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<HEAD>
<TITLE>S-1</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 8pt;">
<B>As filed with the Securities and Exchange Commission on
June&nbsp;29, 2005</B>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B>Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
</DIV>

<DIV align="center" style="font-size: 6pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNITED STATES</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FORM S-1</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 20pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US AIRWAYS GROUP, INC.</B>
</DIV>

<DIV align="center" style="font-size: 7pt;">
<I>(Exact name of registrant as specified in its charter)</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>DELAWARE</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>4512</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>54-1194634</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or other jurisdiction of<BR>
    incorporation or organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(Primary Standard Industrial<BR>
    Classification Code Number)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(I.R.S. Employer Identification No.)</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2345 Crystal Drive</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<B>Alexandria, Virginia 22227</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<B>Telephone: (703)&nbsp;872-7000</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Address, including zip code, and telephone number, including
area code, of registrant&#146;s principal executive office)</I>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Elizabeth K. Lanier,&nbsp;Esq.</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<B>Executive Vice President&nbsp;&#151; Corporate Affairs and
General Counsel</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<B>2345 Crystal Drive</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<B>Arlington, Virginia 22227</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<B>(703)&nbsp;872-7000</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Name, address, including zip code, and telephone number,
including area code, of agent for service)</I>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<B><I>Copies to: </I></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Kevin J. Lavin,&nbsp;Esq.<BR>
    Brian P. Leitch,&nbsp;Esq.<BR>
     <FONT style="font-variant:SMALL-CAPS">Arnold&nbsp;&#38; Porter
    llp<BR>
     </FONT>555 Twelfth Street, NW<BR>
    Washington, DC 20004<BR>
    Tel. No.: (202) 942-5000<BR>
    Fax No.: (202) 942-5999</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>James E. Walsh&nbsp;III,&nbsp;Esq.<BR>
     <FONT style="font-variant:SMALL-CAPS">America West Holdings<BR>
    Corporation<BR>
     </FONT>111 West Rio Salado Parkway<BR>
    Tempe, AZ 85281<BR>
    Tel. No.: (480) 693-0800<BR>
    Fax No.: (480) 693-5155</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Peter C. Krupp, Esq.<BR>
    Timothy R. Pohl, Esq.<BR>
     <FONT style="font-variant:SMALL-CAPS">Skadden, Arps, Slate,<BR>
    Meagher &#38; Flom llp<BR>
     </FONT>333 West Wacker Drive<BR>
    Chicago, IL 60606-1285<BR>
    Tel. No.: (312) 407-0700<BR>
    Fax No.: (312) 407-0411</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Stephen A. Greene,&nbsp;Esq.<BR>
    Ann S. Makich,&nbsp;Esq.<BR>
     <FONT style="font-variant:SMALL-CAPS">Cahill Gordon&nbsp;&#38;
    Reindel llp<BR>
     </FONT>80 Pine Street<BR>
    New York, NY 10005<BR>
    Tel. No.: (212) 701-3000<BR>
    Fax No.: (212) 269-5420</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 7pt;">&nbsp;&nbsp;&nbsp;
<B>Approximate date of commencement of proposed sale to the
public:</B> As soon as practicable after the date of this
Registration Statement.
</DIV>

<DIV align="left" style="font-size: 7pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule&nbsp;415 under the Securities Act of 1933, as amended (the
&#147;Securities Act&#148;), check the following
box.&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#120;
</FONT>
</DIV>

<DIV align="left" style="font-size: 7pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;
If this Form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 7pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;
If this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 7pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;
If this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 7pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;
If delivery of the prospectus is expected to be made pursuant to
Rule&nbsp;434, please check the following
box.&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="center" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="32%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Proposed Maximum</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Proposed Maximum</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B>Title of Each Class of</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Amount to be</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Offering</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Aggregate</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Amount of</B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B>Securities to be Registered</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Registered</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Price Per Share&nbsp;(1)</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Offering Price</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Registration Fee</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rights&nbsp;(2)</DIV>
    </TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    9,090,909</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    N/A</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    N/A</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $0&nbsp;(3)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Stock, $0.01 par value&nbsp;(4)</DIV>
    </TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    9,090,909</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $16.50</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $149,999,998.50&nbsp;(5)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $17,655&nbsp;(6)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 7pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Estimated solely for the purpose of calculating the registration
    fee in accordance with Rule&nbsp;457(o) under the Securities Act.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    This registration statement relates to (a)&nbsp;rights to
    purchase shares of common stock of new US&nbsp;Airways Group,
    Inc., which rights will be issued to holders of Class&nbsp;A and
    Class&nbsp;B common stock of America West Holdings Corporation
    and certain unsecured creditors of US&nbsp;Airways Group, Inc.
    and its domestic subsidiaries and (b)&nbsp;the shares of common
    stock deliverable upon exercise of the rights pursuant to the
    rights offering.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Pursuant to Rule&nbsp;457(g), no registration fee is payable
    with respect to the rights since the rights are being registered
    in the same Registration Statement as the securities to be
    offered pursuant thereto.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Represents the shares of stock issuable upon the exercise of the
    rights.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Represents the gross proceeds from the assumed exercise of all
    rights issued.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Calculated by multiplying the proposed maximum aggregate
    offering price by 0.0001177.</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 7pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;
<B>The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant
to said Section&nbsp;8(a), may determine.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" cellpadding="5" style="border: 3pt double #000000; margin-bottom: 6pt; font-size: 10pt"><TR><TD>
<FONT style="font-size: 9pt" color="#E8112D">The information in
this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state
where the offer or sale is not
permitted.</FONT><FONT style="font-size: 9pt"> <BR>


</FONT>
</TD></TR></TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT color="#E8112D">Subject to Completion</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B><FONT color="#E8112D">Preliminary Prospectus Dated
June&nbsp;29, 2005</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><U>PROSPECTUS</U></B>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 14pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>9,090,909&nbsp;Shares of Common Stock of</B>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US AIRWAYS GROUP, INC.</B>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Issuable upon Exercise of Rights to Subscribe for Such
Shares</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 27%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group, Inc. is distributing, at no charge, to
the holders of record of America West Holdings Corporation
Class&nbsp;A and Class&nbsp;B common stock as of the close of
business on [month, day], 2005, the record date for this rights
offering, and to certain unsecured creditors of US&nbsp;Airways
Group, Inc. and its domestic subsidiaries who will be entitled
to vote on the plan of reorganization of US&nbsp;Airways Group
and its domestic subsidiaries on the record date for this rights
offering, as part of their pending bankruptcy proceedings in the
United States Bankruptcy Court for the Eastern District of
Virginia, Alexandria Division, under Chapter&nbsp;11 of the
bankruptcy code, rights to subscribe for an aggregate of
9,090,909&nbsp;shares of new US&nbsp;Airways Group common stock,
par value $0.01&nbsp;per share, following effectiveness of the
plan of reorganization and pending merger with America West
Holdings. We refer to the US Airways Group common stock after
these transactions as New US Airways Group common stock. Holders
of record of America West Holdings Class&nbsp;A and Class&nbsp;B
common stock will receive transferable subscription rights based
on the number of shares of America West Holdings Class&nbsp;A
and Class&nbsp;B common stock owned of record on the record
date. Certain unsecured creditors of US&nbsp;Airways Group and
its domestic subsidiaries will receive non-transferable
subscription rights based on the dollar amounts of claims that
will be allowed to vote on the plan of reorganization of
US&nbsp;Airways Group and its domestic subsidiaries.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Each subscription right entitles its holder to purchase
one&nbsp;share of New US&nbsp;Airways Group common stock for a
subscription price of $16.50. In addition, recipients who
exercise their rights will also have the opportunity to purchase
additional shares of New US&nbsp;Airways Group common stock for
a subscription price of $16.50 under an over-subscription
privilege. Once a right has been exercised, the exercise may not
be revoked by the holder. See the section entitled &#147;The
Rights Offering.&#148;
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The rights will expire at 5:00&nbsp;p.m., New York City time, on
[month, day], 2005. Any rights unexercised at the end of the
exercise period will expire without any payment to the holders
of these unexercised rights. You should carefully consider
whether or not to exercise or sell your rights, to the extent
your rights are transferable, before the expiration of this
rights offering.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
This offering is conditional, among other things, on the plan of
reorganization being confirmed by the bankruptcy court and the
completion of the pending merger with America West Holdings. If
either the plan of reorganization is not confirmed or the merger
is not completed, this offering will be deemed not to have been
made, no rights will be exercisable, no shares of New
US&nbsp;Airways Group common stock will be distributed under
this prospectus and any funds deposited under this rights
offering will be refunded.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
We are applying to have the shares of New US Airways Group
common stock to be issued upon the exercise of rights in the
rights offering authorized for listing on the New York Stock
Exchange, or the NYSE, upon official notice of issuance under
the symbol &#147;[&nbsp;&nbsp;&nbsp;&nbsp;].&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>Investing in the common stock of New US&nbsp;Airways Group
involves risks that are described in the section entitled
&#147;Risk Factors&#148; beginning on page&nbsp;21.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 27%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dealer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Manager</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Proceeds Before</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price to Public</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fee&nbsp;(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expenses&nbsp;(2)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Per Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>$16.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>$149,999,998.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    In connection with this rights offering, Merrill
    Lynch&nbsp;&#38; Co. has been retained as dealer manager and
    structuring advisor.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Assumes all shares of New US Airways Group common stock are
    subscribed for.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Merrill Lynch is not underwriting the offering and has no
obligation to purchase or procure purchases of the common stock
offered hereby. See the section entitled &#147;Dealer Manager
and Structuring Advisor Arrangements.&#148;
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 27%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Merrill Lynch&nbsp;&#38; Co.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 27%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The date of this prospectus is [month, day], 2005
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TABLE OF CONTENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#161'>WHERE YOU CAN FIND MORE INFORMATION ABOUT
    US AIRWAYS GROUP AND AMERICA WEST HOLDINGS</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>i</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#101'>QUESTIONS AND ANSWERS ABOUT THE RIGHTS
    OFFERING</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>ii</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#102'>KEY DATES</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>x</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>SUMMARY</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>The Companies</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>The Merger</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#198'>The Combined Company Following the
    Merger</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#110'>Listing of New US&nbsp;Airways Group Common
    Stock</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>The Debtors&#146; Plan of Reorganization</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>New Equity Investments</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Accounting Treatment</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#114'>Risk Factors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#115'>Rights Offering Summary</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Summary Selected Financial Data</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#117'>US&nbsp;Airways Group, Inc.</A>&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#118'>America West Holdings Corporation</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Selected Unaudited Pro Forma Condensed
    Combined Financial Data</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#120'>RISK FACTORS</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#121'>CAUTIONARY STATEMENT CONCERNING
    FORWARD-LOOKING STATEMENTS</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#122'>USE OF PROCEEDS</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#123'>CAPITALIZATION</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#124'>PRO FORMA FULLY DILUTED SECURITY OWNERSHIP
    BY ENTITY OF NEW US&nbsp;AIRWAYS GROUP AT CLOSING</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#125'>PRO FORMA SECURITY OWNERSHIP OF CERTAIN
    BENEFICIAL OWNERS OF NEW US&nbsp;AIRWAYS GROUP</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    PER SHARE MARKET PRICE DATA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#126'>DIVIDEND POLICY</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#127'>THE COMBINED COMPANY FOLLOWING THE
    MERGER</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#164'>THE RIGHTS OFFERING</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#165'>The Rights</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#166'>Subscription Privileges</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#167'>Subscription Price</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#168'>Expiration Time and Date</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#169'>Determination of Payment Amount Upon
    Exercise</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#170'>Exercise of Rights</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#171'>No Revocation</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    &nbsp;<A HREF='#172'>Method of Transferring Rights</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    Non-Transferability of US Airways Creditors Rights</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    &nbsp;<A HREF='#190'>Procedures for DTC Participants</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#173'>Subscription Agent</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#174'>Determination of Subscription Price</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#175'>No Appraisal Rights</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#176'>No Recommendation to Holders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#177'>Conditions to the Rights Offering</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#179'>Regulatory Limitation</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign and Certain Other Holders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#180'>Withdrawal</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#181'>Issuance of New US Airways Group Common
    Stock</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#128'>THE MERGER</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#129'>General</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#130'>Background of the Merger</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#131'>Bankruptcy Court Approvals</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#132'>Regulatory Approvals Required for the
    Merger</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#133'>Approvals of the Air Transportation
    Stabilization Board</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#134'>Accounting Treatment</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Listing of New US Airways Group Common Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#135'>Change of Control Put Option under America
    West Airlines, Inc.&#146;s 7.25% Senior Exchangeable Notes</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#136'>America West Holdings Warrants</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#137'>THE MERGER AGREEMENT</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#138'>Structure of the Merger</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#139'>Closing and Effective Time of the Merger</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#140'>Post-Merger America West Holdings Governing
    Documents, Officers and Directors; New US&nbsp;Airways Group
    Governing Documents and Directors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#141'>The Merger Consideration</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#142'>Representations, Warranties and
    Covenants</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#144'>Conditions to the Merger</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#145'>Termination of the Merger Agreement</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#146'>Effect of Termination</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#148'>Amendment and Waiver</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#150'>THE PLAN OF REORGANIZATION</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#151'>THE NEW EQUITY INVESTMENTS</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#152'>Summary of the Investments</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#153'>Closing of the Investments</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#154'>Commercial Agreements with ACE Aviation
    Holdings Inc.&nbsp;</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#155'>Participation Agreements with Par
    Investment Partners, L.P. and Peninsula Investment Partners,
    L.P.&nbsp;</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#156'>Transaction Documents</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#157'>Representations, Warranties and
    Covenants</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#159'>Conditions to the Investment Agreements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#160'>Termination</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#190'>The Stockholders Agreement</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#182'>DESCRIPTION OF CAPITAL STOCK OF NEW
    US&nbsp;AIRWAYS GROUP</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#183'>SHARES ELIGIBLE FOR FUTURE SALE</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#184'>DEALER MANAGER AND STRUCTURING ADVISOR
    ARRANGEMENTS</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#185'>MATERIAL UNITED STATES FEDERAL INCOME TAX
    CONSEQUENCES</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#186'>INFORMATION WITH RESPECT TO US&nbsp;AIRWAYS
    GROUP, INC. PRIOR TO THE MERGER</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>109</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    &nbsp;<A HREF='#187'>US&nbsp;AIRWAYS GROUP MANAGEMENT&#146;S
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#188'>LEGAL MATTERS</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#189'>EXPERTS</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Annexes</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#192'>ANNEX A-1</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#192'>US&nbsp;Airways Group, Inc.&#146;s Annual
    Report on Form&nbsp;10-K for the year ended December&nbsp;31,
    2004</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>A-1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#193'>ANNEX A-2</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#193'>US&nbsp;Airways Group, Inc.&#146;s
    Quarterly Report on Form&nbsp;10-Q for the three months ended
    March&nbsp;31, 2005</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>A-2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#194'>ANNEX B-1</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#194'>America West Holdings Corporation&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2004</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>B-1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#195'>ANNEX B-2</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#195'>America West Holdings Corporation&#146;s
    Quarterly Report on Form&nbsp;10-Q for the three months ended
    March&nbsp;31, 2005</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>B-2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="p70803exv23w1.txt">EX-23.1: CONSENT OF KPMG LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="p70803exv23w2.txt">EX-23.2: CONSENT OF KPMG LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="p70803exv23w3.txt">EX-23.3: CONSENT OF PRICEWATERHOUSECOOPERS LLP</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should rely only on the information contained in this
prospectus for purposes of your decision to exercise your rights
to purchase these securities. We have not, and the dealer
manager and structuring advisor has not, authorized any other
person to provide you with different information for those
purposes. If anyone provides you with different or inconsistent
information, you should not rely on it for purposes of your
decision to exercise your rights to purchase these securities.
We are not, and the dealer manager and structuring advisor is
not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You
should assume that the information appearing in this prospectus
is accurate only as of the date on the front cover of this
prospectus. Our business, financial condition, results of
operations and prospects may have changed since that date. If
you are a creditor of US&nbsp;Airways Group or any of its
domestic subsidiaries, you are also receiving a disclosure
statement that provides the information on which you should rely
for purposes of determining how to vote on the plan of
reorganization. You should only rely on the disclosure statement
for that decision, and not on this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='161'></A>
</DIV>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION ABOUT US AIRWAYS GROUP AND AMERICA WEST HOLDINGS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>WHERE YOU CAN FIND MORE INFORMATION ABOUT US&nbsp;AIRWAYS
GROUP</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>AND AMERICA WEST HOLDINGS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The primary part of this document, which forms part of a
registration statement on Form&nbsp;S-1 filed with the SEC by US
Airways Group, constitutes a prospectus of US Airways Group
under Section&nbsp;5 of the Securities Act with respect to the
rights and the shares of New US Airways Group common stock to be
issued in connection with this rights offering. The prospectus
contains information about this rights offering and the combined
company after completion of the plan of reorganization and the
pending merger transaction with America West Holdings. In
addition, we have included historical information regarding US
Airways Group and America West Holdings that is contained in
their respective filings with the SEC on Forms&nbsp;10-K and
10-Q that are attached as annexes to this prospectus. The
registration statement contains more information than this
prospectus regarding US&nbsp;Airways Group and New
US&nbsp;Airways Group common stock, including certain exhibits.
You can obtain a copy of the registration statement from the SEC
at the address listed below or from the SEC&#146;s website.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways Group, US&nbsp;Airways, Inc., America West Holdings
and America West Airlines, Inc. file annual, quarterly and
current reports, proxy statements and other information with the
SEC. You may read and copy these reports, statements or other
information at the SEC&#146;s Public Reference Room at
Room&nbsp;1580, 100&nbsp;F Street NE, Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. The SEC filings of US Airways Group,
US&nbsp;Airways, Inc., America West Holdings and America West
Airlines, Inc. are also available to the public from commercial
document retrieval services and at the website maintained by the
SEC at www.sec.gov. You can also find the SEC filings of US
Airways Group on its website, www.usairways.com, and of America
West Holdings on its website, www.americawest.com. Information
included on the identified websites is not incorporated by
reference in this prospectus. Documents of US Airways Group,
US&nbsp;Airways, Inc., America West Holdings and America West
Airlines, Inc. are also available from US Airways Group and
America West Holdings, respectively, without charge, excluding
any exhibits to those documents that are not specifically
incorporated by reference as an exhibit in this prospectus. You
may request a copy of these documents in writing or by telephone
by contacting the companies at:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>US Airways Group, Inc.</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    <B>America West Holdings Corporation</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2345 Crystal Drive</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    111 West Rio Salado Parkway</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Arlington, Virginia 22227</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    Tempe, Arizona 85281</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Telephone number: (703) 872-7000</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    Telephone number: (480) 693-0800</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Attn: Investor Relations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    Attn: Investor Relations</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, for information regarding US Airways Group&#146;s
bankruptcy proceedings, you may access filings made in the
proceedings, including the plan of reorganization and disclosure
statement filed by US Airways Group and its domestic
subsidiaries in those proceedings, at www.donlinrecano.com.
Information on this website is not incorporated by reference in
this prospectus.
</DIV>

<P align="center" style="font-size: 10pt;">i

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Unless we specify otherwise, all references in this
prospectus to &#147;New US&nbsp;Airways&nbsp;Group,&#148; the
&#147;combined company&#148; and &#147;our company&#148; refer
to US&nbsp;Airways&nbsp;Group following effectiveness of the
plan of reorganization of US&nbsp;Airways Group and its domestic
subsidiaries and the merger with America West Holdings. Unless
we specify otherwise, all references in this prospectus to
&#147;US&nbsp;Airways&nbsp;Group&#148; refer to
US&nbsp;Airways&nbsp;Group, Inc. prior to the effectiveness of
the merger, all references in this prospectus to &#147;America
West Holdings&#148; refer to America West Holdings Corporation,
and all references to &#147;we&#148; and &#147;us&#148; refer to
US&nbsp;Airways&nbsp;Group and America West Holdings together
before the merger as well as to New
US&nbsp;Airways&nbsp;Group.</I>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='101'></A>
</DIV>

<!-- link1 "QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following are some questions that you, as a stockholder
of America West Holdings or an unsecured creditor of
US&nbsp;Airways Group and its domestic subsidiaries, may have
regarding the rights offering and brief answers to those
questions. You should carefully read the remainder of this
prospectus because the information in this section does not
provide all the information that might be important to you with
respect to this rights offering. Additional important
information is also contained in the annexes to this
prospectus.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Q:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;What
is a right?</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    Each basic right entitles its holder to purchase one share of
    New US&nbsp;Airways Group common stock at a purchase price of
    $16.50, which we refer to as the Subscription Price, as well as
    certain over-subscription privileges described below. America
    West Holders (as defined below) and US&nbsp;Airways Creditors
    (as defined below), which we refer to collectively as the
    Holders, will be issued basic rights.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Q:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
do the rights expire?</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    The rights expire at 5:00&nbsp;p.m., New&nbsp;York City time, on
    [month, day], 2005, which we refer to as the Expiration Date.
    See the section entitled &#147;The Rights Offering&nbsp;&#151;
    Expiration Time and Date&#148; for more information.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Q:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;How
many rights will you be distributing?</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    We will be distributing rights to purchase an aggregate of
    9,090,909&nbsp;shares of New US&nbsp;Airways Group common stock.
    We will issue:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="22%"></TD>
    <TD width="78%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp; &nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;</TD>
    <TD align="left">
    3,500,000 basic rights to the America West Holders, which we
    refer to as the America West Holders Pool; and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp; &nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;</TD>
    <TD align="left">
    5,590,909 basic rights to the US&nbsp;Airways Creditors, which
    we refer to as the US&nbsp;Airways Creditors Pool.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    We will not issue fractional rights or cash in lieu of
    fractional rights. We will round fractional rights up to the
    nearest whole number subject to any adjustments necessary to
    ensure that, assuming all rights are exercised, we will issue
    9,090,909&nbsp;shares. See the section entitled &#147;The Rights
    Offering&nbsp;&#151; Subscription Privileges&#148; for more
    information.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Q:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;How
many rights will I be receiving?</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="21%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>A:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;</TD>
    <TD align="left">
    <I>If you are an America West Holder:</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    If you are a holder of record of Class&nbsp;A or Class&nbsp;B
    common stock of America West Holdings on [month, day], 2005, the
    record date for the rights offering, you will receive one basic
    right for every
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;shares
    of America West Holdings Class&nbsp;A or Class&nbsp;B common
    stock that you hold on the record date, in addition to certain
    over-subscription privileges discussed below. We refer to
    holders of America West Holdings Class&nbsp;A or Class&nbsp;B
    common stock that are entitled to receive rights in the rights
    offering as America West Holders. The amount of your
    over-subscription privilege depends on the extent to which
    others exercise their basic rights and over-subscription
    privileges.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">ii

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="22%"></TD>
    <TD width="78%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp; &nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;</TD>
    <TD align="left">
    <I>If you are a US&nbsp;Airways Creditor:</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    US&nbsp;Airways Group and its domestic subsidiaries, which we
    refer to as the debtors, will be filing a plan of reorganization
    in the bankruptcy court. The debtors&#146; general unsecured
    creditors that, pursuant to the terms of the plan of
    reorganization, are entitled to receive rights pursuant to this
    rights offering, are referred to as US&nbsp;Airways Creditors.
    If you are a US&nbsp;Airways Creditor, you will receive basic
    rights, in addition to certain over-subscription privileges
    discussed below. The number of basic rights you will receive
    depends on the amount of your claim that is allowed for the
    purpose of voting on the plan of reorganization, as well as on
    the total amount of claims that are allowed for the purpose of
    voting on the plan of reorganization. The amount of your
    over-subscription privilege depends on these two amounts, as
    well as on the extent to which others exercise their basic
    rights and over-subscription privileges. See the questions
    &#147;How are the basic rights of each US&nbsp;Airways Creditor
    ultimately determined?&#148; and &#147;What is the
    over-subscription privilege?&#148; for more information.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>Is there a difference between the amount of my claim as a US
    Airways Creditor that is allowed for purposes of voting on the
    plan of reorganization and the amount of my claim as ultimately
    determined through the bankruptcy process?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    There can be. The number of basic rights and the associated
    over-subscription privilege you receive is based on the allowed
    amount of your claim, if it is undisputed, or any amount of your
    claim temporarily allowed for these purposes if your claim is
    disputed. If your claim is disputed, your claim might ultimately
    be determined to have an equal, lesser or greater value.
    Whatever the ultimate value of your claim, it will have no
    effect on the number of rights to which you are entitled through
    the rights offering.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>How are the basic rights of each America West Holder
    determined?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    For every
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;shares
    of Class&nbsp;A or Class&nbsp;B common stock of America West
    Holdings you own on the record date, you will be entitled to one
    basic right.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>How are the basic rights of each US&nbsp;Airways Creditor
    ultimately determined?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    The number of basic rights issued to each US&nbsp;Airways
    Creditor is based on the amount of each US&nbsp;Airways
    Creditor&#146;s allowed voting claim, as well as the total
    amount of all US&nbsp;Airways Creditors&#146; allowed voting
    claims. These amounts will be determined no later than the date
    that the confirmation order is entered by the bankruptcy court,
    referred to as the Confirmation Order Date. On a date that is
    within 3&nbsp;business days after the Confirmation Order Date,
    which we refer to as the Allocation Date, the number of each
    US&nbsp;Airways Creditor&#146;s basic rights will be determined
    using the following formula, which we refer to as the
    US&nbsp;Airways Creditor Basic Right Calculation:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 15pt; ">

<TR style="font-size: 1pt;">
    <TD width="21%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="76%">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    -</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&#215;&nbsp;C&nbsp;=&nbsp;D</TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    B</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Where:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>A&nbsp; =&nbsp;</TD>
    <TD align="left">
    The total allowed voting claim of the US&nbsp;Airways Creditor</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>B&nbsp; =&nbsp;</TD>
    <TD align="left">
    The total amount of all allowed voting claims of all
    US&nbsp;Airways Creditors</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>C&nbsp; =&nbsp;</TD>
    <TD align="left">
    5,590,909 basic rights, representing the US&nbsp;Airways
    Creditors Pool</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>D&nbsp; =&nbsp;</TD>
    <TD align="left">
    The number of basic rights that the US&nbsp;Airways Creditor
    ultimately receives</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    For more information regarding the amount of payment you may
    submit for your rights, see the question &#147;&#151;&nbsp;How
    do I determine the amount to pay when I exercise my
    rights?&#148;.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">iii

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Q:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;What
is the over-subscription privilege?</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    The over-subscription privilege provides a way for America West
    Holders and US&nbsp;Airways Creditors to purchase any shares of
    New US&nbsp;Airways Group common stock that might be left over
    after all America West Holders and US&nbsp;Airways Creditors
    have had the opportunity to exercise their basic rights. There
    may be shares left over to the extent that not all America West
    Holders and US&nbsp;Airways Creditors choose to exercise all of
    their basic rights.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Q:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;How
does the over-subscription privilege work?</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="21%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>A:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;</TD>
    <TD align="left">
    <I>If you are an America West Holder</I>:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    The over-subscription privilege entitles you to elect to
    purchase additional shares of New US&nbsp;Airways Group common
    stock at the same purchase price per share you paid in
    exercising your basic subscription privilege. The number of
    additional shares you elect to purchase is at your discretion
    but cannot exceed
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]x
    the number of shares you elected to purchase pursuant to the
    basic subscription. However, we give no assurance that you will
    be able to purchase any or all of the shares for which you make
    an over-subscription election. For example, if all of the basic
    subscription rights granted by us are exercised, no shares will
    be available to be issued pursuant to exercises of
    over-subscription privileges. See the question
    &#147;&#151;&nbsp;How will you allocate shares under the
    over-subscription privilege?&#148; for more information.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    You must pay for the shares you elect to purchase pursuant to
    the over-subscription privilege at the same time you pay for the
    shares you are purchasing pursuant to the basic subscription
    privilege. If we do not satisfy your over-subscription request
    in full, the Subscription Agent (as defined below) will return
    to you, within 5 business days of the Allocation Date (as
    defined below), without interest, any payment for shares not
    issued to you.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="22%"></TD>
    <TD width="78%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp; &nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;</TD>
    <TD align="left">
    <I>If you are a US&nbsp;Airways Creditor</I>:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    The over-subscription privilege entitles you to elect to
    purchase additional shares of New US&nbsp;Airways Group common
    stock at the same purchase price per share you paid in
    exercising your basic subscription privilege. The number of
    additional shares you will ultimately receive under your
    over-subscription election cannot exceed
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]x
    the number of shares you will ultimately receive in the basic
    subscription. See the question &#147;How are the basic rights of
    each US&nbsp;Airways Creditor ultimately determined?&#148; for
    more information. However, we give no assurance that you will
    receive any shares pursuant to the over-subscription privilege.
    For example, if all of the basic subscription rights granted by
    us are exercised, no shares will be available to be issued
    pursuant to exercises of the over-subscription privileges. See
    the question &#147;How will you allocate shares under the
    over-subscription privilege?&#148; for more information.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    You must pay for the shares you elect to purchase pursuant to
    the over-subscription privilege at the same time you pay for the
    shares you are purchasing pursuant to the basic subscription
    privilege. The difference between your total subscription and
    the ultimate determination of your basic rights will determine
    the amount of your subscription eligible for your
    over-subscription privilege. If we do not satisfy your
    over-subscription request in full, the Subscription Agent will
    return to you, within 5 business days of the Allocation Date,
    without interest, any payment for shares not issued to you.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>How will you allocate shares under the over-subscription
    privilege?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    If any shares being offered in this rights offering are
    available after satisfying all exercises of basic rights, we
    will allocate the over-subscription requests as follows:</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>If
you are an America West Holder:</I>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    You will have your over-subscription requests satisfied first
    out of any shares remaining in the America West Holders Pool
    after satisfying all exercises of the basic subscription rights
    by America West Holders and then out of any remaining shares in
    the US&nbsp;Airways Creditors Pool after satisfying</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">iv

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    all exercises of the basic and over-subscription requests of
    US&nbsp;Airways Creditors. The number of additional shares we
    allocate to you pursuant to your over-subscription privilege
    will be calculated by adding the number of shares available for
    over-subscription in the America West Holders Pool and any
    remaining shares in the US Airways Creditor Pool, and
    multiplying the sum of those shares by a proration factor. The
    proration factor is determined by dividing the total number of
    shares that the America West Holder elected to purchase under
    the over-subscription privilege by the total number of shares
    all America West Holders elected to purchase pursuant to the
    over-subscription privilege. However, each basic right held by
    an America West Holder must be exercised for that Holder&#146;s
    associated over-subscription privilege to apply. The number of
    additional shares we allocate to you pursuant to the
    over-subscription privilege may be subject to certain reductions
    to ensure that the merger will qualify as a tax-free
    &#147;reorganization&#148; within the meaning of
    Section&nbsp;368(a) of the Internal Revenue Code of 1986, as
    amended.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="22%"></TD>
    <TD width="78%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp; &nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;</TD>
    <TD align="left">
    <I>If you are a US Airways Creditor:</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    You will have your over-subscription requests satisfied first
    out of any shares remaining in the US&nbsp;Airways Creditors
    Pool after satisfying all exercises of the basic subscription
    rights of US&nbsp;Airways Creditors and then out of any
    remaining shares in the America West Holders Pool after
    satisfying all exercises of the basic subscription rights and
    over-subscription requests of America West Holders. The number
    of additional shares we allocate to you pursuant to your
    over-subscription privilege will be calculated by adding the
    number of shares available for over- subscription in the
    US&nbsp;Airways Creditors Pool and any remaining shares in the
    America West Holders Pool, and multiplying the sum of those
    shares by a proration factor. The proration factor is determined
    by dividing the total number of shares that the US&nbsp;Airways
    Creditor is ultimately determined to have elected to purchase
    pursuant to the over-subscription privilege by the total number
    of shares all US&nbsp;Airways Creditors are ultimately
    determined to have elected to purchase pursuant to the
    over-subscription privilege. However, each basic right that is
    ultimately deemed to be held by a US&nbsp;Airways Creditor must
    be exercised for that Holder&#146;s associated over-subscription
    privilege to apply.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>How did you determine the Subscription Price for the shares
    of New US&nbsp;Airways Group common stock?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    The Subscription Price of $16.50 per share is the highest price
    committed to be paid by the new equity investors that have
    committed to purchase shares of New US&nbsp;Airways Group common
    stock in connection with the merger and the plan of
    reorganization. However, we cannot predict the price at which
    New US&nbsp;Airways Group common stock will trade following this
    rights offering.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>How will you use the proceeds from this rights offering?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    We expect to use the net proceeds from this rights offering for
    general corporate purposes, including the possible redemption or
    repurchase of other securities of New US&nbsp;Airways Group.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>How do I exercise my rights?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    You may exercise your rights by properly completing, signing and
    delivering your rights certificate. You must deliver your
    original completed rights certificate to
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;],
    which is acting as the subscription agent. <B>The subscription
    agent will not accept a facsimile transmission of your completed
    rights certificate.</B> This delivery must be accompanied by
    full payment of the purchase price for each share you wish to
    purchase under the basic rights, as well as for each share you
    wish to purchase pursuant to your over-subscription privilege.
    If you use the mail, we recommend that you use insured,
    registered mail, return receipt requested. If you cannot deliver
    your rights certificate to the Subscription Agent before the
    expiration of the rights offering, you may follow the guaranteed
    delivery procedures described under the section entitled
    &#147;The Rights Offering&nbsp;&#151; Exercise of Rights.&#148;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">v

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>How do I determine the amount to pay when I exercise my
    rights?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="21%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>A:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;</TD>
    <TD align="left">
    <I>If you are an America West Holder:</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    For every [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;shares of
    America West Holdings Class&nbsp;A or Class&nbsp;B common stock
    you own on the record date, you will be entitled to one basic
    right. In addition, you may purchase up to
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]x that basic subscription amount
    pursuant to your over-subscription privilege.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    For example, assuming you will be entitled to 1&nbsp;basic right
    for each 10&nbsp;shares of Class&nbsp;A or Class&nbsp;B common
    stock you own, if you own 100&nbsp;shares of common stock of
    America West Holdings on the record date, you would be entitled
    to 10&nbsp;basic rights. To fully exercise your basic rights,
    you would then multiply the fixed Subscription Price of $16.50
    by your 10&nbsp;basic rights, and submit a dollar amount of
    $165.00. If you wish to fully exercise your over-subscription
    privilege, assuming a 10x over-subscription option, you would
    multiply 10 x 10 x $16.50, and submit an additional $1,650.00 as
    payment for the full amount of the over-subscription privilege.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    Therefore, you would submit a total payment to the Subscription
    Agent of $1,815.00 (the sum of $165.00 to exercise your basic
    rights and $1,650.00 to exercise your over-subscription
    privilege) for your full exercise of your basic and
    over-subscription privileges.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    Notwithstanding the foregoing, you are in no way obligated to
    exercise either your basic or over-subscription privileges in
    full, and any lesser amount will be accepted. However, you must
    exercise each basic right to exercise any associated
    over-subscription privilege.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    In the event that the total dollar amount you submit is greater
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, the surplus will be
    applied as an exercise of the over-subscription privilege
    discussed above.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    In the event that the total dollar amount you submit is less
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, you will receive fewer
    shares than you estimated you would have been entitled to
    receive. In the case of an under-subscription, you will not have
    an opportunity to submit further payment for the exercise of any
    additional basic rights or over- subscription privileges.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    In the event that the total dollar amount you submit is greater
    than the basic and over-subscription privileges you are
    ultimately entitled to, any excess funds will be returned to
    you, without interest, within 5&nbsp;business days of the
    Allocation Date.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>If
you are a US&nbsp;Airways Creditor</I>:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    Your basic rights will ultimately be determined pursuant to the
    US&nbsp;Airways Creditor Basic Right Calculation on the
    Allocation Date. A determination may not be made on the exact
    amount of your allowed claim, or the total amount of all allowed
    claims, entitled to vote on the plan of reorganization until on
    or before the Confirmation Order Date. Solely for the purposes
    of estimating your basic rights, we have assumed
    $[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;billion
    of total allowed voting claims. You may estimate you will
    receive one basic right for each
    $[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    allowed voting claim amount. For example, a claim for
    $[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    is estimated to receive
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    basic rights. However, your basic rights will ultimately be
    determined pursuant to the US Airways Creditor Basic Right
    Calculation on the Allocation Date. See the question, &#147;How
    are the basic rights of each US Airways Creditor ultimately
    determined?&#148; for more information.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    Once you have estimated your basic subscription, you may pay for
    your basic subscription and pay up to
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]x
    that basic subscription price to participate in the associated
    over-subscription privilege.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    You would multiply the Subscription Price of $16.50 by the
    estimated number of basic rights to which you estimate you are
    entitled, and submit a dollar amount in order to pay for the
    full amount of basic rights attributable to your estimated
    claim. If you hold a $100,000 claim and wish to fully exercise
    your over-subscription privilege, assuming a 10x
    over-subscription option, you would</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">vi

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    multiply
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;x&nbsp;10&nbsp;x&nbsp;$16.50,
    and submit
    $[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    as an additional payment for the full amount of the
    over-subscription privilege.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    Therefore, you would submit a total payment to the Subscription
    Agent of
    $[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    (the sum of
    $[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    to exercise your basic rights and
    $[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    to exercise your over-subscription privilege) for your full
    exercise of your basic and over-subscription privileges.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    Notwithstanding the foregoing, you are in no way obligated to
    exercise either your basic or over-subscription privilege in
    full, and any lesser amount will be accepted. However, you must
    exercise each basic right to exercise any associated
    over-subscription privilege.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    Although we have provided you with our best estimate of the
    amount of your basic rights and over-subscription privilege, it
    is likely that your final basic rights and over-subscription
    privilege will be different from our estimate, perhaps
    materially so. In the rights certificate, you must acknowledge
    that New US Airways Group is not liable for any damages
    resulting from your receiving a different number of rights and
    over-subscription privileges than you originally estimated you
    would be entitled to receive.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    In the event that the total dollar amount you submit is greater
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, the surplus will be
    applied as an exercise of the over-subscription privilege
    discussed above.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    In the event that the total dollar amount you submit is less
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, you will receive fewer
    shares than you estimated you would have been entitled to. In
    the case of an under-subscription, you will not have an
    opportunity to submit further payment for the exercise of any
    additional basic rights or over- subscription privileges.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    In the event that the total dollar amount you submit is greater
    than the basic and over-subscription privileges you are
    ultimately entitled to, any excess funds will be returned to
    you, without interest, within 5&nbsp;business days of the
    Allocation Date.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>When will I receive the shares I am purchasing by exercising
    my rights?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    We will issue the shares as soon as practicable after the
    Closing Date, which is the date on which the merger will close.
    To the extent your request could not be satisfied, payment for
    the purchase price for the shares you elected to purchase will
    be returned to you within 5&nbsp;business days following the
    Allocation Date, without interest.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    In addition, the completion of this rights offering is subject
    to a number of conditions, including the confirmation of the
    plan of reorganization and the completion of the merger. In the
    event that this rights offering is terminated because the
    conditions precedent could not be met, your payment of the
    purchase price for the shares you elected to purchase will be
    returned to you, within 5&nbsp;business days of that
    termination, with interest to accrue from the Expiration Date to
    the date of that termination. See the section entitled &#147;The
    Rights Offering&nbsp;&#151; Conditions to the Rights
    Offering&#148; for more information.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>Am I required to exercise my rights?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    No.&nbsp;However, if you choose not to fully exercise your
    rights, the relative percentage of New US&nbsp;Airways Group
    common stock that you own will decrease, and your voting and
    other rights will be diluted to the extent that other holders of
    rights exercise their rights. Also, holders who do not exercise
    their rights prior to the Expiration Date will lose any value
    represented by the rights.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">vii

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>What happens if I do not exercise my rights?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    If you do not exercise your rights before the Expiration Date,
    your rights will expire.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>May I transfer my rights through the Subscription Agent if I
    do not want to purchase any shares?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="21%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>A:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;</TD>
    <TD align="left">
    <I>If you are an America West Holder:</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    You may transfer your rights through the Subscription Agent or
    otherwise. See the section entitled &#147;The Rights
    Offering&nbsp;&#151; Method of Transferring Rights&#148; for
    more information.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="22%"></TD>
    <TD width="78%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp; &nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;</TD>
    <TD align="left">
    <I>If you are a US&nbsp;Airways Creditor:</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></TD>
    <TD align="left">
    Your rights are not transferable through the Subscription Agent.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>If I am a US&nbsp;Airways Creditor, what happens to my rights
    if I transfer my claim?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    Rights may only be exercised by the holder of the claim on the
    record date. If you subsequently transfer your claim, we will
    not recognize the transferee as the holder of the rights.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>If I exercise rights in this rights offering, may I cancel or
    change my decision?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    No.&nbsp;Once you have exercised your rights, you may not revoke
    your exercise even if we have not yet issued the associated
    shares to you.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>Are there any limitations on the exercise of rights by
    foreign holders?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    We reserve the right to reject subscriptions by non-U.S. persons
    to the extent that acceptance of those subscriptions would cause
    the number of shares of New US Airways Group common stock held
    by non-U.S. persons to be entitled to more than 24.9% of the
    aggregate votes of all outstanding shares of common stock of New
    US Airways Group following the completion of the rights offering.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>Can you terminate this rights offering?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    Yes. We may terminate this rights offering for any reason at any
    time prior to the Expiration Date. Although we have no current
    intention to terminate this rights offering, we are reserving
    the right to do so in the event that circumstances occur between
    the date of this prospectus and the Expiration Date that cause
    us to conclude that it should be withdrawn. In addition, this
    rights offering will be terminated following the Expiration Date
    in the event that any of the conditions to the completion of
    this rights offering have not been met. This rights offering
    will expire automatically if the merger does not occur by
    December&nbsp;31, 2005. See the section entitled &#147;The
    Rights Offering&nbsp;&#151; Conditions to the Rights
    Offering&#148; for more information.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>If this rights offering is terminated or if my request is not
    satisfied in full, will my payment be refunded to me?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    Yes. If this rights offering is terminated, the Subscription
    Agent will return to you all payments for the shares not issued
    to you, within 5 business days of the date of termination. If
    the termination occurs after the Expiration Date, that payment
    will be made with interest, which will accrue from the
    Expiration Date to the date of termination. If this rights
    offering is completed and we do not satisfy your request in
    full, the Subscription Agent will return to you, within 5
    business days of the Allocation Date, without interest, all
    payments for the shares not issued to you. See the section
    entitled &#147;The Rights Offering&nbsp;&#151; Withdrawal&#148;
    for more information.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>When will the merger occur?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    We are planning to complete the merger as promptly as
    practicable. This rights offering will terminate automatically
    if the merger is not completed by December&nbsp;31, 2005.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">viii
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>What should I do if I want to participate in this rights
    offering but my rights are held in the name of my broker,
    dealer, commercial bank, trust company or other nominee?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    If you hold your rights through a broker, dealer, commercial
    bank, trust company or other nominee, you will need to have your
    broker, dealer, commercial bank, trust company or other nominee
    act for you if you wish to exercise or, in the case of America
    West Holders, sell your rights. To indicate your decision, you
    should complete and return to your broker, bank or other nominee
    the form entitled &#147;Beneficial Owner Election Form.&#148;
    You should receive this form from your broker, bank or other
    nominee with the other rights offering materials. See the
    section entitled &#147;The Rights Offering&nbsp;&#151;
    Subscription Privileges&#148; for more information.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>Will I be charged a sales commission or a fee by
    US&nbsp;Airways Group if I exercise my rights?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    No.&nbsp;We will not charge a brokerage commission or a fee to
    rights holders for exercising their rights. However, if you
    exercise your rights through a broker, bank or other nominee,
    you will be responsible for any fees charged by your broker,
    bank or nominee.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>Have US&nbsp;Airways Group, its board of directors, America
    West Holdings&#146; board of directors or Merrill Lynch made a
    recommendation as to whether I should exercise, or, if I am an
    America West Holder, sell, my rights?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    No.&nbsp;Neither US&nbsp;Airways Group, its board of directors,
    America West Holdings&#146; board of directors, nor Merrill
    Lynch has made any recommendation as to whether you should
    exercise or sell your rights. You should decide whether to
    purchase shares of New US&nbsp;Airways Group common stock
    pursuant to this rights offering based upon your own assessment
    of your best interests.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>What are the United States federal income tax consequences of
    the rights offering to me?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    The tax consequences of the rights offering will depend, among
    other things, on your status as an America West Holder or a
    US&nbsp;Airways Creditor. The likely tax consequences of the
    rights offering are described under the section entitled
    &#147;Material United States Federal Income Tax
    Consequences.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    We strongly urge you to consult your own tax advisor as to the
    specific tax consequences to you of the rights offering,
    including the applicability and effect of federal, state, local
    and foreign income and other tax laws in your particular
    circumstances.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>How many shares of New US&nbsp;Airways Group common stock
    will be outstanding upon completion of the merger?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    Effective upon completion of the merger, but not including the
    rights offering, we estimate that there will be outstanding
    approximately
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;shares
    of New US&nbsp;Airways Group common stock. This number includes
    shares that we are required to issue upon exercise of
    outstanding options, convertible debt and warrants. If all
    rights we are issuing in this rights offering are exercised, the
    number of outstanding shares of New US&nbsp;Airways Group common
    stock will increase by 9,090,909&nbsp;shares.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>Q:</B></TD>
    <TD align="left">
    <B>What should I do if I have other questions?</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>A:</TD>
    <TD align="left">
    If you have any questions about the procedure for exercising
    your rights, including if you have lost your rights certificate,
    please contact
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;],
    which is acting as our information agent, at
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;].</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    Banks and brokerage firms, please call
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;].
    All others, please call toll-free
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;].</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left">
    If you have questions about whether your completed rights
    certificate or payment has been received, please contact
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;],
    which is acting as our Subscription Agent, at
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;].</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For a more complete description of this rights offering, see the
section entitled &#147;The Rights Offering.&#148;
</DIV>

<P align="center" style="font-size: 10pt;">ix
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='102'></A>
</DIV>

<!-- link1 "KEY DATES" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>KEY DATES</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Record Date</TD>
    <TD></TD>
    <TD valign="top">
    [month, day], 2005, which is the date used to determine which
    stockholders of America West Holdings are entitled to be granted
    rights.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Rights Distribution Date</TD>
    <TD></TD>
    <TD valign="top">
    [month, day], 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Rights Exercise Period</TD>
    <TD></TD>
    <TD valign="top">
    [month, day], 2005 through and including [month, day], 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Expiration Date</TD>
    <TD></TD>
    <TD valign="top">
    The rights will expire, if not previously exercised, at
    5:00&nbsp;p.m., New York City time, on [month, day], 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Confirmation Order Date</TD>
    <TD></TD>
    <TD valign="top">
    The date that the confirmation order for the plan of
    reorganization is entered by the bankruptcy court. No later than
    that date, the determination will be made as to the amount of
    each US&nbsp;Airways Creditor&#146;s claim allowed to vote on
    the plan of reorganization.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Allocation Date</TD>
    <TD></TD>
    <TD valign="top">
    The date which is 3&nbsp;business days after the Confirmation
    Order Date. On that date, the ultimate determination of the
    rights allocation will be made.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Closing Date</TD>
    <TD></TD>
    <TD valign="top">
    The date when this rights offering is completed. On that date,
    the shares of New US&nbsp;Airways Group common stock will be
    issued pursuant to this rights offering.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">x

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
<A name='103'></A>
</DIV>

<!-- link1 "SUMMARY" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SUMMARY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following is a summary that highlights information
contained in this prospectus. This summary may not contain all
of the information that may be important to you. For a more
complete description of the rights offering and the merger, as
well as the plan of reorganization of US&nbsp;Airways Group and
its domestic subsidiaries, we encourage you to read carefully
this entire prospectus. In addition, we encourage you to read
documents of US&nbsp;Airways Group and America West Holdings
that have been filed with the SEC, and the companies&#146;
respective Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q attached to this prospectus. These documents include
important business and financial information about
US&nbsp;Airways Group and America West Holdings.</I>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='104'></A>
</DIV>

<!-- link1 "The Companies" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Companies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>US&nbsp;Airways&nbsp;Group, Inc.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
2345 Crystal Drive
</DIV>

<DIV align="left" style="font-size: 10pt;">
Arlington, Virginia 22224
</DIV>

<DIV align="left" style="font-size: 10pt;">
(703)&nbsp;872-7000
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways&nbsp;Group, Inc., a Delaware corporation, is a
holding company formed in 1983 whose origins trace back to the
formation of All American Aviation in 1937. US Airways
Group&#146;s primary business activity is the operation of a
major network air carrier through its ownership of the common
stock of US&nbsp;Airways, Inc., Piedmont Airlines, Inc., PSA
Airlines, Inc., Material Services Company, Inc. and Airways
Assurance Limited. US&nbsp;Airways, Inc., along with
US&nbsp;Airways&nbsp;Group&#146;s regional airline subsidiaries
and affiliated carriers flying as US&nbsp;Airways Express, is a
hub-and-spoke carrier with a substantial presence in the Eastern
United States and with service to Canada, the Caribbean, Latin
America and Europe. US&nbsp;Airways, Inc. had approximately
42&nbsp;million passengers boarding its planes in 2004 and is
the seventh largest U.S.&nbsp;air carrier based on ASMs. As of
March&nbsp;31, 2005, US&nbsp;Airways, Inc. operated 279 jet
aircraft and 25 regional jet aircraft and provided regularly
scheduled service at 101 airports in the continental United
States, Canada, the Caribbean, Latin America and Europe. As of
March&nbsp;31, 2005, the US&nbsp;Airways Express network served
133 airports in the United States, Canada and the Bahamas,
including approximately 51 airports also served by
US&nbsp;Airways, Inc. During 2004, US&nbsp;Airways Express air
carriers had approximately 15.2&nbsp;million passengers boarding
their planes.
</DIV>

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As discussed in more detail below, on September&nbsp;12, 2004,
US&nbsp;Airways&nbsp;Group and its domestic subsidiaries,
US&nbsp;Airways, Inc., Piedmont Airlines, Inc., PSA Airlines,
Inc. and Material Services Company, Inc., which account for
substantially all of the operations of
US&nbsp;Airways&nbsp;Group, filed voluntary petitions for relief
under Chapter&nbsp;11 of the United States Bankruptcy Code in
the United States bankruptcy court for the Eastern District of
Virginia, Alexandria Division. US&nbsp;Airways&nbsp;Group and
its domestic subsidiaries are sometimes referred to in this
prospectus as the &#147;debtors&#148; because that is a common
term for companies in bankruptcy.
</DIV>

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<B><I>America West Holdings Corporation</I></B>
</DIV>

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111 West Rio Salado Parkway
</DIV>

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Tempe, Arizona 85281
</DIV>

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(480)&nbsp;693-0800
</DIV>

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America West Holdings Corporation, a Delaware corporation formed
in 1996, is a holding company that owns all of the stock of
America West Airlines, Inc., a Delaware corporation formed in
1981. America West Airlines, Inc. accounted for most of America
West Holdings&#146; revenues and expenses in 2004. Based on 2004
operating revenues and available seat miles, or ASMs, America
West Airlines, Inc. is the eighth largest passenger airline and
the second largest low-cost carrier in the United States.
America West Airlines, Inc. is the largest low-cost carrier that
operates a hub-and-spoke network, with large hubs in both
Phoenix, Arizona and Las Vegas, Nevada. As of March&nbsp;31,
2005, America West Airlines, Inc. operated a fleet of 138
aircraft with an average age of 11.0&nbsp;years and served 63
destinations in North America, including eight in Mexico,
</DIV>
</DIV>

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three in Canada and one in Costa Rica. Through regional alliance
and code share arrangements with other airlines, America West
Airlines, Inc. served an additional 51 destinations in North
America. In 2004, America West Airlines, Inc. had approximately
21.1&nbsp;million passengers boarding its planes and generated
revenues of approximately $2.3&nbsp;billion.
</DIV>

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<B>The Merger (see page&nbsp;70)</B>
</DIV>

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America West Holdings and US&nbsp;Airways Group have agreed to
the business combination of US&nbsp;Airways Group and America
West Holdings under the terms of the merger agreement that is
described in this prospectus. America West Holdings will merge
with Barbell Acquisition Corp., a wholly owned subsidiary of
US&nbsp;Airways Group. The rights offering is conditioned on the
completion of the merger. For more information relating to the
merger, see the section entitled &#147;The Merger.&#148;
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<B>The Combined Company Following the Merger (see
page&nbsp;44)</B>
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<B><I>US&nbsp;Airways&nbsp;Group, Inc.</I></B>
</DIV>

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111 West Rio Salado Parkway
</DIV>

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Tempe, Arizona 85281
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(480)&nbsp;693-0800
</DIV>

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Following the implementation of the debtors&#146; plan of
reorganization, including the merger and the new equity
investments and other related transactions described in this
prospectus, we will operate under the single brand name of
US&nbsp;Airways through our two principal operating subsidiaries
US&nbsp;Airways, Inc. and America West Airlines, Inc. We expect
to integrate the two operating subsidiaries into one operation
over the following 24&nbsp;months. We expect that the merger
will create the fifth largest airline operating in the United
States as measured by domestic revenue passenger miles and by
ASMs. We expect to have primary hubs in Charlotte, Philadelphia
and Phoenix and secondary hubs/focus cities in Pittsburgh, Las
Vegas, New York, Washington,&nbsp;D.C. and Boston. After the
merger, New US&nbsp;Airways Group will be a low-cost carrier
offering scheduled passenger service on approximately 3,600
flights daily to 229&nbsp;cities in the U.S., Canada, the
Caribbean, Latin America and Europe. New US&nbsp;Airways Group
will operate 361&nbsp;mainline jets and will be supported by its
regional airline subsidiaries and affiliates operating as
US&nbsp;Airways Express, which will operate approximately 239
regional jets, of which 83 will be aircraft with 70 or more
seats, and approximately 57&nbsp;turboprops.
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We expect that New US&nbsp;Airways Group will have one of the
most competitive cost structures in the airline industry due to
cost cutting measures initiated by both companies over the last
three years. US&nbsp;Airways Group&#146;s restructuring
activities in the debtors&#146; current and prior
Chapter&nbsp;11 bankruptcy proceedings have specifically
targeted cost reductions in four main areas. First, it has
achieved important reductions in labor, pension and benefit
costs resulting in ratified collective bargaining agreements,
representing over $2&nbsp;billion of annual cost savings.
Second, it has put restructuring initiatives in place to reduce
overhead, including reducing management payroll, and has
re-vamped its schedule to improve aircraft utilization. Third,
it has renegotiated various contractual obligations resulting in
lower costs, including those related to aircraft, real estate
and suppliers, and lowered catering costs. Lastly,
US&nbsp;Airways&nbsp;Group rationalized its fleet through the
elimination of older, less efficient aircraft, the introduction
of large regional jet aircraft with low trip costs to better
match capacity with demand, and the reduction of the number of
mainline aircraft types it operates in order to lower
maintenance, inventory and pilot training costs.
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Separately, America West Holdings has also been able to greatly
reduce its operating expenses as a percentage of revenues since
2002. America West Holdings instituted programs to reduce
management payroll, clerical payroll, travel agency based
commissions, incentive programs and override commissions. It has
reduced capital expenditures and discretionary expenses, and
lowered catering costs. Other initiatives include increasing
point-to-point flying at minimal additional costs using aircraft
that would otherwise be parked at a gate, which increases daily
utilization of aircraft.
</DIV>
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In addition to the cost saving initiatives already undertaken at
the individual companies, we believe the combination of America
West Holdings and US&nbsp;Airways&nbsp;Group will result in
significant annual revenue and cost synergies of approximately
$600&nbsp;million that would be unachievable without completing
the merger. These synergies derive from three principal sources.
In anticipation of the merger, US&nbsp;Airways&nbsp;Group has
negotiated a reduction in its existing fleet so that the fleet
of the combined company suits the expected network. New
US&nbsp;Airways Group will be able to schedule the combined
fleet to better match aircraft size with consumer demand. By
scheduling the reduced fleet more efficiently and by adding new,
low-fare service to Hawaii, we expect to create approximately
$175&nbsp;million in annual operating synergies. We also expect
to realize annual cost synergies of approximately
$250&nbsp;million by reducing administrative overhead,
consolidating our information technology systems and combining
facilities. Lastly, by becoming one nationwide, low-cost carrier
with a global reach that provides more choice for consumers and
an improved ability to connect, we expect to realize
approximately $175&nbsp;million in additional annual revenue.
There can be no assurance that we will be able to achieve these
revenue, operating and cost synergies or that they can be
achieved in a timely manner.
</DIV>

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US&nbsp;Airways Group and its subsidiaries currently employ
approximately 30,100 people, and America West Holdings and its
subsidiaries currently employ approximately 14,000 people. After
seniority lists have been integrated for each of the combined
airlines&#146; unionized labor groups, we anticipate that a
single labor contract will be applied to each of those groups.
</DIV>

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The combined airline is expected to operate a mainline fleet of
361 planes (supported by approximately 239 regional jets and
approximately 57 turboprops that provide passenger feed into the
mainline system), down from a total of 417 mainline aircraft
operated by the two airlines as of March&nbsp;31, 2005.
US&nbsp;Airways Group has removed an additional 13&nbsp;aircraft
from its fleet through May&nbsp;31, 2005 and projects removing
an additional 35 aircraft by the end of 2006. The combined
airline is also expected to take delivery by the end of
February&nbsp;2006 of seven Airbus A320 family aircraft
previously ordered by America West Airlines, Inc. Airbus has
also agreed to reconfirm 30 narrow body A320-family aircraft
deliveries and reschedule those deliveries from the 2006&nbsp;to
2008 period to the 2009&nbsp;to 2010 period. To rationalize
international flying, the merged company anticipates working
with Airbus to begin transitioning to an all-Airbus widebody
fleet of A350 aircraft in 2011.
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We believe the merger will create one of the industry&#146;s
most financially stable airlines with approximately
$1.5&nbsp;billion in new liquidity coming from equity
investments, this rights offering, new cash infusions from
commercial partners, asset sales and the release of currently
restricted cash.
</DIV>

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The $500&nbsp;million of new equity investments is expected to
be provided by several investors. This rights offering, if fully
subscribed, will provide an additional $150&nbsp;million of
equity financing. In addition, the merged company will receive
approximately $550&nbsp;million of cash infusions from
commercial partners, approximately $100&nbsp;million from
asset-based financings or sales of aircraft and approximately
$170&nbsp;million from release of certain cash reserves that are
currently restricted but that should be released as a part of
the plan of reorganization.
</DIV>

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For more information on these matters, see the sections entitled
&#147;The Plan of Reorganization&#148; and &#147;The New Equity
Investments.&#148;
</DIV>

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</DIV>

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    <B><I>Competitive Strengths of the Combined Company</I></B></TD>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we will have a number of competitive strengths
as a combined company, including:
</DIV>

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<B><I>Largest U.S.&nbsp;Low-Cost Carrier with Nationwide Route
Network.</I></B> We expect to be the first national full-service
low-cost carrier and the largest low-cost carrier by revenue
passenger miles (including international service). We anticipate
being the fifth largest airline operating in the United States
as measured by domestic revenue passenger miles and by ASMs,
with a national hub-and-spoke route network that will provide
our customers with nationwide reach. We believe New
US&nbsp;Airways Group will capture approximately
</DIV>
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10% of all domestic revenue passenger miles. The combined
company plans to continue as a member of the Star Alliance, the
world&#146;s largest airline alliance group.
</DIV>

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With our simplified pricing structure and international scope,
we will offer competitive fare service to approximately
229&nbsp;cities in the United States, Canada, the Caribbean,
Latin America and Europe, making us the only low-cost carrier
with a significant international route presence. Starting in
2006, we expect to expand our route network to include Hawaii.
We will be the only low-cost carrier with an established East
Coast route network, including the US&nbsp;Airways Shuttle
service, with substantial presence at capacity constrained
airports like New York&#146;s LaGuardia Airport and
Washington,&nbsp;D.C.&#146;s Ronald Reagan Washington National
Airport.
</DIV>

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<B><I>Offer Services Not Typical of Low-Cost Carriers.</I></B>
We believe that by delivering high-quality service, with greater
frequency of flight departures and by offering our customers
premium amenities not available on other low-cost carriers, we
will provide the best value in our markets and create increased
demand for our air travel services. We expect to be the only
national low-cost carrier offering a global frequent flyer
program, assigned seating, a First Class cabin, the
US&nbsp;Airways Shuttle, online service to approximately
44&nbsp;international destinations, convenient access to over
700&nbsp;global destinations through our membership in the Star
Alliance, and the convenience of our airport clubs. We expect
that these amenities will differentiate our service from other
low-cost carriers and will allow us to strengthen customer
loyalty and attract new air travelers. We believe that our
customers will continue to value our full service amenities and
flight frequency, and that will help us to compete effectively
with other low-cost carriers by providing our business oriented
passengers with a premium product at a competitive price.
</DIV>

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<B><I>Competitive Low-Cost Structure.</I></B> We believe that
the cost saving initiatives of both companies discussed above,
coupled with the significant cost synergies from the
combination, will allow us to have one of the most competitive
cost structures in the airline industry. On a pro forma basis,
once the anticipated merger synergies are realized, we expect
that the costs of New US&nbsp;Airways&nbsp;Group, on a unit
basis, after merger synergies will be approximately the same as
those of America West Holdings today. We believe that we will be
able to compete effectively and profitably with this cost
structure.
</DIV>

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<B><I>Improved Balance Sheet with Substantial New
Liquidity.</I></B> We believe that we will be one of the
industry&#146;s most financially stable airlines. We expect New
US&nbsp;Airways Group to realize approximately $10&nbsp;billion
in annual revenues and have as of the completion of the merger a
strong balance sheet that includes an estimated $2&nbsp;billion
in total cash, cash equivalents and short term investments. The
combined balance sheets will benefit from a cash infusion of
approximately $1.5&nbsp;billion, which will include equity
investments aggregating $500&nbsp;million, the proceeds raised
through this rights offering of approximately $150&nbsp;million,
the release of certain cash reserves and other initiatives that
will provide New US&nbsp;Airways Group with substantial new
liquidity.
</DIV>

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<B><I>Experienced Management Team.</I></B> We will benefit from
an experienced, highly motivated combined management team. Our
team will be led by W.&nbsp;Douglas Parker, who has been the
chief executive officer of America West Holdings since 2001 and
prior to that served as chief operating officer from 2000 to
2001 and chief financial officer from 1995 to 2000. As chief
executive officer, Mr.&nbsp;Parker led America West
Holdings&#146; transformation into a low-cost carrier.
</DIV>

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    <B><I>Business Strategy</I></B></TD>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business strategy consists of the following:
</DIV>

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<B><I>Provide Excellent Value to Our Customers.</I></B> We plan
to standardize customer service initiatives system-wide and
provide a competitive, simplified pricing structure that we
believe will provide our customers with an excellent value when
compared to other low-cost carriers as well as legacy mainline
carriers. We are committed to building a successful airline by
taking care of our customers. We believe that our focus on
excellent customer service in every aspect of operations,
including personnel, flight equipment, in-flight and ancillary
amenities, on-time performance, flight completion ratios and
baggage handling, will strengthen
</DIV>
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customer loyalty, provide excellent value to our customers and
attract new customers. Further, we believe that the amenities we
provide our customers, such as a frequent flyer program, airport
clubs, assigned seating and a First Class cabin, differentiates
our product offering from other low-cost carriers.
</DIV>

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<B><I>Continue to Reduce Our Operating Costs.</I></B> After the
merger, New US&nbsp;Airways Group will focus on achieving cost
reduction synergies that it expects to realize from the merger.
Key areas where cost reductions can be achieved as a result of
the merger include overhead costs, in-sourcing of information
technology solutions where America West Holdings has existing
capabilities, airport savings through better use of gates and
employees in airports that both America West Holdings and
US&nbsp;Airways Group serve today, and eliminating redundant
facilities such as office space and hangars. We currently expect
these initiatives to achieve approximately $250&nbsp;million in
annual savings once fully implemented. In addition, we also plan
to increase aircraft use to increase flying and reduce unit
costs.
</DIV>

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<B><I>Leverage Our Broader Route Network and Rationalize Our
Fleet.</I></B> We expect to achieve annual savings of
approximately $175&nbsp;million from rationalizing our fleet,
rescheduling our operations, and adding new, low-fare service to
Hawaii. As a result of the merger, New US&nbsp;Airways Group
plans to combine the current regional strengths of both America
West Holdings on the West Coast and US&nbsp;Airways Group on the
East Coast to provide a comprehensive product offering more
attractive to customers. We also plan to make more efficient use
of our nationwide network as a combined entity. New
US&nbsp;Airways Group will be able to coordinate the schedules
to and from the hubs and secondary hubs/focus cities of both
airlines to create a significantly greater number of flight
connections across the route network. Similarly, we believe that
we will be able to optimize the utilization of our aircraft and
employees. For instance, aircraft of one airline that today
would have to sit idle awaiting the next scheduled departure
could be utilized after the merger along existing routes of the
other airline to increase daily utilization.
</DIV>

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In anticipation of the merger, US&nbsp;Airways Group has
negotiated a reduction to its existing fleet so that the fleet
of the combined company suits the expected route network and so
that the introduction of new aircraft will be timed to coincide
with the expiration of existing aircraft leases. We believe that
we will also be able to reschedule the combined fleet to better
match aircraft size with consumer demand. For example, in some
markets that US&nbsp;Airways&nbsp;Group currently serves with a
Boeing&nbsp;737 aircraft, we expect to replace that service with
a 90-seat regional jet that is currently operated in the America
West Holdings system. In addition, we expect to place America
West Holdings new aircraft into service on flights out of
current US&nbsp;Airways Group hubs. Furthermore, we plan to
initiate Boeing&nbsp;757 aircraft service to Hawaii, which
neither of us currently serves. These changes are expected to
generate revenue benefits of approximately $175&nbsp;million.
</DIV>

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<B><I>Prudent Integration of America West Airlines, Inc. and
US&nbsp;Airways, Inc. Operations.</I></B> While management will
move quickly to try to provide a seamless integration for
consumers, we currently expect to achieve full labor and
operational integration of America West Airlines, Inc. and
US&nbsp;Airways, Inc. over a 24&nbsp;month period. We believe
that this timeframe will allow us to resolve the critical labor
and systems issues necessary to achieve full integration. We
plan to operate under a single brand name of US&nbsp;Airways
while maintaining separate operating certificates for this
24&nbsp;month period. We believe that the majority of the
synergy value can be realized quickly through the rapid
integration of routes, schedules, pricing, other marketing
initiatives and overhead reductions.
</DIV>

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<B><I>Management of New US&nbsp;Airways Group</I></B>
</DIV>

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Following the merger, the board of directors of New
US&nbsp;Airways Group will consist of 13&nbsp;members. Six of
these directors will be appointed by America West Holdings (five
of whom will be independent), four of these directors will be
appointed by US&nbsp;Airways Group (three of whom will be
independent) and up to three of these directors will be
appointed by certain new equity investors in New US&nbsp;Airways
Group. Except as described in the next paragraph, we have not
yet determined the identities of the new directors.
</DIV>

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W.&nbsp;Douglas Parker, the current Chairman and Chief Executive
Officer of America West Holdings, will serve as Chairman and
Chief Executive Officer of New US&nbsp;Airways Group following
the merger. Bruce
</DIV>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Lakefield, the current President and Chief Executive Officer of
US&nbsp;Airways Group and US&nbsp;Airways, Inc., will serve as
Vice Chairman of New US&nbsp;Airways Group following the merger.
See the section entitled &#147;The Merger Agreement&nbsp;&#151;
Post-Merger America West Holdings Governing Documents, Officers
and Directors; New US&nbsp;Airways Group Governing Documents and
Directors.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='110'></A>
</DIV>

<!-- link1 "Listing of New US Airways Group Common Stock (see page 75)" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Listing of New US&nbsp;Airways Group Common Stock (see
page&nbsp;75)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are applying to have the shares of New US&nbsp;Airways Group
common stock to be issued in the rights offering authorized for
listing on the NYSE upon official notice of issuance under the
symbol
&#147;[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;].&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='111'></A>
</DIV>

<!-- link1 "The Debtors&#146; Plan of Reorganization (see page 84)" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Debtors&#146; Plan of Reorganization (see
page&nbsp;84)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Federal bankruptcy law requires the debtors to complete a series
of tasks in order to emerge from bankruptcy and complete the
merger. The major tasks include filing with the court a
disclosure statement and a plan of reorganization that contain
detailed historical, financial and operational information about
the debtors and also explain how the business will be structured
following the bankruptcy and how claims will be treated. The
debtors will ask the bankruptcy court for approval of the
disclosure statement and, if it is approved, the plan of
reorganization will be submitted to certain creditors for a
vote. The plan of reorganization will then be submitted to the
bankruptcy court for confirmation. Assuming the bankruptcy court
approves the plan of reorganization, the debtors will have
permission and authority to enter into all of the transactions
necessary to emerge from bankruptcy, including the merger. The
date that all of these transactions are finalized is the
effective date of both the plan of reorganization and the merger.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On [month, day], 2005, the debtors submitted to the bankruptcy
court their proposed disclosure statement. On [month, day],
2005, the bankruptcy court issued an order approving the
disclosure statement and ordered that the disclosure statement
and proposed plan of reorganization be submitted to certain
creditors eligible to vote on the plan of reorganization. On
[month, day], 2005, the debtors mailed copies of the plan of
reorganization and disclosure statement to creditors and set
[month, day], 2005 as the voting deadline for those creditors
who could cast votes for or against the plan of reorganization.
Assuming that the plan of reorganization is confirmed by the
bankruptcy court and that the other conditions specified in the
plan of reorganization are satisfied or waived, the plan of
reorganization will become effective. US&nbsp;Airways Group
currently anticipates that the plan of reorganization will
become effective on or around [month, day], 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the proposed plan of reorganization developed by the
debtors, the following events will occur on the effective date
of the plan of reorganization and the merger (percentages below
are based on certain assumptions contained in the section
entitled &#147;Capitalization&#148; and reflect the impact of
certain securities that are dilutive at the per share purchase
price paid by the equity investors):
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="5%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    America West Holdings will merge with Barbell Acquisition Corp.,
    which is a wholly owned subsidiary of US&nbsp;Airways Group, and
    will as a result itself become a wholly owned subsidiary of New
    US&nbsp;Airways Group;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    The new equity investors ACE Aviation Holdings Inc., or ACE; Par
    Investment Partners, L.P., or Par; Peninsula Investment
    Partners, L.P., or Peninsula; a group of investors under the
    management of Wellington Management Company, LLP, or Wellington;
    and Eastshore Aviation, LLC, or Eastshore; will invest
    $500&nbsp;million in consideration for the issuance of
    approximately 32.5&nbsp;million&nbsp;shares of New
    US&nbsp;Airways Group common stock, representing approximately
    49% of New US&nbsp;Airways Group common stock outstanding as of
    the completion of the merger, as more fully described in the
    section entitled &#147;The New Equity Investments.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    The general unsecured creditors, including the Pension Benefit
    Guaranty Corporation, or the PBGC, and the Air Line Pilots
    Association, as their claims are allowed, will receive
    approximately</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">6

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="5%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    8.2&nbsp;million&nbsp;shares of New US&nbsp;Airways Group common
    stock, representing approximately 12% of New US&nbsp;Airways
    Group common stock outstanding as of the completion of the
    merger;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Under certain agreements among General Electric and certain of
    its affiliates, or GE, and US&nbsp;Airways Group, GE has agreed,
    in consideration for the early return of 51 aircraft and six
    engines, the assumption of certain modified leases and the
    issuance of convertible notes in the amount of
    $125&nbsp;million, (1)&nbsp;in part to retire an existing bridge
    loan facility, (2)&nbsp;to complete a purchase by GE of 21
    aircraft and 28 engines with a simultaneous lease back of the
    equipment to US&nbsp;Airways, Inc. at market rates, (3)&nbsp;to
    allow US&nbsp;Airways Group to draw additional amounts under an
    existing credit facility, which will result in a total principal
    outstanding balance thereunder of approximately
    $28&nbsp;million, (4)&nbsp;to restructure lease obligations of
    US&nbsp;Airways, Inc. relating to 59 aircraft to market rates,
    (5)&nbsp;to provide financing for current and growth aircraft,
    (6)&nbsp;to grant concessions regarding return condition
    obligations with respect to the return of aircraft and engines,
    and (7)&nbsp;to waive penalties for the removal of engines
    currently under GE engine agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    In consideration of (i)&nbsp;the assumption by US&nbsp;Airways
    Group of certain purchase agreements between US&nbsp;Airways
    Group and AVSA, S.A.R.L., an affiliate of Airbus Industrie
    G.I.E., referred to as Airbus, and (ii)&nbsp;the entry into
    certain new agreements between New US&nbsp;Airways Group,
    America West Holdings and Airbus which provide for (1)&nbsp;the
    purchase by US&nbsp;Airways Group and America West Holdings of
    up to 20 new A350 airplanes from Airbus, (2)&nbsp;the ability to
    convert orders for up to ten of the A350 aircraft to orders for
    A330 aircraft, (3)&nbsp;the ability to cancel up to ten of the
    A330 aircraft previously ordered upon the payment of certain
    predelivery payments for A350 aircraft, and (4)&nbsp;changes in
    the delivery schedule for existing orders of narrow-body
    aircraft, Airbus will provide New US&nbsp;Airways Group a
    $250&nbsp;million line of credit to be used by New
    US&nbsp;Airways Group, of which $213&nbsp;million can be used
    for general corporate purposes, together with additional
    backstop financing for the purchase of the A350 aircraft.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Affiliates of ACE will enter into a series of agreements with
    New US&nbsp;Airways&nbsp;Group, including maintenance and
    airport handling agreements; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    New US&nbsp;Airways Group&#146;s board of directors will be
    reconstituted to include 13&nbsp;members as described in the
    section entitled &#147;The Merger Agreement&nbsp;&#151;
    Post-Merger America West Holdings Governing Documents, Officers
    and Directors; New US&nbsp;Airways Group Governing Documents and
    Directors.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the proposed plan of reorganization will provide
for the satisfaction of certain secured and unsecured
prepetition claims against the debtors. These include claims
related to the debtors&#146; assumption or rejection of various
contracts and unexpired leases, the assumption of debtors&#146;
existing collective bargaining agreements with their unions and
the termination of certain employee benefit plans with employees
and retirees, and other matters. The ultimate resolution of
certain of the claims asserted against the debtors in the
Chapter&nbsp;11 cases will be subject to negotiations, elections
and bankruptcy court procedures that will occur after the date
of this prospectus and after the effective date, although
resolution of these claims will not affect the number of shares
of New US&nbsp;Airways Group common stock available to the
general unsecured creditors pursuant to this rights offering.
While a significant amount of the debtors&#146; liabilities will
be extinguished as a result of the discharge granted upon
confirmation of the plan of reorganization, not all of the
debtors&#146; liabilities will be subject to discharge. The
types of obligations that the debtors will remain responsible
for include those relating to their secured financings, aircraft
financings, certain environmental liabilities and the continuing
obligations arising under contracts and leases assumed by the
debtors.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='112'></A>
</DIV>

<!-- link1 "New Equity Investments (see page 86)" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>New Equity Investments (see page&nbsp;86)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group and America West Holdings have entered
into agreements with equity investors which have agreed to
contribute a total of $500&nbsp;million in new equity to New
US&nbsp;Airways Group, subject to a variety of conditions,
including completion of the merger.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">7

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<DIV align="left" style="font-size: 10pt;">
<A name='113'></A>
</DIV>

<!-- link1 "Accounting Treatment (see page 75)" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Accounting Treatment (see page&nbsp;75)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For accounting purposes only, New US&nbsp;Airways&nbsp;Group
will account for the merger as a &#147;reverse acquisition&#148;
using the purchase method of accounting in conformity with
accounting principles generally accepted in the United States of
America. Although the merger is structured so that America West
Holdings will become a wholly owned subsidiary of New
US&nbsp;Airways&nbsp;Group at closing, America West Holdings
will be treated as the acquiring company for accounting purposes
in accordance with Statement of Financial Accounting Standards,
or SFAS, No.&nbsp;141, &#147;Business Combinations.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='114'></A>
</DIV>

<!-- link1 "Risk Factors (see page 21)" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risk Factors (see page&nbsp;21)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In evaluating whether to purchase shares of New US&nbsp;Airways
Group common stock in this rights offering, you should carefully
read this prospectus and especially consider the factors
discussed in the section entitled &#147;Risk Factors.&#148;
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">8

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<DIV align="left" style="font-size: 10pt;">
<A name='115'></A>
</DIV>

<!-- link1 "Rights Offering Summary" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rights Offering Summary</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following is a summary that highlights information about
this rights offering. This summary might not contain all the
information that is important to you. For a more complete
description of this rights offering, please see the section
entitled &#147;The Rights Offering.&#148;</I>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Rights</TD>
    <TD></TD>
    <TD valign="top">
    Each basic right entitles its holder to purchase one share of
    New US&nbsp;Airways Group common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
     &#149; &nbsp;Each America West Holder at the close of business
    on the record date will receive, at no charge, one transferable
    basic right for every
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;shares
    of America West Holdings Class&nbsp;A or Class&nbsp;B common
    stock held of record on the record date. In addition, America
    West Holders will receive over-subscription privileges. The
    number of rights issued to each America West Holder will be
    rounded up to the nearest whole right, subject to any
    adjustments necessary to ensure that, if all rights are
    exercised, we will issue 9,090,909&nbsp;shares.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
     &#149; &nbsp;Certain US&nbsp;Airways Creditors at the close of
    business on the record date will receive, at no charge,
    non-transferable basic rights. Since a determination will not be
    made on the exact amount of all US&nbsp;Airways Creditor&#146;s
    claims or the total amount of all claims allowed to vote on the
    plan of reorganization until the confirmation hearing,
    US&nbsp;Airways Creditors will need to estimate the amount of
    basic rights in order to estimate the required subscription
    payment. See &#147;Determination of Payment when Exercising
    Rights&#148; below. In addition, each US&nbsp;Airways Creditor
    will receive over-subscription privileges. The number of rights
    issued to each US&nbsp;Airways Creditor will be rounded up to
    the nearest whole right, subject to any adjustments necessary to
    ensure that, if all rights are exercised, we will issue
    9,090,909&nbsp;shares.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Subscription Price</TD>
    <TD></TD>
    <TD valign="top">
    $16.50 per share.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Number of Rights</TD>
    <TD></TD>
    <TD valign="top">
    Holders will receive rights to purchase an aggregate of
    9,090,909&nbsp;shares of New US&nbsp;Airways Group common stock.
    A total of 3,500,000 basic rights will be issued to America West
    Holders, and a total of 5,590,909 basic rights will be issued to
    US&nbsp;Airways Creditors.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Over-Subscription Privilege</TD>
    <TD></TD>
    <TD valign="top">
    Each America West Holder and US&nbsp;Airways Creditor who elects
    to exercise its basic subscription privilege may also subscribe
    at the Subscription Price for additional shares of New
    US&nbsp;Airways Group common stock, not to exceed
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]x
    the number of shares that Holder elected to purchase pursuant to
    the basic subscription.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    If any shares being offered in this rights offering are
    available after satisfying all exercises of basic rights, we
    will allocate the over-subscription requests as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
     &#149; &nbsp;America West Holders will have their
    over-subscription requests satisfied first out of any shares
    remaining in the America West Holders Pool after satisfying all
    exercises of the basic subscription rights by America West
    Holders and then out of any remaining shares in the
    US&nbsp;Airways Creditors Pool after satisfying the basic and
    over-subscription requests of US&nbsp;Airways Creditors. The
    number of additional shares</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">9

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    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

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    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    we allocate to each America West Holder pursuant to its
    over-subscription privilege will be calculated by adding the
    number of shares available for over-subscription in the America
    West Holders Pool and any remaining shares in the
    US&nbsp;Airways Creditor Pool, and multiplying the sum of those
    shares by a proration factor. The proration factor is determined
    by dividing the total number of shares that the America West
    Holder elected to purchase under the over-subscription privilege
    by the total number of shares all America West Holders elected
    to purchase pursuant to the over-subscription privilege.
    However, each basic right held by an American West Holder must
    be exercised for that Holder&#146;s associated over-subscription
    privilege to apply. The number of additional shares we allocate
    to you pursuant to the over-subscription privilege is subject to
    further adjustment to permit tax counsel to deliver opinions to
    the effect that the merger will qualify as a tax-free
    &#147;reorganization&#148; within the meaning of
    Section&nbsp;368(a) of the Internal Revenue Code of 1986, as
    amended.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
     &#149; &nbsp;US&nbsp;Airways Creditors will have their
    over-subscription requests satisfied first out of any shares
    remaining in the US&nbsp;Airways Creditors Pool after satisfying
    all exercises of the basic subscription rights of
    US&nbsp;Airways Creditors and then out of any remaining shares
    in the America West Holders Pool after satisfying the basic and
    over- subscription requests of America West Holders. The number
    of additional shares we allocate to each US&nbsp;Airways
    Creditor pursuant to its over-subscription privilege will be
    calculated by adding the number of shares available for
    over-subscription in the US&nbsp;Airways Creditors Pool and any
    remaining shares in the America West Holders Pool, and
    multiplying the sum of those shares by a proration factor. The
    proration factor will be determined by dividing the total number
    of shares that the US&nbsp;Airways Creditor is ultimately
    determined to have elected to purchase pursuant to the
    over-subscription privilege by the total number of shares all
    US&nbsp;Airways Creditors are ultimately determined to have
    elected to purchase pursuant to the over-subscription privilege.
    However, each basic right that is ultimately determined to be
    held by a US&nbsp;Airways Creditor must be exercised for that
    Holder&#146;s associated over-subscription privilege to apply.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Record Date</TD>
    <TD></TD>
    <TD valign="top">
    [month, day], 2005, which is the date used to determine which
    (x)&nbsp;America West Holders and (y)&nbsp;US&nbsp;Airways
    Creditors are entitled to be granted rights.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Expiration Date</TD>
    <TD></TD>
    <TD valign="top">
    <B>The rights will expire at 5:00&nbsp;p.m., New York City time,
    on [month, day], 2005, which we refer to as the Expiration Date.
    Any rights that remain unexercised at the Expiration Date will
    expire and no longer be exercisable.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Transferability of Rights of America West Holders</TD>
    <TD></TD>
    <TD valign="top">
    America West Holders may transfer their rights through the
    Subscription Agent or otherwise. We cannot assure you, however,
    that any market for the rights will develop or, if a market
    develops, that the market will remain available throughout the</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">10

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</TD>
    <TD></TD>
    <TD valign="top">
    period during which rights may be exercised. Each America West
    Holder may sell its rights through usual investment channels or
    request that the Subscription Agent endeavor to sell the rights
    for such America West Holders who have so requested and have
    delivered a certificate evidencing the rights, which we refer to
    as a rights certificate, with the instruction for sale properly
    executed, to the Subscription Agent at or prior to
    11:00&nbsp;a.m., New York City time, on [month, day], 2005. We
    cannot assure you that the Subscription Agent will be able to
    sell any rights or as to the prices the Subscription Agent may
    be able to obtain in those sales. See the section entitled
    &#147;The Rights Offering&nbsp;&#151; Method of Transferring
    America West Holdings Rights&#148; for more information.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Non-Transferability of US Airways Creditors Rights</TD>
    <TD></TD>
    <TD valign="top">
    US&nbsp;Airways Creditors&#146; rights are not transferable
    through the Subscription Agent. A US&nbsp;Airways
    Creditor&#146;s rights may only be exercised by the holder of
    the claim on the record date. If a US&nbsp;Airways Creditor
    subsequently transfers its claim, we will not recognize the
    transferee as the holder of the rights.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Procedure for Exercising Rights</TD>
    <TD></TD>
    <TD valign="top">
    The rights may be exercised by properly completing the rights
    certificate and delivering it, or by following the Guaranteed
    Delivery Procedures as described in this prospectus, with
    payment of the Subscription Price for each share subscribed for,
    to the Subscription Agent. The Subscription Agent must receive
    your payment and your rights certificate, or a Notice of
    Guaranteed Delivery, prior to the Expiration Date. If you send
    your rights certificates by mail, we urge you to use insured,
    registered mail, return receipt requested.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Funds paid by uncertified personal checks may take at least five
    business days to clear. Accordingly, we urge Holders of rights
    who wish to pay the Subscription Price by means of uncertified
    personal checks to make payment sufficiently in advance of the
    Expiration Date to ensure that the payment is received and
    clears by the Expiration Date. We also urge you to consider, in
    the alternative, payment by means of certified or cashier&#146;s
    check, money order or wire transfer of funds.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <B>ONCE A HOLDER HAS EXERCISED ITS RIGHTS, THE HOLDER MAY NOT
    REVOKE THAT EXERCISE. RIGHTS NOT EXERCISED PRIOR TO THE
    EXPIRATION DATE WILL EXPIRE AND WILL NO LONGER BE EXERCISABLE BY
    ANY HOLDER.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Determination of Payment when Exercising Rights</TD>
    <TD></TD>
    <TD valign="top">

    &#149; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>If
    you are an America West Holder:</I></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    For every
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    shares of America West Holdings Class&nbsp;A or Class&nbsp;B
    common stock you own on the record date, you will be entitled to
    one basic right. In addition, you may purchase up to
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]x that basic subscription amount
    pursuant to your over-subscription privilege.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
     For example, assuming you will be entitled to 1&nbsp;basic
    right for each 10&nbsp;shares of America West Holdings
    Class&nbsp;A or Class&nbsp;B</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">11

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    common stock you own, if you own 100&nbsp;shares of common stock
    of America West Holdings on the record date, you would be
    entitled to 10 basic rights. To fully exercise your basic rights
    you would then multiply the Subscription Price of $16.50 by your
    10 basic rights, and submit a dollar amount of $165.00. If you
    wish to fully exercise your over-subscription privilege,
    assuming a 10x over-subscription option, you would multiply 10 x
    10 x $16.50, and submit an additional $1,650.00 as payment for
    the full amount of the over-subscription privilege.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
     Therefore, you would submit a total payment to the Subscription
    Agent of $1,815.00 (the sum of $165.00 to exercise your basic
    rights and $1,650.00 to exercise your over-subscription
    privilege) for your full exercise of your basic and
    over-subscription privileges.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
     Notwithstanding the foregoing, you are in no way obligated to
    exercise either your basic or over-subscription privileges in
    full, and any lesser amount will be accepted. However, you must
    exercise each basic right to exercise any associated
    over-subscription privilege.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In the event that the total dollar amount you submit is greater
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, the surplus will be
    applied as an exercise of the over-subscription privilege
    discussed above.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In the event that the total dollar amount you submit is less
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, you will receive fewer
    shares than you estimated you would have been entitled to
    receive. In the case of an under-subscription, you will not have
    an opportunity to submit further payment for any additional
    basic rights or over-subscription privileges.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In the event that the total dollar amount you submit is greater
    than the basic and over-subscription privileges you are
    ultimately entitled to, any excess funds will be returned to
    you, without interest, within 5&nbsp;business days of the
    Allocation Date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">

    &#149; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>If
    you are a US&nbsp;Airways Creditor</I>:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
     Your basic rights will ultimately be determined pursuant to the
    US&nbsp;Airways Creditor Basic Right Calculation on the
    Allocation Date. A determination may not be made on the exact
    amount of your allowed claim, or the total amount of all allowed
    claims, entitled to vote on the plan of reorganization until on
    or before the Confirmation Order Date. Solely for the purposes
    of estimating your basic rights, we have assumed
    $[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;billion
    of total allowed voting claims. You may estimate you will
    receive one basic right for each
    $[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    allowed voting claim amount. For example, an allowed voting
    claim for
    $[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    is estimated to receive
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    basic rights. However, your basic rights will ultimately be
    determined pursuant to the US Airways Creditor Basic Right
    Calculation on the Allocation Date. See the question, &#147;How
    are the basic rights of each US Airways Creditor ultimately
    determined?&#148; for more information.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">12

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
     Once you have estimated your basic subscription, you may pay
    for your basic subscription and pay up to
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]x
    that basic subscription price to participate in the associated
    over-subscription privilege.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    You would multiply the Subscription Price of $16.50 by the
    estimated number of basic rights to which you estimate you are
    entitled, and submit a dollar amount in order to pay for the
    full amount of basic rights attributable to your estimated
    claim. If you hold a $100,000 claim and wish to fully exercise
    your over-subscription privilege, assuming a 10x
    over-subscription option, you would multiply
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;x&nbsp;10&nbsp;x&nbsp;$16.50,
    and submit
    $[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    as an additional payment for the full amount of the
    over-subscription privilege.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Therefore, you would submit a total payment to the Subscription
    Agent of
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    (the sum of
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    to exercise your basic rights and
    $[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
    to exercise your over-subscription privilege) for your full
    exercise of your basic and over-subscription privileges.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Notwithstanding the foregoing, you are in no way obligated to
    exercise either your basic or over-subscription privilege in
    full, and any lesser amount will be accepted. However, you must
    exercise each basic right to exercise any associated
    over-subscription privilege.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Although we have provided you with our best estimate of the
    amount of your basic rights and over-subscription privilege, it
    is likely that your final basic rights and over-subscription
    privilege will be different from our estimate, perhaps
    materially so. In the rights certificate, you must acknowledge
    that New US Airways Group is not liable for any damages
    resulting from your receiving a different number of rights and
    over- subscription privileges than you originally estimated you
    would be entitled to receive.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In the event that the total dollar amount you submit is greater
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, the surplus will be
    applied as an exercise of the over-subscription privilege
    discussed above.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In the event that the total dollar amount you submit is less
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, you will receive fewer
    shares than you estimated you would have been entitled to
    receive. In the case of an under-subscription, you will not have
    an opportunity to submit further payment for any additional
    basic rights or over-subscription privileges.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In the event that the total dollar amount you submit is greater
    than the basic and over-subscription privileges you are
    ultimately entitled to, any excess funds will be returned to
    you, without interest, within 5&nbsp;business days of the
    Allocation Date.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">13

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Persons Holding the Rights, or Wishing to Exercise Rights,
    through Others</TD>
    <TD></TD>
    <TD valign="top">
    Persons holding rights through a broker, dealer, commercial
    bank, trust company or other nominee, as well as persons holding
    certificates for the rights personally who would prefer to have
    those institutions effect transactions relating to the rights on
    their behalf, should contact the appropriate institution or
    nominee and request it to effect the transactions for them.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Conditions to the Rights Offering</TD>
    <TD></TD>
    <TD valign="top">
    The completion of this rights offering is subject to a number of
    conditions, including the confirmation of the plan of
    reorganization and completion of the merger. See the section
    entitled &#147;The Rights Offering&nbsp;&#151; Conditions to the
    Rights Offering&#148; for more information.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Issuance of Common Stock</TD>
    <TD></TD>
    <TD valign="top">
    Certificates for shares of New US&nbsp;Airways Group common
    stock purchased under the rights will be delivered to
    subscribers as soon as practicable after the Closing Date. Funds
    delivered to the Subscription Agent in payment of the
    Subscription Price will be retained by the Subscription Agent
    until the completion of this rights offering and the issuance of
    those stock certificates. If this rights offering is terminated
    after the Expiration Date, interest will be paid to Holders
    (with that interest to accrue from the Expiration Date to the
    date of termination) on funds paid to the Subscription Agent and
    returned to the Holders.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Listing</TD>
    <TD></TD>
    <TD valign="top">
    We are applying to have the shares of New US&nbsp;Airways Group
    common stock authorized for listing on the NYSE upon official
    notice of issuance under the symbol
    &#147;[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&#148;.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Use of Proceeds</TD>
    <TD></TD>
    <TD valign="top">
    The aggregate proceeds from this rights offering (estimated to
    be approximately $150&nbsp;million assuming all the rights are
    exercised), after deducting offering expenses, will be used for
    general corporate purposes, including the possible redemption or
    repurchase of other securities of New US&nbsp;Airways Group.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Certain Federal Income Tax Consequences</TD>
    <TD></TD>
    <TD valign="top">
    The tax consequences of the rights offering will depend on your
    status as an America West Holder or a US&nbsp;Airways Creditor.
    The likely tax consequences of the rights offering are described
    under the section entitled &#147;Material United States Federal
    Income Tax Consequences.&#148; The tax consequences to you will
    depend on your particular situation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Tax matters are complicated and we strongly urge you to consult
    your own tax advisor for a fuller understanding of the tax
    consequences to you resulting from the rights offering.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Subscription Agent</TD>
    <TD></TD>
    <TD valign="top">
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;],
    whom we refer to as the Subscription Agent.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">14

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
<A name='116'></A>
</DIV>

<!-- link1 "Summary Selected Financial Data" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Selected Financial Data</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='117'></A>
</DIV>

<!-- link1 "US Airways Group, Inc." -->

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US&nbsp;Airways&nbsp;Group, Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The selected consolidated financial data presented below is
derived from US&nbsp;Airways Group&#146;s consolidated financial
statements for each of the periods in the five years ended
December&nbsp;31, 2004, 2003, 2002, 2001 and 2000 contained in
US&nbsp;Airways Group&#146;s Annual Reports on Form&nbsp;10-K
for the years ended December&nbsp;31, 2004, 2003, 2002 and 2001
and US&nbsp;Airways&nbsp;Group&#146;s unaudited consolidated
financial statements contained in the Quarterly Reports on
Form&nbsp;10-Q for the quarters ended March&nbsp;31, 2005 and
2004. The selected consolidated financial data should be read in
conjunction with the consolidated financial statements for the
respective periods, the related notes and the related reports of
US&nbsp;Airways&nbsp;Group&#146;s independent registered public
accounting firm included elsewhere in this prospectus. See the
consolidated financial statements of US&nbsp;Airways Group
included in its Annual Report on Form&nbsp;10-K for the year
ended December&nbsp;31, 2004 and Quarterly Report on
Form&nbsp;10-Q for the quarterly period ended March&nbsp;31,
2005, which are attached as annexes to this prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="31" align="center" nowrap><B>(in millions, except per share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated statements of operations data:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,312</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,269</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,356</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,322</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(201</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(143</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(378</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(207</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,317</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,683</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(53</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before cumulative effect of accounting change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(282</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(177</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(611</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,663</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,124</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative effect of accounting change, net of applicable income
    taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(103</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(282</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(177</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(611</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,646</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,117</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(269</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) per common share before cumulative effect of
    accounting change:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.28</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(31.59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.28</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(31.48</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss) per common share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.28</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(31.59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.28</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(31.48</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares used in computation:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53.5</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53.5</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash Dividends per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated balance sheet data (at end of period):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,555</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,127</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term obligations and redeemable preferred stock(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,458</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,641</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,379</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(598</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(434</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,921</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,615</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(358</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Includes debt, capital leases and postretirement benefits other
    than pensions (noncurrent). Also includes liabilities subject to
    compromise at March&nbsp;31, 2005, December&nbsp;31, 2004 and
    December&nbsp;31, 2002.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">15
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(b)&nbsp;</TD>
    <TD align="left">
    The operating results for the nine months ended
    December&nbsp;31, 2003, the year ended December&nbsp;31, 2002
    and the year ended December&nbsp;31, 2001 include the following
    unusual items:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="4%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    The nine months ended December&nbsp;31, 2003 include:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="4%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A $214&nbsp;million, net of amounts due to certain affiliates,
    reduction in operating expenses in connection with the
    reimbursement for certain aviation-related security expenses in
    connection with the Emergency Wartime Supplemental
    Appropriations Act.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A $35&nbsp;million charge in connection with US&nbsp;Airways
    Group&#146;s intention not to take delivery of certain aircraft
    scheduled for future delivery.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="4%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    The results for the year ended December&nbsp;31, 2002 include:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="4%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A $392&nbsp;million impairment charge as a result of an
    impairment analysis conducted on the B737-300, B737-400,
    B757-200 and B767-200 aircraft fleets as a result of changes to
    the aircraft&#146;s recoverability periods, the planned
    conversion of owned aircraft to leased aircraft and indications
    of possible material changes to the market values of these
    aircraft. The analysis revealed that estimated undiscounted
    future cash flows generated by these aircraft were less than
    their carrying values for four B737-300s, 15 B737-400s, 21
    B757-200s and three B767-200s. In accordance with Statement of
    Financial Accounting Standards, or SFAS, No.&nbsp;144,
    &#147;Accounting for the Impairment or Disposal of Long-Lived
    Assets,&#148; the carrying values were reduced to fair market
    value.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A curtailment credit of $120&nbsp;million related to certain
    postretirement benefit plans and a $30&nbsp;million curtailment
    charge related to certain defined benefit pension plans.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    An impairment charge of $21&nbsp;million related to capitalized
    gates at certain airports in accordance with
    SFAS&nbsp;No.&nbsp;142, &#147;Goodwill and Other Intangible
    Assets.&#148; The carrying values of the affected gates were
    reduced to fair value based on a third party appraisal.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="4%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    The results for the year ended December&nbsp;31, 2001 include:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="4%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    An aircraft impairment and related charge of $787&nbsp;million.
    During August 2001, US&nbsp;Airways Group conducted an
    impairment analysis in accordance with SFAS&nbsp;No.&nbsp;121
    &#147;Accounting for the Impairment of Long-Lived Assets and for
    Long-Lived Assets to Be Disposed Of,&#148; on its 36 F-100
    aircraft, 16 MD-80 aircraft and 39 B737-200 aircraft as a result
    of changes to the fleet plan as well as indications of possible
    material changes to the market values of these aircraft. The
    analysis revealed that estimated undiscounted future cash flows
    generated by these aircraft were less than their carrying
    values. In accordance with SFAS&nbsp;121, the carrying values
    were reduced to fair market value. This analysis resulted in a
    pretax charge of $403&nbsp;million. In the aftermath of
    September&nbsp;11, 2001, US&nbsp;Airways Group elected to
    accelerate the retirement of the aforementioned aircraft. All
    B737-200 aircraft retirements were accelerated to the end of
    2001 while the F-100s and MD-80s were scheduled to be retired by
    April 2002. Based on this, US&nbsp;Airways Group conducted
    another impairment analysis which revealed that these aircraft
    were impaired. This culminated in an additional pretax charge of
    $173&nbsp;million largely reflecting the further diminution in
    value of used aircraft arising from the events of
    September&nbsp;11, 2001. Management estimated fair market value
    using third-party appraisals, published sources and recent sales
    and leasing transactions. As a result of the events of
    September&nbsp;11, 2001, US&nbsp;Airways Group reviewed other
    aircraft-related assets which resulted in a pretax charge of
    $15&nbsp;million as certain aircraft assets had carrying values
    in excess of their fair value less costs to sell. Management
    estimated fair value based on recent sales and leasing
    transactions. US&nbsp;Airways Group also recognized a pretax
    charge of $26&nbsp;million in connection with the write-down to
    lower of cost or market of surplus parts for the F-100, B737-200
    and MD-80 fleets. Management estimated market value based on
    recent sales activity related to these parts. During the first
    quarter of 2002, US&nbsp;Airways, Inc. entered into agreements
    to sell 97 surplus aircraft and related spare engines and parts,
    including substantially all of its DC-9, MD-80 and B737-200
    aircraft. In connection with these agreements, US&nbsp;Airways
    Group reduced the carrying values of these assets resulting in a
    $148&nbsp;million charge during the fourth quarter of 2001,
    including a $138&nbsp;million impairment charge and a charge of
    $10&nbsp;million to write down the related spare parts.
    Additionally, US&nbsp;Airways Group recognized a pretax
    impairment charge of $22&nbsp;million in connection with the
    planned retirement of five B737-200 aircraft due to a
    third-party&#146;s early return of certain leased B737-200
    aircraft, and early retirement of certain other B737-200s during
    the first quarter of 2001.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A $83&nbsp;million charge for employee severance and benefits.
    In September 2001, US&nbsp;Airways Group announced that in
    connection with its reduced flight schedule it would terminate
    or furlough approximately 11,000 employees across all employee
    groups. Approximately 10,200 of the affected employees were
    terminated or furloughed on or prior to January&nbsp;1, 2002.
    Substantially all the remaining affected employees were
    terminated or furloughed by May 2002. US&nbsp;Airways
    Group&#146;s headcount reduction was largely accomplished
    through involuntary terminations/furloughs. In connection with
    this headcount reduction, US&nbsp;Airways Group offered a
    voluntary leave program to certain employee groups. Voluntary
    leave program participants generally received extended benefits
    (e.g. medical, dental, life insurance) but did not receive any
    furlough pay benefit. In the nine months ended December&nbsp;31,
    2003 and the year ended December&nbsp;31, 2002 include
    $1&nbsp;million and $3&nbsp;million, respectively, in reductions
    to severance pay and benefit accruals related to the involuntary
    termination or furlough of certain employees.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">16

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<P><HR noshade><P>
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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="4%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Charges of $4&nbsp;million and $66&nbsp;million, respectively,
    representing the present value of the future minimum lease
    payments on three B737-200 aircraft and four F-100 aircraft,
    respectively, that were permanently removed from service.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A charge of $13&nbsp;million representing the unamortized
    leasehold improvement balance for facilities to be abandoned and
    aircraft to be parked as of the facility abandonment date or
    aircraft park date. In addition, US&nbsp;Airways Group
    recognized a pretax charge of $3&nbsp;million representing the
    present value of future noncancelable lease commitments beyond
    the facility abandonment date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A $2&nbsp;million curtailment charge related to a certain
    postretirement benefit plan.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(c)&nbsp;</TD>
    <TD align="left">
    Nonoperating income (expense)&nbsp;for the three months ended
    March&nbsp;31, 2005 and the year ended December&nbsp;31, 2004
    include reorganization items, net of $2&nbsp;million and
    $35&nbsp;million, respectively. The nine months ended
    December&nbsp;31, 2003 includes a $30&nbsp;million gain on the
    sale of US&nbsp;Airways Group&#146;s investment in Hotwire, Inc.
    In connection with the prior bankruptcy, a $1.92&nbsp;billion
    gain and charges of $294&nbsp;million of reorganization items,
    net, are included for the three months ended March&nbsp;31, 2003
    and the year ended December&nbsp;31, 2002, respectively.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
<A name='118'></A>
</DIV>

<!-- link1 "America West Holdings Corporation" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Corporation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The selected consolidated financial data presented below is
derived from America West Holdings&#146; consolidated financial
statements for each of the five years ended December&nbsp;31,
2004, 2003, 2002, 2001 and 2000 contained in America West
Holdings&#146; Annual Reports on Form&nbsp;10-K for the years
ended December&nbsp;31, 2004, 2003, 2002 and 2001 and America
West Holdings&#146; unaudited consolidated financial statements
contained in America West Holdings&#146; Quarterly Reports on
Form&nbsp;10-Q and Form&nbsp;10-Q/ A for the quarters ended
March&nbsp;31, 2005 and 2004, respectively. The selected
consolidated financial data should be read in conjunction with
the consolidated financial statements for the respective
periods, the related notes and the related reports of America
West Holdings&#146; independent registered public accounting
firms. See the consolidated financial statements of
America&nbsp;West Holdings included in its Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2004 and
Quarterly Report on Form&nbsp;10-Q for the quarterly period
ended March&nbsp;31, 2005, which are attached as annexes to this
prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(in thousands except per share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated statements of operations data:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>722,812</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>649,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,338,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,254,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,047,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,065,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,344,354</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses(a)(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>672,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>634,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,382,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,232,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,206,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,476,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,356,991</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(43,771</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(159,424</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(410,681</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,637</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes (benefit) and cumulative
    effect of change in accounting principle(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,563</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(88,993</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(214,757</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(324,387</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,743</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,071</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(74,536</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,064</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before cumulative effect of change in accounting
    principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,563</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(179,686</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(249,851</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,563</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(387,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(249,851</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) per share before cumulative effect of change in
    accounting principle:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.04</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.33</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7.42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.04</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.33</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7.42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss) per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.04</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11.50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7.42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.04</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11.50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7.42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares used for computation:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,139</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,688</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated balance sheet data (at end of period):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,580,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,598,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,475,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,614,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,438,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,469,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,568,515</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</DIV>

<P align="center" style="font-size: 10pt;">18

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(in thousands except per share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>588,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>643,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>635,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>688,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>700,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>224,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>145,578</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>124,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>667,073</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Effective with the first quarter of 2005, America West Holdings
    changed the presentation of its regional alliance agreement with
    Mesa Airlines to the gross basis of presentation. Previously,
    America West Holdings used the net basis of presentation. The
    amounts below depict total operating revenues and total
    operating expenses under the gross basis of presentation.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,711,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,541,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,309,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,273,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,522,553</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,755,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,519,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,468,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,684,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,535,190</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(b)&nbsp;</TD>
    <TD align="left">
    The 2004 results include a $16.3&nbsp;million net credit
    associated with the termination of the rate per engine hour
    agreement with General Electric Engine Services for overhaul
    maintenance services on V2500-A1 engines, a $0.6&nbsp;million
    credit related to the revision of the estimated costs associated
    with the sale and leaseback of certain aircraft recorded in the
    first quarter of 2002 and a $0.4&nbsp;million credit related to
    the revision of estimated charges associated with the Columbus,
    Ohio hub closure originally recorded in the second quarter of
    2003. These credits were partially offset by $1.9&nbsp;million
    of net charges related to the return of certain Boeing 737-200
    aircraft which includes termination payments of
    $2.1&nbsp;million, the write-down of leasehold improvements and
    deferred rent of $2.8&nbsp;million, offset by the net reversal
    of maintenance reserves of $3.0&nbsp;million. The 2003 period
    includes $16.0&nbsp;million of charges resulting from the
    elimination of America West Airlines, Inc.&#146;s hub operations
    in Columbus, Ohio ($11.1&nbsp;million), the reduction-in-force
    of certain management, professional and administrative employees
    ($2.3&nbsp;million), and the impairment of certain owned Boeing
    737-200 aircraft that have been grounded ($2.6&nbsp;million)
    offset by a $1.1&nbsp;million reduction of charges due to a
    revision of the estimated costs related to the early termination
    of certain aircraft leases and a $0.5&nbsp;million reduction
    related to the revision of estimated costs associated with the
    sale and leaseback of certain aircraft. The 2002 period includes
    $19.0&nbsp;million of charges primarily related to the
    restructuring completed on January&nbsp;18, 2002, resulting from
    the events of September&nbsp;11, 2001. The 2001 period includes
    $141.6&nbsp;million of special charges related to the impairment
    of reorganization value in excess of amounts allocable to
    identifiable assets and owned aircraft and engines, as well as
    the earlier-than-planned return of seven leased aircraft and
    severance expenses following a reduction-in-force in 2001.
    America West Holdings reclassified amounts related to settled
    fuel hedge transactions and mark-to-market adjustments on open
    hedge instruments from fuel expense to gain (loss) on derivative
    instruments, net. The amounts for the years ended
    December&nbsp;31, 2004 and 2003 were an addition to fuel expense
    of $30.5&nbsp;million and $10.7&nbsp;million, respectively. For
    the years ended December&nbsp;31, 2002 and 2001, the amounts
    reduced fuel expense by $0.7&nbsp;million and $7.2&nbsp;million,
    respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(c)&nbsp;</TD>
    <TD align="left">
    Nonoperating income (expense)&nbsp;in the 2004 period includes a
    $30.5&nbsp;million net gain on derivative instruments, which
    included mark-to-market changes and settled transactions, and
    $1.3&nbsp;million for the write-off of debt issue costs in
    connection with the refinancing of a term loan issued by General
    Electric Capital Corporation with an aggregate amount of
    $110.6&nbsp;million. The 2003 period includes federal government
    assistance of $81.3&nbsp;million recognized as nonoperating
    income under the Emergency Wartime Supplemental Appropriations
    Act and $8.5&nbsp;million and $108.2&nbsp;million recognized in
    2002 and 2001, respectively, as nonoperating income under the
    Air Transportation Safety and System Stabilization Act. The
    2003, 2002 and 2001 periods include a $10.7&nbsp;million net
    gain, $0.7&nbsp;million net loss and $7.2&nbsp;million net loss
    on derivative instruments, respectively, including
    mark-to-market changes and settled transactions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(d)&nbsp;</TD>
    <TD align="left">
    America West Holdings diluted earnings per share for the year
    ended December&nbsp;31, 2003 includes the impact related to the
    7.25%&nbsp;notes under the &#147;if-converted&#148; methodology.
    The impact reduced diluted earnings per share by $0.03 from
    $1.29 to $1.26.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">19

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
<A name='119'></A>
</DIV>

<!-- link1 "Selected Unaudited Pro Forma Condensed Combined Financial Data" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Selected Unaudited Pro Forma Condensed Combined Financial
Data</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways&nbsp;Group will account for the merger as a
&#147;reverse acquisition&#148; using the purchase method of
accounting in conformity with accounting principles generally
accepted in the United States of America. Although the merger is
structured such that America West Holdings will become a wholly
owned subsidiary of New US&nbsp;Airways Group at closing,
America West Holdings will be treated as the acquiring company
for accounting purposes in accordance with
SFAS&nbsp;No.&nbsp;141, &#147;Business Combinations,&#148; due
to the following factors: (1)&nbsp;America West Holdings
stockholders are expected to own approximately 39% of New
US&nbsp;Airways Group common stock outstanding immediately
following the merger as compared to certain former
US&nbsp;Airways Creditors who will hold approximately 12% (these
percentages reflect certain assumptions concerning the likely
exchange of certain convertible debt and the impact of certain
securities that are dilutive at the per share purchase price
paid by the equity investors), (2)&nbsp;America West Holdings
will receive a larger number of designees to the New
US&nbsp;Airways Group board of directors; and (3)&nbsp;America
West Holdings&#146; current Chairman and Chief Executive Officer
will serve as Chairman and Chief Executive Officer of New
US&nbsp;Airways Group following the merger.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following unaudited pro forma condensed combined balance
sheet as of March&nbsp;31, 2005 and the unaudited pro forma
condensed combined statements of operations for the year ended
December&nbsp;31, 2004 and quarter ended March&nbsp;31, 2005 are
based on the historical consolidated financial statements of
US&nbsp;Airways&nbsp;Group and America West Holdings included in
their respective reports on Form&nbsp;10-Q and Form&nbsp;10-K
attached as annexes to this prospectus, giving effect to the
merger and other transactions that will be effective upon
completion of the merger. No effect has been given to the
proceeds received or the rights given in the rights offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma condensed combined statements of
operations give effect to the merger as if it had occurred on
January&nbsp;1, 2004 and the unaudited pro forma condensed
combined balance sheet gives effect to the merger as if it had
occurred on March&nbsp;31, 2005. The two major categories of
adjustments reflected in the pro&nbsp;forma condensed combined
financial statements are &#147;Purchase Accounting
Adjustments&#148; and &#147;Other Merger Adjustments.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For more detailed information about the unaudited pro forma
condensed combined financial statements, see the section
entitled &#147;Unaudited Pro Forma Condensed Combined Financial
Statements.&#148;
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(dollars in millions, except per</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Statement of Operations Data:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,456</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,957</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(501</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(259</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(717</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic and diluted loss per share of common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12.87</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(dollars in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>millions)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance Sheet Data:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash, cash equivalents and short term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt and capital lease obligations, including current
    maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</DIV>

<P align="center" style="font-size: 10pt;">20

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<DIV align="left" style="font-size: 10pt;">
<A name='120'></A>
</DIV>

<!-- link1 "RISK FACTORS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RISK FACTORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>In addition to the other information included in this
prospectus, including the matters addressed in &#147;Cautionary
Statement Concerning Forward-Looking Statements,&#148; you
should carefully consider the following risks before deciding
whether to exercise the rights being issued to you in accordance
with this prospectus.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Related to Our Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our business is dependent on the price and availability of
aircraft fuel. Continued periods of historically high fuel
costs, significant disruptions in the supply of aircraft fuel or
significant further increases in fuel costs could have a
significant negative impact on our operating results.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our operating results are significantly impacted by changes in
the availability or price of aircraft fuel. Fuel prices
increased substantially in 2004 compared with 2003 and have
continued to increase in 2005. Due to the competitive nature of
the airline industry, we generally have not been able to
increase our fares when fuel prices have risen in the past and
we may not be able to do so in the future. Although we are
currently able to obtain adequate supplies of aircraft fuel, it
is impossible to predict the future availability or price of
aircraft fuel. In addition, from time to time we enter into
hedging arrangements to protect against rising fuel costs. Our
ability to hedge in the future, however, may be limited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>New US&nbsp;Airways Group may not perform as well financially
as we expect following the merger.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In deciding to enter into the merger agreement, US&nbsp;Airways
Group and America West Holdings considered the benefits of
operating as a combined company, including, among others: an
enhanced ability to compete in the airline industry and the fact
that the proprietary brands of the combined company would permit
New US&nbsp;Airways Group to further differentiate itself from
other airline companies. The success of the merger will depend,
in part, on our ability to realize the anticipated revenue
opportunities and cost savings from combining the businesses of
US&nbsp;Airways Group and America West Holdings. We have
estimated that the combined companies expect to realize
approximately $600&nbsp;million in incremental operating cost
and revenue synergies. We cannot assure you, however, that these
synergies will be realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To realize the anticipated benefits from the merger, we must
successfully combine the businesses of US&nbsp;Airways Group and
America West Holdings in a manner that permits those costs
savings and other synergies to be realized in a timely fashion.
In addition, we must achieve these savings without adversely
affecting revenues or suffering a business interruption. If we
are not able to successfully achieve these objectives, the
anticipated benefits of the merger may not be realized fully or
at all or may take longer to realize than expected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We cannot assure you that the merger, even if achieved in an
efficient, effective and timely manner, will result in combined
results of operations and financial condition consistent with
the pro forma condensed, combined financial data or superior to
what America West Holdings and US&nbsp;Airways Group could have
achieved independently.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The integration of US&nbsp;Airways Group and America West
Holdings following the merger will present significant
challenges.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
US&nbsp;Airways Group and America West Holdings have operated
and, until the completion of the merger, will continue to
operate, independently. US&nbsp;Airways Group and America West
Holdings will face significant challenges in consolidating
functions, integrating their organizations, procedures and
operations in a timely and efficient manner and retaining key
US&nbsp;Airways Group and America West Holdings personnel. The
integration of US&nbsp;Airways Group and America West Holdings
will be costly, complex and time consuming, and the managements
of US&nbsp;Airways&nbsp;Group and America West Holdings will
have to devote substantial effort to such integration that could
otherwise be spent on operational matters or other strategic
opportunities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We expect that the merger will result in certain synergies,
business opportunities and growth prospects. New US&nbsp;Airways
Group, however, may never realize these expected synergies,
business opportunities and growth
</DIV>

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<DIV align="left" style="font-size: 10pt;">
prospects. New US&nbsp;Airways Group may experience increased
competition that limits its ability to expand its business. We
may not be able to capitalize on expected business
opportunities, including retaining current customers. In
addition, assumptions underlying estimates of expected cost
savings and expected revenue synergies may be inaccurate, or
general industry and business conditions may deteriorate.
Furthermore, integrating operations will require significant
efforts and expenses. New US&nbsp;Airways Group management may
have its attention diverted from ongoing operations while trying
to integrate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US&nbsp;Airways Group continues to experience significant
operating losses.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Despite significant labor cost reductions and other cost savings
achieved in the prior bankruptcy, US&nbsp;Airways Group has
continued to experience significant operating losses. Since
early 2001, the U.S.&nbsp;airline industry&#146;s revenue
performance has fallen short of what would have been expected
based on historical growth trends. This shortfall has been
caused by a number of factors, including rising fuel costs, as
discussed above, and the factors discussed below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The rapid growth of low-cost carriers has had a profound impact
on industry revenues. Using the advantage of low unit costs,
these carriers offer lower fares, particularly those targeted at
business passengers, in order to shift demand from larger,
more-established airlines. As a result of growth, these low-cost
carriers now transport nearly 30% of all domestic
U.S.&nbsp;passengers compared to less than 10% a decade ago.
They now compete for, and thus influence industry pricing on,
approximately 81% of all domestic U.S.&nbsp;passenger ticket
sales compared to less than 20% a decade ago. As a result of
their better financial performance they have access to capital
to fund fleet growth. Low-cost carriers are expected to continue
to increase their market share through pricing and growth.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The advent of Internet travel websites has lowered the cost to
airlines of selling tickets. However, it has also had a large
negative impact on airline revenues because travel consumers now
have access to nearly perfect pricing information and, as a
result, have become more efficient at finding lower fare
alternatives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Union disputes, employee strikes and other labor-related
disruptions may adversely affect our operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The business plan of New US&nbsp;Airways&nbsp;Group includes
assumptions about labor costs going forward. Currently, the
labor costs of both America West Holdings and
US&nbsp;Airways&nbsp;Group are very competitive and very
similar; however, we cannot assure you that labor costs going
forward will remain competitive, either because New
US&nbsp;Airways&nbsp;Group agreements may become amendable or
because competitors may significantly reduce their labor costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Approximately 80% of the employees within
US&nbsp;Airways&nbsp;Group and approximately 81% of the
employees within America West Holdings are represented for
collective bargaining purposes by labor unions. In the United
States, these employees are organized into nine labor groups
represented by five different unions at US&nbsp;Airways, Inc.,
seven labor groups represented by four different unions at
America West Airlines, Inc., four labor groups represented by
four different unions at Piedmont Airlines, and four labor
groups represented by four different unions at PSA Airlines.
There are additional unionized groups of US&nbsp;Airways, Inc.
employees abroad.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Relations between air carriers and labor unions in the United
States are governed by the Railway Labor Act, or the RLA. Under
the RLA, collective bargaining agreements generally contain
&#147;amendable dates&#148; rather than expiration dates, and
the RLA requires that a carrier maintain the existing terms and
conditions of employment following the amendable date through a
multi-stage and usually lengthy series of bargaining processes
overseen by the National Mediation Board. This process continues
until either the parties have reached agreement on a new
collective bargaining agreement, or the parties have been
released to &#147;self-help&#148; by the National Mediation
Board. Although in most circumstances the RLA prohibits strikes,
after release by the National Mediation Board carriers and
unions are free to engage in self-help measures such as strikes
and lock-outs. None of the US&nbsp;Airways, Inc. labor
agreements becomes amendable until December&nbsp;31, 2009. Of
the America West Holdings labor agreements, three are currently
amendable, a fourth becomes amendable soon and negotiations are
proceeding with a fifth group for an initial collective
bargaining agreement.
</DIV>

<P align="center" style="font-size: 10pt;">22

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
There is the potential for litigation to arise in the context of
airline mergers. Unions may seek to delay or halt a transaction,
may seek monetary damages, either in court or in grievance
arbitration, may seek to compel airlines to engage in the
bargaining processes where the airline believes it has no such
obligation or may seek to assert rights to participate in
corporate governance, including through board representation.
There is a risk that one or more unions may pursue such judicial
or arbitral avenues in the context of the merger, and if
successful, could delay or block the merger or create additional
costs that we did not anticipate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
There is also a risk that disgruntled employees, either with or
without union involvement, could engage in illegal slow-downs,
work stoppages, partial work stoppages, sick-outs or other
action short of a full strike that could individually or
collectively harm the operation of the airline and impair its
financial performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fluctuations in interest rates could adversely affect our
liquidity, operating expenses and results.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A substantial portion of our indebtedness bears interest at
fluctuating interest rates. These are primarily based on the
London interbank offered rate for deposits of U.S.&nbsp;dollars,
or LIBOR. LIBOR tends to fluctuate based on general economic
conditions, general interest rates, federal reserve rates and
the supply of and demand for credit in the London interbank
market. We have not hedged our interest rate exposure and,
accordingly, our interest expense for any particular period may
fluctuate based on LIBOR and other variable interest rates. To
the extent these interest rates increase, our interest expense
will increase, in which event, we may have difficulties making
interest payments and funding our other fixed costs and our
available cash flow for general corporate requirements may be
adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We rely heavily on automated systems to operate our business
and any failure of these systems, or the failure to successfully
integrate them following the merger, could harm our business.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We depend on automated systems to operate our business,
including our computerized airline reservation systems, our
flight operations systems, our telecommunication systems and our
websites. Our website and reservation systems must be able to
accommodate a high volume of traffic and deliver important
flight information. Substantial or repeated website,
reservations systems or telecommunication systems failures could
reduce the attractiveness of our services and could cause our
customers to purchase tickets from another airline. Furthermore,
following the merger, we must integrate the automated systems of
America West Holdings and US&nbsp;Airways Group. Any disruption
in these systems could result in the loss of important data,
increase our expenses and generally harm our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>If we incur problems with any of our third party service
providers, our operations could be adversely affected by a
resulting decline in revenue or negative public perception about
our services.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our reliance upon others to provide essential services on behalf
of our operations may result in the relative inability to
control the efficiency and timeliness of contract services. We
have entered into agreements with contractors to provide various
facilities and services required for our operations, including
aircraft maintenance, ground facilities and baggage handling. It
is likely that similar agreements will be entered into in any
new markets we decide to serve. All of these agreements are
subject to termination after notice. Any material problems with
the efficiency and timeliness of contract services could have a
material adverse effect on our business, financial condition and
results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The travel industry, materially adversely affected by the
September&nbsp;11, 2001 terrorist attacks, continues to face
on-going security concerns and cost burdens associated with
security.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The attacks of September&nbsp;11, 2001 materially impacted and
continue to impact air travel. In November&nbsp;2001, the
President signed into law the Aviation and Transportation
Security Act, or the Aviation Security Act. This law federalized
substantially all aspects of civil aviation security, creating a
new Transportation Security Administration, or TSA. Under the
Aviation Security Act, substantially all security screeners at
airports are now federal employees and significant other
elements of airline and airport security are now overseen and
performed by federal employees, including federal security
managers, federal law enforcement officers, federal air marshals
and federal security screeners. Among other matters, the law
mandates improved flight
</DIV>

<P align="center" style="font-size: 10pt;">23

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<DIV align="left" style="font-size: 10pt;">
deck security, deployment of federal air marshals onboard
flights, improved airport perimeter access security, airline
crew security training, enhanced security screening of
passengers, baggage, cargo, mail, employees and vendors,
enhanced training and qualifications of security screening
personnel, additional provision of passenger data to
U.S.&nbsp;Customs and enhanced background checks. These
increased security procedures introduced at airports since the
attacks have increased costs to airlines. We would also be
materially impacted in the event of further terrorist attacks or
perceived terrorist threats.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Increases in insurance costs or reductions in insurance
coverage may adversely impact our operations and financial
results.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The terrorist attacks of September&nbsp;11, 2001 led to a
significant increase in insurance premiums and a decrease in the
insurance coverage available to commercial airline carriers.
Accordingly, our insurance costs increased significantly and our
ability to continue to obtain insurance even at current prices
remains uncertain. In addition, we have obtained third party war
risk (terrorism) insurance through a special program
administered by the FAA resulting in lower premiums than if we
had obtained this insurance in the commercial insurance market.
If the federal insurance program terminates, we would likely
face a material increase in the cost of war risk insurance.
Because of competitive pressures in our industry, our ability to
pass additional insurance costs to passengers is limited. As a
result, further increases in insurance costs or reductions in
available insurance coverage could harm our earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings and US&nbsp;Airways Group may be
required to comply with material restrictions or conditions in
order to obtain the regulatory approvals to complete the merger
and any delays in obtaining regulatory approvals will delay and
may possibly prevent the merger.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The completion of the merger is conditioned upon receiving
approval from various federal, state and local regulatory
authorities, including the U.S.&nbsp;Department of
Transportation, Federal Aviation Administration, Federal
Communications Commission and Department of Homeland Security,
and certain foreign regulatory authorities. America West
Holdings and US&nbsp;Airways Group have not yet obtained all of
the regulatory approvals required to complete the merger.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
While America West Holdings and US&nbsp;Airways Group have
received clearance from the Department of Justice and expect to
obtain the required regulatory approvals, America West Holdings
and US&nbsp;Airways Group cannot be certain that all of the
required air transportation and non-U.S.&nbsp;antitrust
approvals may be obtained, nor can they be certain that the
approvals will be obtained within the time contemplated by the
merger agreement. A delay in obtaining the required approvals
may delay and may possibly prevent the completion of the merger.
For a full description of the regulatory approvals required for
the merger see the section entitled &#147;The Merger&nbsp;&#151;
Regulatory Approvals Required for the Merger.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Changes in government regulation could increase our operating
costs and limit our ability to conduct our business.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Airlines are subject to extensive regulatory requirements. In
the last several years, Congress has passed laws and the
U.S.&nbsp;Federal Aviation Administration has issued a number of
maintenance directives and other regulations. These requirements
impose substantial costs on airlines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Additional laws, regulations, taxes and airport rates and
charges have been proposed from time to time that could
significantly increase the cost of airline operations or reduce
revenues. The ability of U.S.&nbsp;carriers to operate
international routes is subject to change because the applicable
arrangements between the U.S. and foreign governments may be
amended from time to time, or because appropriate slots or
facilities may not be available. We cannot assure you that laws
or regulations enacted in the future will not adversely affect
our operating costs.
</DIV>

<P align="center" style="font-size: 10pt;">24
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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>A small number of shareholders will beneficially own a
substantial amount of New US&nbsp;Airways Group common stock.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Immediately following the effectiveness of the merger and the
plan of reorganization, a significant portion of the New
US&nbsp;Airways Group common stock will be beneficially owned by
a relatively small number of equity investors. As a result,
until these stockholders sell a substantial portion of their
shares, they will have a greater percentage vote in matters that
may be presented for a vote to stockholders than most other
stockholders. This may make it more difficult for other
stockholders to influence votes on matters that may come before
stockholders of New US&nbsp;Airways Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The use of America West Holdings&#146; and US&nbsp;Airways
Group&#146;s respective pre-merger NOLs and certain other tax
attributes may be limited following the merger.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Although New US Airways Group is the same legal entity as US
Airways Group and will continue as the publicly traded parent
entity, each of America West Holdings and US&nbsp;Airways Group
will undergo an &#147;ownership change,&#148; as defined in
Internal Revenue Code Section&nbsp;382, in connection with the
merger and the rights offering. When such an ownership change
occurs, Section&nbsp;382 limits the companies&#146; future
ability to utilize any net operating losses, or NOLs, generated
before the ownership change and certain subsequently recognized
&#147;built-in&#148; losses and deductions, if any, existing as
of the date of the ownership change. The companies&#146; ability
to utilize new NOLs arising after the ownership change would not
be affected. An ownership change generally occurs if certain
persons or groups increase their aggregate ownership percentage
in a corporation&#146;s stock by more than 50&nbsp;percentage
points in the shorter of any three-year period or the period
since the last ownership change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The airline industry is intensely competitive.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our competitors include other major domestic airlines as well as
foreign, regional and new entrant airlines, some of which have
more financial resources or lower cost structures than ours, and
other forms of transportation, including rail and private
automobiles. In most of our markets we compete with at least one
low-cost air carrier. Our revenues are sensitive to numerous
factors, and the actions of other carriers in the areas of
pricing, scheduling and promotions can have a substantial
adverse impact on overall industry revenues. These factors may
become even more significant in periods when the industry
experiences large losses, as airlines under financial stress, or
in bankruptcy, may institute pricing structures intended to
achieve near-term survival rather than long-term viability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Certain US&nbsp;Airways Group liabilities will not be fully
extinguished as a result of confirmation of the plan of
reorganization.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
While a significant amount of US&nbsp;Airways Group&#146;s
current liabilities will be subject to discharge as a result of
the debtors&#146; bankruptcy proceedings, a large number of
US&nbsp;Airways Group obligations may remain in effect following
the merger. Various agreements and liabilities will remain in
place, including secured financings, aircraft agreements,
certain environmental liabilities, leases and other contracts
that, even if modified during the bankruptcy process, will still
subject New US&nbsp;Airways Group to substantial obligations and
liabilities. For more information regarding these liabilities,
refer to the section entitled &#147;Where You Can Find More
Information About US Airways Group and America West
Holdings.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our high level of fixed obligations limits our ability to
fund general corporate requirements and obtain additional
financing, limits our flexibility in responding to competitive
developments and increases our vulnerability to adverse economic
and industry conditions.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have a significant amount of fixed obligations, including
debt, aircraft leases and financings, aircraft purchase
commitments, leases of airport and other facilities and other
cash obligations. As a result of the substantial fixed costs
associated with these obligations:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A decrease in revenues would result in a disproportionately
    greater percentage decrease in earnings.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">25

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We may not have sufficient liquidity to fund all of these fixed
    costs if our revenues decline or costs increase.</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We may have to use our working capital to fund these fixed costs
    instead of funding general corporate requirements, including
    capital expenditures.</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We may not have sufficient liquidity to respond to competitive
    developments and adverse economic conditions.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our obligations also impair our ability to obtain additional
financing, if needed, and our flexibility in the conduct of our
business. Our existing indebtedness is secured by substantially
all of our assets, leaving us with limited collateral for
additional financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our ability to pay the fixed costs associated with our
contractual obligations depends on our operating performance and
cash flow, which in turn depend on general economic and
political conditions. A failure to pay our fixed costs or a
breach of our contractual obligations could result in a variety
of adverse consequences, including the acceleration of our
indebtedness, the withholding of credit card proceeds by the
credit card servicers and the exercise of remedies by our
creditors and lessors. In such a situation, it is unlikely that
we would be able to fulfill our obligations under or repay the
accelerated indebtedness, make required lease payments or
otherwise cover our fixed costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Interruptions or disruptions in service at one of our hub
airports could have a material adverse impact on our
operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We expect that New US&nbsp;Airways Group will operate primarily
through primary hubs in Charlotte, Philadelphia and Phoenix and
secondary hubs/focus cities in Pittsburgh, Las Vegas, New York,
Washington, D.C. and Boston. A majority of our flights will
either originate or fly into one of these hubs. A significant
interruption or disruption in service at one of our hubs could
result in the cancellation or delay of a significant portion of
our flights and, as a result, could have a severe impact on our
business, operations and financial performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We are at risk of losses and adverse publicity stemming from
any accident involving any of our aircraft.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If one of our aircraft were to be involved in an accident, we
could be exposed to significant tort liability. The insurance we
carry to cover damages arising from any future accidents may be
inadequate. In the event that New
US&nbsp;Airways&nbsp;Group&#146;s insurance is not adequate, we
may be forced to bear substantial losses from an accident. In
addition, any accident involving an aircraft that New
US&nbsp;Airways Group operates could create a public perception
that our aircraft are not safe or reliable, which could harm our
reputation, result in air travelers being reluctant to fly on
New US&nbsp;Airways Group&#146;s aircraft and adversely impact
our financial condition and operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our business is subject to weather factors and seasonal
variations in airline travel, which cause our results to
fluctuate.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our operations are vulnerable to severe weather conditions in
parts of our network that could disrupt service, create air
traffic control problems, decrease revenue, and increase costs,
such as during hurricane season in the Caribbean and Southeast
United States, and snow and severe winters in the Northeast
United States. In addition, the air travel business historically
fluctuates on a seasonal basis. Due to the greater demand for
air and leisure travel during the summer months, revenues in the
airline industry in the second and third quarters of the year
tend to be greater than revenues in the first and fourth
quarters of the year. The results of operations of the combined
company will likely reflect weather factors and seasonality, and
therefore quarterly results are not necessarily indicative of
those for an entire year and the prior results of America West
Holdings and US&nbsp;Airways Group are not necessarily
indicative of the combined company&#146;s future results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employee benefit plans represent significant continuing costs
to the sponsoring employers.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
America West Holdings and the subsidiaries of US&nbsp;Airways
Group sponsor employee benefit plans and arrangements that
provide retirement, medical, disability, and other benefits to
our employees and participating
</DIV>

<P align="center" style="font-size: 10pt;">26

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<DIV align="left" style="font-size: 10pt;">
retirees. Many of the benefits provided under these plans are
mandated under various collective bargaining agreements, while
others are provided on a voluntary basis as a means to recruit
and retain valuable employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
While US&nbsp;Airways Group recently terminated certain defined
benefit pension plans, the benefit obligations associated with
the remaining employee benefit plans represent a substantial
continuing cost to the sponsors. In addition, many of these
employee benefit plans are subject to federal laws such as the
Employee Retirement Income Security Act of 1974 and the Internal
Revenue Code, and must be maintained accordingly. Continued
compliance with these rules is necessary, as even unintentional
failures to comply can result in significant fines and
penalties. Employee benefit plans in general also are
increasingly the subject of protracted litigation, especially
following significant plan design changes. Certain of the plans
sponsored by the subsidiaries of US&nbsp;Airways&nbsp;Group have
undergone several changes in connection with the Chapter&nbsp;11
cases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Certain provisions of the second amended and restated
certificate of incorporation and second and amended and restated
bylaws of New US&nbsp;Airways Group will make it difficult for
stockholders to change the composition of our board of directors
and may discourage takeover attempts that some of our
stockholders may consider beneficial.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain provisions of the second amended and restated
certificate of incorporation and second amended and restated
bylaws of New US&nbsp;Airways Group may have the effect of
delaying or preventing changes in control if our board of
directors determines that such changes in control are not in the
best interests of New US&nbsp;Airways&nbsp;Group and its
stockholders. These provisions include, among other things, the
following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    a classified board of directors with three-year staggered terms;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    advance notice procedures for stockholder proposals to be
    considered at stockholders&#146; meetings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability of New US&nbsp;Airways Group&#146;s board of
    directors to fill vacancies on the board;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    a prohibition against stockholders taking action by written
    consent;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    a prohibition against stockholders calling special meetings of
    stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    requiring the approval of holders of at least 80% of the voting
    power of the shares entitled to vote in the election of
    directors for the stockholders to amend the second amended and
    restated bylaws;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    super majority voting requirements to modify or amend specified
    provisions of New US&nbsp;Airways Group&#146;s second amended
    and restated certificate of incorporation.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
These provisions are not intended to prevent a takeover, but are
intended to protect and maximize the value of New
US&nbsp;Airways Group&#146;s stockholders&#146; interests. While
these provisions have the effect of encouraging persons seeking
to acquire control of our company to negotiate with our board of
directors, they could enable our board of directors to prevent a
transaction that some, or a majority, of our stockholders might
believe to be in their best interests and, in that case, may
prevent or discourage attempts to remove and replace incumbent
directors. In addition, New US&nbsp;Airways Group will be
subject to the provisions of Section&nbsp;203 of the Delaware
General Corporation Law, which prohibits business combinations
with interested stockholders. Interested stockholders do not
include stockholders whose acquisition of New
US&nbsp;Airways&nbsp;Group&#146;s securities is pre-approved by
the board of directors under Section&nbsp;203.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Relating to the Rights Offering</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The interest of America West Holders is likely to be diluted
relative to the US&nbsp;Airways Creditors as a result of this
rights offering.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
America West Holders and US&nbsp;Airways Creditors are the only
two groups of participants in this rights offering who will be
stockholders of New US&nbsp;Airways Group upon completion of the
merger. Absent any rights offering, America West Holders and
US&nbsp;Airways Creditors would hold approximately 39% and 12% of
</DIV>

<P align="center" style="font-size: 10pt;">27

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<DIV align="left" style="font-size: 10pt;">
New US&nbsp;Airways Group common stock, respectively, following
the merger assuming conversion of certain convertible debt and
certain securities that are dilutive at the per share purchase
price paid by the equity investors. However, pursuant to the
terms of this rights offering, America West Holders and
US&nbsp;Airways Creditors will be entitled to purchase 38.5% and
61.5%, respectively, of the rights offered hereby. Therefore,
assuming both groups participate fully in this rights offering,
the ownership interests of America West Holders will be diluted
relative to US&nbsp;Airways Creditors with respect to their
ownership of New US&nbsp;Airways Group common stock to 39% and
18%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>No prior market exists for either the common stock of New
US&nbsp;Airways Group or the rights.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
When New US&nbsp;Airways Group emerges from bankruptcy, the New
US&nbsp;Airways Group common stock will be a new issue of
securities which we expect to trade on the NYSE. However, we
cannot assure you that the Subscription Price of $16.50 for
which you will be entitled to purchase shares of New
US&nbsp;Airways Group common stock pursuant to this rights
offering will have any relation to the actual trading price of
that common stock once trading actually begins on the NYSE. In
addition, the transferable basic and over-subscription rights to
be issued to America West Holders are a new issue of securities
with no established trading market. We cannot assure you that a
market for those rights will develop or, if a market does
develop, as to how long it will continue or at what prices the
rights will trade.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>There is uncertainty with respect to the basic subscription
and over-subscription privileges for US&nbsp;Airways
Creditors.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The size of the basic subscription privilege of any
US&nbsp;Airways Creditor participating in this rights offering
is uncertain and, in certain circumstances, may be dependent
upon the ultimate resolution by the bankruptcy court as to the
amount of the unsecured claims that are eligible to vote on the
plan of reorganization. It will, therefore, not be possible for
US&nbsp;Airways Creditors to calculate with certainty their
basic subscription privilege, nor their over-subscription
privilege, as of the Expiration Date. Although we have estimated
that US&nbsp;Airways Creditors will receive one basic right for
each
$[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
of allowed voting claim, US&nbsp;Airways Creditors will need to
make their own estimate as of the Expiration Date of their basic
and over-subscription privileges. To the extent that any such
estimate is incorrect, a US&nbsp;Airways Creditor may have
under- or over-subscribed for the full allotment of rights to
which that US&nbsp;Airways Creditor is entitled. In the case of
an under-subscription, a US&nbsp;Airways Creditor will not have
the opportunity to submit further payment for the exercise of
additional basic rights or over-subscription privileges. In the
case of an over-subscription, a US&nbsp;Airways Creditor will
have its excess funds remitted, without interest, within
5&nbsp;business days of the Allocation Date. In the rights
certificate, you must acknowledge that New US&nbsp;Airways Group
is not liable for any damages resulting from your receiving more
or less rights than you estimated you would be entitled to
receive based upon this initial estimate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We may terminate this rights offering before the Expiration
Date.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We may in our sole discretion decide not to continue with this
rights offering or to terminate this rights offering prior to
the Expiration Date. This decision would be based upon various
factors, including market conditions. We have no current
intention to terminate this rights offering, but we are
reserving the right to do so in the event that circumstances
occur between the date of this prospectus and the Expiration
Date that cause us to conclude that it should be withdrawn. If
we terminate this rights offering, then you will lose any value
represented by the rights. In addition, this rights offering may
be terminated following the Expiration Date in the event that
any of the conditions to the completion of this rights offering
have not been met.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We may have to terminate this rights offering after the
Expiration Date if certain conditions are not met.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The completion of this rights offering is subject to certain
conditions precedent, including the completion of the merger,
which could delay the completion of this rights offering or
result in the termination of this rights offering after the
Expiration Date if those conditions are not met. This rights
offering will expire automatically if the merger does not occur
by December&nbsp;31, 2005. See the section entitled &#147;The
Rights Offering&nbsp;&#151; Conditions to the Rights
Offering&#148; for more information.
</DIV>

<P align="center" style="font-size: 10pt;">28

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>If you are a non-U.S. person, your ability to vote the shares
of New US&nbsp;Airways Group common stock that you acquire upon
exercise of your rights may be limited.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to ensure that it is in compliance with U.S.&nbsp;law,
New US&nbsp;Airways Group&#146;s certificate of incorporation
contains provisions that limit the voting rights of
non-U.S.&nbsp;persons who hold shares of New US&nbsp;Airways
Group common stock, to the extent that the shares of common
stock held by those non-U.S.&nbsp;persons would otherwise be
entitled to more than 24.9% of the aggregate votes of all
outstanding equity securities of New US&nbsp;Airways Group.
Accordingly, if you are a non-U.S.&nbsp;person, your ability to
vote the shares of New US&nbsp;Airways Group common stock that
you acquire upon exercise of your rights may be limited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we reserve the right to reject subscriptions by
non-U.S.&nbsp;persons to the extent that acceptance of those
subscriptions would cause the number of shares of New
US&nbsp;Airways Group common stock held by non-U.S.&nbsp;persons
to be entitled to more than 24.9% of the aggregate votes of all
outstanding shares of common stock of New US&nbsp;Airways Group
following the completion of this rights offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>If you elect to exercise your over-subscription privilege,
you will have to make an advance deposit of the full amount of
the purchase price for all shares of New US&nbsp;Airways Group
common stock you request, without any assurance as to whether
you will receive any shares pursuant to your over-subscription
privilege.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The offering of New US&nbsp;Airways Group common stock upon
exercise of the basic subscription privilege and the
over-subscription privilege will be simultaneous. We may not be
in a position to make any announcements during the offering
period regarding the subscription requests received. Therefore,
if you wish to exercise an over-subscription privilege, you will
have to do so without any further information as to whether and
to what extent the offering will be fully subscribed. In that
case, you would be advancing funds, subject to refund, without
knowing whether you will receive all the shares you requested or
any shares at all under your over-subscription privilege.
Furthermore, if you do not receive all the shares you requested,
you will not receive interest on funds refunded to you.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>You may experience a significant time delay between your
submission of funds for participation in this rights offering
and either your receipt of New US&nbsp;Airways Group common
stock or the return of all or a portion of those funds, as the
case may be.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
First, we are unable to guarantee when the confirmation hearing
on the plan of reorganization will end and, therefore, we are
unable to predict when we will be able to determine the actual
number of shares of New US&nbsp;Airways Group common stock
issuable to each holder who submitted subscription requests.
Consequently, we cannot predict when those shares will
ultimately be issued to participants in this rights offering. In
addition, we cannot return any excess funds collected for
unfulfilled subscription requests until the end of the
confirmation hearing, after which those excess funds will be
returned without interest. Therefore, a significant period of
time may pass between your submission of funds for participation
in this rights offering, and the ultimate issuance of any shares
and the return of any excess payment, as the case may be, in
connection with this rights offering. During that time, you will
not be entitled to interest on your funds and you will forego
other investment opportunities for your funds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Second, we are unable to determine how much time will pass
between the Expiration Date and the termination of this rights
offering due to the failure of a condition to this rights
offering to be satisfied, including the completion of the
merger. Therefore, we cannot predict when collected funds will
be returned, and although those funds will be returned with
interest, with that interest to accrue from the Expiration Date
to the date of termination, the interest may be minimal and may
be less than you could receive elsewhere. The termination of
this rights offering could be as late as December&nbsp;31, 2005.
</DIV>

<P align="center" style="font-size: 10pt;">29
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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Once you exercise your rights, you may not revoke your
commitment.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Once you exercise your rights, you may not revoke your
commitment. Therefore, even if circumstances arise after you
have subscribed in this rights offering that cause you to change
your mind about investing in New US&nbsp;Airways Group common
stock, you will nonetheless be legally bound to proceed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>You must act promptly and follow instructions carefully if
you want to exercise your rights.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Eligible participants and, if applicable, brokers acting on
their behalf, who desire to purchase common stock in this rights
offering must act promptly to ensure that all required
certificates and payments are actually received by the
Subscription Agent,
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;],
before the Expiration Date. <B>The time period to exercise
rights is limited, and we do not anticipate extending the
Expiration Date.</B> See the section entitled &#147;Key
Dates&#148; for more information. If you or your broker fail to
complete and sign the required rights certificate, send an
incorrect payment amount, or otherwise fail to follow the
procedures that apply to the exercise of your rights, we may,
depending on the circumstances, reject your exercise of rights
or accept it to the extent of the payment received. Neither we
nor the Subscription Agent undertake to contact you concerning,
or to attempt to correct, an incomplete or incorrect rights
certificate or payment or contact you concerning whether a
broker holds rights on your behalf. We have the sole discretion
to determine whether an exercise properly follows the procedures
for exercise set forth in this prospectus.
</DIV>

<P align="center" style="font-size: 10pt;">30

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<DIV align="left" style="font-size: 10pt;">
<A name='121'></A>
</DIV>

<!-- link1 "CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of the statements contained herein should be considered
&#147;forward-looking statements&#148; within the meaning of the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements may be identified by words such as
&#147;may,&#148; &#147;will,&#148; &#147;expect,&#148;
&#147;intend,&#148; &#147;anticipate,&#148; &#147;believe,&#148;
&#147;estimate,&#148; &#147;plan,&#148; &#147;project,&#148;
&#147;could,&#148; &#147;should,&#148; and &#147;continue&#148;
and similar terms used in connection with statements regarding
the companies&#146; outlook, expected fuel costs, the revenue
environment, and the companies&#146; respective expected 2005
financial performance. These statements include, but are not
limited to, statements about the benefits of the business
combination transaction involving America West Holdings and
US&nbsp;Airways&nbsp;Group, including future financial and
operating results, the companies&#146; plans, objectives,
expectations and intentions and other statements that are not
historical facts. These statements are based upon the current
beliefs and expectations of America West Holdings and
US&nbsp;Airways&nbsp;Group&#146;s management and are subject to
significant risks and uncertainties that could cause the
companies&#146; actual results and financial position to differ
materially from these statements. These risks and uncertainties
include, but are not limited to, those described above under the
heading &#147;Risk Factors&#148; and the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability of the companies to achieve the synergies
    anticipated as a result of combining the companies and to
    achieve such synergies in a timely manner;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability of the companies to obtain and maintain any
    necessary financing for operations and other purposes, whether
    debtor in possession financing, in the case of US&nbsp;Airways
    Group, during the pendency of the debtors&#146; bankruptcy
    proceeding, or other financing;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability of the companies to maintain adequate liquidity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability to achieve the asset sales contemplated but not yet
    completed in a timely manner;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the impact of global instability including the continuing impact
    of the continued military presence in Iraq and Afghanistan and
    the terrorist attacks of September&nbsp;11, 2001 and the
    potential impact of future hostilities, terrorist attacks,
    infectious disease outbreaks or other global events;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    changes in prevailing interest rates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability to attract and retain qualified personnel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability of the companies to attract and retain customers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the cyclical nature of the airline industry;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    competitive practices in the industry, including significant
    fare restructuring activities by major airlines;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the impact of historically high fuel prices;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    economic conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    reliance on automated systems and the impact of any failure of
    these systems;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    labor costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    security-related and insurance costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    weather conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    government legislation and regulation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    relations with unionized employees generally and the impact and
    outcome of the labor negotiations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways&nbsp;Group&#146;s ability to continue as a going
    concern;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">31

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Group&#146;s ability to obtain court approval
    with respect to motions in the Chapter&nbsp;11 proceedings
    prosecuted by it from time to time;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability of US&nbsp;Airways Group to develop, prosecute,
    confirm and complete a plan of reorganization with respect to
    the Chapter&nbsp;11 proceedings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    risks associated with third parties seeking and obtaining court
    approval to terminate or shorten the exclusivity period for
    US&nbsp;Airways Group to propose and confirm one or more plans
    of reorganization, to appoint a Chapter&nbsp;11 trustee or to
    convert the cases to Chapter&nbsp;7 cases;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability of the companies to obtain and maintain normal terms
    with vendors and service providers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the companies&#146; ability to maintain contracts that are
    critical to their operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the potential adverse impact of the Chapter&nbsp;11 proceedings
    on US&nbsp;Airways Group&#146;s liquidity or results of
    operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability of the companies to operate pursuant to the terms of
    their financing facilities (particularly the financial
    covenants);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability of US&nbsp;Airways Group to fund and execute its
    transformation plan during the Chapter&nbsp;11 proceedings and
    in the context of a plan of reorganization and thereafter; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    other risks and uncertainties listed from time to time in the
    companies&#146; reports to the SEC.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There may be other factors not identified above of which the
companies are not currently aware that may affect matters
discussed in the forward-looking statements, and may also cause
actual results to differ materially from those discussed. The
companies assume no obligation to publicly update any
forward-looking statement to reflect actual results, changes in
assumptions or changes in other factors affecting these
estimates other than as required by law. Similarly, these and
other factors, including the terms of any reorganization plan of
US&nbsp;Airways Group ultimately confirmed, can affect the value
of the US&nbsp;Airways Group&#146;s various prepetition
liabilities, common stock and/or other equity securities.
Accordingly, the companies urge that the appropriate caution be
exercised with respect to existing and future investments in any
of these liabilities and/or securities.
</DIV>

<P align="center" style="font-size: 10pt;">32

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='122'></A>
</DIV>

<!-- link1 "USE OF PROCEEDS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>USE OF PROCEEDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The aggregate proceeds from this rights offering (estimated to
be approximately $150&nbsp;million assuming all of the rights
are exercised), after deducting offering expenses, will be used
for general corporate purposes, including the possible
redemption or repurchase of other securities of New
US&nbsp;Airways Group.
</DIV>

<P align="center" style="font-size: 10pt;">33

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='123'></A>
</DIV>

<!-- link1 "CAPITALIZATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CAPITALIZATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth information regarding
(1)&nbsp;the historical capitalization of America West Holdings
and US&nbsp;Airways Group at March&nbsp;31, 2005; (2)&nbsp;the
pro forma capitalization of New US&nbsp;Airways Group
immediately following the effective time of the merger; and
(3)&nbsp;the pro forma capitalization of New US&nbsp;Airways
Group immediately following the effective time of the merger as
adjusted to reflect the exercise of rights to subscribe for an
aggregate of 9,090,909&nbsp;shares of New US&nbsp;Airways Group
common stock for a subscription price of $16.50 for each right,
for aggregate proceeds of approximately $150&nbsp;million, based
upon certain assumptions that are more fully described in the
footnotes below and assuming that all of the holders of rights
exercise their basic rights in full.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As Adjusted</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March 31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005(l)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Indebtedness</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Secured</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>US&nbsp;Airways Group</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment notes payable, net of discount of $107&nbsp;million
    and $101&nbsp;million on a historical and pro forma basis,
    respectively, installments due 2005 to 2022 (a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,738</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ATSB guaranteed loan, net of discount of $15&nbsp;million and $0
    on a historical and pro forma basis, respectively (b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>712</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2001 GE credit facility, installments due 2005 to 2012&nbsp;(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003 GE liquidity facility, installments due 2010 to
    2012&nbsp;(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Eastshore Aviation, LLC debtor in possession financing, due 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GE bridge facility due 2005&nbsp;(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Airbus term loan, installments due 2008 to 2010&nbsp;(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>153</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>America West Holdings</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GECC term loan, installments due 2006 to 2010&nbsp;(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior secured discount notes, net of discount of
    $5&nbsp;million, installments due 2005 to 2009&nbsp;(e)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment notes payable, installments due 2005 to 2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,809</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Unsecured</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>US&nbsp;Airways Group</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;B mandatorily redeemable preferred stock, net of
    discount of $23&nbsp;million, due 2011&nbsp;(f)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GE convertible notes, due 2020&nbsp;(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>America West</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ATSB guaranteed loan, installments due 2005 through 2008&nbsp;(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    7.25%&nbsp;senior exchangeable notes, net of discount of
    $166&nbsp;million, due 2023&nbsp;(g)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    7.5%&nbsp;convertible senior notes, net of discount of
    $21&nbsp;million, due in 2009&nbsp;(h)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Industrial development bonds, due 2023&nbsp;(i)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Promissory notes, due 2005&nbsp;(j)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State loan, installments due 2005 through 2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>650</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Debt</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,459</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="16">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Stockholders&#146; Equity&nbsp;(k)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,071</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(537</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(537</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Stockholders&#146; Equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>535</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">34
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<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    Equipment notes payable balances are as of March&nbsp;31, 2005,
    bearing interest at rates of 4.17% to 9.01%. We expect to
    complete various sale and leaseback transactions on certain
    wide-body and regional jet aircraft prior to completion of the
    merger. In addition to the GE sale-leaseback transaction, these
    transactions should reduce the equipment notes balance by
    approximately $666&nbsp;million not included in the table above
    if the contemplated transactions are completed as expected.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    <I>US&nbsp;Airways&nbsp;Group ATSB Guaranteed
    Loan</I>&nbsp;&#151; As part of its reorganization under the
    prior bankruptcy, US Airways, Inc. received a $900&nbsp;million
    loan guarantee under the Air Transportation Safety and System
    Stabilization Act from the ATSB in connection with a
    $1&nbsp;billion term loan financing that was funded on
    March&nbsp;31, 2003. The ATSB loan is secured by substantially
    all of the present and future assets of the
    US&nbsp;Airways&nbsp;Group not otherwise encumbered (including
    certain cash and investment accounts, previously unencumbered
    aircraft, aircraft engines, spare parts, flight simulators, real
    property, takeoff and landing slots, ground equipment and
    accounts receivable), other than certain specified assets,
    including assets which are subject to other financing
    agreements. As of March&nbsp;31, 2005, $712&nbsp;million was
    outstanding under the ATSB loan. The US&nbsp;Airways Group ATSB
    loan bears interest at an average variable interest rate on
    Tranche&nbsp;A (the guaranteed 90% of the loan balance) of
    4.79%, which includes a default rate of 200 basis points, plus
    guarantee fees of 4.1%, and on Tranche&nbsp;B (the remaining 10%
    of the loan balance) of 11.13%, which includes a default rate of
    400 basis points.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In connection with the ATSB guarantee, the ATSB received
    7,635,000 warrants that enable it to purchase shares of
    US&nbsp;Airways&nbsp;Group&#146;s Class&nbsp;A common stock at
    $7.42&nbsp;per share. The value attributed to the warrants at
    issuance is being amortized over the term of the warrants. We
    expect that these warrants will be cancelled under the currently
    proposed plan of reorganization. US&nbsp;Airways Group reached
    agreement with the ATSB concerning an interim extension to the
    ATSB cash collateral agreement while US&nbsp;Airways Group and
    America West Holdings work to finalize the post-merger terms of
    both loans. The interim agreement will expire on July&nbsp;29,
    2005 and will require US&nbsp;Airways Group, among other
    conditions, to maintain a weekly minimum unrestricted cash
    balance of $325&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    For more information on US&nbsp;Airways&nbsp;Group&#146;s ATSB
    loan, see the section entitled &#147;US&nbsp;Airways&nbsp;Group
    Management&#146;s Discussion and Analysis of Financial Condition
    and Results of Operations&nbsp;&#151; Liquidity and Capital
    Resources.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <I>America West Holdings ATSB Guaranteed Loan</I>&nbsp;&#151; In
    January 2002, America West Airlines, Inc. closed a
    $429&nbsp;million loan backed by a $380&nbsp;million federal
    loan guarantee provided by the ATSB. Certain third-party
    counter-guarantors have fully and unconditionally guaranteed the
    payment of an aggregate of $45&nbsp;million of the outstanding
    principal amount under the loan partially guaranteed by the ATSB
    plus accrued and unpaid interest thereon. In addition, America
    West Holdings has fully and unconditionally guaranteed the
    payment of all principal, premium, interest and other
    obligations outstanding under the loan partially guaranteed by
    the ATSB and has pledged the stock of America West Airlines,
    Inc. to secure its obligations under such guarantee. Principal
    amounts under this loan become due in ten installments of
    $43&nbsp;million on each March&nbsp;31 and September&nbsp;30,
    which commenced on March&nbsp;31, 2004 and end on
    September&nbsp;30, 2008. Principal amounts outstanding under the
    loan partially guaranteed by the ATSB bear interest at a rate
    per annum equal to LIBOR plus 40&nbsp;basis points plus
    guarantee fees of approximately 8.0%.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    For more information about the America West Holdings ATSB
    guaranteed loan, see America West Holdings&#146; filings on
    Form&nbsp;10-Q and Form&nbsp;10-K attached as Annexes&nbsp;B-1
    and B-2 to this prospectus.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    <I>US&nbsp;Airways&nbsp;Group and General
    Electric</I>&nbsp;&#151; General Electric and its affiliates,
    referred to collectively as GE, is
    US&nbsp;Airways&nbsp;Group&#146;s largest aircraft creditor,
    having financed or leased a substantial portion of
    US&nbsp;Airways&nbsp;Group&#146;s aircraft prior to the current
    Chapter&nbsp;11 filing. In addition, in November 2001, US
    Airways, Inc. obtained a $404&nbsp;million credit facility from
    GE, which was secured by collateral including 11 A320-family
    aircraft and 28 spare engines. Borrowings under the 2001 GE
    credit facility bear interest at the rate of LIBOR plus 3.50%,
    and the term of the facility is 2012.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In connection with the prior bankruptcy,
    US&nbsp;Airways&nbsp;Group reached a settlement with GE that
    resolved substantially all aircraft, aircraft engine and
    loan-related issues, and provided US&nbsp;Airways&nbsp;Group
    with additional financing from GE in the form of a liquidity
    facility of up to $360&nbsp;million that bears interest at rate
    of LIBOR plus 4.25%. Most obligations of
    US&nbsp;Airways&nbsp;Group to GE are cross-defaulted to the 2001
    GE credit facility, the 2003 GE liquidity facility, the GE
    regional jet leases and the GE regional jet mortgage financings.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In November 2004, US&nbsp;Airways&nbsp;Group reached a
    comprehensive agreement with GE and its affiliates, as described
    in a Master Memorandum of Understanding, or GE Master MOU, that
    was approved by the bankruptcy court on December&nbsp;16, 2004.
    The GE Master MOU, together with the transactions contemplated
    by the term sheets attached to the GE Master MOU, will provide
    US&nbsp;Airways&nbsp;Group with short-term liquidity, reduced
    debt, lower aircraft ownership costs, enhanced engine
    maintenance services and operating leases for new regional jets,
    while preserving the vast majority of
    US&nbsp;Airways&nbsp;Group&#146;s mainline fleet owned or
    otherwise financed by GE. In connection with the merger,
    US&nbsp;Airways&nbsp;Group and America West Holdings have
    renegotiated certain of their respective existing agreements,
    and entered into new agreements, with GE. These agreements are
    set forth in a comprehensive agreement with GE and certain of
    its affiliates in a Master Merger Memorandum of Understanding,
    referred to as the GE Merger MOU, that was approved by the
    bankruptcy court in June 2005. In part, the GE Merger MOU
    modified and supplemented the agreements reached between
    US&nbsp;Airways&nbsp;Group and GE in the GE Master MOU.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The bridge facility entered into between
    US&nbsp;Airways&nbsp;Group and GE pursuant to the GE Master MOU
    on December&nbsp;20, 2004 will continue in effect during the
    pendancy of the Chapter&nbsp;11 cases. The bridge facility
    provides for a loan in the amount of up to approximately
    $56&nbsp;million, which has been drawn down by
    US&nbsp;Airways&nbsp;Group ($42&nbsp;million was drawn as of
    March&nbsp;31, 2005). The bridge facility bears interest at the
    rate of LIBOR plus 4.25%, matures on the date
    US&nbsp;Airways&nbsp;Group emerges from the Chapter&nbsp;11
    cases, and is payable in cash or, upon maturity, by issuance of
    the $125&nbsp;million of convertible notes, as described below.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">35

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<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Subject to certain conditions, GE will purchase the assets
    securing the 2001 credit facility in a sale-leaseback
    transaction. The sale proceeds realized from the sale-leaseback
    transaction will be applied to repay the 2003 GE liquidity
    facility, the mortgage financing associated with the CRJ
    aircraft and a portion of the 2001 GE credit facility. The
    balance of the 2001 credit facility will be amended to allow
    certain additional borrowings, which will result in a total
    principal balance outstanding thereunder of approximately
    $28&nbsp;million. The operating leases will be cross-defaulted
    with all other GE obligations, other than excepted obligations,
    and will be subject to return conditions as agreed to by the
    parties.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Pursuant to the GE Master MOU, US&nbsp;Airways&nbsp;Group agreed
    that upon its emergence from the Chapter&nbsp;11 cases, as
    partial consideration for conversion of the bridge facility,
    forgiveness and release of US&nbsp;Airways, Inc. from certain
    prepetition obligations, deferral of certain payment obligations
    and amendments to certain maintenance agreements, an affiliate
    of GE will receive convertible notes of the reorganized
    US&nbsp;Airways, Inc. in the aggregate principal amount of
    $125&nbsp;million. The convertible notes will be convertible at
    any time, at the holders&#146; election, into shares of common
    stock of the New US&nbsp;Airways&nbsp;Group at a conversion
    price equal to the product of (x)&nbsp;140%-150% (at
    US&nbsp;Airways, Inc.&#146;s option) and (y)&nbsp;the average
    closing price of New US&nbsp;Airways&nbsp;Group common stock for
    the sixty consecutive trading days following emergence from
    bankruptcy and the listing of US&nbsp;Airways&nbsp;Group common
    stock on Nasdaq or a national stock exchange. The convertible
    notes will bear interest at a rate to be determined no later
    than thirty days prior to the debtors&#146; scheduled date of
    emergence from bankruptcy and interest will be payable
    semi-annually, in arrears, and will mature in 2020, with an
    option to put the notes back to US&nbsp;Airways, Inc. in 2010.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    For more information about the agreements between
    US&nbsp;Airways&nbsp;Group and GE, see the section entitled
    &#147;US&nbsp;Airways&nbsp;Group Management&#146;s Discussion
    and Analysis of Financial Condition and Results of
    Operations&nbsp;&#151; Liquidity and Capital Resources.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <I>America West Holdings and General Electric</I>&nbsp;&#151; On
    September&nbsp;10, 2004, America West Airlines, Inc. entered
    into a term loan financing with GECC providing for loans in an
    aggregate amount of $111&nbsp;million. The new term loan
    financing consists of two secured term loan facilities:
    (1)&nbsp;a $76&nbsp;million term loan facility secured primarily
    by spare parts, rotables and appliances; and (2)&nbsp;a
    $35&nbsp;million term loan facility secured primarily by
    aircraft engines and parts installed in such engines. The
    facilities are cross-collateralized on a subordinated basis and
    the collateral securing the facilities also secures on a
    subordinated basis certain of America West Airlines, Inc.&#146;s
    other existing debt and lease obligations to GECC and its
    affiliates. Principal amounts outstanding under the loans bear
    interest at a rate per annum based on three-month LIBOR plus a
    margin. Both facilities contain customary events of default,
    including payment defaults, cross-defaults, breach of covenants,
    bankruptcy and insolvency defaults and judgment defaults. The
    America West Holdings&nbsp;GE term loan bears interest at a rate
    of LIBOR plus 3.95%.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    For more information on America West Holdings&#146; arrangements
    with GE, see America West Holdings&#146; filings on
    Form&nbsp;10-Q and 10-K attached as Annexes B-1 and B-2 to this
    prospectus.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    <I>Airbus Term Loan</I>&nbsp;&#151; In connection with the
    merger, a Memorandum of Understanding, which we refer to as the
    Airbus MOU, was executed between ASVA S.A.R.L., an affiliate of
    Airbus Industrie&nbsp;G.I.E., which we refer to as Airbus,
    US&nbsp;Airways&nbsp;Group, US&nbsp;Airways, Inc. and America
    West Airlines, Inc. A key aspect of the Airbus MOU is that
    Airbus will provide a $250&nbsp;million financing commitment
    upon the satisfaction of various conditions precedent, including
    the completion of the merger and the emergence of
    US&nbsp;Airways, Inc. from bankruptcy, of which
    $153&nbsp;million is available to be drawn upon completion of
    the merger and used for general corporate purposes. We expect to
    have approximately $175&nbsp;million available upon completion
    of the merger and $250&nbsp;million available by the end of
    2006. This term loan will bear interest at a floating rate of
    interest with a margin subject to resets based on the credit
    rating of New US&nbsp;Airways Group.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    For more information on the Airbus MOU, see the sections
    entitled &#147;Unaudited Pro Forma Condensed Combined Financial
    Statements&#148; and &#147;US&nbsp;Airways&nbsp;Group
    Management&#146;s Discussion and Analysis of Financial Condition
    and Results of Operations&nbsp;&#151; Liquidity and Capital
    Resources.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    <I>Senior Secured Discount Notes</I>&nbsp;&#151; On
    December&nbsp;27, 2004, America West Airlines, Inc. raised
    additional capital by financing its Phoenix maintenance facility
    and flight training center. The flight training center was
    previously unencumbered, and the maintenance facility became
    unencumbered earlier in 2004 when America West Airlines, Inc.
    refinanced its term loan. Using its leasehold interest in these
    two facilities as collateral, America West Airlines, Inc.,
    through a wholly owned subsidiary named FTCHP LLC, raised
    $30.8&nbsp;million through the issuance of senior secured
    discount notes. The notes bear interest at a rate of LIBOR plus
    3.89%.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (f)</TD>
    <TD></TD>
    <TD valign="top">
    The Class&nbsp;B preferred stock of US&nbsp;Airways&nbsp;Group
    issued to Retirement Systems of Alabama Holdings LLC is subject
    to mandatory redemption on its maturity date of March&nbsp;31,
    2011 and is therefore classified as debt. The debtors&#146; plan
    of reorganization contemplates the cancellation of these shares.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (g)</TD>
    <TD></TD>
    <TD valign="top">
    In July and August of 2003, America West Airlines, Inc.
    completed a private placement of approximately $87&nbsp;million
    issue price of 7.25%&nbsp;Senior Exchangeable Notes due 2023.
    The notes bear cash interest at 2.49%&nbsp;per year until
    July&nbsp;30, 2008. Thereafter, the notes will cease bearing
    cash interest and begin accruing original issue discount daily
    at a rate of 7.25%&nbsp;per year starting in July 2009, until
    maturity. Each note was issued at a price of $343.61 and is
    exchangeable for Class&nbsp;B common stock of America West
    Holdings at an exchange ratio of 32.038&nbsp;shares per $1,000
    principal amount at maturity of the notes, subject to adjustment
    in certain circumstances. This represents an equivalent
    conversion price of approximately $10.73&nbsp;per share. The
    aggregate amount due at maturity, including accrued original
    issue discount from July&nbsp;31, 2008, will be
    $253&nbsp;million. The notes are unconditionally guaranteed on a
    senior unsecured basis by America West Holdings.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (h)</TD>
    <TD></TD>
    <TD valign="top">
    In connection with the closing of the ATSB guaranteed loan and
    the related transactions, America West Holdings issued
    $104.5&nbsp;million of 7.5%&nbsp;convertible senior notes due
    2009, of which approximately $112&nbsp;million remained
    outstanding at March&nbsp;31, 2005, including $22&nbsp;million
    of interest paid through December&nbsp;31, 2004 as a deemed loan
    added to the initial principal thereof. These notes are
    convertible into shares of Class&nbsp;B common stock of America
    West Holdings, at the option of the holders, at an</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">36

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    initial conversion price of $12.00&nbsp;per share or a
    conversion ratio of approximately 83.333&nbsp;shares per $1,000
    principal amount of such notes, subject to standard
    anti-dilution adjustments. Interest on the 7.5%&nbsp;convertible
    senior notes is payable semiannually in arrears on June&nbsp;1
    and December&nbsp;1 of each year. At America West Holdings&#146;
    option, the first six interest payments were payable in the form
    of a deemed loan added to the principal amount of these notes.
    The 7.5%&nbsp;convertible senior notes will mature on
    January&nbsp;18, 2009 unless earlier converted or redeemed. The
    payment of principal, premium and interest on the
    7.5%&nbsp;convertible senior notes is fully and unconditionally
    guaranteed by America West Airlines, Inc.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (i)</TD>
    <TD></TD>
    <TD valign="top">
    The industrial development revenue bonds are due April 2023.
    Interest at 6.3% is payable semiannually on April&nbsp;1 and
    October 1. The bonds are subject to optional redemption prior to
    the maturity date on or after April&nbsp;1, 2008, in whole or in
    part, on any interest payment date at the following redemption
    prices: 102% on April&nbsp;1 or October&nbsp;1, 2008; 101% on
    April&nbsp;1 or October&nbsp;1, 2009; and 100% on April&nbsp;1,
    2010 and thereafter.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (j)</TD>
    <TD></TD>
    <TD valign="top">
    Promissory notes are due in 2005 and bear interest at rates of
    3.81% to 4.16%.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (k)</TD>
    <TD></TD>
    <TD valign="top">
    The Stockholders&#146; Equity for New US&nbsp;Airways&nbsp;Group
    includes the new equity investments and America West
    Holdings&#146; current paid-in capital, partially offset by
    America West Holdings&#146; accumulated deficit.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (l)</TD>
    <TD></TD>
    <TD valign="top">
    The &#147;As Adjusted Pro&nbsp;Forma March&nbsp;31, 2005&#148;
    column reflects the exercise of rights to subscribe for an
    aggregate of 9,090,909 shares of New US&nbsp;Airways Group
    common stock for a subscription price of $16.50 for each right,
    for aggregate assumed proceeds of $150&nbsp;million. For more
    information, see the section entitled &#147;Unaudited Pro Forma
    Condensed Combined Financial Statements.&#148;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">37

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='124'></A>
</DIV>

<!-- link1 "PRO FORMA FULLY DILUTED SECURITY OWNERSHIP BY ENTITY OF NEW US AIRWAYS GROUP AT CLOSING" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRO FORMA FULLY DILUTED SECURITY OWNERSHIP BY ENTITY</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>OF NEW US AIRWAYS GROUP AT CLOSING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth certain information regarding the
potential ownership of New US&nbsp;Airways&nbsp;Group common
stock following the merger and the rights offering. This table
assumes that all rights are exercised in the rights offering.
The table sets forth the potential ownership: (1)&nbsp;on a
primary basis, (2)&nbsp;reflecting the impact of certain
securities that are dilutive at the per share price paid by the
equity investors, and (3)&nbsp;on a fully diluted basis assuming
all equity securities are exercised or converted. We are
providing this information to give you information on what
security holders or groups of security holders may beneficially
own significant amounts of New US&nbsp;Airways Group common
stock. Because many of the variables underlying the assumptions
used to develop this table are out of the control of America
West Holdings and US&nbsp;Airways Group, it is impossible to
predict precisely what the ownership interest of any particular
security holder or group will be in New US&nbsp;Airways Group
common stock following the merger. You should read carefully the
footnotes to this table in order to understand the many
assumptions underlying the information in the table.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Reflecting Dilutive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Securities at the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Fully Diluted</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Primary Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Per Share Price&nbsp;(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares (2)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="5" align="left" nowrap><B>US&nbsp;Airways Group</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GE convertible notes (3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,224,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    US&nbsp;Airways&nbsp;Group Creditors (4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,212,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,212,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,212,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    US&nbsp;Airways&nbsp;Group Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,212,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,212,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,436,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>America West Holdings </B>(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;A common shares outstanding (6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>460,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>460,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>460,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;B common shares outstanding (7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,504,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,504,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,504,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    7.25%&nbsp;convertible notes (8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,606,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,606,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Warrants (9)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,542,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,122,683</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Options (10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>741,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,280,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    7.5%&nbsp;convertible notes (11)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,860,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    America West Holdings Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,965,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,855,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,834,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Equity Investors</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Eastshore</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,333,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,333,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,333,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Par (12)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,768,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,768,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,768,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ACE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Peninsula</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,333,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,333,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,333,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Wellington (13)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,090,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,090,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,090,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rights offering (14)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,090,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,090,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,090,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Equity Investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,616,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,616,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,616,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>64,794,106</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>100%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>75,684,267</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>100%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>91,888,533</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>100%</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Note: Percentages may not total 100% due to rounding.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    This column includes the primary shares outstanding plus the
    dilutive impact of only those dilutive securities that are
    dilutive at the per share price paid by the equity investors,
    including the America West Holdings 7.25% convertible notes and
    America West Holdings warrants and exercisable options. America
    West Holdings dilutive securities represent fully diluted shares
    using the treasury method of accounting (i.e. assuming proceeds
    are used to repurchase outstanding shares) assuming a price of
    $16.50 per share of New US&nbsp;Airways Group common stock (the
    price paid by the most recent equity investor) and a conversion
    factor of 0.4125 of a share of New US&nbsp;Airways Group common
    stock for each share of America West Holdings Class&nbsp;B
    common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Fully diluted shares represent primary shares outstanding plus
    additional shares assuming all convertible notes, options and
    warrants are converted or exercised for shares of New
    US&nbsp;Airways Group common stock. America West Holdings
    dilutive securities represent fully diluted gross shares and a
    conversion factor of 0.4125 of a share of New US&nbsp;Airways
    Group common stock for each share of America West Holdings
    Class&nbsp;B common stock.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">38
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    The $125&nbsp;million GE convertible notes are convertible at a
    price that will be determined at a future date. The contractual
    conversion price will be at a 40 to 50% premium to the average
    of the closing price of New US&nbsp;Airways Group common stock
    for the first 60&nbsp;days of trading following emergence from
    bankruptcy. Shares are estimated assuming conversion at a 45%
    premium and assuming a 60&nbsp;day average price per share of
    New US&nbsp;Airways Group common stock of $16.50.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    The total shares of New US&nbsp;Airways Group common stock shown
    in the table will not be issued as of completion of the merger,
    because not all of the creditors claims will be finally resolved
    at that time. While the total number of shares of common stock
    of New US&nbsp;Airways&nbsp;Group available to creditors will be
    fixed, it is impossible to determine when the claims process
    will be finalized. Shares allocated to certain US Airways Group
    creditors include an allotment of excess shares resulting from
    the $150&nbsp;million Wellington investment at $16.50 per share
    of New US Airways Group common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Share count of America West Holdings Class&nbsp;A and
    Class&nbsp;B common shares, warrants and options include a
    pro-rata allotment of 261,818 excess shares resulting from the
    $150 million Wellington investment at $16.50 per share of New
    US&nbsp;Airways Group common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Class&nbsp;A common shares outstanding at closing is based on
    859,117&nbsp;shares of America West Holdings Class&nbsp;A common
    stock outstanding and a conversion rate of 0.5362 of a share of
    New US&nbsp;Airways Group common stock per share of America West
    Holdings Class&nbsp;A common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Class&nbsp;B common shares outstanding at closing is based on
    35,163,191&nbsp;shares of America West Holdings Class&nbsp;B
    common stock outstanding and a conversion rate of
    0.4125&nbsp;shares of New US&nbsp;Airways&nbsp;Group common
    stock per share of America West Holdings Class&nbsp;B common
    stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    America West Holdings 7.25%&nbsp;convertible notes are
    convertible at $10.73&nbsp;per share of America West Holdings
    Class&nbsp;B common stock and contain a change-of-control
    feature that allows the noteholders to put the notes to America
    West Airlines, Inc. for all outstanding principal and accrued
    interest, totaling $87.9&nbsp;million based on an assumed
    closing date of September&nbsp;30, 2005. America West Holdings
    may satisfy the put with equity at a price per share that is 95%
    of the market price of New US&nbsp;Airways Group common shares.
    This market price is assumed to be $16.50&nbsp;per share of New
    US&nbsp;Airways Group common stock, which would result in
    5,606,196 shares being issued to the noteholders.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    Assumes that America West Holdings warrants are exercised at a
    strike price of $7.27&nbsp;per share of New US&nbsp;Airways
    Group common stock. At the assumed closing price of $16.50 per
    share of New US&nbsp;Airways Group common stock, under the
    treasury stock method of accounting, the warrants would be
    exercisable for 4,542,319&nbsp;shares.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    America West Holdings options are shown on a fully diluted basis
    assuming all options are exercised for shares of New
    US&nbsp;Airways&nbsp;Group common stock. At March&nbsp;31, 2005,
    America West Holdings had 10,377,861 outstanding options with a
    weighted average exercise price of $9.54&nbsp;per share of
    America West Holdings Class&nbsp;B common stock. At the assumed
    closing price of $16.50&nbsp;per share of New US&nbsp;Airways
    Group common stock, under the treasury stock method of
    accounting, the options would be exercisable for
    741,646&nbsp;shares.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)&nbsp;</TD>
    <TD align="left">
    Assumes conversion of the America West Holdings
    7.5%&nbsp;convertible notes at a conversion price of
    $29.09&nbsp;per share of New US&nbsp;Airways&nbsp;Group common
    stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(12)&nbsp;</TD>
    <TD align="left">
    Assumes that 101,818 excess shares resulting from the Wellington
    per share price of $16.50&nbsp;per share of New US&nbsp;Airways
    Group common stock are allocated to Par, per its investment
    agreement, in addition to the 6,666,667&nbsp;shares allocated
    for Par&#146;s primary investment of $100&nbsp;million at
    $15.00&nbsp;per share of New US&nbsp;Airways Group common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(13)&nbsp;</TD>
    <TD align="left">
    Represents a group of investors under the management of
    Wellington Management Company, LLP, a Boston-based investment
    firm.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(14)&nbsp;</TD>
    <TD align="left">
    Represents the exercise of the rights by the US&nbsp;Airways
    Creditors and America West Holders for 9,090,909&nbsp;shares of
    New US&nbsp;Airways common stock at a price of $16.50 per share.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">39

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='125'></A>
</DIV>

<!-- link1 "PRO FORMA SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF NEW US AIRWAYS GROUP" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRO FORMA SECURITY OWNERSHIP OF CERTAIN BENEFICIAL</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>OWNERS OF NEW US&nbsp;AIRWAYS GROUP</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth certain information regarding the
projected ownership of New US&nbsp;Airways&nbsp;Group common
stock immediately following the merger and the exercise of
rights pursuant to this rights offering by all projected
beneficial owners of more than 5% of New US&nbsp;Airways Group
common stock, based upon certain assumptions described in the
notes below.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of Class</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of Class</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Excluding 7.25%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Including 7.25%</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Form of Security</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Notes (1)(3)(7)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Notes (2)(3)(7)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Wellington Management Company, LLP (4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Primary Shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9,090,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>14.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12.9%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    75 State Street</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Boston, MA 02109</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Eastshore Aviation, LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Primary Shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>8,333,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12.9%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>11.8%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    W6390 Challenger Drive,</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Suite&nbsp;203</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Appleton, WI 54924</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Air Transportation Stabilization Board</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Warrants</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7,735,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9.9%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    1120 Vermont Avenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Suite&nbsp;970</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Washington, DC 20220</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Par Investment Partners, L.P.</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Primary Shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6,768,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.4%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9.6%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    One International Place</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Suite&nbsp;2401</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Boston, MA 02109</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General Electric Capital Corporation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Convertible Note</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5,224,660</TD>
    <TD align="left" valign="top" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6.9%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    c/o GE Commercial Aviation Services LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    201 High Ridge Road</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stamford, CT 06927-4900</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ACE Aviation Holdings Inc.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Primary Shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7.7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7.1%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    5100 de Maisonneuve Boulevard West</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Montreal, Quebec, Canada H4A 3T2</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Peninsula Investment Partners, L.P.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Primary Shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3,333,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5.1%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4.7%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    404B East Main Street</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Charlottesville, VA 22902</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension Benefit Guaranty Corporation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Primary Shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*</TD>
    <TD align="left" valign="top" nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    1200 K Street</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Washington, DC 20005-4026</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Calculation of percent of class assumes that America West
    Holdings 7.25%&nbsp;convertible notes are not converted to New
    US&nbsp;Airways Group common stock as a result of the merger.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Calculation of percent of class assumes dilution from the
    conversion of the America West Holdings 7.25%&nbsp;convertible
    notes at a New US&nbsp;Airways Group share price of $15.68
    (representing 5.61&nbsp;million shares).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Calculated percentages are not additive. Percent of class
    ownership represented by holders of primary shares assumes no
    dilution when calculating the total shares. Calculation of
    percent of class ownership represented by holders of dilutive
    securities assumes that only the individual holder listed
    converts or exercises its option to purchase common stock of New
    US&nbsp;Airways Group; in these calculations, total shares used
    for the denominator includes only the sum of shares held by the
    individual holder after conversion plus all primary shares.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Holder represents a group of investors under the management of
    Wellington Management Company, LLP, a Boston-based investment
    firm.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Shares to GE are estimated assuming conversion of their
    $125&nbsp;million loan at a 45% premium to the Wellington price
    per share of $16.50. The actual conversion price will be at a 40
    to 50% premium to the average of the closing price of New
    US&nbsp;Airways Group stock for the first 60&nbsp;days of
    trading following New US&nbsp;Airways Group emergence from
    Chapter&nbsp;11.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    We currently estimate that the PBGC will own more than 5% of the
    outstanding primary shares of New US&nbsp;Airways Group. The
    PBGC&#146;s actual number of shares will be determined by its
    portion of the eventual allowed unsecured claims against the
    debtors.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Assumes the exercise of all rights pursuant to this rights
    offering.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">40

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='129'></A>
</DIV>

<!-- link1 "PER SHARE MARKET PRICE DATA" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PER SHARE MARKET PRICE DATA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group common stock currently trades on the
Nasdaq over-the-counter market under the Symbol
&#147;UAIRQ.&#148; The table below sets forth, for the periods
indicated, the range of high and low per share sales prices for
US&nbsp;Airways Group common stock on the NYSE, Nasdaq national
market and Nasdaq over-the-counter market, as discussed in more
detail below. For current price information, you should consult
publicly available sources. US&nbsp;Airways Group did not pay
dividends during these periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The historical price information of US&nbsp;Airways Group common
stock does not reflect the price at which the New
US&nbsp;Airways Group common stock will trade following the
merger. The plan of reorganization contemplates the cancellation
of all currently outstanding equity securities of
US&nbsp;Airways Group. Therefore, it is not meaningful to
determine the value of one right or one share of New US Airways
Group common stock by reference to current trading values of
US&nbsp;Airways Group common stock. As also discussed in more
detail in this prospectus, various equity investors have entered
into agreements with US&nbsp;Airways Group and America West
Holdings. These agreements were negotiated at arm&#146;s length
and value a share of New US&nbsp;Airways Group common stock at
$15.00 or $16.50&nbsp;per share, assuming completion of the
merger and the debtors&#146; plan of reorganization. We cannot
anticipate the price at which the New US&nbsp;Airways Group
common stock will trade following the merger.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to US&nbsp;Airways Group&#146;s 2002 bankruptcy
proceedings and continuing through September&nbsp;24, 2002,
US&nbsp;Airways Group&#146;s common stock was traded on the NYSE
under the Symbol &#147;U.&#148; On August&nbsp;14, 2002, the
NYSE announced that it would suspend trading and move to delist
US&nbsp;Airways Group&#146;s common stock. The SEC approved the
delisting and the common stock was delisted effective
September&nbsp;25, 2002. As a result, on September&nbsp;25,
2002, the common stock began trading on the Nasdaq
over-the-counter market under the symbol &#147;UAWGQ.&#148; On
March&nbsp;31, 2003, in conjunction with the effective date of
the 2003 plan of reorganization, all then-outstanding equity
securities of the predecessor company were cancelled. The
&#147;predecessor company&#148; refers to US&nbsp;Airways Group
prior to March&nbsp;31, 2003. On October&nbsp;21, 2003,
US&nbsp;Airways Group&#146;s Class&nbsp;A common stock began
trading on the Nasdaq National Market under the symbol
&#147;UAIR.&#148; Prior to listing on the Nasdaq National
Market, the Class&nbsp;A common stock had limited trading
activity on the Over-the-Counter Bulletin Board and in the Pink
Sheets, which provide trading for the over-the-counter
securities markets. On September&nbsp;13, 2004, US&nbsp;Airways
Group received written notice from the Nasdaq Stock Market that
the Class&nbsp;A common stock would be delisted in accordance
with Marketplace Rules&nbsp;4300 and 4450(f), effective with the
opening of business on September&nbsp;22, 2004. Nasdaq indicated
in its letter that the delisting determination followed its
review of US&nbsp;Airways Group&#146;s press release announcing
that the company had filed for bankruptcy protection. As a
result of this notification, a fifth character &#147;Q&#148; was
added to the trading symbol, changing it from &#147;UAIR&#148;
to &#147;UAIRQ&#148; at the opening of business on
September&nbsp;15, 2004. Shares are currently trading on the
Nasdaq over-the-counter market under the symbol
</DIV>

<P align="center" style="font-size: 10pt;">41

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
&#147;UAIRQ.&#148; US&nbsp;Airways Group&#146;s Class&nbsp;B
common stock has no public trading market and is held by one
shareholder of record as of May&nbsp;31, 2005.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>US&nbsp;Airways Group</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>High</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Low</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fiscal Year 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    First Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4.01</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Second Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Third Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fourth Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fiscal Year 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    First Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.01</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Second Quarter (1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Third Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fourth Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.01</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fiscal Year 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    First Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Second Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.44</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Third Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.58</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fourth Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.76</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fiscal Year 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    First Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.69</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Second Quarter (through June&nbsp;22, 2005)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.62</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    As a result of emergence from the prior bankruptcy, the
    predecessor company&#146;s common stock was cancelled effective
    March&nbsp;31, 2003. An established public trading market,
    defined as more than limited or sporadic trading, did not exist
    for the successor company Class&nbsp;A common stock until
    September&nbsp;8, 2003. The successor company refers to
    US&nbsp;Airways&nbsp;Group on and after March&nbsp;31, 2003,
    after giving effect to the cancellation of then-existing common
    stock and the issuance of new securities under the 2003 plan of
    reorganization, and the application of fresh-start reporting.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table presents the last reported sale price of a
share of US&nbsp;Airways&nbsp;Group common stock, as reported on
the over-the-counter market on May&nbsp;18, 2005, the last full
trading day prior to the public announcement of the proposed
merger, and on [month, day], 2005, the last practicable trading
day prior to the date of this prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>US&nbsp;Airways&nbsp;Group</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Date</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common Stock</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    May&nbsp;18, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.77</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    [month, day], 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>[&nbsp;&nbsp;]</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As noted above, because the plan of reorganization contemplates
the cancellation of all currently outstanding securities of
US&nbsp;Airways&nbsp;Group, the historical price information of
US&nbsp;Airways&nbsp;Group common stock does not reflect the
price at which the New US&nbsp;Airways&nbsp;Group common stock
will trade following the merger and the completion of the rights
offering.
</DIV>

<P align="center" style="font-size: 10pt;">42
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<DIV align="left" style="font-size: 10pt;">
<A name='126'></A>
</DIV>

<!-- link1 "DIVIDEND POLICY" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DIVIDEND POLICY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group has not paid any cash dividends on its
currently outstanding common stock. The plan of reorganization
contemplates the cancellation of all currently outstanding
equity securities of US&nbsp;Airways Group. US&nbsp;Airways
Group presently intends to retain any earnings for use in its
business and does not anticipate paying cash dividends on the
New US&nbsp;Airways Group common stock in the foreseeable
future. In addition, certain of US&nbsp;Airways Group&#146;s
debt agreements prohibit it from paying cash dividends.
</DIV>

<P align="center" style="font-size: 10pt;">43

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<DIV align="left" style="font-size: 10pt;">
<A name='127'></A>
</DIV>

<!-- link1 "THE COMBINED COMPANY FOLLOWING THE MERGER" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE COMBINED COMPANY FOLLOWING THE MERGER</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following the implementation of the debtors&#146; plan of
reorganization, including the merger and the new equity
investments and other related transactions described in this
prospectus, we will operate under the single brand name of
US&nbsp;Airways through our two principal operating subsidiaries
US&nbsp;Airways, Inc. and America West Airlines, Inc. We expect
to integrate the two operating subsidiaries into one operation
over the following 24&nbsp;months. We expect that the merger
will create the fifth largest airline operating in the United
States as measured by domestic revenue passenger miles and by
ASMs. We expect to have primary hubs in Charlotte, Philadelphia
and Phoenix and secondary hubs/focus cities in Pittsburgh, Las
Vegas, New York, Washington,&nbsp;D.C., Boston and Pittsburgh.
After the merger, New US&nbsp;Airways Group will be a low-cost
carrier offering scheduled passenger service on approximately
3,600 flights daily to 229&nbsp;cities in the U.S., Canada, the
Caribbean, Latin America and Europe. New US&nbsp;Airways Group
will operate 361&nbsp;mainline jets and will be supported by its
regional airline subsidiaries and affiliates operating as
US&nbsp;Airways Express, which will operate approximately 239
regional jets, of which 83 will be aircraft with 70 or more
seats, and approximately 57 turboprops.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect that New US&nbsp;Airways Group will have one of the
most competitive cost structures in the airline industry due to
cost cutting measures initiated by both companies over the last
three years. US&nbsp;Airways Group&#146;s restructuring
activities in the debtors&#146; current and prior
Chapter&nbsp;11 bankruptcy proceedings have specifically
targeted cost reductions in four main areas. First, it has
achieved important reductions in labor, pension and benefit
costs resulting in ratified collective bargaining agreements,
representing over $2&nbsp;billion of annual cost savings.
Second, it has put restructuring initiatives in place to reduce
overhead, including reducing management payroll, and has
re-vamped its schedule to improve aircraft utilization. Third,
it has renegotiated various contractual obligations resulting in
lower costs, including those related to aircraft, real estate
and suppliers, and lowered catering costs. Lastly,
US&nbsp;Airways&nbsp;Group rationalized its fleet through the
elimination of older, less efficient aircraft, the introduction
of large regional jet aircraft with low trip costs to better
match capacity with demand, and the reduction of the number of
mainline aircraft types it operates in order to lower
maintenance, inventory and pilot training costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Separately, America West Holdings has also been able to greatly
reduce its operating expenses as a percentage of revenues since
2002. America West Holdings instituted programs to reduce
management payroll, clerical payroll, travel agency based
commissions, incentive programs and override commissions. It has
reduced capital expenditures and discretionary expenses, and
lowered catering costs. Other initiatives include increasing
point-to-point flying at minimal additional costs using aircraft
that would otherwise be parked at a gate, which increases daily
utilization of aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the cost saving initiatives already undertaken at
the individual companies, we believe the combination of America
West Holdings and US&nbsp;Airways&nbsp;Group will result in
significant annual revenue and cost synergies of approximately
$600&nbsp;million that would be unachievable without completing
the merger. These synergies derive from three principal sources.
In anticipation of the merger, US&nbsp;Airways&nbsp;Group has
negotiated a reduction in its existing fleet so that the fleet
of the combined company suits the expected network. New
US&nbsp;Airways&nbsp;Group will be able to schedule the combined
fleet to better match aircraft size with consumer demand. By
scheduling the reduced fleet more efficiently and by adding new,
low-fare service to Hawaii, we expect to create approximately
$175&nbsp;million in annual operating synergies. We also expect
to realize annual cost synergies of approximately
$250&nbsp;million by reducing administrative overhead,
consolidating our information technology systems and combining
facilities. Lastly, by becoming one nationwide, low-cost carrier
with a global reach that provides more choice for consumers and
an improved ability to connect, we expect to realize
approximately $175&nbsp;million in additional annual revenue.
There can be no assurance that we will be able to achieve these
revenue, operating and cost synergies or that they can be
achieved in a timely manner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways&nbsp;Group and its subsidiaries currently employ
approximately 30,100 people and America West Holdings and its
subsidiaries employ approximately 14,000 people. After seniority
lists have been integrated for each of the combined
airlines&#146; unionized labor groups, we anticipate that a
single labor contract will be applied to each of those groups.
</DIV>

<P align="center" style="font-size: 10pt;">44

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined airline is expected to operate a mainline fleet of
361 planes (supported by approximately 239 regional jets and
approximately 57 turboprops that provide passenger feed into the
mainline system), down from a total of 417 mainline aircraft
operated by the two airlines as of March&nbsp;31, 2005.
US&nbsp;Airways&nbsp;Group has removed an additional 13 aircraft
from its fleet through May&nbsp;31, 2005 and projects removing
an additional 35 aircraft by the end of 2006. The combined
airline is also expected to take delivery by the end of
February&nbsp;2006 of seven Airbus A320 family aircraft
previously ordered by America West Airlines, Inc. Airbus has
also agreed to reconfirm 30 narrow body A320-family aircraft
deliveries and reschedule those deliveries from the 2006&nbsp;to
2008 period to the 2009&nbsp;to 2010 period. To rationalize
international flying, the merged company anticipates working
with Airbus to begin transitioning to an all-Airbus widebody
fleet of A350 aircraft in 2011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe the merger will create one of the industry&#146;s
most financially stable airlines with approximately
$1.5&nbsp;billion in new liquidity coming from equity
investments, the rights offering, new cash infusions from
commercial partners, asset sales and the release of currently
restricted cash.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The $500&nbsp;million of new equity investments is expected to
be provided by several investors. US&nbsp;Airways&nbsp;Group
also plans to conduct a rights offering that will provide up to
an additional $150&nbsp;million of equity financing. In
addition, the merged company will receive approximately
$550&nbsp;million of cash infusions from commercial partners,
approximately $100&nbsp;million from asset-based financings or
sales of aircraft and approximately $170&nbsp;million from
release of certain cash reserves that are currently restricted
but that should be released as a part of the plan of
reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For more information on these matters, see the sections entitled
&#147;The Plan of Reorganization,&#148; and &#147;The New Equity
Investments.&#148;
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>Competitive Strengths of the Combined Company</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we will have a number of competitive strengths
as a combined company, including:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Largest U.S.&nbsp;Low-Cost Carrier with Nationwide Route
Network.</I></B> We expect to be the first national full-service
low-cost carrier and the largest low-cost carrier by revenue
passenger miles (including international service). We anticipate
being the fifth largest airline operating in the United States
as measured by domestic revenue passenger miles and by ASMs,
with a national hub-and-spoke route network that will provide
our customers with nationwide reach. We believe New
US&nbsp;Airways&nbsp;Group will capture approximately 10% of all
domestic revenue passenger miles. The combined company plans to
continue as a member of the Star Alliance, the world&#146;s
largest airline alliance group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
With our simplified pricing structure and international scope,
we will offer competitive fare service to approximately
229&nbsp;cities in the United States, Canada, the Caribbean,
Latin America and Europe, making us the only low-cost carrier
with a significant international route presence. Starting in
2006, we expect to expand our route network to include Hawaii.
We will be the only low-cost carrier with an established East
Coast route network, including the US&nbsp;Airways Shuttle
service, with substantial presence at capacity constrained
airports like New York&#146;s LaGuardia Airport and
Washington,&nbsp;D.C.&#146;s Ronald Reagan Washington National
Airport.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Offer Services Not Typical of Low-Cost Carriers.</I></B>
We believe that by delivering high-quality service, with greater
frequency of flight departures and by offering our customers
premium amenities not available on other low-cost carriers, we
will provide the best value in our markets and create increased
demand for our air travel services. We expect to be the only
national low-cost carrier offering a global frequent flyer
program, assigned seating, a First Class cabin, the
US&nbsp;Airways Shuttle, online service to approximately 44
international destinations, convenient access to over 700 global
destinations through our membership in the Star Alliance, and
the convenience of our airport clubs. We expect that these
amenities will differentiate our service from other low-cost
carriers and will allow us to strengthen customer loyalty and
attract new air travelers. We believe that our customers will
continue to value our full service amenities and flight
frequency, and that will help us to compete effectively with
other low-cost carriers by providing our business oriented
passengers with a premium product at a competitive price.
</DIV>

<P align="center" style="font-size: 10pt;">45

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Competitive Low-Cost Structure.</I></B> We believe that
the cost saving initiatives of both companies discussed above,
coupled with the significant cost synergies from the
combination, will allow us to have one of the most competitive
cost structures in the airline industry. On a pro forma basis,
once the anticipated merger synergies are realized, we expect
that the costs of New US&nbsp;Airways&nbsp;Group, on a unit
basis, after merger synergies will be approximately the same as
those of America West Holdings today. We believe that we will be
able to compete effectively and profitably with this cost
structure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Improved Balance Sheet with Substantial New
Liquidity.</I></B> We believe that we will be one of the
industry&#146;s most financially stable airlines. We expect New
US&nbsp;Airways Group to realize approximately $10&nbsp;billion
in annual revenues and have as of the completion of the merger a
strong balance sheet that includes an estimated $2&nbsp;billion
in total cash, cash equivalents and short term investments. The
combined balance sheets will benefit from a cash infusion of
approximately $1.5&nbsp;billion, which will include equity
investments aggregating $500&nbsp;million, the proceeds raised
through the rights offering of approximately $150&nbsp;million,
the release of certain cash reserves and other initiatives that
will provide New US&nbsp;Airways Group with substantial new
liquidity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Experienced Management Team.</I></B> We will benefit from
an experienced, highly motivated combined management team. Our
team will be led by W. Douglas Parker, who has been the chief
executive officer of America West Holdings since 2001 and prior
to that served as chief operating officer from 2000 to 2001 and
chief financial officer from 1995 to 2000. As chief executive
officer, Mr.&nbsp;Parker led America West Holdings&#146;
transformation into a low-cost carrier.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Business Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business strategy consists of the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Provide Excellent Value to Our Customers.</I></B> We plan
to standardize customer service initiatives system-wide and
provide a competitive, simplified pricing structure that we
believe will provide our customers with an excellent value when
compared to other low-cost carriers as well as legacy mainline
carriers. We are committed to building a successful airline by
taking care of our customers. We believe that our focus on
excellent customer service in every aspect of operations,
including personnel, flight equipment, in-flight and ancillary
amenities, on-time performance, flight completion ratios and
baggage handling, will strengthen customer loyalty, provide
excellent value to our customers and attract new customers.
Further, we believe that the amenities we provide our customers,
such as a frequent flyer program, airport clubs, assigned
seating and a First Class cabin, differentiates our product
offering from other low-cost carriers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Continue to Reduce Our Operating Costs.</I></B> After the
merger, New US&nbsp;Airways Group will focus on achieving cost
reduction synergies that it expects to realize from the merger.
Key areas where cost reductions can be achieved as a result of
the merger include overhead costs, in-sourcing of information
technology solutions where America West Holdings has existing
capabilities, airport savings through better use of gates and
employees in airports that both America West Holdings and
US&nbsp;Airways Group serve today, and eliminating redundant
facilities such as office space and hangars. We currently expect
these initiatives to achieve approximately $250&nbsp;million in
annual savings once fully implemented. In addition, we also plan
to increase aircraft use to increase flying and reduce unit
costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Leverage Our Broader Route Network and Rationalize Our
Fleet.</I></B> We expect to achieve annual savings of
approximately $175&nbsp;million from rationalizing our fleet,
rescheduling our operations, and adding new, low-fare service to
Hawaii. As a result of the merger, New
US&nbsp;Airways&nbsp;Group plans to combine the current regional
strengths of both America West Holdings on the West Coast and
US&nbsp;Airways Group on the East Coast to provide a
comprehensive product offering more attractive to customers. We
also plan to make more efficient use of our nationwide network
as a combined entity. New US&nbsp;Airways Group will be able to
coordinate the schedules to and from the hubs and secondary
hubs/focus cities of both airlines to create a significantly
greater number of flight connections across the route network.
Similarly we believe that we will be able to optimize the
utilization of our aircraft and employees. For instance,
aircraft of one airline that today would have to sit idle
awaiting the next scheduled departure could be utilized after
the merger along existing routes of the other airline to
increase daily utilization.
</DIV>

<P align="center" style="font-size: 10pt;">46

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In anticipation of the merger, US&nbsp;Airways Group has
negotiated a reduction to its existing fleet so that the fleet
of the combined company suits the expected route network and so
that the introduction of new aircraft will be timed to coincide
with the expiration of existing aircraft leases. We believe that
we will also be able to reschedule the combined fleet to better
match aircraft size with consumer demand. For example, in some
markets that US&nbsp;Airways Group currently serves with a
Boeing 737 aircraft, we expect to replace that service with a
90-seat regional jet that is currently operated in the America
West Holdings&#146; system. In addition, we expect to place
America West Holdings new aircraft into service on flights out
of current US&nbsp;Airways&nbsp;Group hubs. Furthermore, we plan
to initiate Boeing 757 aircraft service to Hawaii, which neither
of us currently serves. These changes are expected to generate
revenue benefits of approximately $175&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Prudent Integration of America West Airlines, Inc. and
US&nbsp;Airways, Inc. Operations.</I></B> While management will
move quickly to try to provide a seamless integration for
consumers, we currently expect to achieve full labor and
operational integration of America West Airlines, Inc. and
US&nbsp;Airways, Inc. over a 24&nbsp;month period. We believe
that this timeframe will allow us to resolve the critical labor
and systems issues necessary to achieve full integration. We
plan to operate under a single brand name of US&nbsp;Airways
while maintaining separate operating certificates for this
24&nbsp;month period. We believe that the majority of the
synergy value can be realized quickly through the rapid
integration of routes, schedules, pricing, other marketing
initiatives and overhead reductions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Management of New US&nbsp;Airways Group</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following the merger, the board of directors of New
US&nbsp;Airways Group will consist of 13 members. Six of these
directors will be appointed by America West Holdings (five of
whom will be independent), four of these directors will be
appointed by US&nbsp;Airways Group (three of whom will be
independent) and up to three of these directors will be
appointed by certain new equity investors in New
US&nbsp;Airways&nbsp;Group. Except as described in the next
paragraph, we have not yet determined the identities of the new
directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
W.&nbsp;Douglas Parker, the current Chairman and Chief Executive
Officer of America West Holdings, will serve as Chairman and
Chief Executive Officer of New US&nbsp;Airways Group following
the merger. Bruce Lakefield, the current President and Chief
Executive Officer of US&nbsp;Airways Group and US&nbsp;Airways,
Inc., will serve as Vice Chairman of New US&nbsp;Airways Group
following the merger. See the section entitled &#147;The Merger
Agreement&nbsp;&#151; Post-Merger America West Holdings
Governing Documents, Officers and Directors; New
US&nbsp;Airways&nbsp;Group Governing Documents and
Directors.&#148;
</DIV>

<P align="center" style="font-size: 10pt;">47

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<DIV align="left" style="font-size: 10pt;">
<A name='191'></A>
</DIV>

<!-- link1 "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group will account for the merger as a
&#147;reverse acquisition&#148; using the purchase method of
accounting in conformity with accounting principles generally
accepted in the United States of America. Although the merger is
structured such that America West Holdings will become a wholly
owned subsidiary of US&nbsp;Airways Group at closing, America
West Holdings will be treated as the acquiring company for
accounting purposes under SFAS&nbsp;No.&nbsp;141, &#147;Business
Combinations&#148; due to the following factors:
(1)&nbsp;America West Holdings&#146; stockholders are expected
to own approximately 39% of New US&nbsp;Airways&nbsp;Group
common stock outstanding immediately following the merger as
compared to certain former US&nbsp;Airways&nbsp;Group Creditors
who will hold approximately 12% (these percentages reflect
certain assumptions concerning the likely exchange of certain
convertible debt and the impact of certain securities that are
dilutive at the per share purchase price paid by the equity
investors); (2)&nbsp;America West Holdings will receive a larger
number of designees to the New US&nbsp;Airways Group board of
directors; and (3)&nbsp;America West Holdings&#146; current
Chairman and Chief Executive Officer will serve as Chairman and
Chief Executive Officer of New US&nbsp;Airways Group following
the merger. The following unaudited pro forma condensed combined
balance sheet as of March&nbsp;31, 2005 and the unaudited pro
forma condensed combined statements of operations for the year
ended December&nbsp;31, 2004 and quarter ended March&nbsp;31,
2005 are based on the historical consolidated financial
statements of US&nbsp;Airways&nbsp;Group and on the historical
consolidated financial statements of America West Holdings,
included in America&nbsp;West Holdings&#146; Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2005 and its
Quarterly Report on Form&nbsp;10-Q for the quarterly period
ended March&nbsp;31, 2005, all of which are attached as annexes
to this prospectus, giving effect to the merger and the other
transactions that will be effective upon completion of the
merger. No effect has been given to the proceeds received or the
rights given in the rights offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma condensed combined statements of
operations give effect to the merger as if it had occurred on
January&nbsp;1, 2004 and the unaudited pro forma condensed
combined balance sheet gives effect to the merger as if it had
occurred on March&nbsp;31, 2005. The two major categories of
adjustments reflected in the pro forma condensed combined
financial statements are &#147;Purchase Accounting
Adjustments&#148; and &#147;Other Merger Adjustments.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Purchase Accounting Adjustments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Purchase accounting adjustments include adjustments necessary to
(1)&nbsp;allocate the purchase price to the tangible and
intangible assets and liabilities of US&nbsp;Airways Group based
on their fair values; (2)&nbsp;reflect the expected disposition
of prepetition liabilities upon US&nbsp;Airways Group&#146;s
emergence from bankruptcy; (3)&nbsp;reflect the changes in
deferred taxes; and (4)&nbsp;conform the accounting policies of
US&nbsp;Airways Group and America West Holdings. A detailed
description of each of these purchase accounting adjustments
follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Fair Market Value Adjustments</I></B>&nbsp;&#151; The pro
forma financial statements reflect the purchase price allocation
based on a preliminary assessment of fair market values and
lives assigned to the assets, liabilities and leases being
acquired. Fair market values in the pro forma financial
statements were determined based on preliminary consultation
with independent valuation consultants, industry trends and by
reference to market rates and transactions. After the closing of
the merger, New US&nbsp;Airways Group, with the assistance of
valuation consultants, will complete its evaluation of the fair
value and the lives of the assets, liabilities and leases
acquired. Fair market value adjustments reflected in the pro
forma financial statements may be subject to significant
revisions and adjustments pending finalization of those
valuation studies. Significant assets and liabilities adjusted
to fair market value which are subject to finalization of
valuation studies include expendable spare parts and supplies,
property and equipment, airport take-off and landing slots
(included in other intangibles in the pro forma balance sheet),
aircraft leases, deferred revenue and continuing debt
obligations of New US&nbsp;Airways Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>US&nbsp;Airways Group&#146;s
Bankruptcy</I></B>&nbsp;&#151; In connection with
US&nbsp;Airways Group&#146;s emergence from bankruptcy, the plan
of reorganization will provide for the disposition of
prepetition liabilities classified as &#147;Liabilities Subject
to Compromise&#148; on US&nbsp;Airways Group&#146;s historical
balance sheet. A portion of these liabilities classified as
subject to compromise will be restructured and continue to be
liabilities of New
</DIV>

<P align="center" style="font-size: 10pt;">48

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<DIV align="left" style="font-size: 10pt;">
US&nbsp;Airways Group after the merger and a portion will be
discharged with creditors only entitled to receive such
distributions of cash and common stock in New US&nbsp;Airways
Group as provided under the plan of reorganization. The pro
forma accounting adjustments reflect a preliminary determination
of liabilities expected to continue, which have been
reclassified on the pro forma balance sheet, and those expected
to be discharged which have been eliminated from the pro forma
balance sheet. The ultimate resolution of certain of the claims
asserted against US&nbsp;Airways Group in the Chapter&nbsp;11
cases will be subject to negotiations and bankruptcy court
procedures that will occur after the date of this prospectus.
Therefore the final determination of liabilities continuing or
being discharged upon emergence from bankruptcy may result in
significant further revisions and adjustments. Persons holding
equity in US&nbsp;Airways Group prior to emergence are not
expected to be entitled to any distribution and their stock is
expected to be cancelled. Reorganization costs associated with
the bankruptcy included in the US&nbsp;Airways Group historical
financial statements have also been eliminated from the pro
forma financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Purchase Price Allocation</I></B>&nbsp;&#151; The value of
the merger consideration was determined based on America West
Holdings&#146; traded market price per share due to
US&nbsp;Airways Group operating under bankruptcy protection. The
outstanding shares of America West Holdings at March&nbsp;31,
2005 were valued at $4.82&nbsp;per share, resulting in a value
assigned to the shares of $175&nbsp;million. The $4.82&nbsp;per
share value is based on the five-day average share price of
America West Holdings with May&nbsp;19, 2005, the merger
announcement date, as the midpoint. The outstanding shares of
America West Holdings Class&nbsp;A and Class&nbsp;B common stock
were converted to New US&nbsp;Airways Group common stock at a
conversion rate of 0.5362 and 0.4125, respectively. Certain
unsecured creditors of US&nbsp;Airways Group will be issued
approximately 8.2&nbsp;million shares of New US&nbsp;Airways
Group common stock in settlement of their claims. The fair value
of that common stock valued at an equivalent price based on the
$4.82 value of the America West Holdings stock is
$96&nbsp;million. America West Holdings expects to incur direct
acquisition costs in connection with the merger of approximately
$19&nbsp;million. The following table summarizes the estimated
purchase price (dollars in&nbsp;millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of common shares issued to US&nbsp;Airways
    Group&#146;s unsecured creditors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Estimated merger costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total purchase price</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes the pro forma net assets acquired
and liabilities assumed in connection with the merger and the
preliminary allocation of the purchase price (dollars
in&nbsp;millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,451</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property plant and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,816</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,305</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>385</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liabilities assumed</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,842</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total purchase price</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Income Taxes</I></B>&nbsp;&#151; The pro forma balance
sheet reflects a pro forma adjustment to record a deferred tax
liability for US Airways Group, primarily due to the significant
discharge of prepetition liabilities in connection with the
emergence of US Airways Group from bankruptcy. Upon completion
of the merger, America West Holdings will evaluate whether there
is any reduction necessary of its deferred tax asset valuation
allowance. Any such reduction in the valuation allowance would
be recorded as a decrease to goodwill. Due to the change in
ownership upon completion of the merger, the annual usage of any
attributes that were generated prior to the merger may be
substantially limited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Conforming Accounting Policies</I></B>&nbsp;&#151; The pro
forma financial statements reflect the following adjustments to
conform the accounting policies of US&nbsp;Airways&nbsp;Group
with those of America West Holdings.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    <I>Share-based compensation</I>&nbsp;&#151; US&nbsp;Airways
    Group is conforming its policy of accounting for share-based
    compensation under Statement of Financial Accounting Standards
    No.&nbsp;123, &#147;Accounting for Stock-Based
    Compensation,&#148; or SFAS&nbsp;123, to America West
    Holdings&#146; policy of accounting under Accounting Principles
    Board Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to
    Employees,&#148; or APB No.&nbsp;25.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">49
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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    <I>Passenger Transportation Revenues</I>&nbsp;&#151;
    US&nbsp;Airways Group is conforming its passenger revenue
    recognition policy to America West Holdings&#146; policy, which
    estimates and records at the time of sale a portion of passenger
    ticket revenue for those tickets expected to expire unused and
    defers costs such as credit card fees and computer reservation
    system fees until the related revenue is recognized.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Change in Accounting Policy</I></B>&nbsp;&#151; The pro
forma balance sheet reflects the following adjustment to conform
the accounting policies of America West Holdings with that of
US&nbsp;Airways Group, the effect of which will be treated as a
cumulative effect of a change in accounting principle upon the
earlier of completion of the merger or January&nbsp;1, 2006.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    <I>Aircraft Maintenance and Repairs</I>&nbsp;&#151;
    US&nbsp;Airways Group charges maintenance and repair costs for
    owned and leased flight equipment to operating expense as
    incurred. America West Holdings records the cost of major
    scheduled airframe, engine and certain component overhauls as
    capitalized assets that are subsequently amortized over the
    periods benefited (deferral method). Upon the earlier of the
    completion of the merger or January&nbsp;1, 2006, America West
    Holdings will change its accounting policy from the deferral
    method to the expense as incurred method. While the deferral
    method is permitted under accounting principles generally
    accepted in the United States of America, America West Holdings
    believes that the expense as incurred method is preferable and
    the predominant method used in the airline industry.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The historical financial statements of US&nbsp;Airways Group
reflect other reclassifications of certain balances to conform
with America West Holdings&#146; financial statement
presentation. Additionally, the 2004 historical statement of
operations for America West Holdings does not reflect
reclassifications made by America West Holdings in its first
quarter 2005 financial statements as filed in its Form&nbsp;10-Q.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Other Adjustments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Critical to US&nbsp;Airways Group&#146;s emergence from
bankruptcy and its merger with America West Holdings is
additional financing and liquidity to fund operations. Several
material agreements have been entered into that will be
effective either before or upon completion of the merger. The
unaudited pro forma condensed combined statements of operations
give effect to these material agreements as if they occurred on
January&nbsp;1, 2004 and the unaudited pro forma condensed
combined balance sheet gives effect to the material agreements
as if they occurred on March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>The New Equity Investments</I></B>&nbsp;&#151; The new
equity investors, ACE Aviation Holdings Inc., Par Investment
Partners L.P., Peninsula Investment Partners L.P., and certain
investors advised by Wellington Management Co. LLP, will invest
$375&nbsp;million in consideration for the issuance of
24,192,727&nbsp;shares of New US&nbsp;Airways&nbsp;Group common
stock. Eastshore Aviation, LLC will convert the outstanding
principal amount of its junior debtor in possession financing,
or the DIP facility, into approximately 8,333,333&nbsp;shares of
New US&nbsp;Airways Group common stock. As of March&nbsp;31,
2005, US&nbsp;Airways Group had drawn $75&nbsp;million under the
DIP facility. The first of two additional $25&nbsp;million draws
was made in April 2005 and the final $25&nbsp;million is
scheduled to be drawn no later than September&nbsp;30, 2005. The
pro forma adjustments reflect the $500&nbsp;million of new
equity. See also the section entitled &#147;The New Equity
Investments.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>GE Merger MOU</I></B>&nbsp;&#151; US&nbsp;Airways Group
and America West Holdings reached a comprehensive agreement with
General Electric Capital Corporation, or GECC, and its
affiliates as described in the Master Merger Memorandum of
Understanding, which we refer to as the GE Merger MOU. The key
aspects of the GE Merger MOU are as follows (See the section
entitled &#147;US&nbsp;Airways&nbsp;Group Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&nbsp;&#151; Liquidity and Capital Resources&#148;):
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    The GE Merger MOU provides for continued use by US&nbsp;Airways
    Group of certain leased Airbus, Boeing and regional jet
    aircraft, the modification of monthly lease rates, and the
    return to GECC of certain other leased Airbus and Boeing
    aircraft. The pro forma adjustments reflect the modification of
    monthly lease rates.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">50

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    GECC has provided a bridge facility of approximately
    $56&nbsp;million for use by the US&nbsp;Airways Group during the
    pendency of the Chapter&nbsp;11 proceedings. As of
    March&nbsp;31, 2005, $42&nbsp;million was outstanding under the
    bridge facility. The remaining $14&nbsp;million was drawn
    subsequent to March&nbsp;31, 2005. Upon completion of the
    merger, convertible notes of US&nbsp;Airways, Inc. will be
    issued to GECC in the aggregate principal amount of
    $125&nbsp;million in exchange for conversion of the bridge
    facility into the convertible notes, forgiveness and release of
    US&nbsp;Airways, Inc. from certain prepetition obligations,
    deferral of certain payment obligations, and amendments to
    future maintenance agreements. The convertible notes will be
    convertible at any time, at the holders&#146; election, into
    shares of common stock of the New US&nbsp;Airways Group at a
    conversion price equal to the product of
    (x)&nbsp;140%&nbsp;&#150;&nbsp;150% (at US&nbsp;Airways,
    Inc.&#146;s option) and (y)&nbsp;the average closing price of
    New US&nbsp;Airways Group common stock for the sixty consecutive
    trading days following emergence from bankruptcy and the listing
    of New US&nbsp;Airways Group common stock on a national stock
    exchange. The pro forma adjustments reflect the additional cash
    received under the bridge facility, the issuance of the
    convertible notes, and the forgiveness of certain prepetition
    obligations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    GECC will purchase and immediately lease back to US&nbsp;Airways
    Group: (a)&nbsp;the assets securing the 2001 GE credit facility
    and the 2003 GE liquidity facility, and other GE obligations,
    consisting of 11 Airbus aircraft and 28 spare engines and engine
    stands, and (b)&nbsp;ten regional jet aircraft currently debt
    financed by GECC. The sale leaseback transaction is expected to
    close prior to July&nbsp;1, 2005. The proceeds from the sale
    leaseback transaction of approximately $633&nbsp;million are
    required to be used to pay down balances due GE by
    US&nbsp;Airways Group under the 2003 GE liquidity facility in
    full, the GECC mortgage-debt financed CRJ aircraft in full, and
    a portion of the 2001 GE credit facility. The 2001 GE credit
    facility will be amended to allow certain additional borrowings,
    which will result in a total principal balance outstanding
    thereunder of approximately $28&nbsp;million.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    The pro forma adjustments reflect the impact of the sale
    leaseback transaction, the pay down of debt with the sale
    leaseback proceeds, and additional borrowings under the GE
    credit facility after the sale leaseback.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Airbus MOU</I></B>&nbsp;&#151; In connection with the
merger, a Memorandum of Understanding was executed between ASVA
S.A.R.L., an affiliate of Airbus Industrie, which we refer to as
Airbus, US&nbsp;Airways Group, US&nbsp;Airways, Inc. and America
West Airlines, Inc. which we refer to as the Airbus MOU. The key
aspects of the Airbus MOU are as follows (see also the section
entitled &#147;US&nbsp;Airways Group Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&nbsp;&#151; Liquidity and Capital Resources&#148;):
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Airbus will provide a $250&nbsp;million financing commitment
    upon the satisfaction of various conditions precedent (including
    the completion of the merger and the emergence of
    US&nbsp;Airways, Inc. from bankruptcy) of which
    $153&nbsp;million is available to be drawn upon completion of
    the merger and used for general corporate purposes.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Airbus has rescheduled US&nbsp;Airways Group&#146;s A320-family
    and A330-200 delivery commitments and has agreed to provide
    backstop financing for a substantial number of aircraft, subject
    to certain terms and conditions, on an order of 20 A350
    aircraft. US&nbsp;Airways Group&#146;s A320-family aircraft are
    now scheduled for delivery in 2009 and 2010. US&nbsp;Airways
    Group&#146;s A330-200 aircraft are scheduled for delivery in
    2009 and 2010 and A350 aircraft deliveries are currently
    scheduled to occur beginning in 2011. The Airbus MOU also
    eliminates cancellation penalties on
    US&nbsp;Airways&nbsp;Group&#146;s orders for the ten A330-200
    aircraft, provided that New US&nbsp;Airways Group has met
    certain predelivery payment obligations under the
    A350&nbsp;order. In connection with the restructuring of
    aircraft firm orders, US&nbsp;Airways Group and America West
    Holdings will be required to pay an aggregate non-refundable
    restructuring fee which will be paid by means of set-off against
    existing equipment purchase deposits of US&nbsp;Airways Group
    and America West Holdings, Inc. held by Airbus. The
    US&nbsp;Airways Group restructuring fee is recorded as a
    reduction in the assets acquired by America West Holdings in
    purchase</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">51

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    accounting. The America West Holdings restructuring fee will be
    recorded as a charge at the time of the merger, but has been
    excluded from the pro forma statement of operations as it is a
    non-recurring item directly related to the merger.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The pro forma adjustments reflect the initial draw of
$153&nbsp;million immediately available upon closing of the
merger, the issuance of certain services credits and the
elimination of existing equipment purchase deposits used to
satisfy the restructuring fee. The pro forma adjustments also
reflect an adjustment to reverse a $33&nbsp;million accrued
aircraft order cancellation penalty previously established by
US&nbsp;Airways&nbsp;Group in connection with its pre-merger
intention not to take delivery of the A330-200 aircraft
scheduled for future delivery.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Items Excluded From the Pro Forma Financial Statements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>The Rights Offering</I></B>&nbsp;&#151; US Airways Group
is distributing (i)&nbsp;transferable rights to purchase up to
3,500,000&nbsp;shares of New US Airways Group common stock to
the holders of shares of America West Holdings Class&nbsp;A and
Class&nbsp;B common stock on the record date and
(ii)&nbsp;non-transferable rights to purchase up to
5,590,909&nbsp;shares of New US Airways Group common stock to
certain unsecured creditors of the debtors entitled to vote on
the plan of reorganization, with certain exceptions as specified
in the plan of reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, each holder of rights may also subscribe (with
certain exceptions) for additional shares at the same exercise
price per share, pursuant to an over-subscription privilege. The
rights will be exercisable for a subscription price of $16.50
per share. If exercised in full, this rights offering will
result in gross proceeds to New US Airways Group of
$150&nbsp;million. The completion of this rights offering is
conditioned on completion of the merger and is not an
underwritten offering. See also the section entitled
&#147;Capitalization&#148; for the impact on New US Airways
Group Stockholders&#146; Equity assuming the rights offering is
exercised in full.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Integration Activities</I></B>&nbsp;&#151; The pro forma
financial statements do not include any adjustments for
liabilities that may result from integration activities, as
management is in the process of making these assessments, and
estimates of these costs are currently unknown. However,
significant liabilities ultimately may be recorded for
US&nbsp;Airways Group employee severance and/or relocation costs
of vacating some US&nbsp;Airways Group facilities, and costs
associated with other exit activities. Any such liabilities
would be recorded as an adjustment to the purchase price and an
increase in goodwill. In addition, significant restructuring
charges may be incurred upon completion of the merger or in
subsequent quarters for severance or relocation costs related to
America West Holdings employees, costs of vacating some
facilities of America West Holdings or other costs associated
with exit activities of America West Holdings. Any such
restructuring charges would be recorded as an expense in the
combined statement of operations in the period in which they
were incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Conversion of America West Holdings&#146; Convertible
Debt</I></B>&nbsp;&#151; In July and August of 2003, America
West Holdings completed a private placement of approximately
$87&nbsp;million issue price of 7.25%&nbsp;Senior Exchangeable
Notes due 2023. The notes bear cash interest until July&nbsp;30,
2008. Thereafter, the notes will cease bearing cash interest and
begin accruing original issue discount daily at a rate of
7.25%&nbsp;per year until maturity. Each note was issued at a
price of $343.61 and is exchangeable for class&nbsp;B common
stock of America West Holdings at an exchange ratio of
32.038&nbsp;shares per $1,000 principal amount at maturity of
the notes (subject to adjustment in certain circumstances). This
represents an equivalent conversion price of approximately
$10.73&nbsp;per share. The aggregate amount due at maturity,
including accrued original issue discount from July&nbsp;31,
2008, will be approximately $253&nbsp;million. The notes are
unconditionally guaranteed on a senior unsecured basis by
America West Holdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the proposed merger, the holders of the notes
will have the option to require America West Holdings to
purchase the notes. Conversely, America West Holdings has the
option to redeem the notes in either cash or shares of America
West Holdings Class&nbsp;B common stock, which then would be
converted into New US&nbsp;Airways Group common stock in
connection with the merger. If it elects to pay in shares, the
number of shares to be issued will be equal to the change of
control purchase price divided by 95% of the market price of the
America West Holdings Class&nbsp;B common stock at or around the
time of the merger.
</DIV>

<P align="center" style="font-size: 10pt;">52

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The right to convert the notes is at the sole discretion of the
holders of the notes. As it is not currently known if the notes
will be converted, the pro forma financial statements do not
assume conversion. If all of the noteholders elect to require
America West Holdings to repurchase the notes and if America
West Holdings elects to use common shares to satisfy the
repurchase obligation, approximately 5.6&nbsp;million shares of
New US&nbsp;Airways Group common stock would be issued, based on
an assumed market price of $16.50.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Restructuring of the ATSB
Loan&nbsp;Guarantees</I></B>&nbsp;&#151; US&nbsp;Airways Group
and America West Holdings each have loans outstanding guaranteed
under the Air Transportation Safety and System Stabilization Act
by the ATSB. As of March&nbsp;31, 2005, the amounts outstanding
under these loans for US&nbsp;Airways Group and America West
Holdings was approximately $712&nbsp;million and
$300&nbsp;million, respectively. US Airways Group reached
agreement with the ATSB concerning an interim extension to the
ATSB cash collateral agreement while US Airways Group and
America West Holdings work to finalize the post-merger terms of
both loans. The interim agreement will expire on July&nbsp;29,
2005 and will require US Airways Group, among other conditions,
to maintain a weekly minimum unrestricted cash balance of
$325&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Synergies</I></B>&nbsp;&#151; America West Holdings and
US&nbsp;Airways Group anticipate the combination of America West
Holdings and US&nbsp;Airways Group will result in significant
annual revenue, operating and cost synergies that would be
unachievable without completing the merger. We cannot assure you
that we will be able to achieve these revenue, operating and
cost synergies and the synergies have not been reflected in the
pro forma financial statements. See also the section entitled
&#147;The Combined Company Following the Merger&#148; for
further discussion of anticipated synergies.
</DIV>

<P align="center" style="font-size: 10pt;">53
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>MARCH&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(dollars in millions)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>US&nbsp;Airways</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>America West</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Purchase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Group</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Holdings</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accounting</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Merger</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash, cash equivalents and short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>613</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;&nbsp;(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>474</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expendable spare parts and supplies, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(b)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;&nbsp;(c)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>389</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,530</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Flight equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(595</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(d)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(562</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(e)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,056</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(96</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(f)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>567</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment purchase deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(g)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(691</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(651</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,680</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(463</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(h)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(i)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>468</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(228</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(619</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,212</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,105</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(j)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>385</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>727</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other intangibles, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(k)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>594</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;(9</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(l)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;(1</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(m)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>232</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,044</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,938</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,321</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,680</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current maturities of long-term debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>163</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(n)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(168</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(n)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>933</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(o)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>724</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Air traffic liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(164</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(p)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,115</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation and vacation benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>275</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;&nbsp;(q)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(r)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>655</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(185</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,702</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non current liabilities and deferred credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt and capital leases, less current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,192</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(n)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(276</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(n)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,587</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred credits and other obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>183</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(s)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(103</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(t)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>275</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employee benefit liabilities and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>481</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(u)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>731</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total non-current liabilities and deferred credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,856</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(379</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,593</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liabilities subject to compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,814</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(v)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(w)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, Class&nbsp;A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;(51</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(x)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, Class&nbsp;B</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;(6</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(w)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(621</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(y)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(z)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>921</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,067</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(255</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>727</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(aa)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(aa)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(537</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Treasury stock, Series&nbsp;B Common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;(308</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>311</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(ab)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(ac)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(ad)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(598</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>385</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,321</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,680</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">54

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Unaudited Pro Forma Condensed Combined Financial
Statements</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    To reflect increases in cash, cash equivalents and short-term
    investments as described in the table below (dollars in
    millions):</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="92%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash received from new equity investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>425</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Initial draw on Airbus loan available at closing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>153</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash draws from GECC facilities available at or prior to closing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total increase in cash, cash equivalents and short-term
    investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>613</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    Fair market value adjustment of US&nbsp;Airways Group&#146;s
    expendable spare parts and supplies in purchase accounting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to record the services credit to be received in
    connection with restructure of Airbus purchase agreements.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to reflect the change in America West Holdings&#146;
    method of accounting for aircraft maintenance and repairs of
    $361&nbsp;million and the fair market value adjustment of
    US&nbsp;Airways Group flight equipment and elimination of
    accumulated depreciation, in purchase accounting of
    $234&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to reflect the reduction in flight equipment related
    to the GECC sale-leaseback transaction of $554&nbsp;million and
    the elimination of capitalized interest related to Airbus
    predelivery deposits of $8&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (f)</TD>
    <TD></TD>
    <TD valign="top">
    Elimination of US&nbsp;Airways Group accumulated depreciation in
    purchase accounting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (g)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to reflect the use of Airbus equipment purchase
    deposits to satisfy restructuring fees in connection with the
    amended Airbus purchase agreements.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (h)</TD>
    <TD></TD>
    <TD valign="top">
    Elimination of US&nbsp;Airways Group accumulated depreciation
    and amortization in purchase accounting of $324&nbsp;million and
    adjustment to reflect the elimination of accumulated
    depreciation and amortization related to the change in America
    West Holdings&#146; method of accounting for aircraft
    maintenance and repairs of $139&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (i)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to reflect the reduction in accumulated depreciation
    and amortization related to the GECC sale-leaseback transaction.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (j)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to reflect elimination of prior US&nbsp;Airways Group
    goodwill of $2.5&nbsp;billion and the establishment of goodwill
    as part of purchase accounting of $385&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (k)</TD>
    <TD></TD>
    <TD valign="top">
    Purchase accounting adjustment to reflect US&nbsp;Airways Group
    take-off and landing slots at fair market value.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (l)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to eliminate debt issuance costs in purchase
    accounting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (m)</TD>
    <TD></TD>
    <TD valign="top">
    Elimination of deposits related to aircraft returned under the
    GECC transaction.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (n)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustments to reflect changes in debt as summarized in the
    table below.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="92%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Short-term</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Long-term</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase accounting adjustments:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepetition debt previously classified as subject to compromise
    assumed to be a continuing obligation upon emergence from
    bankruptcy</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,192</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other merger adjustments:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exchange of Eastshore debtor in possession financing for equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(75</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Initial draw on Airbus loan available at closing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>153</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt restructured under the GE Merger MOU</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(93</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(429</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other merger adjustments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(168</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(276</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    (o)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to reflect an estimated $85&nbsp;million of
    prepetition accounts payable previously classified as subject to
    compromise assumed to be a continuing obligation upon emergence
    from bankruptcy and the accrual of merger related expenses of
    $23&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (p)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to conform to the acquirer&#146;s accounting policy
    for revenue recognition related to tickets that expire unused
    and fair value adjustment for US&nbsp;Airways Group deferred
    revenue.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (q)</TD>
    <TD></TD>
    <TD valign="top">
    Reclassification of prepetition obligations previously
    classified as subject to compromise assumed to be continuing
    obligations upon emergence from bankruptcy.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (r)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to reflect the reduction of accrued interest and
    maintenance contract accruals related to the GECC debt
    restructuring.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (s)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustments for deferred income taxes related to purchase
    accounting.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (t)</TD>
    <TD></TD>
    <TD valign="top">
    Reduction of other non-current liabilities related to
    restructuring of GE deferred maintenance payment obligations of
    $70&nbsp;million and the elimination of Airbus penalties of
    $33&nbsp;million.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">55

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    (u)</TD>
    <TD></TD>
    <TD valign="top">
    Reclassification of prepetition obligations previously
    classified as subject to compromise assumed to be continuing
    obligations upon emergence from bankruptcy.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (v)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to reflect the elimination of liabilities subject to
    compromise upon emergence from bankruptcy.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (w)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to eliminate US&nbsp;Airways Group common stock and
    the conversion of America West Holdings&#146; Class&nbsp;B
    common stock for New US&nbsp;Airways Group common stock and the
    issuance of New US&nbsp;Airways Group common stock as part of
    purchase accounting.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (x)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to reflect the elimination of Class&nbsp;A common
    stock as part of purchase accounting.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (y)</TD>
    <TD></TD>
    <TD valign="top">
    Change in additional paid-in capital as summarized below
    (dollars in millions):</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="92%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Elimination of America West Holdings treasury stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(307</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Elimination of existing additional paid-in capital for
    US&nbsp;Airways Group</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(410</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Value of additional common stock issued to US&nbsp;Airways Group
    unsecured creditors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(621</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    (z)</TD>
    <TD></TD>
    <TD valign="top">
    Change in additional paid-in capital reflects value contributed
    by new investors of $500&nbsp;million including the exchange of
    Eastshore debtor in possession financing of $75&nbsp;million to
    equity.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (aa)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to reflect the elimination of US&nbsp;Airways Group
    accumulated deficit and the impact of other purchase accounting
    and merger related adjustments.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (ab)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to reflect the elimination of both US&nbsp;Airways
    Group and America West Holdings&#146; treasury stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (ac)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to reflect the elimination of deferred compensation
    related to cancelled US&nbsp;Airways Group restricted stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (ad)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to reflect the elimination of US&nbsp;Airways Group
    accumulated other comprehensive income as part of purchase
    accounting.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">56

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>FOR THE THREE MONTHS ENDED MARCH&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in millions, except share and per share amounts)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>US&nbsp;Airways</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>America West</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Purchase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Group</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Holdings</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accounting</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other Merger</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,126</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cargo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,351</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Salaries and related costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>652</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft rent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(b)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>207</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other rent and landing fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft fuel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>526</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Realized and unrealized gains&nbsp;on fuel hedging instruments,
    net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(60</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(66</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agency commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft maintenance materials and repairs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(c)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>153</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(d)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(e)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Express capacity purchases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>313</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(f)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>489</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,525</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(201</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating income (expenses):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(78</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(g)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(h)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(87</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(i)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total nonoperating income (expenses), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(81</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(85</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(282</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(259</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(282</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(259</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.65</TD>
    <TD align="left" valign="bottom" nowrap>)(j)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.65</TD>
    <TD align="left" valign="bottom" nowrap>)(j)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares used for computation (in thousands):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,703</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,703</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">57

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Unaudited Pro Forma Condensed Combined Financial
Statements</B>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the three months ended March&nbsp;31, 2005
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects increase in aircraft rent expense related to the fair
    market value adjustments in purchase accounting related to
    aircraft leases.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects increased aircraft rent expense related to the GECC
    aircraft sale-leaseback transaction and lease rate restructuring.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects America West Holdings&#146; change in accounting method
    for aircraft maintenance and repairs.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects change in depreciation related to fair market value
    adjustments in purchase accounting related to flight equipment.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects reduction of depreciation expense related to the GECC
    aircraft sales leaseback transaction.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (f)</TD>
    <TD></TD>
    <TD valign="top">
    Adjustment to conform to America West Holdings&#146; accounting
    policy to defer costs related to unused tickets until the
    revenue is recognized.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (g)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects decrease in interest expense related to purchase
    accounting fair market value adjustments related to debt.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (h)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects decrease in interest expense of $10&nbsp;million
    related to the restructuring of GECC debt obligations and the
    elimination of interest expense of $1&nbsp;million on debtor in
    possession financing that converts to equity upon the merger,
    offset by interest expense of $3&nbsp;million on the new Airbus
    debt obligation assumed to be drawn down upon closing of the
    merger.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (i)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects the elimination of reorganization costs.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (j)</TD>
    <TD></TD>
    <TD valign="top">
    Basic earnings (loss) per common share gives effect to the
    number of shares expected to be outstanding as a result of the
    merger; see the section entitled &#147;Pro Forma Fully Diluted
    Security Ownership by Entity of New US&nbsp;Airways Group at
    Closing.&#148; As a result of the pro forma net loss, no effect
    has been given to potentially dilutive securities.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">58

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>FOR THE YEAR ENDED DECEMBER&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in millions, except share and per share amounts)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>US&nbsp;Airways</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>America West</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Purchase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Group</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Holdings</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accounting</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other Merger</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Historical</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,542</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cargo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>754</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,456</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Salaries and related costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,090</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft rent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(b)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(c)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>813</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other rent and landing fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>587</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft fuel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,656</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agency commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft maintenance materials and repairs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(d)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>621</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(e)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(f)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>279</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special credits, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Express capacity purchases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>801</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(g)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,957</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(378</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(501</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating income (expenses):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(242</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(80</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(h)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(i)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(295</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(j)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total nonoperating income (expenses), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(243</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss before income tax benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(621</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(727</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(611</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(89</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(717</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12.87</TD>
    <TD align="left" valign="bottom" nowrap>)(k)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12.87</TD>
    <TD align="left" valign="bottom" nowrap>)(k)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares used for computation (in&nbsp;thousands):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,703</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,703</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">59

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Unaudited Pro Forma Condensed Combined Financial
Statements</B>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the year ended December&nbsp;31, 2004
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Reduction in salaries and related costs related to the change in
    US Airways Group accounting for share-based compensation from
    SFAS&nbsp;No.&nbsp;123 to APB Opinion No.&nbsp;25 to conform to
    accounting policy of America West Holdings.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(b)&nbsp;</TD>
    <TD align="left">
    Reflects increase in aircraft rent expense related to the fair
    market value adjustments in purchase accounting related to
    aircraft leases.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(c)&nbsp;</TD>
    <TD align="left">
    Reflects increased aircraft rent expense related to the GECC
    aircraft sale-leaseback transaction and lease rate restructuring.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(d)&nbsp;</TD>
    <TD align="left">
    Reflects America West Holdings&#146; change in accounting method
    for aircraft maintenance and repairs.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(e)&nbsp;</TD>
    <TD align="left">
    Reflects changes in depreciation and amortization related to
    fair market value adjustments in purchase accounting related to
    flight equipment and slots of ($7)&nbsp;million and
    $1&nbsp;million, respectively.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(f)&nbsp;</TD>
    <TD align="left">
    Reflects reduction of depreciation expense related to the GECC
    aircraft sale-leaseback transaction.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(g)&nbsp;</TD>
    <TD align="left">
    Reflects a reduction in expense for purchase accounting fair
    market value adjustments related to inventory of $3&nbsp;million
    and a $4&nbsp;million adjustment to conform to the America West
    Holdings&#146; policy to defer costs related to unused tickets
    until the revenue is recognized.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(h)&nbsp;</TD>
    <TD align="left">
    Reflects decrease in interest expense related to purchase
    accounting fair market value adjustments related to debt.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(i)&nbsp;</TD>
    <TD align="left">
    Reflects the estimated reduction of interest expense of
    $28&nbsp;million related to the restructuring of GECC debt
    obligations offset by interest expense of $9&nbsp;million on the
    new Airbus debt obligation assumed to be drawn down upon closing
    of the merger.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(j)&nbsp;</TD>
    <TD align="left">
    Reflects the elimination of reorganization costs.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (k)</TD>
    <TD></TD>
    <TD valign="top">
    Basic earnings (loss) per common share gives effect to the
    number of shares expected to be outstanding as a result of the
    merger; see the section entitled &#147;Pro Forma Fully Diluted
    Security Ownership by Entity of New US&nbsp;Airways Group at
    Closing.&#148; As a result of the pro forma net loss, no effect
    has been given to potentially dilutive securities.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">60

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='164'></A>
</DIV>

<!-- link1 "THE RIGHTS OFFERING" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE RIGHTS OFFERING</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='165'></A>
</DIV>

<!-- link1 "The Rights" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Rights</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are issuing (i)&nbsp;an aggregate of 3,500,000 transferable
basic rights to America West Holders on a pro rata basis based
on the number of shares of America West Holdings common stock
held at the close of business on the record date, in addition to
certain over-subscription privileges discussed below, and
(ii)&nbsp;an aggregate of 5,590,909 non-transferable basic
rights to US&nbsp;Airways Creditors based on specified dollar
amounts of claims held at the close of business on the record
date entitling each such creditor to vote on the plan of
reorganization, in addition to certain over-subscription
privileges discussed below. The rights will be evidenced by
(x)&nbsp;transferable rights certificates distributed to each
America West Holder for basic subscription privileges and
over-subscription privileges and (y)&nbsp;non-transferable
rights certificates distributed to US&nbsp;Airways Creditors for
basic subscription privileges and over-subscription privileges.
Upon execution of a rights certificate, each Holder will agree
that the exercise of rights will be made on the terms and
subject to the conditions specified in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The number of rights issued to each Holder will be rounded up to
the nearest whole right, subject to any adjustments necessary to
ensure that, if all rights are exercised, 9,090,909&nbsp;shares
will be issued. No fractional rights or cash in lieu thereof
will be issued or paid. No rights certificate may be divided in
such a way as to permit the Holder to receive a greater number
of rights than the number to which that rights certificate
entitles its Holder. However, a depository, bank, trust company
or securities broker or dealer holding shares of the common
stock of America West Holdings on the record date for more than
one beneficial owner may, upon proper showing to the
Subscription Agent, exchange its right certificate to obtain a
rights certificate for the number of rights to which all such
beneficial owners in the aggregate would have been entitled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>The time period to exercise rights expires on [month, day],
2005, and we may not extend the expiration date. You must act
promptly if you want to exercise your rights.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='166'></A>
</DIV>

<!-- link1 "Subscription Privileges" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Subscription Privileges</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Over-Subscription Privilege.</I></B> If any shares being
offered in this rights offering are available after satisfying
all exercises of basic rights, we will allocate the
over-subscription requests as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>If you are an America West Holder:</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You will have your over-subscription requests satisfied first
out of any shares remaining in the America West Holders Pool
after satisfying all exercises of the basic subscription rights
by America West Holders and then out of any remaining shares in
the US&nbsp;Airways Creditors Pool after satisfying the basic
and over-subscription requests of US&nbsp;Airways Creditors. The
number of additional shares we allocate to you pursuant to your
over-subscription privilege will be calculated by adding the
number of shares available for over-subscription in the America
West Holders Pool and any remaining shares in the
US&nbsp;Airways Creditor Pool, and multiplying the sum of those
shares by a proration factor. The proration factor is determined
by dividing the total number of shares that the America West
Holder elected to purchase under the over-subscription privilege
by the total number of shares all America West Holders elected
to purchase pursuant to the over-subscription privilege.
However, each basic right held by an America West Holder must be
exercised for any associated over-subscription privilege to
apply. The number of additional shares we allocate to you
pursuant to the over-subscription privilege may be subject to
certain reductions to ensure that the merger will qualify as a
tax-free &#147;reorganization&#148; within the meaning of
Section&nbsp;368(a) of the Internal Revenue Code of 1986, as
amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>If you are a US&nbsp;Airways Creditor:</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You will have your over-subscription requests satisfied first
out of any shares remaining in the US&nbsp;Airways Creditors
Pool after satisfying all exercises of the basic subscription
rights of US&nbsp;Airways Creditors and then out of any
remaining shares in the America West Holders Pool after
satisfying the basic and over-subscription requests of America
West Holders. The number of additional shares we allocate to you
</DIV>

<P align="center" style="font-size: 10pt;">61
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<DIV align="left" style="font-size: 10pt;">
pursuant to your over-subscription privilege will be calculated
by adding the number of shares available for over-subscription
in the US&nbsp;Airways Creditors Pool and any remaining shares
in the America West Holders Pool, and multiplying the sum of
those shares by a proration factor. The proration factor will be
determined by dividing the total number of shares that the
US&nbsp;Airways Creditor is ultimately determined to have
elected to purchase pursuant to the over-subscription privilege
by the total number of shares all US&nbsp;Airways Creditors are
ultimately determined to have elected to purchase pursuant to
the over-subscription privilege. However, each basic right
ultimately determined to be held by a US&nbsp;Airways Creditor
must be exercised for that Holder&#146;s associated
over-subscription privilege to apply.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A Holder&#146;s election to exercise the over-subscription
privilege must be made at the time that the Holder exercises the
basic subscription privilege.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to exercise the over-subscription privilege, commercial
banks, brokers, dealers, trust companies and other nominee
Holders who exercise the over-subscription privilege on behalf
of America West Holders that are beneficial owners of rights
will be required to certify to the Subscription Agent the number
of shares of America West Holdings common stock held on the
record date on behalf of each such beneficial owner of rights,
the number of rights as to which the basic subscription
privilege has been exercised on behalf of each such beneficial
owner, that each such beneficial owner&#146;s basic subscription
privilege held in the same capacity has been exercised and the
number of shares subscribed for under the over-subscription
privilege by each such beneficial owner, and to record certain
other information received from each such beneficial owner. We
refer to this certification as the Nominee Holder Certification.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='167'></A>
</DIV>

<!-- link1 "Subscription Price" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Subscription Price</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Subscription Price is $16.50&nbsp;per share of New
US&nbsp;Airways Group common stock.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='168'></A>
</DIV>

<!-- link1 "Expiration Time and Date" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Expiration Time and Date</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ability of Holders to exercise their rights will expire at
5:00&nbsp;p.m., New York City time, on [month, day], 2005.
Rights not exercised prior to the Expiration Date will expire
and those rights will no longer be exercisable by any Holder. We
will not be obligated to honor any purported exercise of rights
by Holders received by the Subscription Agent after the
Expiration Date, regardless of when the documents relating to
that exercise were sent, except under the Guaranteed Delivery
Procedures described below.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='169'></A>
</DIV>

<!-- link1 "Determination of Payment Amount Upon Exercise" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Determination of Payment Amount Upon Exercise</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>If
you are an America West Holder:</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For every
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;shares
of America West Holdings Class&nbsp;A or Class&nbsp;B common
stock you own on the record date, you will be entitled to
one&nbsp;basic right. In addition, you may purchase up to
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]x that basic subscription
pursuant to your over-subscription privilege.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For example, assuming you will be entitled to 1&nbsp;basic
right, for each 10 shares of Class&nbsp;A or Class&nbsp;B common
stock you own, if you own 100&nbsp;shares of common stock of
America West Holdings on the record date, you would be entitled
to 10 basic rights. To fully exercise your basic rights, you
would then multiply the Subscription Price of $16.50 by your 10
basic rights, and submit a dollar amount of $165.00. If you wish
to fully exercise your over-subscription privilege, assuming a
10x over-subscription option, you would multiply
10&nbsp;x&nbsp;10&nbsp;x&nbsp;$16.50, and submit an additional
$1,650.00 as payment for the full amount of the
over-subscription privilege.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Therefore, you would submit a total payment to the Subscription
Agent of $1,815.00 (the sum of $165.00 to exercise your basic
rights and $1,650.00 to exercise your over-subscription
privilege) for your full exercise of your basic and
over-subscription privileges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notwithstanding the foregoing, you are in no way obligated to
exercise either your basic or over-subscription privileges in
full, and any lesser amount will be accepted. However, you must
exercise each basic right in full to exercise any associated
over-subscription privilege.
</DIV>

<P align="center" style="font-size: 10pt;">62

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that the total dollar amount you submit is greater
than the final dollar amount attributable to the basic right you
are ultimately entitled to receive, the surplus will be applied
as an exercise of the over-subscription privilege discussed
above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that the total dollar amount you submit is less
than the final dollar amount attributable to the basic rights
you are ultimately entitled to receive, you will receive fewer
shares than you estimated you would have been entitled to
receive. In the case of an under-subscription, you will not have
an opportunity to submit further payment for any additional
basic rights or over-subscription privileges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that the total dollar amount you submit is greater
than the basic and over-subscription privileges you are
ultimately entitled to, any excess funds will be returned to
you, without interest, within 5&nbsp;business days of the
Allocation Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><I>If
you are a US&nbsp;Airways Creditor:</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Your basic rights will ultimately be determined pursuant to the
US&nbsp;Airways Creditor Basic Right Calculation on the
Allocation Date. A determination may not be made on the exact
amount of your allowed claim, or the total amount of all allowed
claims, entitled to vote on the plan of reorganization until on
or before the Confirmation Order Date. Solely for the purposes
of estimating your basic rights, we have assumed
$[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;billion
of total allowed voting claims. You may estimate you will
receive one basic right for each
$[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
allowed voting claim amount. For example, an allowed voting
claim for
$[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
is estimated to receive
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
basic rights. However, your basic rights will ultimately be
determined pursuant to the US&nbsp;Airways Creditor Basic Right
Calculation on the Allocation Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Once you have estimated your basic subscription, you may pay for
your basic subscription and pay up to
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]x
that basic subscription price to participate in the associated
over-subscription privilege.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You would multiply the Subscription Price of $16.50 by the
estimated number of basic rights to which you estimate you are
entitled, and submit a dollar amount of
$[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
in order to pay for the full amount of basic rights attributable
to your estimated claim. If you hold a $100,000 claim and wish
to fully exercise your over-subscription privilege, assuming a
10x over-subscription option, you would multiply
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;x&nbsp;10&nbsp;x&nbsp;$16.50,
and submit
$[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
as an additional payment for the full amount of the
over-subscription privilege.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Therefore, you would submit a total payment to the Subscription
Agent of
$[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
(the sum of
$[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
to exercise your basic rights and
$[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
to exercise your over-subscription privilege) for your full
exercise of your basic and over-subscription privileges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notwithstanding the foregoing, you are in no way obligated to
exercise either your basic or over-subscription privilege in
full, and any lesser amount will be accepted. However, you must
exercise each basic right to exercise any associated
over-subscription privilege.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although we have provided you with our best estimate of the
amount of your basic rights and over-subscription privilege, it
is likely that your final basic rights and over-subscription
privilege will be different from our estimate, perhaps
materially so. In the rights certificate, you must acknowledge
that New US&nbsp;Airways Group is not liable for any damages
resulting from your receiving a different number of rights or
over-subscription privileges than you originally estimated you
would be entitled to receive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that the total dollar amount you submit is greater
than the final dollar amount attributable to the basic rights
you are ultimately entitled to receive, the surplus will be
applied as an exercise of the over-subscription privilege
discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that the total dollar amount you submit is less
than the final dollar amount attributable to the basic rights
you are ultimately entitled to receive, you will receive fewer
shares than you estimated you would have been entitled to
receive. In the case of an under-subscription, you will not have
an opportunity to submit further payment for any additional
basic rights or over-subscription privileges.
</DIV>

<P align="center" style="font-size: 10pt;">63
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that the total dollar amount you submit is greater
than the basic and over-subscription privileges you are
ultimately entitled to, any excess funds will be returned to
you, without interest, within 5&nbsp;business days of the
Allocation Date.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='170'></A>
</DIV>

<!-- link1 "Exercise of Rights" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Exercise of Rights</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A Holder may exercise its rights by delivering to the
Subscription Agent, at the address specified below, at or prior
to the Expiration Date, the properly completed and executed
rights certificate(s) evidencing those rights, with any
signatures guaranteed as required, together with payment in full
of the Subscription Price for each share subscribed for by that
Holder, as the case may be. Payment in full must be made by
(i)&nbsp;check or bank draft drawn upon a United States bank, or
postal, or express money order, payable to
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;],
as Subscription Agent, or (ii)&nbsp;wire transfer of funds to
the account maintained by the Subscription Agent for the purpose
of accepting subscriptions at
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;].
The Subscription Price will be deemed to have been received by
the Subscription Agent only upon (i)&nbsp;clearance of an
uncertified check, (ii)&nbsp;receipt by the Subscription Agent
of a certified or cashier&#146;s check or bank draft drawn upon
a United States bank or of a postal, telegraphic or express
money order or (iii)&nbsp;receipt of collected funds in the
Subscription Agent&#146;s account designated above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Funds paid by uncertified personal check may take at least five
business days to clear. Accordingly, we urge Holders who wish to
pay the Subscription Price by means of uncertified personal
check to make payment sufficiently in advance of the Expiration
Date to ensure that the payment is received and clears by that
time. We also urge Holders to consider, in the alternative,
payment by means of certified or cashier&#146;s check, money
order or wire transfer of funds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a Holder wishes to exercise rights, but time will not permit
the Holder to cause the rights certificate(s) evidencing those
rights to reach the Subscription Agent prior to the Expiration
Date, the Holder may nevertheless exercise the rights if all of
the following conditions, which we refer to as the Guaranteed
Delivery Procedures, are met:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
    Holder has caused payment in full of the Subscription Price for
    each share being subscribed for by that Holder to be received
    (in the manner set forth above) by the Subscription Agent at or
    prior to the Expiration Date;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
    Subscription Agent receives, at or prior to the Expiration Date,
    a guarantee notice, referred to as a Notice of Guaranteed
    Delivery, substantially in the form provided with the
    Instructions as to Use of Rights Certificates, distributed with
    the rights certificates, from a member firm of a registered
    national securities exchange or a member of the National
    Association of Securities Dealers, Inc., or from a commercial
    bank or trust company having an office or correspondent in the
    United States (each of which we refer to as an Eligible
    Institution) stating the name of the exercising Holder, the
    number of rights represented by the rights certificate(s) held
    by the exercising Holder, the number of shares being subscribed
    for by that Holder, and guaranteeing the delivery to the
    Subscription Agent of the rights certificate(s) evidencing those
    rights, and, if applicable for a nominee Holder, the related
    Nominee Holder Certification, within three NYSE trading days
    following the date of the Notice of Guaranteed Delivery;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
    properly completed rights certificate(s), and, if applicable for
    a nominee Holder, the related Nominee Holder Certification, with
    any signatures guaranteed as required, is received by the
    Subscription Agent within three NYSE trading days following the
    date of the Notice of Guaranteed Delivery relating thereto. The
    Notice of Guaranteed Delivery may be delivered to the
    Subscription Agent in the same manner as rights certificates at
    the address set forth above, or may be delivered by telegram or
    facsimile transmission (facsimile no.
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]).
    To confirm facsimile deliveries, please call
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;].
    Additional copies of the form of Notice of Guaranteed Delivery
    are available upon request from
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;],
    whose address and telephone numbers are set forth below.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If an exercising Holder does not indicate the number of rights
being exercised, or does not forward full payment of the
aggregate Subscription Price for the number of rights that the
Holder indicates are being
</DIV>

<P align="center" style="font-size: 10pt;">64

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<DIV align="left" style="font-size: 10pt;">
exercised, then the Holder will be deemed to have exercised
those rights with respect to the maximum number of rights that
may be exercised for the aggregate Subscription Price payment
delivered by the Holder, and, to the extent that the aggregate
Subscription Price payment delivered by the Holder exceeds the
product of the Subscription Price multiplied by the number of
rights evidenced by the rights certificates delivered by the
Holder, which excess is referred to as the Subscription Excess,
the Holder will be deemed to have exercised those rights to
purchase that number of whole shares equal to the quotient
obtained by dividing the Subscription Excess by the Subscription
Price, subject to proration, as described above. Any amount,
remaining after application of the foregoing procedures shall be
returned to the Holder, without interest, within 5&nbsp;business
days of the Allocation Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An America West Holder who subscribes for fewer than all of the
shares represented by its rights certificate may, under certain
circumstances, (i)&nbsp;direct the Subscription Agent to attempt
to sell its remaining rights, or (ii)&nbsp;receive from the
Subscription Agent a new rights certificate representing the
unused rights. See &#147;&#151;&nbsp;Method of Transferring
America West Holdings Rights&#148; below. A Holder&#146;s
election to exercise its over-subscription privilege must be
made at the time that the Holder exercises its basic
subscription privilege.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless a rights certificate (i)&nbsp;provides that the shares to
be issued under the exercise of the rights represented thereby
are to be issued to the registered Holder of those rights as
indicated in the rights certificate or (ii)&nbsp;is submitted
for the account of an Eligible Institution, signatures on each
rights certificate must be guaranteed by a bank, broker, dealer,
credit union, national securities exchange, registered
securities association, clearing agency or savings association.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
America West Holders who hold shares of Class A or Class B
common stock of America West Holdings for the account of others,
such as brokers, trustees or depositories for securities, which
we refer to as Nominee Record Date Holders, should contact the
respective beneficial owners of such shares as soon as possible
to ascertain those beneficial owners&#146; intentions and to
obtain instructions and certain beneficial owner certifications
with respect to their rights, all as included in the
Instructions distributed by Nominee Record Date Holders to
beneficial owners. If a beneficial owner so instructs, the
Nominee Record Date Holder should complete appropriate rights
certificates [and, in the case of any exercise of the
over-subscription privilege, the related Nominee Holder
Certification], and submit them to the Subscription Agent with
the proper payment. In addition, beneficial owners of the common
stock held through such a Nominee Record Date Holder should
contact the Nominee Record Date Holder and request the Nominee
Record Date Holder to effect transactions under the beneficial
owner&#146;s instructions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should read the Instructions accompanying the rights
certificates carefully and follow those instructions in detail.
Rights certificates should be sent with payment to the
Subscription Agent. <B>DO NOT SEND US&nbsp;AIRWAYS GROUP OR
AMERICA WEST HOLDINGS ANY RIGHTS CERTIFICATES.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The method of delivery of rights certificates and payment of the
Subscription Price to the Subscription Agent will be at the
election and risk of the Holder. If rights certificates and
payments are sent by mail, we urge Holders to send these
materials by registered mail, properly insured, with return
receipt requested. We also urge Holders to allow a sufficient
number of days to ensure delivery to the Subscription Agent and
clearance of payment prior to the Expiration Date. Because
uncertified personal checks may take at least five business days
to clear, we strongly urge Holders to pay, or arrange for
payment, by means of certified or cashier&#146;s check, money
order or wire transfer of funds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All questions concerning the timeliness, validity, form and
eligibility of any exercise of rights will be determined by us,
and the determinations will be final and binding. We, in our
sole discretion, may waive any defect or irregularity, or permit
a defect or irregularity to be corrected within such time as we
may determine, or reject the purported exercise of any right
because of any defect or irregularity. Rights certificates will
not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as we
determine, in our sole discretion. <B>Neither we, nor the
Subscription Agent, will be under any duty to give notification
of any defect or irregularity in connection with the submission
of rights certificates or any other required document or incur
any liability for failure to give such notification. We reserve
the right to reject any exercise if that exercise is not
contemplated under the terms of the rights offering or not in
proper form or if the acceptance of that exercise or the</B>
</DIV>

<P align="center" style="font-size: 10pt;">65

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<DIV align="left" style="font-size: 10pt;">
<B>issuance of shares of New US&nbsp;Airways Group common stock
pursuant to that exercise could be deemed unlawful or materially
burdensome.</B> See &#147;&#151;&nbsp;Regulatory
Limitation&#148; below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should direct any questions or requests for assistance
concerning the method of exercising rights or requests for
additional copies of this prospectus, the Instructions or the
Notice of Guaranteed Delivery to
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
(telephone: banks and brokers
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;],
collect; all others
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]).
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='171'></A>
</DIV>

<!-- link1 "No Revocation" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>No Revocation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Once a Holder has exercised its rights, the Holder may not
revoke that exercise.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='172'></A>
</DIV>

<!-- link1 "Method of Transferring America West Holdings Rights" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Method of Transferring America West Holdings Rights</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The rights issued to America West Holders will be transferable
and may be purchased or sold through the Subscription Agent.
There has, however, been no prior trading in the rights, and we
cannot assure you that a trading market will develop or, if a
market develops, that the market will remain available
throughout the subscription period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An America West Holder may transfer the rights evidenced by a
single rights certificate in whole by endorsing the rights
certificate for transfer under the accompanying Instructions. An
America West Holder may transfer a portion of the rights
evidenced by a single rights certificate, but not fractional
rights, may be transferred by delivering to the Subscription
Agent a rights certificate properly endorsed for transfer, with
instructions to register that portion of the rights indicated
therein in the name of the transferee and to issue a new rights
certificate to the transferee evidencing the transferred rights.
In that event, a new rights certificate evidencing the balance
of the rights will be issued to the Holder or, if the Holder so
instructs, to an additional transferee, or will be sold by the
Subscription Agent in the manner described below upon
appropriate instruction from the Holder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An America West Holder may also sell the rights evidenced by a
rights certificate, in whole or in part, through the
Subscription Agent by delivering to the Subscription Agent the
rights certificate properly executed for sale by the
Subscription Agent. If only a portion of rights evidenced by a
single rights certificate must be accompanied by instructions
setting forth the action to be taken with respect to the rights
that are not to be sold. Orders to sell rights must be received
by the Subscription Agent at or prior to 11:00&nbsp;a.m., New
York City time, on [month, day], 2005. Promptly following the
Expiration Date, the Subscription Agent will send the Holder a
check for the net proceeds from the sale of any rights sold on
behalf of that Holder. If these rights can be sold, the sale
will be deemed to have been effected at the weighted average
sale price of all rights sold by the Subscription Agent at the
request of Holders, less the pro rata portion of any applicable
brokerage commissions, taxes and other expenses. We cannot
assure you, however, that a market will develop for the rights
or that the Subscription Agent will be able to sell any rights.
The Subscription Agent&#146;s obligation to execute orders is
subject to its ability to find buyers. If less than all sales
orders received by the Subscription Agent can be filled, sales
proceeds will be prorated among the Holders requesting these
sales based upon the number of rights each such Holder has
requested the Subscription Agent to sell, regardless of when
during the period ending [month, day], 2005 such requests are
received by the Subscription Agent. If the rights cannot be sold
by the Subscription Agent by 5:00&nbsp;p.m., New York City time,
on [month, day], 2005, they will be returned promptly by mail to
the Holder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
America West Holders wishing to transfer all or a portion of
their rights, but not fractional rights, should allow a
sufficient amount of time prior to the Expiration Date for
(i)&nbsp;the transfer instructions to be received and processed
by the Subscription Agent, (ii)&nbsp;new rights certificates to
be issued and transmitted and (iii)&nbsp;the rights evidenced by
the new rights certificates to be exercised or sold by the
recipients thereof. This amount of time could range from two to
ten business days, depending upon the method by which delivery
of the rights certificates and payment is made and the number of
transactions which the Holder instructs the Subscription Agent
to effect. Neither we nor the Subscription Agent will have any
liability to a transferee or transferor of rights if rights
certificates or any other required documents are not received in
time for exercise or sale prior to the Expiration Date.
</DIV>

<P align="center" style="font-size: 10pt;">66

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A new rights certificate will be issued to a submitting Holder
upon the partial exercise or sale of rights only if the
Subscription Agent receives a properly endorsed rights
certificate no later than 5:00&nbsp;p.m., New York City time, on
the fifth day prior to the Expiration Date. No new rights
certificates will be issued with respect to rights certificates
submitted after that time and date. Accordingly, after that time
and date a Holder exercising or selling less than all of its
rights will lose the power to sell or exercise its remaining
rights. Unless the submitting Holder makes other arrangements
with the Subscription Agent, a new rights certificate issued
after 5:00&nbsp;p.m., New York City time, on the fifth business
day before the Expiration Date will be held for pick-up by the
submitting Holder at the Subscription Agent&#146;s hand delivery
address provided in this prospectus. All deliveries of newly
issued rights certificates will be at the risk of the submitting
Holder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All commissions, fees and other expenses, including brokerage
commissions and transfer taxes, incurred in connection with the
purchase, sale or exercise of rights will be for the account of
the transferor of the rights, and none of these commissions,
fees or expenses will be paid by US&nbsp;Airways Group or the
Subscription Agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
THOSE RIGHTS NOT EXERCISED BY A HOLDER PRIOR TO THE EXPIRATION
DATE WILL EXPIRE AND WILL NO LONGER BE EXERCISABLE.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Non-Transferability of US Airways Creditors Rights</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Your rights are not transferable through the Subscription Agent.
A US&nbsp;Airways Creditor&#146;s rights may only be exercised
by the holder of the claim on the record date. If a
US&nbsp;Airways Creditor subsequently transfers its claim, we
will not recognize the transferee as the holder of the rights.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='190'></A>
</DIV>

<!-- link1 "Procedures for DTC Participants" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Procedures for DTC Participants</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will use our reasonable efforts to have the America West
Holders&#146; rights eligible for transfer through, and the
exercise of the Holders&#146; rights effected through, the
facilities of The Depository Trust Company.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='173'></A>
</DIV>

<!-- link1 "Subscription Agent" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Subscription Agent</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Subscription Agent is
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;].
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Subscription Agent&#146;s address, which is the address to
which the rights certificates and payment of the Subscription
Price must be delivered, is
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='174'></A>
</DIV>

<!-- link1 "Determination of Subscription Price" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Determination of Subscription Price</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Subscription Price of $16.50 per share is the highest price
committed to be paid by the new equity investors that have
committed to invest in shares of New US&nbsp;Airways Group
common stock in connection with the merger and the plan of
reorganization. We cannot assure you of the price at which New
US&nbsp;Airways Group common stock will trade following this
rights offering.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='175'></A>
</DIV>

<!-- link1 "No Appraisal Rights" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>No Appraisal Rights</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holders will not have any appraisal rights in connection with
this rights offering.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='176'></A>
</DIV>

<!-- link1 "No Recommendation to Holders" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>No Recommendation to Holders</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An investment in New US&nbsp;Airways Group common stock must be
made under each investor&#146;s evaluation of its, his or her
best interests. Accordingly, neither the board of directors of
US&nbsp;Airways Group, nor the board of directors of America
West Holdings, nor Merrill Lynch makes any recommendation to
Holders regarding whether they should exercise their rights.
</DIV>

<P align="center" style="font-size: 10pt;">67

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<DIV align="left" style="font-size: 10pt;">
<A name='177'></A>
</DIV>

<!-- link1 "Conditions to the Rights Offering" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Conditions to the Rights Offering</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Notwithstanding any other provisions of this rights offering, we
will not complete this rights offering if any of the following
has not occurred:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    New&nbsp;US&nbsp;Airways Group must have received from the
    equity investors, on or before the effective time of the merger,
    cash equity investments of not less than $375&nbsp;million on a
    pre-investment value of not less than $500&nbsp;million, with
    those equity investments to be made substantially on the basis
    set forth in their financing commitments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    no law shall have been promulgated, enacted or entered that
    restrains, enjoins, prevents, materially delays, prohibits or
    otherwise makes illegal the performance of any of the terms of
    this rights offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    no preliminary or permanent injunction or other order by any
    governmental authority that restrains, enjoins, prevents,
    delays, prohibits or otherwise makes illegal the performance of,
    or materially modifies, the terms of this rights offering shall
    have been issued and remain in effect, except for such
    injunctions that, if obtained, could not, individually or in the
    aggregate, reasonably be expected to have a material adverse
    effect on the ability of the Holders or New US&nbsp;Airways
    Group to complete this rights offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the plan of reorganization must have been confirmed by the
    bankruptcy court and an order confirming the plan of
    reorganization must have been entered and become a final order
    no later than December&nbsp;31, 2005;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    New US&nbsp;Airways Group alone, and not any affiliate of New
    US&nbsp;Airways Group, must have issued equity securities in
    connection with the completion of the plan of reorganization;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the merger shall have become effective substantially on the
    terms described in this prospectus, and must become effective
    prior to or concurrently with the closing of this rights
    offering;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the shares of New US&nbsp;Airways Group common stock to be
    issued under this rights offering must have been authorized for
    listing on the NYSE upon official notice of issuance.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='179'></A>
</DIV>

<!-- link1 "Regulatory Limitation" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Regulatory Limitation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group will not be required to issue shares
under the rights offering to any Holders who, in the opinion of
New US&nbsp;Airways Group, would be required to obtain prior
clearance or approval from any state or federal regulatory
authorities to own or control those shares if, at the Expiration
Date, this clearance or approval has not been obtained.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Foreign and Certain Other Holders</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Rights certificates will not be mailed to any Holder who might
be entitled to receive rights, whose address is outside the
United States or who has an APO or FPO address, because the
ability to exercise rights may be prohibited by the laws of the
country in which that person or entity resides. Such rights
certificates will be held by the Subscription Agent for these
persons&#146; accounts. This rights offering is not being
offered to any person in any jurisdiction in which it is
unlawful to do so, nor will any offers to purchase any shares of
New&nbsp;US&nbsp;Airways Group common stock or, in the case of
America West Holders, transfer any rights, be accepted from any
person in any jurisdiction in which it is unlawful to do so.
However, such person may exercise or, in the case of America
West Holders, transfer rights, if, on or prior to [month, day],
2005, the Holders provide evidence that is satisfactory to us,
such as a legal opinion from local counsel, that it is otherwise
lawful for such person to receive, exercise or, in the case of
America West Holders, transfer rights without any requirement
being imposed on us to be registered or licensed. If the person
can provide this evidence, the Subscription Agent will mail a
rights certificate to that Holder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we reserve the right to reject subscriptions by
non-U.S. persons to the extent that acceptance of those
subscriptions would cause the number of shares of New
US&nbsp;Airways Group common stock held by
</DIV>

<P align="center" style="font-size: 10pt;">68
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<DIV align="left" style="font-size: 10pt;">
non-U.S. persons to be entitled to more than 24.9% of the
aggregate votes of all outstanding shares of common stock of New
US Airways Group following the completion of the rights offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If an America West Holder holds shares of America West Holdings
Class&nbsp;A or Class&nbsp;B common stock through a broker,
dealer, commercial bank, trust company or other nominee within
the United States and such Holder resides outside the United
States, neither such Holder nor such broker, bank or nominee may
attempt to exercise any rights unless such Holder provides
evidence that is satisfactory to us, such as a legal opinion
from local counsel, that it is not unlawful for such Holder to
receive, exercise or transfer rights without any requirement
being imposed on us to be registered or licensed.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='180'></A>
</DIV>

<!-- link1 "Withdrawal" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Withdrawal</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group reserves the right to withdraw this rights
offering at any time prior to the Expiration Date for any
reason, in which event US&nbsp;Airways Group will have no
obligation to Holders other than to return all funds received
from Holders without interest.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='181'></A>
</DIV>

<!-- link1 "Issuance of New US Airways Group Common Stock" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Issuance of New&nbsp;US&nbsp;Airways Group Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certificates representing shares of New US&nbsp;Airways Group
common stock purchased under this rights offering will be issued
to subscribers as soon as practicable after the Expiration Date.
Funds delivered to the Subscription Agent in payment of the
Subscription Price will be retained by the Subscription Agent,
and will not be delivered to New US&nbsp;Airways Group, until
the completion of this rights offering and the issuance of those
stock certificates. If a Holder exercising its rights is
allocated less than all of the shares which that Holder
subscribed for under its right, the excess funds paid by that
Holder will be returned to that Holder within
three&nbsp;business days after the Allocation Date. Interest
will not be paid to Holders on those funds.
</DIV>

<P align="center" style="font-size: 10pt;">69

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<DIV align="left" style="font-size: 10pt;">
<A name='128'></A>
</DIV>

<!-- link1 "THE MERGER" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE MERGER</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following is a description of the material aspects of the
merger. While we believe that the following description covers
the material terms of the merger, the description may not
contain all of the information that is important to you. We
encourage you to read carefully this entire prospectus and the
merger agreement, which is filed as an exhibit to the
registration statement of which this prospectus forms a part.</I>
</DIV>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='129'></A>
</DIV>

<!-- link1 "General" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>General</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the America West Holdings and US&nbsp;Airways Group
boards of directors has unanimously approved and declared
advisable the merger agreement and the merger. The merger
agreement provides that, upon the terms and subject to the
conditions set forth in the merger agreement, Barbell
Acquisition Corp., a wholly owned subsidiary of US&nbsp;Airways
Group, will merge with and into America West Holdings, with
America West Holdings continuing as a wholly owned subsidiary of
US&nbsp;Airways Group. At the effective time and as a result of
the merger, (i)&nbsp;each share of America West Holdings
Class&nbsp;A common stock will be converted into 0.5362 of a
share of common stock of New US&nbsp;Airways Group and
(ii)&nbsp;each share of America West Holdings Class&nbsp;B
common stock will be converted into 0.4125 of a share of New
US&nbsp;Airways Group common stock, on the terms and subject to
the adjustment as provided in the merger agreement and further
described below under the section entitled &#147;The Merger
Agreement&nbsp;&#151; The Merger Consideration.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='130'></A>
</DIV>

<!-- link1 "Background of the Merger" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Background of the Merger</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group was one of the airlines most affected by
the significant reductions in air travel post-September&nbsp;11,
2001. With its concentration of routes in the eastern United
States, US&nbsp;Airways Group&#146;s average stage length, or
trip distance, is shorter than those of other major airlines. In
the post-September&nbsp;11, 2001 environment, US&nbsp;Airways
Group was more susceptible than other major airlines to
competition from surface transportation, such as automobiles and
trains. In addition, the increased airport security charges and
procedures had a disproportionate impact on short-haul travel,
which constitutes a significant portion of flying for
US&nbsp;Airways Group&#146;s airline subsidiaries. On
August&nbsp;11, 2002, the debtors filed voluntary petitions for
relief under Chapter&nbsp;11 of the U.S.&nbsp;Bankruptcy Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the petition, the debtors developed a plan of
reorganization that became effective on March&nbsp;31, 2003.
Although the plan included cost reductions, structural changes
and revenue initiatives intended to help the company return to
profitability, US&nbsp;Airways Group found itself facing two
factors not sufficiently anticipated in its forecasts. The first
was the decline in domestic passenger unit revenues. This
decline was due to the growth of low-cost carriers and the
impact of these carriers on the prices other carriers could
charge. The second was higher than predicted fuel costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
When it became apparent that US&nbsp;Airways Group could not
survive under the business plan developed as part of the plan of
reorganization, US&nbsp;Airways Group developed a new business
plan, which it called its transformation plan. This plan
contained a number of initiatives, including significant
reductions in labor costs through changes to the company&#146;s
collective bargaining agreements. Although US&nbsp;Airways Group
hoped to achieve these reductions without the need for new
Chapter&nbsp;11 protection, it could not do so. As a result of
recurring losses, declining available cash and the risk of
defaults or cross defaults, the debtors filed voluntary
petitions for relief under Chapter&nbsp;11 on September&nbsp;12,
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Even before the petitions were filed in 2004, one of the
alternatives US&nbsp;Airways&nbsp;Group explored to address its
problems and return to profitability was a possible merger with
America West Holdings. The management of America West Holdings
believed that consolidation in the industry was inevitable, and
was interested in the potential benefits of combining the
airlines&#146; complementary east-west route networks. The
parties held preliminary discussions about a possible
transaction and conducted due diligence during the period from
February through July 2004. Ultimately, these discussions ended
due to the parties&#146; view that a number of issues, including
those related to labor, pension and benefit costs, made a merger
impracticable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, in anticipation of US&nbsp;Airways
Group&#146;s success in significantly restructuring its labor
costs, US&nbsp;Airways Group&#146;s investment advisor, The
Seabury Group LLC, began considering potential
</DIV>

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<DIV align="left" style="font-size: 10pt;">
transactions involving the company and other entities. During
this period, executives of US&nbsp;Airways Group and America
West Holdings discussed the possibility of resuming discussions
concerning a business combination transaction. US&nbsp;Airways
Group considered the potential benefits that could be achieved
from joining two airlines with complementary networks and
similar labor costs as US&nbsp;Airways Group hoped to lower its
labor costs during its Chapter&nbsp;11 proceedings. In addition,
the parties considered that, as part of the plan of
reorganization, US&nbsp;Airways Group would have greater
flexibility to combine its network with America West
Holdings&#146; network in a more efficient and cost-effective
manner than it had prior to filing bankruptcy petitions in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The parties remained interested in combining the two
companies&#146; complementary route networks. The parties also
believed that, as a result of US&nbsp;Airways Group&#146;s
improved cost structure and liquidity following a plan of
reorganization, a merger could create the nation&#146;s largest
low-cost carrier with better liquidity and more efficient
operations than either airline could achieve on its own.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Beginning in January 2005, US&nbsp;Airways Group and America
West Holdings resumed discussions. Both parties conducted due
diligence and each management group met separately and together.
On January&nbsp;20, 2005, the board of directors of America West
Holdings discussed the renewed merger talks with US&nbsp;Airways
Group as part of a strategic overview presentation. In late
February 2005, US&nbsp;Airways&nbsp;Group management and its
outside financial advisor made a presentation regarding a
possible combination with America West Holdings to the Strategy
and Finance Committee of US&nbsp;Airways Group&#146;s board of
directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During March 2005, due diligence and discussions about the
structure of a possible transaction involving the companies and
their respective advisors continued. These discussions included
analysis of legal structuring issues and financial modeling. As
part of the modeling, potential synergies relating to a
combination of the two companies were the subject of extensive
review. The companies and their advisors also considered labor
contract and other integration issues. During the
Chapter&nbsp;11 cases, US&nbsp;Airways Group had entered into
new agreements with its labor groups and had obtained
significant reductions in pension and retiree benefit costs,
with the result that these issues no longer made a merger
impracticable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;4, 2005, there was a meeting of the Governance
Committee of the America West Holdings Board of Directors at
which the committee was updated on the status of discussions
with US&nbsp;Airways Group. On March&nbsp;10, 2005, the America
West Holdings board of directors was updated on the proposed
structure of the transaction, ongoing due diligence and
discussions with US&nbsp;Airways Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;11, 2005, the Strategy and Finance Committee of
US&nbsp;Airways Group&#146;s board of directors again met and
received a presentation from senior management concerning the
status of the potential transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;21, 2005, Seabury and Greenhill&nbsp;&#38; Co.,
LLC, America West Holdings&#146; financial advisor, met to
discuss the potential economic terms of a possible transaction.
Discussions relating to the economic terms continued after this
meeting. On March&nbsp;24, 2005, at a special meeting of the
board of directors of America West Holdings, its management
presented a description of a proposed structure of the
transaction. Also on March&nbsp;24, 2005, David Bronner,
Chairman of US&nbsp;Airways Group&#146;s board of directors, and
Bruce Lakefield, US&nbsp;Airways Group&#146;s Chief Executive
Officer, met with John Luth of Seabury and Douglas Parker, Chief
Executive Officer of America West Holdings to discuss a
potential merger.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;30, 2005, there was a further meeting of the
Strategy and Finance Committee of US&nbsp;Airways Group&#146;s
board of directors. The committee was updated on the proposed
structure of the transaction and the status of the diligence
effort and discussions with America West Holdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2005, the parties and their advisors participated in
active negotiations regarding the merger agreement, including
with respect to the consideration to be paid to the holders of
America West Holdings Class&nbsp;A and Class&nbsp;B common
stock, respectively, in the merger. Beginning in early April,
representatives of the two companies and their advisors
participated in frequent meetings and teleconferences discussing
business and due diligence issues. Topics of negotiation
included the exchange ratio for the conversion of shares of
America West Holdings&#146; common stock into shares of
US&nbsp;Airways Group, the need to attract additional equity
investment and the composition of the combined company&#146;s
board of directors after the
</DIV>

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<DIV align="left" style="font-size: 10pt;">
merger. Also in April, the parties and their advisors made a
joint presentation regarding a possible merger to the ATSB. The
merger is subject to the approval of the ATSB under the terms of
loan guarantees issued to America West Holdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the same time, US&nbsp;Airways Group and America West
Holdings participated in discussions and negotiations with
potential equity investors in the post-merger company. Prior to
the announcement of the proposed merger on May&nbsp;19, 2005,
four investors committed to investing in New US&nbsp;Airways
Group. Those four investors are Eastshore Aviation, LLC, a
company owned by Air Wisconsin Airlines Corporation and its
shareholders; ACE Aviation Holdings Inc., the parent corporation
of Air Canada; and Par Investment Partners, L.P. and Peninsula
Investment Partners, L.P., two private investment firms.
Subsequent to the signing of the merger agreement and the
announcement of the proposed transaction, the parties commenced
discussions with Wellington Management Company, LLP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April 18 and&nbsp;19, 2005, the board of directors of
US&nbsp;Airways Group convened in-person meetings at
US&nbsp;Airways Group&#146;s Crystal City headquarters. During
that two-day period, the Strategy and Finance Committee met
twice, and on both occasions reviewed the status of the
potential transaction with America West Holdings. During the
second meeting, US&nbsp;Airways Group&#146;s financial advisors
reviewed factors relating to valuation of the company, and
discussed the potential valuation of the company in combination
with America West Holdings. On April&nbsp;19, 2005, the full
board of directors of US&nbsp;Airways Group met and reviewed the
potential transaction with America West Holdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;19, 2005, an article appeared on the Wall Street
Journal&#146;s website speculating that America West Holdings
and US&nbsp;Airways Group were involved in discussions regarding
a potential merger and it was followed the next day with a
lengthy story in the paper&#146;s print edition. Prior media
reports contained similar speculation, but not with the level of
specificity that appeared in the Wall Street Journal. On
April&nbsp;22, 2005, each of America West Holdings and
US&nbsp;Airways Group issued a press release confirming the fact
that such discussions were occurring.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;29, 2005, the board of directors of America West
Holdings met to discuss the status of discussions.
Representatives of management of America West Holdings&#146;
advisors updated the board of directors on the status of
negotiations, the terms of the merger agreement and the proposed
voting agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, during the course of these negotiations, TPG
Advisors, Inc., acting as a financial advisor to America West
Holdings, rendered advice and assistance to America West
Holdings, including assistance in negotiating certain governance
aspects of the transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Negotiations over the merger agreement and ongoing due diligence
continued into May 2005. Also, negotiations with potential
investors continued during this period. Like the merger itself,
obtaining new equity financing is a central component of the
debtors&#146; plan of reorganization. The receipt of at least
$375&nbsp;million of new equity investment is a closing
condition in the merger agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Negotiations over the merger agreement entered their final phase
in mid-May 2005 and US&nbsp;Airways Group and America West
Holdings reached agreement on exchange ratios with respect to
the America West Holdings Class&nbsp;A common stock and America
West Holdings Class&nbsp;B common stock. Final negotiations with
potential investors also were occurring at the same time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group&#146;s board of directors convened a
special meeting on May&nbsp;18, 2005, to consider approval of
the merger agreement and related agreements. After presentations
by US&nbsp;Airways Group&#146;s outside legal and financial
advisors, the board of directors of US&nbsp;Airways Group
approved the merger agreement and related agreements. On
May&nbsp;19, 2005, at a regularly scheduled meeting of the board
of directors of America West Holdings, America West
Holdings&#146; management, together with America West
Holdings&#146; legal and financial advisors reviewed the terms
of the merger agreement and related agreements. America West
Holdings&#146; legal advisors reviewed with the board its
fiduciary duties and the board reviewed materials related to the
merger in detail. Greenhill made a financial presentation and
delivered its oral opinion, subsequently confirmed in writing,
that, as of that date of the opinion and based upon and subject
to the limitations and assumptions stated in its opinion, the
Class&nbsp;B merger consideration to be received by the holders
of Class&nbsp;B common stock of America West Holdings is fair,
from a financial point of view, to those stockholders.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Following discussions, the board of directors determined that
the merger agreement and the merger were fair, from a financial
point of view, and in the best interests of America West
Holdings and its stockholders and unanimously approved the
merger agreement and the merger. Execution of the merger
agreement was announced after the close of the market on May 19.
Also on May&nbsp;19, US&nbsp;Airways Group and America West
Holdings entered into agreements with Eastshore, Par, Peninsula
and ACE for equity investments in the merged company of
$125&nbsp;million, $100&nbsp;million, $50&nbsp;million and
$75&nbsp;million, respectively. These investments are
conditioned on the merger becoming effective.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a condition to Par&#146;s and Peninsula&#146;s investment
agreements, on May&nbsp;19, 2005, America West Holdings entered
into participation agreements with each of Par and Peninsula
pursuant to which, Par, and under certain circumstances,
Peninsula will be entitled to receive an aggregate of 11.2% of
any excess in the pre-investment equity value of US&nbsp;Airways
Group over $500&nbsp;million. For further detail, see the
section entitled &#147;The New Equity Investments&nbsp;&#151;
Participation Agreements with Par Investment Partners, L.P. and
Peninsula Investment Partners, L.P.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;20, 2005, the debtors filed a motion in the
bankruptcy court seeking approval of a process for dealing with
any competing offers for US&nbsp;Airways&nbsp;Group or for
providing additional investment into the post-merger company
that might arise and also seeking approval of the termination
fee provisions of the merger agreement and the investment
agreements. On May&nbsp;31, 2005, the bankruptcy court granted
the motion and approved the process for dealing with competing
offers, which we refer to as the &#147;bidding procedures.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Shortly after execution of the merger agreement, US&nbsp;Airways
Group and America West Holdings began negotiating with
Wellington Management Company, LLP, a Boston-based investment
management firm acting on behalf of a group of potential
investors, about an equity investment in the merged company. On
May&nbsp;27, 2005, US&nbsp;Airways Group and America West
Holdings entered into an investment agreement with Wellington
Management, on behalf of certain funds it manages, for a
$150&nbsp;million equity investment. Like the other new equity
investments, Wellington&#146;s investment is conditioned on the
merger becoming effective. Because the Wellington investment is
at a per share price of $16.50&nbsp;per share, as opposed to the
$15.00&nbsp;per share price paid by the other new equity
investors, the exchange ratios for the America West Holdings
Class&nbsp;A and Class&nbsp;B common stock in the merger
agreement will be amended in accordance with its terms to adjust
the exchange ratios for America West Holdings Class&nbsp;A and
Class&nbsp;B common stock from 0.5306 and 0.4082 to 0.5362 and
0.4125, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='131'></A>
</DIV>

<!-- link1 "Bankruptcy Court Approvals" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Bankruptcy Court Approvals</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The merger and its related transactions are conditioned upon
approval of the merger agreement and other related agreements by
the bankruptcy court overseeing the debtors&#146;
Chapter&nbsp;11 cases.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='132'></A>
</DIV>

<!-- link1 "Regulatory Approvals Required for the Merger" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Regulatory Approvals Required for the Merger</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
America West Holdings and US&nbsp;Airways&nbsp;Group are
regulated by various federal, state, local and foreign
regulatory authorities that exercise broad powers, generally
governing activities such as operations, safety, financial
reporting, security and certain mergers, consolidations and
acquisitions. The airline industry is subject to possible
regulatory and legislative changes that may affect the economics
of the industry by requiring changes in operating practices or
by affecting the cost of providing services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the antitrust related filings and approvals
discussed below, completion of the merger is conditioned on
America West Holdings and US&nbsp;Airways&nbsp;Group supplying
or obtaining certain notices, reports, filings, consents,
registrations, approvals, permits or authorizations with, from
or to the U.S.&nbsp;Department of Transportation, the FAA, the
Federal Communications Commission and the Department of Homeland
Security.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Antitrust</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The merger is subject to review by the Antitrust Division, under
the HSR Act. Under the HSR Act, America West Holdings and
US&nbsp;Airways&nbsp;Group are required to make pre-merger
notification filings and to
</DIV>

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<DIV align="left" style="font-size: 10pt;">
await the expiration or early termination of the statutory
waiting period prior to completing the merger. On May&nbsp;23,
2005, America West Holdings and US&nbsp;Airways&nbsp;Group each
filed a Premerger Notification and Report Form with the
Antitrust Division and the FTC. On June&nbsp;23, 2005, the
initial waiting period expired and the Antitrust Division
announced it had closed its investigation of the proposed merger
without issuing requests for additional information. The
Antitrust Division&#146;s announcement clears the way for the
merger to proceed without antitrust challenge by the federal
government.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We cannot assure you that other government agencies, including
state attorneys general, or a private party, will not also
initiate action to challenge the merger before or after it is
completed. Any such challenge to the merger could result in
restrictions or conditions that would have a material adverse
effect on the combined company if the merger is completed. These
restrictions and conditions could include operating
restrictions, or the divestiture, spin-off or the holding
separate of assets or businesses. Under the terms of the merger
agreement, each of America West Holdings and
US&nbsp;Airways&nbsp;Group, if requested by America West
Holdings, are each required to commit to any divestitures,
licenses or hold separate or similar arrangements with respect
to its assets or conduct of business arrangements if that
divestiture, license, holding separate or arrangement is a
condition to obtain any approval from any governmental entity in
order to complete the merger and would not have a material
adverse effect on the combined company.
US&nbsp;Airways&nbsp;Group may condition any divestiture,
license or hold separate or similar arrangement upon the
completion of the merger. No additional stockholder approval is
expected to be required or sought for any decision by America
West Holdings or US&nbsp;Airways&nbsp;Group, after the America
West Holdings special meeting, to agree to any terms and
conditions necessary to resolve any regulatory objections to the
merger.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
America West Holdings and US&nbsp;Airways&nbsp;Group must also
either notify or obtain consent from certain foreign regulatory
agencies. US&nbsp;Airways&nbsp;Group, with the consent of
America West Holdings, has filed a notification with and
obtained approval of the merger from the German Federal Cartel
Office or Bundeskartellamt.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of the equity investors are also required to file
notifications under the HSR Act and obtain regulatory approvals.
Because the receipt of at least $375&nbsp;million of new equity
is a condition to completion of the merger, expiration of the
HSR waiting periods and obtaining other regulatory approvals for
the equity investors may affect the timing of the merger. These
waiting periods expired on June&nbsp;27, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='133'></A>
</DIV>

<!-- link1 "Approvals of the Air Transportation Stabilization Board" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Approvals of the Air Transportation Stabilization Board</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to a loan agreement with the ATSB, America West
Holdings must obtain a waiver from the ATSB of a prepayment
obligation to complete the merger. On January&nbsp;18, 2002,
America West Airlines, Inc. closed a $429&nbsp;million loan
supported by a $380&nbsp;million guarantee provided by the ATSB.
America West Holdings fully and unconditionally guaranteed the
payment of all principal, premium, interest and other
obligations outstanding under the loan partially guaranteed by
the ATSB and has pledged the stock of America West Airlines,
Inc. to secure its obligations under such guarantee. The loan
balance is currently approximately $300&nbsp;million. Principal
amounts under this loan become due in ten installments of
$42.9&nbsp;million on each March&nbsp;31 and September&nbsp;30,
commencing on March&nbsp;31, 2004 and ending on
September&nbsp;30, 2008. Principal amounts outstanding under the
loan partially guaranteed by the ATSB bear interest at a rate
per annum equal to LIBOR plus 40&nbsp;basis points plus a
guarantee fee of 8%&nbsp;per year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to certain exceptions, America West Holdings is required
to prepay the loan partially guaranteed by the ATSB upon a
change in control and may be required to prepay portions of the
loan if America West Holdings&#146; employee compensation costs
exceed a certain threshold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The loan partially guaranteed by the ATSB requires that America
West Airlines, Inc. maintain a minimum unrestricted cash balance
of $100&nbsp;million. In addition, the government loan contains
customary affirmative covenants and the following negative
covenants: restrictions on liens, investments, restricted
payments, fundamental changes, asset sales and acquisitions, the
creation of new subsidiaries, sale and leasebacks, transactions
with affiliates, the conduct of business, mergers or
consolidations, issuances and dispositions of capital stock of
subsidiaries, and amendments to other indebtedness. The loan
partially
</DIV>

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<DIV align="left" style="font-size: 10pt;">
guaranteed by the ATSB contains customary events of default,
including payment defaults, cross-defaults, breach of covenants,
bankruptcy and insolvency defaults and judgment defaults.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='134'></A>
</DIV>

<!-- link1 "Accounting Treatment" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Accounting Treatment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For accounting purposes only, US&nbsp;Airways Group will account
for the merger as a &#147;reverse acquisition&#148; using the
purchase method of accounting in conformity with accounting
principles generally accepted in the United States of America.
Although the merger is structured such that America West
Holdings will become a wholly owned subsidiary of
US&nbsp;Airways Group at closing, America West Holdings will be
treated as the acquiring company for accounting purposes in
accordance with SFAS&nbsp;No.&nbsp;141, &#147;Business
Combinations.&#148; Because America West Holdings&#146;
stockholders are expected to own approximately 39% of the shares
of New US&nbsp;Airways Group after the merger as compared to the
former US&nbsp;Airways Group creditors who will own 12%, which
assumes the exchange of certain convertible debt and reflects
the impact of certain securities that are dilutive at the per
share price paid by the equity investors, America West Holdings
will receive a larger number of designees to the New
US&nbsp;Airways Group board of directors, and America West
Holdings&#146; current Chairman and Chief Executive Officer will
serve as Chairman and Chief Executive Officer of New
US&nbsp;Airways Group after the merger, America West Holdings is
deemed to be the acquiring company for accounting purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Listing of New US Airways Group Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Listing of New US Airways Group common stock on the NYSE or
Nasdaq Stock Market, subject to official notice of issuance, is
a condition to completion of the merger. We are applying to have
the shares of New US Airways Group common stock authorized for
listing on the NYSE upon official notice of issuance under the
symbol
&#147;[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;].&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='135'></A>
</DIV>

<!-- link1 "Change of Control Put Option under America West Airlines, Inc.&#146;s 7.25% Senior Exchangeable Notes" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Change of Control Put Option under America West Airlines,
Inc.&#146;s 7.25%&nbsp;Senior Exchangeable Notes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Completion of the merger will constitute a &#147;change of
control&#148; under America West Airlines, Inc.&#146;s
outstanding 7.25%&nbsp;Senior Exchangeable Notes due 2023 and
will require America West Holdings to make an offer to purchase
those notes within 30&nbsp;days after the effective time of the
merger at a purchase price of $343.61&nbsp;per $1,000 principal
amount at maturity. Under the terms of the notes and the related
guarantee and exchange agreement, America West Airlines,
Inc.&#146;s obligation to purchase those notes may be satisfied
at America West Holdings&#146; election by delivery of shares of
New US&nbsp;Airways&nbsp;Group common stock having a &#147;fair
market value&#148; of not less than $343.61&nbsp;per $1,000
principal amount at maturity for a total of $86.8&nbsp;million
plus an additional $1.1&nbsp;million of accrued but unpaid
interest. For this purpose &#147;fair market value&#148; means
95% of the average market price of the New US&nbsp;Airways Group
common stock calculated over the 5&nbsp;business days ending on
the third business day before the purchase date.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='136'></A>
</DIV>

<!-- link1 "America West Holdings Warrants" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Warrants</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As compensation for various elements of America West
Holdings&#146; financial restructuring completed in January
2002, America West Holdings issued a warrant to
purchase&nbsp;18.8&nbsp;million shares of America West Holdings
Class&nbsp;B common stock to the ATSB and additional warrants to
purchase&nbsp;3.8&nbsp;million shares of its Class&nbsp;B common
stock to other loan participants, in each case at an exercise
price of $3&nbsp;per share and a term of ten years. In the first
quarter of 2004 and the third quarter of 2003, approximately
220,000 and 2.6&nbsp;million warrants, respectively, were
exercised at $3&nbsp;per share. These warrant exercises were
cashless transactions resulting in the issuance of approximately
1.6&nbsp;million shares of America West Holdings Class&nbsp;B
common stock. As of the date of this prospectus, warrants to
purchase 19.7&nbsp;million&nbsp;shares of America West Holdings
Class&nbsp;B common stock remain outstanding. Upon completion of
the merger, the warrants will be converted into the right to
receive, upon exercise and payment of the adjusted exercise
price, in lieu of America West Holdings Class&nbsp;B common
stock, the Class&nbsp;B merger consideration that the holder of
such warrants would have received had the warrants been
exercised immediately prior to the merger.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='137'></A>
</DIV>

<!-- link1 "THE MERGER AGREEMENT" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE MERGER AGREEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>This section of the prospectus describes material aspects of
the merger agreement. This summary may not contain all of the
information that is important to you. You should carefully read
this entire prospectus, including the full text of the Agreement
and Plan of Merger, which is filed as an exhibit to the
registration statement of which this prospectus forms a part,
and the other documents to which we refer you for a more
complete understanding of the merger.</I>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='138'></A>
</DIV>

<!-- link1 "Structure of the Merger" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Structure of the Merger</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of the merger, Barbell Acquisition Corp., a
wholly owned subsidiary of US&nbsp;Airways Group, newly
organized to effect the merger will merge with and into America
West Holdings. America West Holdings will become a wholly owned
subsidiary of New US&nbsp;Airways Group.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='139'></A>
</DIV>

<!-- link1 "Closing and Effective Time of the Merger" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Closing and Effective Time of the Merger</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The closing of the merger will occur on the fifth business day
after the satisfaction or waiver of all of the closing
conditions provided in the merger agreement, except for those
conditions that, by their terms, are to be satisfied at the
closing (but subject to the satisfaction or waiver of those
conditions), or on such other date as America West Holdings and
US&nbsp;Airways Group may agree.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As soon as practicable following the closing, America West
Holdings and US&nbsp;Airways&nbsp;Group will deliver an executed
and acknowledged certificate of merger to the Secretary of State
of the State of Delaware. At that time, or at such later time as
may be agreed by the parties in writing and specified in the
certificate of merger, the merger will become effective.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='140'></A>
</DIV>

<!-- link1 "Post-Merger America West Holdings Governing Documents, Officers and Directors; New US Airways Group Governing Documents and Directors" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Post-Merger America West Holdings Governing Documents,
Officers and Directors; New US&nbsp;Airways Group Governing
Documents and Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>America West Holdings Governing Documents.</I> At the
effective time of the merger, the certificate of incorporation
of Barbell Acquisition Corp. in effect at the effective time of
the merger will be the certificate of incorporation of America
West Holdings and the bylaws of Barbell Acquisition Corp. in
effect at the effective time of the merger will be the bylaws of
America West Holdings, in each case until subsequently amended
as provided therein or by applicable laws. However, the
certificate of incorporation of America West Holdings will be
amended at the effective time of the merger to reflect the fact
that the corporation&#146;s name is &#147;America West Holdings
Corporation.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>America West Holdings Officers and Directors.</I> The
officers of America West Holdings at the effective time of the
merger will, from and after the effective time, be the officers
of post-merger America West Holdings until their successors will
have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with America
West Holdings&#146; certificate of incorporation and bylaws. The
chief executive officer of US&nbsp;Airways Group immediately
prior to effective time of the merger and the chief executive
officer of America West Holdings immediately prior to effective
time of the merger will, from and after the effective time of
the merger, be the directors of post-merger America West
Holdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>New US&nbsp;Airways Group Governing Documents.</I> At the
effective time of the merger, the certificate of incorporation
of New US&nbsp;Airways Group will be amended and restated in its
entirety and the bylaws of New US&nbsp;Airways Group will be
amended and restated in their entirety, in each case until
thereafter amended as provided therein or by applicable laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>New US&nbsp;Airways Group Board of Directors.</I> The merger
agreement provides that at the effective time of the merger, the
board of directors of New US&nbsp;Airways Group will consist of
13&nbsp;directors composed as follows: (i)&nbsp;two of the
directors will be designated by US&nbsp;Airways Group to an
initial one-year term, and each of them will be an independent
director, (ii)&nbsp;two of the directors will be designated by
America West
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Holdings to an initial one-year term, and each of them will be
an independent director, (iii)&nbsp;one of the directors will be
designated by US&nbsp;Airways Group to an initial two-year term,
and he or she will be an independent director, (iv)&nbsp;three
of the directors will be designated by America West Holdings to
an initial two-year term, and each of them will be independent
directors, (v)&nbsp;one of the directors will be W. Douglas
Parker, Chairman and Chief Executive Officer of America West
Holdings, who will also serve as Chairman of the Board, and will
be appointed to an initial three-year term, (vi)&nbsp;one of the
directors will be Bruce Lakefield, President and Chief Executive
Officer of US&nbsp;Airways Group and US Airways, Inc., who will
also serve as Vice Chairman of the Board, and will be appointed
to an initial three-year term and (vii)&nbsp;three of the
directors will be nominated by the equity investors to an
initial three-year term pursuant to the terms of their financing
commitments.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='141'></A>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Merger Consideration</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>US&nbsp;Airways Group Common Stock.</I> At the effective time
of the merger, the existing US&nbsp;Airways Group common stock
will be cancelled and shares of New US&nbsp;Airways&nbsp;Group
common stock will be issued in accordance with the merger
agreement and the investment agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Conversion of America West Holdings Common Stock.</I> At the
effective time of the merger, each share of America West
Holdings Class&nbsp;A common stock issued and outstanding
immediately prior to the effective time (other than any shares
of America West Holdings Class&nbsp;A common stock owned by
US&nbsp;Airways Group, America West Holdings or any of their
respective subsidiaries, which shares are not beneficially owned
by third parties) will be converted into the right to receive
0.5362 of a share of New US&nbsp;Airways Group common stock,
together with the right, if any, to receive cash in lieu of
fractional shares of New US&nbsp;Airways&nbsp;Group common
stock. At the effective time of the merger, each share of
America West Holdings Class&nbsp;B common stock issued and
outstanding immediately prior to the effective time (other than
any shares of America West Holdings Class&nbsp;B common stock
owned by US&nbsp;Airways Group, America West Holdings or any of
their respective subsidiaries, which shares are not beneficially
owned by third parties) will be converted into the right to
receive 0.4125 of a share of New US&nbsp;Airways Group common
stock, together with the right, if any, to receive cash in lieu
of fractional shares of New US&nbsp;Airways Group common stock.
The exchange ratios above reflect the current Class&nbsp;A
merger consideration and Class&nbsp;B merger consideration as
adjusted pursuant to the merger agreement to reflect any
increase above $500&nbsp;million of the pre-investment valuation
of US&nbsp;Airways Group.*
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cancellation of Other America West Holdings Common Stock.</I>
At the effective time of the merger, shares of America West
Holdings common stock owned by US&nbsp;Airways Group, America
West Holdings or any of their respective subsidiaries, except
for shares that are beneficially owned by third parties, will be
cancelled and retired without payment of any consideration
therefor and will cease to exist.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Conversion of Barbell Acquisition Corp. Stock.</I> At the
effective time of the merger, each share of common stock of
Barbell Acquisition Corp. issued and outstanding immediately
prior to the effective time will be converted into one share of
common stock, par value $0.01&nbsp;per share, of America West
Holdings.
</DIV>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt; margin-top: 0pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
*&nbsp;As a result of the new equity investment in New
US&nbsp;Airways Group by certain investors advised by Wellington
Management Company, LLP at a per share price of $16.50, as
opposed to the $15.00 per share price paid by the other new
equity investors, the merger agreement will be amended in
accordance with its terms to adjust the exchange ratios for
America West Holdings Class&nbsp;A and Class&nbsp;B common stock
to 0.5362 and 0.4125, respectively. In advance of this
amendment, we use these exchange ratios throughout this
prospectus.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='142'></A>
</DIV>

<!-- link1 "Representations, Warranties and Covenants" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Representations, Warranties and Covenants</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The merger agreement contains customary and substantially
reciprocal representations and warranties made by America West
Holdings to US&nbsp;Airways Group and Barbell Acquisition Corp.
and by US&nbsp;Airways Group and Barbell Acquisition Corp. to
America West Holdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The merger agreement contains customary covenants, including,
among others, covenants regarding the bankruptcy court
proceedings, and solicitation of alternative proposals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, America West Holdings and US&nbsp;Airways Group
agreed that if US&nbsp;Airways Group enters into any
reorganization, sale, merger, consolidation, joint venture,
recapitalization, stand-alone plan, sale of assets or equity
interests, or other combination or disposition or similar
transaction involving US&nbsp;Airways Group as part of the plan
of reorganization with respect to which the pre-money equity
valuation of US&nbsp;Airways Group exceeds $500&nbsp;million,
the parties will amend the merger agreement to adjust the
applicable exchange ratios appropriately such that 40% of the
excess of the pre-investment equity valuation of US&nbsp;Airways
Group pursuant to such transaction over $500&nbsp;million will,
in the aggregate, be allocated to the aggregate merger
consideration paid to holders of America West Holdings
Class&nbsp;A common stock, the aggregate merger consideration
paid to holders of America West Holdings Class&nbsp;B common
stock and the value of the equity participation, if any. The
equity participation, which will be delivered to such person or
persons as America West Holdings may designate in its sole
discretion, will be equal to the shares of New US&nbsp;Airways
Group common stock representing 28% of the 40% of the excess of
the pre-investment equity valuation of New US&nbsp;Airways Group
pursuant to a transaction described in the preceding sentence
over $500&nbsp;million. The remaining 60% will be allocated to
certain US&nbsp;Airways Group creditors. Because the Wellington
investment is at a price of $16.50&nbsp;per share, as opposed to
the $15.00&nbsp;per share price paid by the other new equity
investors, the merger agreement will be amended in accordance
with its terms to adjust the exchange ratios for the America
West Holdings Class&nbsp;A and Class&nbsp;B common stock to
0.5362 and 0.4125, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='144'></A>
</DIV>

<!-- link1 "Conditions to the Merger" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Conditions to the Merger</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Conditions to Each Party&#146;s Obligations to Effect the
Merger.</I> The respective obligations of each of US Airways
Group, Barbell Acquisition Corp. and America West Holdings to
complete the merger are conditioned upon the satisfaction or
waiver prior to the effective time of the merger of each of the
following conditions:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the merger agreement must have been duly adopted by holders of a
    majority of the outstanding shares of America West Holdings
    common stock entitled to vote on the matter in accordance with
    applicable law and America West Holdings&#146; certificate of
    incorporation and bylaws;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the waiting period applicable to the completion of the merger
    under the HSR Act must have expired or been earlier terminated;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    all approvals and authorizations required to be obtained from
    the ATSB, DOT and FAA for the completion of the merger must have
    been obtained;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    all other governmental consents required to be obtained from any
    governmental entities for the completion of the merger must have
    been obtained, subject to certain exceptions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    all other governmental consents the failure of which to make or
    obtain would, individually or in the aggregate, provide a
    reasonable basis to conclude that America West Holdings or its
    directors or officers would be subject to the risk of criminal
    liability, must have been made or obtained;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    no governmental entity of competent jurisdiction must have
    enacted, issued, promulgated, enforced or entered any order or
    law that is in effect and restrains, enjoins, makes illegal or
    otherwise prohibits completion of the merger or the other
    transactions contemplated by the merger agreement, except for
    orders of governmental entities outside the United States as</TD>
</TR>

</TABLE>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    would not, individually or in the aggregate, reasonably be
    expected to have a specified material adverse effect and which
    do not provide a reasonable basis to conclude that America West
    Holdings, US&nbsp;Airways Group or their respective directors or
    officers would be subject to the risk of criminal liability;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the registration statement filed with the SEC to register the
    shares of New US Airways Group common stock to be issued in
    connection with the merger must have been declared effective by
    the SEC under the Securities Act and no stop order suspending
    its effectiveness will have been issued by the SEC and no
    proceedings for that purpose will have been initiated or
    threatened by the SEC;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the debtors&#146; plan of reorganization, in form and substance
    reasonably acceptable to each of US&nbsp;Airways Group and
    America West Holdings, must have been confirmed by the
    bankruptcy court pursuant to a confirmation order in form and
    substance reasonably acceptable to each of US&nbsp;Airways Group
    and America West Holdings, and that confirmation order must have
    become a final order;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    in connection with the emergence of US&nbsp;Airways Group from
    bankruptcy and the completion of the plan of reorganization,
    US&nbsp;Airways Group must have received from the equity
    investors on or before the effective time of the merger, cash
    equity investments of not less than $375&nbsp;million on a
    pre-investment value of not less than $500&nbsp;million, with
    those equity investments to be made substantially on the basis
    set forth in their financing commitments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    all agreements and bankruptcy court orders entered into,
    modified or otherwise effected pursuant to or in connection with
    the merger agreement or the plan of reorganization must be in
    form and substance reasonably acceptable to each of
    US&nbsp;Airways Group and America West Holdings;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the shares of New US&nbsp;Airways Group common stock to be
    issued in the merger must have been authorized for listing or
    quotation, as applicable, on the NYSE or Nasdaq Stock Market
    upon official notice of issuance.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Conditions to Obligations of US&nbsp;Airways Group and
Barbell Acquisition Corp.</I> The obligations of US&nbsp;Airways
Group and Barbell Acquisition Corp. to effect the merger are
subject to the satisfaction or waiver by US&nbsp;Airways Group
at or prior to the effective time of the merger of the following
conditions:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    each of the representations and warranties made by America West
    Holdings in the merger agreement must be true and correct in all
    respects as of the date of the merger agreement and as of the
    closing date as though made on and as of the closing date
    (except to the extent any such representation and warranty
    expressly speaks as of an earlier date, in which case the
    representation and warranty will be true and correct as of such
    earlier date) except where the failure of that representation
    and warranty to be true and correct would not, individually or
    in the aggregate, reasonably be expected to have a specified
    material adverse effect on America West Holdings; and
    US&nbsp;Airways&nbsp;Group must have received a certificate as
    to the foregoing from the chief executive officer or chief
    financial officer of America West Holdings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    America West Holdings must have performed in all material
    respects all obligations required to be performed by it under
    the merger agreement at or prior to the closing date, and
    US&nbsp;Airways&nbsp;Group must have received a certificate to
    that effect from the chief executive officer or chief financial
    officer of America West Holdings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    no governmental entity of competent jurisdiction must have
    instituted (or if instituted, must have withdrawn) any suit,
    action or proceeding seeking any order which would, in the
    reasonable judgment of US&nbsp;Airways Group, individually or in
    the aggregate, be reasonably likely to result in the failure of
    the condition described in the sixth bullet point under</TD>
</TR>

</TABLE>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    &#147;Conditions to the Merger&nbsp;&#151; Conditions to Each
    Party&#146;s Obligation to Effect the Merger&#148; above;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    America West Holdings must have obtained the consent or approval
    of each person whose consent or approval will be required under
    any material contract to which America West Holdings or any of
    its subsidiaries is a party in connection with the transactions
    contemplated by the merger agreement, except where the failure
    to obtain that consent or approval, individually or in the
    aggregate, would not reasonably be expected to result in a
    specified material adverse effect on America West
    Holdings;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Group must have received the opinion of
    Arnold&nbsp;&#38; Porter LLP, counsel to US&nbsp;Airways Group,
    in form and substance reasonably satisfactory to US&nbsp;Airways
    Group, dated the closing date of the merger, substantially to
    the effect that the merger will be treated for federal income
    tax purposes as a reorganization within the meaning of
    Section&nbsp;368(a) of the Internal Revenue Code.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Conditions to Obligations of America West Holdings.</I> The
obligation of America West Holdings to effect the merger is also
subject to the satisfaction or waiver by America West Holdings
at or prior to the effective time of the merger of the following
conditions:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    each of the representations and warranties made by
    US&nbsp;Airways Group and Barbell Acquisition Corp. in the
    merger agreement must be true and correct in all respects as of
    the date of the merger agreement and as of the closing date as
    though made on and as of the closing date (except to the extent
    any such representation and warranty expressly speaks as of an
    earlier date, in which case such representation and warranty
    will be true and correct as of that earlier date) except where
    the failure of the representations and warranties to be true and
    correct would not, individually or in the aggregate, reasonably
    be expected to have a specified material adverse effect on
    US&nbsp;Airways Group; and America West Holdings must have
    received a certificate as to the foregoing from the chief
    executive officer or chief financial officer of US&nbsp;Airways
    Group;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    each of US&nbsp;Airways Group and Barbell Acquisition Corp. must
    have performed in all material respects all obligations required
    to be performed by it under the merger agreement at or prior to
    the closing date, and America West Holdings must have received a
    certificate to that effect from the chief executive officer or
    chief financial officer of US&nbsp;Airways Group on behalf of
    US&nbsp;Airways Group and Barbell Acquisition Corp.;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    no governmental entity of competent jurisdiction must have
    instituted (or if instituted, must have withdrawn) any suit,
    action or proceeding seeking any order which would, in the
    reasonable judgment of America West Holdings, individually or in
    the aggregate, be reasonably likely to result in the failure of
    the condition described in the sixth bullet point under
    &#147;Conditions to the Merger&nbsp;&#151; Conditions to Each
    Party&#146;s Obligation to Effect the Merger&#148; above;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Group must have obtained the consent or approval
    of each person whose consent or approval will be required under
    any material contract to which US&nbsp;Airways Group or any of
    its subsidiaries is a party in connection with the transactions
    contemplated by the merger agreement, except where the failure
    to obtain that consent or approval, individually or in the
    aggregate, would not reasonably be expected to result in a
    specified material adverse effect on US&nbsp;Airways&nbsp;Group;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    America West Holdings must have received the opinion of Skadden,
    Arps, Slate, Meagher&nbsp;&#38; Flom LLP, counsel to America
    West Holdings, in form and substance reasonably satisfactory to
    America West Holdings, dated the closing date of the merger,
    substantially to the effect that the merger will be treated for
    federal income tax purposes as a reorganization within the
    meaning of Section&nbsp;368(a) of the Internal Revenue Code; and</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    immediately prior to the effective time of the merger, there
    must not exist more than $10&nbsp;million of administrative
    claims, including contingent liabilities, arising out of or
    related to any US&nbsp;Airways Group compensation and benefit
    plan that is subject to Section&nbsp;302 of ERISA or
    Section&nbsp;412 of the Internal Revenue Code, other than any
    claims relating to amounts incurred in the ordinary course of
    US&nbsp;Airways&nbsp;Group&#146;s business, including, but not
    limited to, plan contributions or any US&nbsp;Airways Group
    compensation and benefit plan not listed in the US&nbsp;Airways
    Group disclosure letter.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='145'></A>
</DIV>

<!-- link1 "Termination of the Merger Agreement" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Termination of the Merger Agreement</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Termination by America West Holdings or US&nbsp;Airways
Group.</I></B> The merger agreement may be terminated and the
merger may be abandoned at any time prior to the effective time
of the merger by action taken by the board of directors of the
terminating party or parties:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    by mutual written consent of America West Holdings and
    US&nbsp;Airways Group, whether before or after the adoption of
    the merger agreement by America West Holdings&#146; stockholders
    or the entry of the order confirming the debtors&#146; plan of
    reorganization;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    by either America West Holdings or US&nbsp;Airways Group if:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the merger is not completed by October&nbsp;31, 2005, whether
    that date is before or after the adoption of the merger
    agreement by America West Holdings&#146; stockholders or the
    entry of the order confirming the plan of reorganization, unless
    certain closing conditions have not been satisfied by
    October&nbsp;31, 2005, in which case the termination date may be
    extended from time to time by either US&nbsp;Airways&nbsp;Group
    or America West Holdings one or more times to a date not beyond
    December&nbsp;31, 2005;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the adoption of the merger agreement by America West Holdings
    stockholders is not obtained at the stockholders meeting or at
    any adjournment or postponement of that meeting;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    any order of a governmental entity permanently restraining,
    enjoining or otherwise prohibiting the completion of the merger
    becomes final and non-appealable, except for any orders the
    existence of which would not result in the failure of the
    closing condition described in the sixth bullet point under
    &#147;Conditions to the Merger&nbsp;&#151; Conditions to Each
    Party&#146;s Obligations to Effect the Merger&#148; above
    (whether before or after the adoption of the merger agreement by
    America West Holdings&#146; stockholders);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the merger and the transactions contemplated under the merger
    agreement are not determined by the bankruptcy court to be the
    approved proposal within 45&nbsp;days after the entry of the
    order approving the bidding procedures by the bankruptcy court,
    in which case each of US&nbsp;Airways Group and America West
    Holdings has five business days within which to terminate the
    merger agreement. If the merger agreement is not terminated
    within those five days, the time period with respect to the
    termination trigger is automatically extended for ten business
    days. After those ten business days, if the merger and the
    transactions contemplated under the merger agreement have not
    been determined by the bankruptcy court to be the approved
    proposal, then the merger agreement terminates automatically.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The foregoing rights to terminate the merger agreement will not
be available to any party that has breached its obligations
under the merger agreement in any manner that will have
proximately contributed to the occurrence of the failure of a
condition to the completion of the merger.
</DIV>

<P align="center" style="font-size: 10pt;">81

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Termination by America West Holdings.</I></B> The merger
agreement may be terminated and the merger may be abandoned at
any time prior to the effective time by America West Holdings
if, whether before or after the adoption of the merger agreement
by America West Holdings&#146; stockholders:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    without the consent of America West Holdings,
    US&nbsp;Airways&nbsp;Group enters into or seeks authority from
    the bankruptcy court to enter into (or does not object to
    efforts by any other party to have US&nbsp;Airways Group enter
    into) a binding written agreement concerning any qualified
    competing plan proposal;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the America West Holdings board of directors authorizes America
    West Holdings, subject to complying with the terms of the merger
    agreement, to enter into a binding written agreement concerning
    a transaction that constitutes a superior proposal;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    there is a breach of any representation, warranty, covenant or
    agreement made by US&nbsp;Airways&nbsp;Group or Barbell
    Acquisition Corp. in the merger agreement, or any representation
    or warranty becomes untrue or incorrect after the execution of
    the merger agreement, such that closing conditions to America
    West Holdings&#146; obligation to effect the merger would not be
    satisfied and such breach or failure to be true and correct is
    not curable within 60&nbsp;days of America West Holdings
    providing notice of the breach or failure to US&nbsp;Airways
    Group;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Group knowingly and materially and not
    inadvertently breaches any of its obligations under the merger
    agreement relating to acquisition proposals;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Group withdraws the plan of reorganization after
    it is filed with the bankruptcy court, US&nbsp;Airways Group
    ceases to seek actively to have the plan confirmed by the
    bankruptcy court (or does not actively contest efforts by
    another person to cause the plan not to be so confirmed) or
    20&nbsp;days after the bankruptcy court enters an order denying
    confirmation of the plan.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Termination by US&nbsp;Airways Group.</I></B> The merger
agreement may be terminated and the merger may be abandoned at
any time prior to the effective time by
US&nbsp;Airways&nbsp;Group if, whether before or after the
adoption of the merger agreement by America West Holdings&#146;
stockholders:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the board of directors of America West Holdings withdraws,
    modifies or qualifies, or agrees to withdraw, modify or qualify,
    in fact or in substance, its adoption of the merger agreement or
    its recommendation of the merger in a manner adverse to
    US&nbsp;Airways Group;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    America West Holdings enters into a binding written agreement
    concerning a transaction that constitutes a superior proposal;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Group, by duly authorized action, is authorized
    to enter into a binding written agreement concerning a
    transaction that constitutes an approved proposal;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    there is a breach of any representation, warranty, covenant or
    agreement made by America West Holdings, or any such
    representation or warranty becomes untrue or incorrect after the
    execution of the merger agreement, such that closing conditions
    to US&nbsp;Airways Group&#146;s obligation to effect the merger
    would not be satisfied and such breach or failure to be true or
    correct is not curable within 60&nbsp;days of US&nbsp;Airways
    Group providing notice of the breach or failure to America West
    Holdings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    by the later of 120&nbsp;days after the date of the merger
    agreement or 60&nbsp;days after effectiveness of the
    registration statement registering the shares of New US Airways
    Group common stock to be issued in connection with the merger,
    America West Holdings&#146; stockholders meeting is not held, or
    the vote of America West Holdings&#146; stockholders is not
    taken, unless America West Holdings has used its reasonable best
    efforts to convene the stockholders meeting and hold that vote
    by the later of those dates;&nbsp;or</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">82

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    America West Holdings knowingly and materially and not
    inadvertently breaches its obligations under the merger
    agreement relating to acquisition proposals.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='146'></A>
</DIV>

<!-- link1 "Effect of Termination" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Effect of Termination</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the merger agreement is terminated and the merger is
abandoned as described above, the merger agreement will be void
and of no effect, with no liability on the part of any party to
the merger agreement, except that certain designated provisions
of the merger agreement, including the payment of fees and
expenses, the confidential treatment of information and, if
applicable, the termination fee described below, will survive
the termination. Termination of the merger agreement does not
relieve or release either party from liabilities or damages
arising out of the party&#146;s willful breach of any provision
of the merger agreement.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='148'></A>
</DIV>

<!-- link1 "Amendment and Waiver" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Amendment and Waiver</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At any time prior to the effective time of the merger, the
parties to the merger agreement may modify or amend the merger
agreement by written agreement executed and delivered by duly
authorized officers of the respective parties. The conditions to
each of the parties&#146; obligations to complete the merger may
be waived by that party in whole or in part to the extent
permitted by applicable laws.
</DIV>

<P align="center" style="font-size: 10pt;">83

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<DIV align="left" style="font-size: 10pt;">
<A name='150'></A>
</DIV>

<!-- link1 "THE PLAN OF REORGANIZATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE PLAN OF REORGANIZATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Federal bankruptcy law requires the debtors, to complete a
series of tasks in order to emerge from bankruptcy and complete
the merger. The major tasks include filing with the court a
disclosure statement and a plan of reorganization that contain
detailed historical, financial and operational information about
the debtors and also explain how the business will be structured
following the bankruptcy and how claims will be treated. The
debtors will ask the bankruptcy court for approval of the
disclosure statement and if it is approved, the plan of
reorganization will be submitted to certain creditors for a
vote. The plan of reorganization will then be submitted to the
bankruptcy court for confirmation. Assuming the bankruptcy court
confirms the plan of reorganization, the debtors will have
permission and authority to enter into all of the transactions
necessary to emerge from bankruptcy, including the merger
agreement. The date that all of these transactions are finalized
is the effective date of both the plan of reorganization and the
merger.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On [month, day], 2005, the debtors submitted to the bankruptcy
court their proposed disclosure statement. On [month, day] 2005,
the bankruptcy court issued an order approving the disclosure
statement and ordered that the disclosure statement and proposed
plan of reorganization be submitted to certain creditors
eligible to vote on the plan of reorganization. On [month, day],
2005, the debtors mailed copies of the plan of reorganization
and disclosure statement to creditors and set [month, day], 2005
as the voting deadline for those creditors who could cast votes
for or against the plan of reorganization. Assuming that the
plan of reorganization is confirmed by the bankruptcy court and
that the other conditions specified in the plan of
reorganization are satisfied or waived, the plan of
reorganization will become effective. US&nbsp;Airways&nbsp;Group
currently anticipates that the plan of reorganization will
become effective on or around [month, day], 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the proposed plan of reorganization developed by the
debtors, the following events will occur on the effective date
of the plan of reorganization and the merger (percentages below
are based on certain assumptions contained in the section
entitled &#147;Capitalization&#148; and reflect the impact of
certain securities that are dilutive at the per share purchase
price paid by the equity investors):
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    America West Holdings will merge with Barbell Acquisition Corp.,
    which is a wholly owned subsidiary of
    US&nbsp;Airways&nbsp;Group, and will as a result itself become a
    wholly owned subsidiary of New US&nbsp;Airways Group;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    The new equity investors ACE Aviation Holdings Inc., or ACE; Par
    Investment Partners, L.P., or Par; Peninsula Investment
    Partners, L.P., or Peninsula; the group of investors under the
    management of Wellington Management Company, LLP, or Wellington;
    and Eastshore Aviation, LLC, or Eastshore; will invest
    $500&nbsp;million in consideration for the issuance of
    approximately 32.5&nbsp;million&nbsp;shares of New
    US&nbsp;Airways Group common stock, representing approximately
    49% of New US&nbsp;Airways&nbsp;Group common stock outstanding
    as of the completion of the merger, as more fully described in
    the section entitled &#147;The New Equity Investments&#148;;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    The general unsecured creditors, including the Pension Benefit
    Guaranty Corporation, or the PBGC, and the Air Line Pilots
    Association, as their claims are allowed, will receive
    approximately 8.2&nbsp;million&nbsp;shares of New
    US&nbsp;Airways Group common stock, representing approximately
    12% of New US&nbsp;Airways&nbsp;Group common stock outstanding
    as of the completion of the merger;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Under certain agreements among General Electric and certain
    affiliates, or GE, and US&nbsp;Airways Group, GE has agreed in
    consideration for the early return of 51 aircraft and six
    engines, the assumption of certain modified leases and the
    issuance of convertible notes in the amount of
    $125&nbsp;million, (1)&nbsp;in part to retire an existing bridge
    loan facility, (2)&nbsp;to complete a purchase by GE of 21
    aircraft and 28 engines with a simultaneous lease back of the
    equipment to US&nbsp;Airways, Inc. at market rates, (3)&nbsp;to
    allow US&nbsp;Airways&nbsp;Group to draw additional amounts
    under an existing credit facility, which will result in a total
    principal outstanding balance thereunder of approximately
    $28&nbsp;million, (4)&nbsp;to restructure lease obligations of
    US&nbsp;Airways, Inc. relating to 59 aircraft to market rates,
    (5)&nbsp;to provide financing for current</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">84

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    and growth aircraft, (6)&nbsp;to grant concessions regarding
    return condition obligations with respect to the return of
    aircraft and engines, and (7)&nbsp;to waive penalties for the
    removal of engines currently under GE engine agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    In consideration of (i)&nbsp;the assumption by US Airways Group
    of certain purchase agreements between US&nbsp;Airways Group and
    AVSA, S.A.R.L., an affiliate of Airbus Industrie G.I.E.,
    referred to as Airbus, and (ii)&nbsp;the entry into certain new
    agreements between US&nbsp;Airways Group, America West Holdings
    and Airbus which provide for (1)&nbsp;the purchase by New
    US&nbsp;Airways Group and America West Holdings of up to 20 new
    A350 airplanes from Airbus, (2)&nbsp;the ability to convert
    orders for up to ten of the A350 aircraft to orders for A330
    aircraft, (3)&nbsp;the ability to cancel up to ten of the A330
    aircraft previously ordered upon the payment of certain
    predelivery payments for A350 aircraft, and (4)&nbsp;changes in
    the delivery schedule for existing orders of narrow-body
    aircraft, Airbus will provide New US&nbsp;Airways Group a
    $250&nbsp;million line of credit to be used by New US Airways
    Group, of which $213&nbsp;million can be used for general
    corporate purposes, together with additional backstop financing
    for the purchase of the A350 aircraft.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Affiliates of ACE will enter into a series of agreements with
    New US&nbsp;Airways Group, including maintenance and airport
    handling agreements;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    New US&nbsp;Airways Group&#146;s board of directors will be
    reconstituted to include 13 members as described in the section
    entitled &#147;The Merger Agreement&nbsp;&#151; Post-Merger
    America West Holdings Governing Documents, Officers and
    Directors; New US&nbsp;Airways Group Governing Documents and
    Directors.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the proposed plan of reorganization will provide
for the satisfaction of certain secured and unsecured
prepetition claims against the debtors. These include claims
related to the debtors&#146; assumption or rejection of various
contracts and unexpired leases, the assumption of debtors&#146;
existing collective bargaining agreements with their unions and
the termination of certain employee benefit plans with employees
and retirees, and other matters. The ultimate resolution of
certain of the claims asserted against the debtors in the
Chapter&nbsp;11 cases will be subject to negotiations, elections
and bankruptcy court procedures that will occur after the date
of this prospectus and after the effective date, although
resolution of these claims will not affect the number of shares
of New US Airways Group common stock available to the general
unsecured creditors. While a significant amount of the
debtors&#146; liabilities will be extinguished as a result of
the discharge granted upon confirmation of the plan of
reorganization, not all of the debtors&#146; liabilities will be
subject to discharge. The types of obligations that the debtors
will remain responsible for include those relating to their
secured financings, aircraft financings, certain environmental
liabilities and the continuing obligations arising under
contracts and leases assumed by the debtors.
</DIV>

<P align="center" style="font-size: 10pt;">85

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<DIV align="left" style="font-size: 10pt;">
<A name='151'></A>
</DIV>

<!-- link1 "THE NEW EQUITY INVESTMENTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE NEW EQUITY INVESTMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>This section of the prospectus describes material aspects of
the investment agreements. This summary may not contain all of
the information that is important to you. You should carefully
read this entire prospectus, including the full text of the
investment agreements, which are filed as exhibits to the
registration statement of which this prospectus is a part, for a
more complete understanding of the investments.</I>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='152'></A>
</DIV>

<!-- link1 "Summary of the Investments" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary of the Investments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Various equity investors have agreed, pursuant to five separate
investment agreements entered into with US&nbsp;Airways Group
and America West Holdings, to provide $500&nbsp;million of new
cash investments to New US&nbsp;Airways Group in exchange for
shares of New US&nbsp;Airways Group common stock. The new
investors, and the level of equity investment they are making,
are:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    ACE Aviation Holdings Inc. ($75&nbsp;million of equity
    investment at a per share purchase price of $15.00), a Canadian
    holding company that owns Air Canada, Canada&#146;s largest
    airline with over $7.5&nbsp;billion in annual revenues;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Eastshore Aviation, LLC ($125&nbsp;million of equity investment
    at a per share purchase price of $15.00), which is owned by Air
    Wisconsin Airlines Corporation and its stockholders and provides
    regional jet service under a US&nbsp;Airways Express code share
    arrangement;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Par Investment Partners, L.P. ($100,000,005 of equity investment
    at a per share purchase price of $15.00), a Boston-based
    investment firm;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Peninsula Investment Partners, L.P. ($49,999,995 of equity
    investment at a per share purchase price of $15.00), a
    Virginia-based investment firm;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    a group of investors under the management of Wellington
    Management Company, LLP, a Boston-based investment firm
    ($149,999,850 of equity investment at a per share purchase price
    of $16.50).</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We refer to these investors as the equity investors.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='153'></A>
</DIV>

<!-- link1 "Closing of the Investments" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Closing of the Investments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to satisfaction or waiver of the closing conditions
contained in each investment agreement, the closing of each
investment will occur on the first business day following the
effective time of the merger agreement, or on such other date as
America West Holdings, US&nbsp;Airways&nbsp;Group and each
equity investor may agree. At the closing, each equity investor
will receive shares of New US&nbsp;Airways Group common stock in
exchange for their respective equity investment. The equity
investors will receive the following amounts of shares of New
US&nbsp;Airways Group common stock:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    ACE Aviation Holdings Inc. will receive 5,000,000&nbsp;shares,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Eastshore Aviation, LLC will receive 8,333,333&nbsp;shares,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Par Investment Partners, L.P. will receive
    6,768,485&nbsp;shares, including the shares received pursuant to
    participation agreements, as more fully described below,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Peninsula Investment Partners, L.P. will receive
    3,333,333&nbsp;shares, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the group of investors under the management of Wellington
    Management Company, LLP will receive a total of
    9,090,900&nbsp;shares.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='154'></A>
</DIV>

<!-- link1 "Commercial Agreements with ACE Aviation Holdings Inc." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Commercial Agreements with ACE Aviation Holdings Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with ACE Aviation Holdings Inc.&#146;s investment
in New US&nbsp;Airways Group, US&nbsp;Airways Group, America
West Holdings and ACE Aviation Holdings Inc. or subsidiaries
thereof as specified below entered into four separate memoranda
of understanding relating to definitive commercial agreements to
be
</DIV>

<P align="center" style="font-size: 10pt;">86

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<DIV align="left" style="font-size: 10pt;">
entered into on market terms. The parties agreed to work in good
faith to negotiate and document the commercial agreements. These
memoranda of understanding are as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A memorandum of understanding among Air Canada Technical
    Services, or ACTS, America West Airlines, Inc. and
    US&nbsp;Airways, Inc. in anticipation of definitive agreements
    under which ACTS will, consistent with prior existing
    constraints, have the opportunity to provide, for a term of five
    years, all aircraft engine, aircraft component, and aircraft
    heavy maintenance for America West Airlines, Inc. and
    US&nbsp;Airways, Inc. to the extent that it can do so on a
    competitive basis versus other providers taking into
    consideration price, terms and conditions. As part of these
    arrangements, ACTS will have right of first offer with respect
    to maintenance-related facilities or equipment to be sold by
    America West Airlines, Inc. and US&nbsp;Airways, Inc. The
    parties will also enter into an agreement under which ACTS will
    subcontract with America West Airlines, Inc. and
    US&nbsp;Airways, Inc. to provide on-call aircraft maintenance
    services to Air Canada in the United States and America West
    Airlines, Inc. and US&nbsp;Airways, Inc. will contract with ACTS
    to provide each of them with on-call aircraft maintenance
    services in Canada;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A memorandum of understanding among ACE Aviation Holdings Inc.,
    America West Holdings and US&nbsp;Airways Group under which, in
    the event that the merged entity plans to increase the number of
    70 or 90&nbsp;seat regional jet U.S.&nbsp;&#151; Canada
    trans-border flights operated as US&nbsp;Airways Express or
    America West Express, then Air Canada Jazz will have the right,
    for a period of five years from the date of the closing, to
    provide those flights using its 70 or 90&nbsp;seat jet aircraft
    provided that Jazz is competitive on price, terms and conditions
    and subject to entry into a definitive agreement thereon
    comparable to those in effect with carriers operating as
    US&nbsp;Airways Express or America West Express as well as
    obtaining necessary regulatory and labor approvals;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A memorandum of understanding among Air Canada, America West
    Airlines, Inc., and US&nbsp;Airways, Inc. in anticipation of and
    subject to entry into definitive agreements for five year terms,
    but not beyond five years from the date of the closing, under
    which each of America West Airlines, Inc. and US&nbsp;Airways,
    Inc. may provide certain airport facilities and ground handling
    services in the United States to Air Canada and under which Air
    Canada may provide certain ground handling services in Canada to
    America West Airlines, Inc. and US&nbsp;Airways, Inc.;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A memorandum of understanding among Air Canada, America West
    Airlines, Inc., and US&nbsp;Airways, Inc. in anticipation of a
    definitive agreement under which each will operate flights under
    the others&#146; codes, commonly known as a &#147;code share
    agreement.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Execution and delivery of definitive commercial agreements based
on the terms described above is a condition to each party&#146;s
obligations under the investment agreement with ACE.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='155'></A>
</DIV>

<!-- link1 "Participation Agreements with Par Investment Partners, L.P. and Peninsula Investment Partners, L.P." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Participation Agreements with Par Investment Partners, L.P.
and Peninsula Investment Partners, L.P.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a condition to their willingness to enter into investment
agreements, America West Holdings entered into participation
agreements with each of Par Investment Partners, L.P. and
Peninsula Investment Partners, L.P. in connection with the
execution and delivery of their respective investment
agreements. The participation agreements provide that, unless
the merger agreement is terminated by US&nbsp;Airways Group or
America West Holdings because America West Holdings enters into
a superior alternative business combination transaction, neither
Par Investment Partners, L.P. nor Peninsula Investment Partners,
L.P. will make, directly or indirectly, any debt or equity
investment in US&nbsp;Airways Group or provide, directly or
indirectly, equity or debt financing; in either case for the
purposes of funding a reorganization, business combination
transaction or stand-alone plan of US&nbsp;Airways Group with
respect to which America West Holdings is not involved. The
participation agreements also provide that, subject to certain
limitations, in the event America West Holdings is a party to a
reorganization, business combination or similar transaction
involving US&nbsp;Airways Group as part of a plan of
reorganization with respect to which the pre-investment
</DIV>

<P align="center" style="font-size: 10pt;">87

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<DIV align="left" style="font-size: 10pt;">
equity value of US&nbsp;Airways&nbsp;Group, taking into account
the merger, exceeds $500&nbsp;million, America West Holdings
will cause that alternative transaction to provide for Par
Investment Partners, L.P. and, Peninsula Investment Partners,
L.P. to be issued New US&nbsp;Airways&nbsp;Group common stock in
the aggregate equal in value to 11.2% of the amount by which the
pre-investment equity value of US&nbsp;Airways Group in the
alternative transaction exceeds $500&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='156'></A>
</DIV>

<!-- link1 "Transaction Documents" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transaction Documents</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In this summary we refer to the transaction documents, which is
meant to include each investment agreement, the merger
agreement, the plan of reorganization, the stockholders
agreement, the order of the bankruptcy court confirming the plan
of reorganization and the order of the bankruptcy court
approving the bidding procedures as well as the commercial
agreements with respect to ACE Aviation Holdings Inc.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='157'></A>
</DIV>

<!-- link1 "Representations, Warranties and Covenants" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>Representations, Warranties and Covenants</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The investment agreements contain customary representations and
warranties made by US&nbsp;Airways Group and America West
Holdings to the equity investors and by the equity investors to
US&nbsp;Airways&nbsp;Group and America West Holdings. In
addition, each of the Investment Agreements contains customary
covenants, including, among others, covenants, limiting the
issuance of equity securities. US&nbsp;Airways Group has agreed
not to offer, issue or sell any New US&nbsp;Airways Group common
stock other than New US&nbsp;Airways Group common stock:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    issued to the equity investors pursuant to the investment
    agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    issued to other persons pursuant to other investment agreements
    on no more favorable terms than those agreed to with the equity
    investors other than the group of investors under the management
    of Wellington Management Company, LLP (up to a maximum aggregate
    amount of new equity of $500&nbsp;million);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    issued to America West Holdings&#146; equity holders or, at the
    request of America West Holdings, to Par Investment Partners,
    L.P. and Peninsula Investment Partners, L.P., pursuant to the
    merger agreement;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    issued to the equity holders and certain creditors of
    US&nbsp;Airways Group as contemplated by the plan of
    reorganization;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    issued in connection with the rights offering to certain
    existing US&nbsp;Airways Group unsecured creditors and to
    America West Holdings stockholders at a price per share no less
    than the price per share paid by the equity investors other than
    the group of investors under the management of Wellington
    Management Company, LLP which, when combined with the equity
    investments received by US&nbsp;Airways Group, may not exceed
    $650&nbsp;million;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    issued by New US&nbsp;Airways Group at a price per share no less
    than that paid by the equity investors other than the group of
    investors under the management of Wellington Management Company,
    LLP for proceeds in excess of $650&nbsp;million provided that
    the proceeds are used solely to redeem or repurchase equity
    securities from New US&nbsp;Airways Group stakeholders at a
    price that values the shares redeemed or repurchased at a price
    per share no more than the price per share paid by the equity
    investors other than the group of investors under the management
    of Wellington Management Company, LLP and provided that the
    aggregate value of the New US&nbsp;Airways Group common stock
    issued does not exceed $200&nbsp;million and that the equity
    investors have a right to purchase, at their option, a pro rata
    portion of New US&nbsp;Airways Group common stock issued
    relative to their respective equity investment.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">88

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<DIV align="left" style="font-size: 10pt;">
<A name='159'></A>
</DIV>

<!-- link1 "Conditions to the Investment Agreements" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Conditions to the Investment Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Conditions to Obligations of the Equity Investors.</I> The
obligations of the equity investors to make the equity
investment are subject to the satisfaction or waiver of each of
the following conditions:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    definitive transaction documents in form and substance
    reasonably satisfactory to the equity investors, must have been
    prepared, negotiated and, to the extent applicable, duly
    executed by the parties, and approval by the bankruptcy court of
    those documents pursuant to a final order, to the extent
    necessary, must have been obtained;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    all of these transaction documents must have been executed by
    the parties to those agreements (other than the equity investors
    and their affiliates) on or prior to the effective date of the
    investment, must not have been modified, amended, waived or
    supplemented without the consent of the equity investors, must
    be in effect and the completion of the transactions contemplated
    by those agreements must not have been stayed, and all
    conditions to the obligations of the parties under such
    transaction documents must have been satisfied or waived (with
    limited exceptions with respect to ACE Aviation Holdings Inc.
    and the commercial agreements);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    all corporate and other proceedings to be taken by
    US&nbsp;Airways Group, America West Holdings or any of their
    respective subsidiaries in connection with the transaction
    documents and the transactions contemplated by those documents
    to be completed at the closing of the investment and documents
    incident thereto must have been completed in form and substance
    reasonably satisfactory to the equity investors, and the equity
    investors must have received all such counterpart originals or
    certified or other copies of those transaction documents and
    such other documents as it may reasonably request;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Group and the equity investors must have entered
    into the stockholders agreement;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    each of the representations and warranties made by
    US&nbsp;Airways Group and America West Holdings in the
    investment agreements must be true and correct in all respects
    as of the date of the investment agreement and as of the closing
    date as though made on and as of the closing date (except to the
    extent any such representation and warranty expressly speaks as
    of an earlier date, in which case the representation and
    warranty must be true and correct as of that earlier date)
    except where the failure of those representations and warranties
    to be true and correct would not, individually or in the
    aggregate, reasonably be expected to have a specified material
    adverse effect on US&nbsp;Airways Group or America West
    Holdings, as applicable; US&nbsp;Airways Group and America West
    Holdings must have performed in all material respects all
    obligations and complied in all material respects with all
    agreements, undertakings, covenants and conditions required to
    be performed by them under the investment agreements at or prior
    to the closing; and the equity investors must have received a
    certificate as to the foregoing from the chief executive officer
    or chief financial officer of each of US&nbsp;Airways Group and
    America West Holdings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    no law must have been promulgated, enacted or entered that
    restrains, enjoins, prevents, materially delays, prohibits or
    otherwise makes illegal the performance of any of the
    transaction documents;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    no preliminary or permanent injunction or other order by any
    governmental authority that restrains, enjoins, prevents,
    delays, prohibits or otherwise makes illegal the performance of
    any of the transaction documents must have been issued and
    remain in effect, except for injunctions that, if obtained,
    could not, individually or in the aggregate, reasonably be
    expected to have a material adverse effect on the ability of the
    equity investors, US&nbsp;Airways Group or America West Holdings
    or their respective affiliates to complete the transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    no governmental authority must have instituted any legal
    proceeding that seeks to restrain, enjoin, prevent, delay,
    prohibit or otherwise make illegal the performance of any of the</TD>
</TR>

</TABLE>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    transaction documents, except for any legal proceedings which
    have a significant possibility of being brought to a conclusion
    which could not, individually or in the aggregate, reasonably be
    expected to have a material adverse effect on the ability of the
    equity investors, US&nbsp;Airways&nbsp;Group or America West
    Holdings or their respective affiliates to complete the
    transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    there is no pending or threatened investigation or litigation by
    any other person relating to the transactions which, if
    determined adversely to US&nbsp;Airways&nbsp;Group, America West
    Holdings or the equity investors, would materially impair or
    limit the rights and benefits of the equity investors under the
    transaction documents or the economic benefits to the equity
    investors of the transactions in the aggregate and which the
    equity investors reasonably believe, based on the advice of
    counsel, has a reasonable likelihood of success;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Group, the equity investors and America West
    Holdings must have received all material regulatory approvals
    and all other material approvals, permits, authorizations,
    exemptions, consents, licenses and agreements from other third
    parties that are necessary to permit the transactions to be
    completed or performed as contemplated by the transaction
    documents and to permit each of the equity investors and their
    affiliates and New US&nbsp;Airways&nbsp;Group and its
    subsidiaries (including America West Holdings and its
    subsidiaries) to carry on its business after those transactions
    in a manner not materially inconsistent with the manner in which
    it was carried on prior to the effective date, which approvals
    must not contain any condition or restriction that materially
    impairs the ability of the equity investors and their affiliates
    or the ability of New US&nbsp;Airways Group, including America
    West Holdings and its subsidiaries, to carry on its business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    all waiting periods imposed by applicable law, including,
    without limitation, under the HSR Act, in connection with the
    transactions must have expired or been terminated without any
    action having been taken by any court of competent jurisdiction
    restraining, preventing or imposing materially adverse
    conditions upon those transactions or upon the conduct of the
    business of the equity investors, US&nbsp;Airways Group, America
    West Holdings or their respective affiliates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the plan of reorganization must be in a form reasonably
    acceptable to the equity investors, that plan of reorganization
    must have been confirmed by the bankruptcy court, and the plan
    of reorganization must not conflict with any material term of
    the investment agreements, the stockholders agreement or the
    other transaction documents, must be substantially consistent in
    all material respects with the terms of the financial plan and
    must reflect a corporate and capital structure, including
    liabilities, of New US&nbsp;Airways Group consistent with the
    financial plan; all conditions to the effectiveness of the plan
    of reorganization, other than the completion of the investment
    agreements, must have been satisfied, and an order confirming
    the plan of reorganization in a form reasonably acceptable to
    the equity investors must have been entered and become a final
    order no later than December&nbsp;31, 2005;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Group must have received on the effective date
    cash equity investments aggregating not less than
    $375&nbsp;million and not more than $500&nbsp;million pursuant
    to the investment agreements and cash equity investments from
    other persons as permitted by the investment agreements, all on
    terms no more favorable than the terms of the investment
    agreements and the stockholders agreement are to the equity
    investors (other than the group of investors under the
    management of Wellington Management Company, LLP), which with
    all other equity capital of US&nbsp;Airways Group, will be
    invested only in a single class of New US&nbsp;Airways Group
    common stock, with all of that stock having the same voting
    rights, and New US&nbsp;Airways Group must have no other class
    of capital stock authorized in its charter other than the New
    US&nbsp;Airways&nbsp;Group common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    New US&nbsp;Airways Group alone, and not any affiliate of New
    US&nbsp;Airways Group, must have issued equity securities in
    connection with the completion of the plan of reorganization;</TD>
</TR>

</TABLE>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    all material executory contracts and unexpired leases, the
    assumption, assignment, rejection or renegotiation of which is
    necessary for the successful implementation of the plan of
    reorganization and the operation of New US&nbsp;Airways
    Group&#146;s business as that business is contemplated in the
    financial plan to be conducted, must have been assumed,
    assigned, rejected or renegotiated, as applicable;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the merger must have become effective, or must become effective
    concurrently with the closing of the investments, and the merger
    must have been, or will concurrently with the closing of the
    investments be, completed in accordance with the terms of the
    merger agreement without amendment or waiver other than as
    permitted under the investment agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Eastshore Aviation LLC must have converted the existing debt
    owed to it by US&nbsp;Airways&nbsp;Group into New
    US&nbsp;Airways Group common stock in an amount not less than
    $125&nbsp;million;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    neither US&nbsp;Airways Group&#146;s nor its subsidiaries&#146;
    Chapter&nbsp;11 bankruptcy case must have been converted to a
    case under Chapter&nbsp;7 of the bankruptcy code and no trustee
    must have been appointed under any chapter of the bankruptcy
    code in respect of any such case;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the certificate of incorporation and bylaws of New
    US&nbsp;Airways&nbsp;Group must have been filed with and
    accepted by the Secretary of State of the State of Delaware and
    must have become effective, copies of which must have been
    delivered to the equity investors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    New US&nbsp;Airways Group must have executed and delivered to
    the equity investors the shares of New US&nbsp;Airways Group
    common stock pursuant to and in accordance with the investment
    agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the composition of the board of directors of New
    US&nbsp;Airways&nbsp;Group must be as set forth in the merger
    agreement and, as contemplated by the stockholders agreement,
    the investor directors designated by the equity investors, if so
    designated, must have been elected or appointed to the board of
    directors of New US&nbsp;Airways Group for an initial term of
    three years; provided, however, that ACE Aviation Holdings Inc.,
    must not be entitled to designate an investor director if any
    person other than the other equity investors has invested more
    than $75&nbsp;million in New US&nbsp;Airways Group (other than
    by virtue of the merger), in which case this condition will be
    automatically waived; provided further, however, that the group
    of investors under the management of Wellington Management
    Company, LLP will not be entitled to designate an investor
    director;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Group must have procured and maintained in full
    force and effect directors&#146; and officers&#146; liability
    insurance with respect to members of the board of directors of
    New US&nbsp;Airways Group, which insurance must be at least
    $100&nbsp;million;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    from the date of the investment agreements through the closing
    date, there must not have occurred any change, event,
    occurrence, condition or development that has or could
    reasonably be expected to have a material adverse effect on the
    financial condition, assets, liabilities, business or results of
    operations of US&nbsp;Airways Group or America West Holdings or
    that would prevent, materially delay or materially impair the
    ability of US&nbsp;Airways Group, America West Holdings or the
    equity investors to complete the transactions contemplated by
    the investment agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Group&#146;s financial and operational
    performance from the period from March&nbsp;31, 2005 to the
    closing date must not have deviated materially and adversely
    from the performance indicated in the financial plan;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Group&#146;s employee profit sharing plan must
    have been amended in accordance with the terms of the investment
    agreements;&nbsp;and</TD>
</TR>

</TABLE>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the shares of New US&nbsp;Airways Group common stock to be
    issued to the equity investors under the investment agreements
    must have been authorized for listing or quotation, as
    applicable, on the NYSE or Nasdaq Stock Market upon official
    notice of issuance.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A further condition to the ACE Aviation Holdings Inc. investment
agreement provides that US&nbsp;Airways&nbsp;Group and America
West Holdings must have not less than $280&nbsp;million per year
of maintenance, repair and overhaul services work immediately
available to be outsourced to ACE Aviation Holdings Inc. or its
affiliates as of the closing date in accordance with the term
sheet governing those services. A further condition to the
Eastshore Aviation, LLC investment agreement provides that an
amendment to a currently outstanding Jet Service Agreement, in
form and substance reasonably satisfactory to Eastshore
Aviation, LLC, providing for a guarantee of payment by
US&nbsp;Airways Group with respect to the obligations of its
primary subsidiary under the Jet Services Agreement (excluding
any consequential damages), if the subsidiary is in breach of
the agreement, must be duly executed and delivered by
US&nbsp;Airways Group and its subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Conditions to Obligations of US&nbsp;Airways Group.</I> The
obligation of US&nbsp;Airways&nbsp;Group to issue and sell the
New US&nbsp;Airways Group common stock at the closing is subject
to the satisfaction or waiver of each of the following
conditions:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    definitive transaction documents in form and substance
    reasonably satisfactory to US&nbsp;Airways&nbsp;Group must have
    been prepared, negotiated and, to the extent applicable, duly
    executed by the parties, and approval by the bankruptcy court of
    those documents, to the extent necessary, must have been
    obtained; all such transaction documents must not have been
    modified, must be in effect and the completion of the
    transactions contemplated thereby must not be stayed, and all
    conditions to the obligations of the parties under those
    transaction documents must have been satisfied or waived, with
    limited exceptions with respect to ACE Aviation Holdings Inc.
    and the commercial agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    all corporate and other proceedings to be taken by the equity
    investors or any of their respective subsidiaries in connection
    with the transaction documents and the transactions contemplated
    by those documents to be completed at the closing of the
    investment and documents incident thereto must have been
    completed in form and substance reasonably satisfactory to
    US&nbsp;Airways Group, and US&nbsp;Airways Group must have
    received all counterpart originals or certified or other copies
    of those transaction documents and such other documents as it
    may reasonably request;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    each of the representations and warranties made by the equity
    investors in the investment agreements must be true and correct
    in all respects as of the date of the investment agreement and
    as of the closing date as though made on and as of the closing
    date (except to the extent any such representation and warranty
    expressly speaks as of an earlier date, in which case the
    representation and warranty must be true and correct as of that
    earlier date) except where the failure of those representations
    and warranties to be true and correct would not, individually or
    in the aggregate, reasonably be expected to have a material
    adverse effect on the ability of the equity investors or their
    affiliates to complete the transactions; the equity investors
    must have performed in all material respects all obligations and
    complied in all material respects with all agreements,
    undertakings, covenants and conditions required to be performed
    by them under the investment agreements at or prior to the
    closing; and US&nbsp;Airways Group and America West Holdings
    must have received a certificate as to the foregoing from the
    equity investors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    no law must have been promulgated, enacted or entered that
    restrains, enjoins, prevents, materially delays, prohibits or
    otherwise makes illegal the performance of any of the
    transaction documents;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    no preliminary or permanent injunction or other order by any
    governmental authority that restrains, enjoins, prevents,
    delays, prohibits or otherwise makes illegal the performance of
    any of the transaction documents must have been issued and
    remain in effect, except for injunctions</TD>
</TR>

</TABLE>

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<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    that, if obtained, could not, individually or in the aggregate,
    reasonably be expected to have a material adverse effect on the
    ability of the equity investors, US&nbsp;Airways Group or
    America West Holdings or their respective affiliates to complete
    the transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    no governmental authority must have instituted any legal
    proceeding that seeks to restrain, enjoin, prevent, delay,
    prohibit or otherwise make illegal the performance of any of the
    transaction documents, except for any legal proceedings which
    have a significant possibility of being brought to a conclusion
    which could not, individually or in the aggregate, reasonably be
    expected to have a material adverse effect on the ability of the
    equity investors, US&nbsp;Airways&nbsp;Group or America West
    Holdings or their respective affiliates to complete the
    transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Group and America West Holdings must have
    received all material regulatory approvals and all other
    material approvals, permits, authorizations, exemptions,
    consents, licenses and agreements from other third parties that
    are necessary to permit the transactions to be completed or
    performed as contemplated by the transaction documents and to
    permit each of the equity investors and their affiliates and
    US&nbsp;Airways Group and its subsidiaries, including America
    West Holdings and its subsidiaries, to carry on its business
    after such transactions in a manner not materially inconsistent
    with the manner in which it was carried on prior to the
    effective date, which approvals must not contain any condition
    or restriction that materially impairs the ability of New
    US&nbsp;Airways Group to carry on its business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    all waiting periods imposed by applicable law, including,
    without limitation, under the HSR Act, in connection with the
    transactions must have expired or been terminated without any
    action having been taken by any court of competent jurisdiction
    restraining, preventing or imposing materially adverse
    conditions upon those transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    an order confirming the plan of reorganization, satisfactory in
    form and substance in all respects to US&nbsp;Airways Group,
    must have been entered by the bankruptcy court and, once
    entered, must not have been modified without US&nbsp;Airways
    Group&#146;s and America West Holdings&#146; prior written
    consent in any manner materially adverse to US&nbsp;Airways
    Group, must be in effect and must not have been stayed;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the effective date of the plan of reorganization and the
    satisfaction or waiver of all conditions to the closing of the
    merger must have occurred not later than the closing;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    each of US&nbsp;Airways Group and America West Holdings must
    have received reasonably satisfactory assurances as it may
    request that Par Investment Partners, L.P. and Eastshore
    Aviation LLC are citizens of the United States.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='160'></A>
</DIV>

<!-- link1 "Termination" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Termination</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The investment agreements contain customary termination
provisions, including in the event that the merger is not
completed by December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Stockholders Agreement</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The investment agreements contemplate that, at the closing of
the merger, each new equity investor and US&nbsp;Airways Group
will enter into a stockholders agreement. The stockholders
agreement will provide that, subject to certain exceptions, each
equity investor will agree not to transfer any of the shares of
New US&nbsp;Airways Group common stock acquired pursuant to the
investment agreements until six months following the closing
under the investment agreements and that New US&nbsp;Airways
Group will provide certain customary registration rights to the
equity investors. The stockholders agreement will also provide
for the appointment of up to three individuals designated by
certain of the equity investors to be appointed to the board of
directors of New US&nbsp;Airways Group as of the effective time
of the merger for a three-year term. In the case of ACE, the
stockholders agreement will provide that (i)&nbsp;for so long as
ACE holds at least 66.67% of the number of shares of New
US&nbsp;Airways Group common stock acquired pursuant to its
investment agreement, referred to
</DIV>

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<DIV align="left" style="font-size: 10pt;">
as the ACE director threshold, ACE will be entitled to designate
a director nominee for successive three-year terms and
(ii)&nbsp;if ACE falls below the ACE director threshold, ACE
will cause its director designee to resign from the board of
directors. In the case of the equity investors other than ACE
which are entitled as of the effective time of the merger to
designate a director to the board of directors of New
US&nbsp;Airways Group, the stockholders agreement will provide
that (i)&nbsp;for so long as that investor holds at least 35% of
the number of shares of New US&nbsp;Airways Group common stock
acquired pursuant to its investment agreement, referred to as
the designating investor threshold, that equity investor will be
entitled to designate a director nominee for successive
three-year terms and (ii)&nbsp;if any such equity investor falls
below the designating director threshold, the designee of that
equity investor will serve the remainder of that designee&#146;s
term as a director, but that equity investor will no longer have
the right to designate a director nominee under the stockholders
agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The form of stockholders agreement is attached as an exhibit to
the registration statement of which this prospectus forms a
part. The description of the stockholders agreement is qualified
in its entirety by reference to the full text of the
stockholders agreement.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='182'></A>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DESCRIPTION OF CAPITAL STOCK OF NEW US AIRWAYS GROUP</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways&nbsp;Group authorized capital stock will
consist of 200,000,000&nbsp;shares of common stock with a par
value of $0.01.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following summary of certain provisions of the New
US&nbsp;Airways Group common stock is not intended to be
complete and is qualified by reference to the provisions of
applicable law and to the form of second amended and restated
certificate of incorporation and the form of second amended and
restated bylaws of New US&nbsp;Airways Group as exhibits to this
registration statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of New US&nbsp;Airways&nbsp;Group common stock will
be entitled to one vote per share on all matters submitted to a
vote of common stockholders, except that voting rights of
non-U.S.&nbsp;citizens are limited to the extent that the shares
of common stock held by such non-U.S.&nbsp;persons would
otherwise be entitled to more than 24.9% of the aggregate votes
of all outstanding equity securities of New US&nbsp;Airways
Group. Holders of common stock have no right to cumulate their
votes. We anticipate that the common stock will be listed on the
NYSE. Holders of common stock participate equally as to any
dividends or distributions on the common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Authorized Capital Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The authorized capital stock of New US&nbsp;Airways Group will
consist of 200&nbsp;million shares of common stock, par value
$0.01&nbsp;per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Number of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
provides that the board of directors will consist of not less
than one nor more than 15&nbsp;directors, the exact number of
which will be fixed from time to time by resolution adopted by a
majority of New US&nbsp;Airways Group&#146;s board of directors.
The merger agreement contemplates that New US&nbsp;Airways
Group&#146;s board of directors will consist of
13&nbsp;directors following the completion of the merger.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Cumulative Voting</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
does not provide for cumulative voting and, accordingly, holders
of New US&nbsp;Airways Group common stock will not have
cumulative voting rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Classification of Board of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
classifies the board of directors into three separate classes,
consisting as nearly equal in number as may be possible of
one-third of the total number of directors constituting the
entire board of directors, with staggered three-year terms. If
the number of directors is changed, any increase or decrease
will be apportioned across classes in order for the classes to
remain as nearly equal as possible.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Removal of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
provides that any director may be removed only &#147;for
cause,&#148; and by the affirmative vote of the holders of at
least 80% of the voting power of the then issued and outstanding
capital stock entitled to vote for the election of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Vacancies on the Board of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
provides that any vacancy on the board of directors that results
from an increase in the number of directors may be filled by a
majority of the board of directors then in office, provided that
a quorum is present, and any other vacancy occurring on the
board of directors may be filled by a majority of the board then
in office, even if less than a quorum, or by a sole remaining
director. Any director of any class elected to fill a vacancy
resulting from an increase in the
</DIV>

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<DIV align="left" style="font-size: 10pt;">
number of directors of that class will hold office for a term
that coincides with the remaining term of that class. Any
director elected to fill a vacancy not resulting from an
increase in the number of directors will have the same remaining
term as his or her predecessor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stockholder Action by Written Consent</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
provides that no stockholder action may be taken except at an
annual or special meeting of stockholders and that stockholders
may not take any action by written consent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Amendment to Certificate of Incorporation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
provides that New US&nbsp;Airways Group reserves the right to
amend, alter, change or repeal any provision contained in its
certificate of incorporation in a manner in keeping with the
certificate of incorporation or the Delaware General Corporation
Law, or DGCL, and that all rights conferred upon stockholders
are granted subject to that reservation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
requires the affirmative vote of the holders of at least
two-thirds of the voting power of the shares entitled to vote
for the election of directors to amend, alter, change, repeal or
adopt any provision as part of the certificate of incorporation
inconsistent with the purpose and intent of Articles&nbsp;V
(Board of Directors), VIII&nbsp;(No Written Consent),
X&nbsp;(Amendment of Bylaws) or XI&nbsp;(Amendment of the
Certificate of Incorporation) of the certificate of
incorporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Amendment of Bylaws</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
provides that an affirmative vote of at least a majority of the
board of directors or the affirmative vote of at least 80% of
the voting power of the shares entitled to vote for the election
of directors will be required to adopt, amend, alter or repeal
New US&nbsp;Airways Group&#146;s bylaws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Special Meeting of Stockholders</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
provides that special meetings of the stockholders may be called
by:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the chairman of the board of directors; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the secretary, at the written request or by a resolution adopted
    by the affirmative vote of a majority of the board of directors.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Quorum</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
and bylaws provide that the holders of a majority of the capital
stock issued, outstanding and entitled to vote at a meeting of
stockholders, present in person or represented by proxy, will
constitute a quorum at any meeting of the stockholders held for
the purpose of electing directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notice of Stockholder Meeting</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s bylaws provide that written
notice of meetings of stockholders, stating the place, if any,
date and hour of the meeting, the means of remote
communications, if any, by which stockholders and proxyholders
may be deemed to be present in person and vote at that meeting,
and, in the case of a special meeting, the purpose(s) for which
the meeting is called, must be given to each stockholder of
record entitled to vote whenever stockholders are required or
permitted to take any action at any meeting. The secretary must
provide such notice not less than 10 nor more than 60&nbsp;days
before the date of the meeting.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Delivery&nbsp;&#38; Notice Requirements of Stockholder
Nominations and Proposals</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s bylaws provide that at any
annual stockholders&#146; meeting only such business may be
transacted as has been:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    specified in the notice of meeting or any supplement thereto;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    given by or at the direction of the board or any duly authorized
    committee thereof;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    otherwise properly brought by or at the direction of the board
    of directors or any duly authorized committee thereof; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    otherwise properly brought by any stockholder of New
    US&nbsp;Airways&nbsp;Group (A)&nbsp;who is a stockholder of
    record on the date of the giving of the notice provided for in
    the bylaws and on the record date for the determination of
    stockholders entitled to notice of and to vote at such annual
    meeting, and (B)&nbsp;who complies with the notice procedures
    set forth in the bylaws.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For a proposal, other than nominations of persons for election
to the board of directors, to be properly brought before an
annual meeting by a stockholder, the stockholder must have given
timely written notice thereof to the secretary of New
US&nbsp;Airways Group and such business must be a proper matter
for stockholder action.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To be timely, a stockholder&#146;s written notice pertaining to
an annual meeting must be delivered to, or mailed to and
received by, the secretary at the principal executive offices of
New US&nbsp;Airways Group:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    not less than 120 calendar days prior to the first anniversary
    of the date that New US&nbsp;Airways Group&#146;s proxy
    statement was released to stockholders in connection with the
    preceding year&#146;s annual meeting; except that</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    if no annual meeting was held in the preceding year, no proxy
    statement was released to stockholders in the preceding year, or
    if the date of the annual meeting has been changed by more than
    30&nbsp;calendar days from the date contemplated at the time of
    the preceding year&#146;s proxy statement, the notice must be
    received not less than 150&nbsp;calendar days prior to the date
    of the contemplated annual meeting or the date that is
    10&nbsp;calendar days after the date of the first public
    announcement or other notification to stockholders of the date
    of the contemplated annual meeting, whichever occurs first.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s bylaws also provide that, for
business to be properly brought before a special meeting of
stockholders, other than nominations of persons for election to
the board of directors, a stockholder must give timely written
notice thereof to the secretary of New US&nbsp;Airways Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To be timely, a stockholder&#146;s written notice must be
received by the secretary at the principal executive offices of
New US&nbsp;Airways Group at least 120 calendar days prior to
the date of the special meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A stockholder&#146;s written notice to the secretary for either
an annual meeting or a special meeting must set forth:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    a brief description of the business desired to be brought before
    the meeting and the reasons for conducting the business at the
    meeting;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the name and address of record of the stockholder proposing that
    business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the class and number of shares of New US&nbsp;Airways Group
    which are beneficially owned by the stockholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the dates upon which the stockholder acquired those shares;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    documentary support for any claim of beneficial ownership;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    a description of all arrangements or understandings between the
    stockholder and any other person or persons (including their
    names) in connection with the proposal and any material interest
    of the stockholder in the business;</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    a representation that the stockholder intends to appear in
    person or by proxy at the meeting to bring the business before
    the meeting;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    a statement in support of the matter; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    for proposals sought to be included in the proxy statement, any
    other information required by Rule&nbsp;14a-8 under the Exchange
    Act.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s bylaws also provide that no
business may be conducted at any stockholders&#146; meeting
except business brought before the meeting in accordance with
the procedures set forth in the bylaws. If the chairman of the
meeting determines that business was not properly brought before
the meeting, the chairman will declare that the business was not
properly brought and such business will not be considered or
transacted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Preemptive Rights</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
does not grant any preemptive rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Dividends</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
provides that stockholders are entitled to receive such
dividends and other distributions in cash, stock or property of
New US&nbsp;Airways Group when, as and if declared thereon by
the board of directors from time to time out of assets or funds
legally available therefor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s bylaws provide that dividends,
if any, may be declared by the board of directors at any regular
or special meeting of the board (or any action by written
consent in lieu thereof) and may be paid in cash, property or
shares of New US&nbsp;Airways Group&#146;s capital stock. Before
payment of any dividend, the directors may set aside a portion
of the funds available for dividends such as the board of
directors, in its absolute discretion, deems proper as a reserve
fund. Also, the board of directors may modify or abolish any
such reserve.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Limitation of Personal Liability of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways&nbsp;Group&#146;s certificate of
incorporation provides that no director will be personally
liable to New US&nbsp;Airways Group or any of its stockholders
for monetary damages for breach of fiduciary duty as a director,
except to the extent such exemption from liability or limitation
thereof is not permitted under the DGCL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
further provides that if the DGCL is amended to authorize the
further elimination or limitation of the liability of directors,
then the liability of a director of the corporation will be
eliminated or limited to the fullest extent authorized by the
DGCL, as so amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Indemnification of Officers&nbsp;&#38; Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
provides that New US&nbsp;Airways Group:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    will indemnify its directors and officers to the fullest extent
    authorized or permitted by law. This right to indemnification
    continues even after a person has ceased to be a director or
    officer and inures to the benefit of his or her heirs, executors
    and personal and legal representatives. Subject to applicable
    law, the right to indemnification includes the right to be paid
    the expenses incurred in defending or otherwise participating in
    any proceeding in advance of its final disposition; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    may, to the extent authorized by the board of directors, provide
    rights to indemnification and to the advancement of expenses to
    employees and agents similar to those conferred on directors and
    officers.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except for proceedings to enforce rights to indemnification, New
US&nbsp;Airways Group is not obligated to indemnify any director
or officer or his or her heirs, executors or personal or legal
representatives in
</DIV>

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<DIV align="left" style="font-size: 10pt;">
connection with a proceeding or part thereof initiated by that
person unless the proceeding or part thereof was authorized or
consented to by the board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group&#146;s certificate of incorporation
also provides that the rights to indemnification and to the
advance of expenses are not exclusive of any other right which
any person may have or acquire under the certificate of
incorporation, the bylaws, any statute, agreement, vote of
stockholders or disinterested directors or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Insofar as indemnification for liabilities under the Securities
Act may be permitted to directors, officers and controlling
persons of New US&nbsp;Airways Group under the foregoing
provisions, or otherwise, New US&nbsp;Airways Group has been
advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is
therefore unenforceable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stockholder Rights Plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New US&nbsp;Airways Group will not have a stockholder rights
plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Business Combinations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain provisions of the second amended and restated
certificate of incorporation and second amended and restated
bylaws of New US&nbsp;Airways Group may have the effect of
delaying or preventing changes in control if our board of
directors determines that those changes in control are not in
the best interests of New US&nbsp;Airways Group and its
stockholders. These provisions include, among other things, the
following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

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    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
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    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    a classified board of directors with three-year staggered terms;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    advance notice procedures for stockholder proposals to be
    considered at stockholders&#146; meetings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability of New US&nbsp;Airways&nbsp;Group&#146;s board of
    directors to fill vacancies on the board;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    a prohibition against stockholders taking action by written
    consent;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    a prohibition against stockholders calling special meetings of
    stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    requiring the approval of holders of at least 80% of the voting
    power of the shares entitled to vote in the election of
    directors for the stockholders to amend the second amended and
    restated bylaws;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    super majority voting requirements to modify or amend specified
    provisions of New US&nbsp;Airways Group&#146;s second amended
    and restated certificate of incorporation.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These provisions are not intended to prevent a takeover, but are
intended to protect and maximize the value of New
US&nbsp;Airways Group&#146;s stockholders&#146; interests. While
these provisions have the effect of encouraging persons seeking
to acquire control of our company to negotiate with our board of
directors, they could enable our board of directors to prevent a
transaction that some, or a majority, of our stockholders might
believe to be in their best interests and, in that case, may
prevent or discourage attempts to remove and replace incumbent
directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, Section&nbsp;203 of the DGCL protects
publicly-traded Delaware corporations, such as New
US&nbsp;Airways Group, from hostile takeovers, and from actions
following the takeover, by prohibiting some transactions once an
acquirer has gained a significant holding in the corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A corporation may elect not to be governed by Section&nbsp;203
of the DGCL. Neither New US&nbsp;Airways Group&#146;s
certificate of incorporation nor its bylaws contain this
election. Therefore, New US&nbsp;Airways Group is governed by
Section&nbsp;203 of the DGCL.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='183'></A>
</DIV>

<!-- link1 "SHARES ELIGIBLE FOR FUTURE SALE" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SHARES ELIGIBLE FOR FUTURE SALE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because no shares of New US&nbsp;Airways Group will be issued
until the effectiveness of the plan of reorganization and the
completion of the merger and this rights offering, prior to this
offering, there has been no public market for New
US&nbsp;Airways Group common stock. We cannot assure you that a
significant public market for New US&nbsp;Airways Group common
stock will develop or be sustained after this offering. Future
sales of substantial amounts of New US&nbsp;Airways Group common
stock, including shares issued upon exercise of options or
warrants, in the public market after this offering, or the
perception that those sales could occur, could adversely affect
the prevailing market price of New US&nbsp;Airways Group common
stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the completion of the rights offering and the merger and
after giving effect to the confirmation order and the plan of
reorganization, there will be approximately
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
shares of New US&nbsp;Airways Group common stock outstanding.
Except as set forth below, all shares of New US&nbsp;Airways
Group common stock outstanding after this offering will be
freely tradeable without restriction or further registration
under the Securities Act unless held by one of our
&#147;affiliates,&#148; as that term is defined in Rule&nbsp;144
under the Securities Act. Unless otherwise registered under the
Securities Act, sales of shares of our common stock by
affiliates will be subject to the volume limitations and other
restrictions set forth in Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Stockholders</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the effective time of the merger, subject to certain
conditions, each share of America West Holdings Class&nbsp;A
common stock issued and outstanding immediately prior to the
effective time will be converted into the right to receive
0.5362 of a share of New US&nbsp;Airways Group common stock. At
the effective time of the merger, each share of America West
Holdings Class B common stock issued and outstanding immediately
prior to the effective time will be converted into the right to
receive 0.4125 of a share of New US&nbsp;Airways Group common
stock. We expect that upon completion of the merger,
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
shares of New US&nbsp;Airways Group common stock will be issued
to the America West Holdings Class&nbsp;A and Class&nbsp;B
common stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The shares of New US&nbsp;Airways Group common stock to be
issued in connection with the merger will be registered under
the Securities Act and will be freely transferable, except for
shares of New US&nbsp;Airways Group common stock issued to any
person who is deemed to be an &#147;affiliate&#148; of America
West Holdings under the Securities Act prior to the completion
of the merger. Persons who may be deemed to be
&#147;affiliates&#148; of America West Holdings prior to the
completion of the merger include individuals or entities that
control, are controlled by, or are under common control with,
America West Holdings prior to the merger, and may include
officers and directors, as well as significant stockholders, of
America West Holdings prior to the merger. The same restrictions
apply to the spouses and certain relations of those persons and
any trusts, estates, corporations or other entities in which
those persons have a 10% or greater beneficial or equity
interest. Affiliates of America West Holdings prior to the
merger may not sell any of the shares of New US&nbsp;Airways
Group common stock received by them in connection with the
merger except pursuant to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    an effective registration statement under the Securities Act
    covering the resale of those shares;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    an exemption under paragraph&nbsp;(d) of Rule&nbsp;145 under the
    Securities Act; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    any other applicable exemption under the Securities Act.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Unsecured Creditors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the plan of reorganization,
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
shares of New US&nbsp;Airways Group common stock will be
distributed to certain holders of general unsecured claims that
are allowed by the confirmation order from the bankruptcy court.
We relied, based on the confirmation order we received from the
bankruptcy court, on Section&nbsp;1145(a)(1) of the bankruptcy
code to exempt from the registration requirements of the
Securities Act the offer and sale of New US&nbsp;Airways Group
common stock to certain general unsecured creditors.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;1145(a)(1) of the bankruptcy code exempts the offer
and sale of securities under a plan of reorganization from
registration under Section&nbsp;5 of the Securities Act and
state laws if three principal requirements are satisfied:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the securities must be offered and sold under a plan of
    reorganization and must be securities of the debtor, of an
    affiliate participating in joint plan of reorganization with the
    debtor or of a successor to the debtor under the plan of
    reorganization;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the recipients of the securities must hold claims against or
    interests in the debtor; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the securities must be issued in exchange, or principally in
    exchange, for the recipient&#146;s claim against or interest in
    the debtor.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The debtors believe that the offer and sale of New
US&nbsp;Airways Group common stock under the plan of
reorganization to holders of claims against the debtors
satisfies the requirements of Section 1145(a)(1) of the
bankruptcy code and is, therefore, exempt from registration
under the Securities Act and state securities laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To the extent that New US&nbsp;Airways Group common stock is
issued under the plan of reorganization and is covered by
Section 1145(a)(1) and (2) of the bankruptcy code, it may be
resold without registration unless, as more fully described
below, the holder is an &#147;underwriter&#148; with respect to
those securities. Generally, Section&nbsp;1145(b)(1) of the
bankruptcy code defines an &#147;underwriter&#148; as any person
who:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    purchases a claim against, an interest in, or a claim for an
    administrative expense against the debtor, if that purchase is
    with a view to distributing any security received in exchange
    for such a claim or interest;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    offers to sell securities offered under a plan of reorganization
    for the holders of those securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    offers to buy those securities from the holders of the
    securities, if the offer to buy is:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    with a view to distributing those securities; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    under an agreement made in connection with the plan of
    reorganization, the completion of the plan of reorganization, or
    with the offer or sale of securities under the plan of
    reorganization; or</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    is an &#147;issuer&#148; with respect to the securities, as the
    term &#147;issuer&#148; is defined in Section&nbsp;2(11) of the
    Securities Act.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Section&nbsp;2(11) of the Securities Act, an
&#147;issuer&#148; includes any person directly or indirectly
controlling or controlled by the issuer, or any person under
direct or indirect common control of the issuer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To the extent that persons who receive New US&nbsp;Airways Group
common stock pursuant to the plan of reorganization are deemed
to be &#147;underwriters&#148; as defined in
Section&nbsp;1145(b) of the bankruptcy code, resales by those
persons would not be exempted by Section&nbsp;1145 of the
bankruptcy code from registration under the Securities Act or
other applicable law. Those persons would, however, be permitted
to sell the New US&nbsp;Airways Group common stock or other
securities without registration if they are able to comply with
the provisions of Rule&nbsp;144 under the Securities Act, as
described further below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Whether or not any particular person would be deemed to be an
&#147;underwriter&#148; with respect to New US&nbsp;Airways
Group common stock or other security to be issued pursuant to
the plan of reorganization would depend on various facts and
circumstances applicable to that person. Accordingly, we express
no view as to whether any particular person receiving New
US&nbsp;Airways Group common stock or other securities under the
plan of reorganization would be an &#147;underwriter&#148; with
respect to the New US&nbsp;Airways Group common stock or other
securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Given the complex and subjective nature of the question of
whether a particular holder may be an underwriter, we make no
representation concerning the right of any person to trade in
New US&nbsp;Airways Group common stock or other securities. We
recommend that potential recipients of New US&nbsp;Airways Group
</DIV>

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<DIV align="left" style="font-size: 10pt;">
common stock or other securities consult their own counsel
concerning whether they may freely trade New US&nbsp;Airways
Group common stock or other securities without compliance with
the Securities Act, the Exchange Act or similar state and
federal laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Equity Investors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Several equity investors have agreed, pursuant to separate
investment agreements entered into with US&nbsp;Airways Group
and America West Holdings, to provide $500&nbsp;million of new
cash investments to New US&nbsp;Airways Group in exchange for
shares of New US&nbsp;Airways Group common stock. These
investments include the conversion of the $125&nbsp;million
debtor in possession facility provided by Eastshore into shares
of New US&nbsp;Airways Group common stock at the effective time
of the plan of reorganization. The debtors believe that the
offer and sale of New US&nbsp;Airways Group common stock to the
new equity investors are exempt from registration requirements
pursuant to Section&nbsp;4(2) of the Securities Act and, to the
extent that shares of New US&nbsp;Airways Group common stock are
issued in exchange for the conversion of the $125&nbsp;million
debtor in possession facility provided by Eastshore, pursuant to
Section&nbsp;1145(a)(1) of the bankruptcy code, as described
above. We expect that upon completion of the merger and the
effectiveness of the plan of reorganization, approximately
32.5&nbsp;million shares of New US&nbsp;Airways Group common
stock will be issued to the equity investors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the equity investments, each of the equity
investors will enter into a stockholders agreement that
prohibits the equity investors&#146; sale of New US&nbsp;Airways
Group common stock for a period of six months following the
closing date of the investment. In addition, in accordance with
the terms of the stockholders agreement, within 45 days of the
closing date of the investment, we are required to file with the
SEC a shelf registration statement covering the resale of the
New US&nbsp;Airways Group common stock issued to the investors
in connection with their investment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rule 144</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, under Rule&nbsp;144 as currently in effect, a person
who has beneficially owned shares of New US&nbsp;Airways Group
common stock for at least one year from the later of the date
those shares of common stock were acquired from us or one of our
affiliates would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    one percent of the number of shares of New US&nbsp;Airways Group
    common stock then outstanding, which will equal approximately
    [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;shares immediately after
    this offering, assuming all rights are exercised; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the average weekly trading volume of the New US&nbsp;Airways
    Group common stock during the four calendar weeks preceding the
    filing of a notice on Form&nbsp;144 with respect to that sale.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales under Rule&nbsp;144 are also subject to certain
manner-of-sale provisions and notice requirements, and to the
availability of current public information about us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A person who is not deemed to have been our affiliate at any
time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least
two years (including the holding period of any prior owner
except an affiliate), would be entitled to sell those shares
under Rule&nbsp;144(k) without complying with the volume
limitations, manner-of-sale provisions, public information or
notice requirements of Rule&nbsp;144. Rule&nbsp;144 also
provides that affiliates who are selling shares that are not
restricted securities must nonetheless comply with the same
volume limitations, manner-of-sale provisions, public
information or notice requirements applicable to the sale of
restricted securities described above in this paragraph.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stock Options and Other Stock Awards</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the merger, each outstanding America West
Holdings stock option will be converted into an option to
purchase the number of shares of New US&nbsp;Airways Group
common stock that is equal to the product of the number of
shares of America West Holdings Class&nbsp;B common stock that
could have been
</DIV>

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<DIV align="left" style="font-size: 10pt;">
purchased before the merger upon the exercise of the option
multiplied by 0.4125 and rounded up to the nearest whole share.
Each America West Holdings stock option will continue to be
governed by the same terms and conditions as were applicable
under that America West Holdings stock option immediately prior
to the effective time of the merger, including its vesting
schedule, if any, and expiration date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the effective time of the merger, each right of any kind,
contingent or accrued, to acquire or receive shares of America
West Holdings Class&nbsp;B common stock or benefits measured by
the value of America West Holdings Class&nbsp;B common stock,
and each award of any kind consisting of shares of America West
Holdings Class&nbsp;B common stock that may be held, awarded,
outstanding, payable or reserved for issuance under any America
West Holdings stock plans or benefit plans, other than America
West Holdings stock options, will be deemed to be converted into
the right to acquire or receive benefits measured by the value
of (as the case may be) the number of shares of New
US&nbsp;Airways Group common stock obtained by multiplying the
number of America West Holdings Class&nbsp;B common stock
subject to that award immediately prior to the effective time of
the merger by the exchange ratio of 0.4125, and each such right
will otherwise be subject to the terms and conditions applicable
to that right under the relevant America West Holdings stock
plan or other benefit plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect that upon completion of the merger, options and other
rights exercisable for a total of
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;shares
of New US&nbsp;Airways Group common stock will be outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the plan of reorganization contemplates the create
of a management compensation plan, under which shares of New
US&nbsp;Airways Group common stock, or options or other awards
to purchase shares of New US&nbsp;Airways Group common stock,
can be issued to management and other employees of New
US&nbsp;Airways Group. A total of
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;shares
of New US&nbsp;Airways Group common stock are reserved for
issuance under the management compensation plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect to file registration statements on Form&nbsp;S-8
covering all of the shares of common stock issuable or reserved
for issuance under the stock plans. Upon filing of the
Forms&nbsp;S-8 applicable to each stock plan, the shares will be
freely tradeable in the public market, subject to Rule&nbsp;144
limitations applicable to affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Warrants</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the merger, each outstanding America West
Holdings warrant will be converted into a warrant to purchase
the number of shares of New US&nbsp;Airways Group common stock
that is equal to the product of the number of shares of America
West Holdings Class&nbsp;B common stock that could have been
purchased before the merger upon the exercise of the warrant
multiplied by 0.4125 and rounded up to the nearest whole share.
Each America West Holdings warrant will continue to be governed
by the same terms and conditions as were applicable under that
America West Holdings warrant immediately prior to the effective
time of the merger, including its vesting schedule, if any, and
expiration date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect that upon completion of the merger, warrants
exercisable for a total of
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]&nbsp;shares
of New US&nbsp;Airways Group common stock will be outstanding.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='184'></A>
</DIV>

<!-- link1 "DEALER MANAGER AND STRUCTURING ADVISOR ARRANGEMENTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DEALER MANAGER AND STRUCTURING ADVISOR ARRANGEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are offering rights directly to the America West Holders and
US Airways Creditors. US Airways Group and America West Holdings
are retaining Merrill Lynch, Pierce, Fenner&nbsp;&#38; Smith
Incorporated, to act as the dealer manager in connection with
this rights offering. America West Holdings has retained Merrill
Lynch as its structuring advisor to the rights offering. Merrill
Lynch will provide customary advisory and dealer manager
services in connection with this rights offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will agree to pay Merrill Lynch a selling commission of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
each share issued in connection with this rights offering. In
addition, we will agree to pay Merrill Lynch a structuring
advisory fee of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
to reimburse certain of Merrill Lynch&#146;s expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways Group and America West Holdings will agree to
indemnify Merrill Lynch, in its capacity as dealer manager, with
respect to certain liabilities, including civil liabilities
under the Securities Act, or contribute to payments which
Merrill Lynch may be required to make in respect thereof.
America West Holdings has also agreed to indemnify Merrill Lynch
for certain liabilities arising out of Merrill Lynch&#146;s
engagement as structuring advisor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Merrill Lynch has not prepared any report or opinion
constituting a recommendation or advice, nor has Merrill Lynch
prepared an opinion as to the fairness of the Subscription Price
or the terms of this rights offering. Merrill Lynch neither
expresses an opinion nor makes any recommendation to Holders as
to the purchase by any person of any shares. Merrill Lynch
expresses no opinion as to the prices at which shares to be
distributed in connection with this rights offering may trade if
and when they are issued or at any future time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other than Merrill Lynch, we have not employed any brokers,
dealers or underwriters in connection with this rights offering,
and, except as described in this prospectus, no other
commissions, fees or discounts will be paid in connection with
this rights offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Merrill Lynch may sell short shares of the New US Airways Group
common stock and cover such short sales by delivering shares
received upon exercise of rights purchased in the market. The
shares may be resold by Merrill Lynch in one or more
transactions, at a fixed price or prices, which may be changed,
or at market prices prevailing at the time of sale, or at prices
related to those prevailing prices, or at negotiated prices.
Merrill Lynch is not obligated to purchase rights or shares of
New US Airways Group common stock in connection with its role as
dealer manager or otherwise. Merrill Lynch may also engage in
stabilizing transactions in accordance with Regulation&nbsp;M
under the Exchange Act, but is not obligated to do so.
Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a
specified maximum. These stabilizing transactions may cause the
price of the securities to be higher than it would otherwise be
in the absence of these transactions. These transactions, if
commenced, may be discontinued at any time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Merrill Lynch and its affiliates have engaged in, and in the
future may engage in, investment banking and other commercial
dealings in the ordinary course with US Airways Group, New
US&nbsp;Airways Group and America West Holdings. Merrill Lynch
has received customary fees and commissions for these
transactions.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='185'></A>
</DIV>

<!-- link1 "MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES" -->

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a summary of the material United States federal
income tax consequences of the receipt, ownership and exercise
of the subscription rights to an original holder of rights to
whom the rights were distributed in this rights offering. The
summary is based on the Internal Revenue Code of 1986, as
amended, which we refer to as the Internal Revenue Code,
Treasury regulations promulgated under the Internal Revenue
Code, published administrative rulings and pronouncements, and
court decisions in effect as of the date hereof, all of which
are subject to change, possibly with retroactive effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This discussion applies only to United States persons (as
defined in Section&nbsp;7701(a)(30) of the Internal Revenue
Code) who hold the subscription rights, and New US Airways Group
common stock acquired upon the exercise of the rights, as
capital assets within the meaning of Section&nbsp;1221 of the
Internal Revenue Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This summary is not a complete description of all the
consequences of the rights offering and, in particular, may not
address United States federal income tax considerations
applicable to Holders subject to special treatment under United
States federal income tax law (including, for example,
non-United States persons, banks and financial institutions,
dealers in securities, insurance companies or tax-exempt
entities, 401(k) plans, persons that are, or hold rights or New
US Airways Group common stock through, pass-through entities,
and Holders who hold the New US Airways Group common stock as
part of a hedge, straddle, conversion or constructive sale
transaction). This summary does not address the tax consequences
of any transaction other than this rights offering and the
related issuance of New US Airways Group common stock. This
summary does not address the tax consequences to any person who
actually or constructively owns 5% or more of America West
Holdings common stock or New US Airways Group common stock.
Also, this summary does not address United States federal income
tax considerations applicable to holders of options or warrants
to purchase America West Holdings or New US Airways Group common
stock, or holders of debt instruments convertible into America
West Holdings or New US Airways Group common stock. In addition,
no information is provided herein with respect to the tax
consequences of this rights offering under applicable state,
local or non-United States laws, or under any proposed Treasury
regulations that have not taken effect as of the date hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No rulings or determinations of the Internal Revenue Service or
any other taxing authority have been sought or obtained with
respect to the tax consequences described in this prospectus,
and the discussion below is not binding on the Internal Revenue
Service or the courts. Accordingly, we cannot assure you that
the Internal Revenue Service will not assert, or that a court
will not sustain, a position different from any described herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
HOLDERS OF RIGHTS OR NEW US AIRWAYS GROUP COMMON STOCK ARE URGED
TO CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX
CONSEQUENCES OF THIS RIGHTS OFFERING OR THE RELATED ISSUANCE OF
NEW US AIRWAYS GROUP COMMON STOCK TO THEM, INCLUDING THE EFFECTS
OF UNITED STATES FEDERAL, STATE AND LOCAL, FOREIGN AND OTHER TAX
LAWS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Receipt of the Rights.</I></B> The United States federal
income tax characterization and consequences of the rights
offering are uncertain. Set forth below are possible alternative
characterizations and consequences that America West Holdings
and US&nbsp;Airways Group believe are most likely. The
consequences of the receipt of the rights will depend on the
nature of a Holder&#146;s interest in America West Holdings or
US Airways Group, which in either case is surrendered, in part,
in exchange for the rights. No assurances can be made, however,
that the IRS will not assert, or that a court will not sustain,
a treatment different from those discussed below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The tax treatment of US Airways Creditors is as follows:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    US&nbsp;Airways Creditors with claims against domestic corporate
    subsidiaries of US Airways Group, Inc. should be treated as
    having received the rights as part of a taxable exchange. Such a
    US Airways Creditor will recognize gain or loss equal to the
    difference between (i)&nbsp;the fair market value of the rights
    and any cash received and (ii)&nbsp;the US Airways
    Creditor&#146;s adjusted basis in its claims on the date of the
    exchange. The aggregate tax basis of the rights received by a US
    Airways Creditor in a taxable exchange will be the fair market
    value of the rights on the date of the exchange, and the holding
    period for the rights will begin on the day after the exchange.</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Likewise, US Airways Creditors with claims against US Airways
    Group that are not treated as &#147;securities&#148; for United
    States federal income tax purposes will be treated as having
    received the rights as part of a taxable exchange, with the same
    resulting tax treatment as described in the paragraph above. The
    term &#147;security&#148; is not defined in the Internal Revenue
    Code or the applicable Treasury regulations and has not been
    clearly defined by judicial decisions or administrative rulings.
    Whether a debt instrument constitutes a security is determined
    based on all the facts and circumstances, including the nature
    of the debt instrument, the holder&#146;s degree of
    participation in the affairs of the business and the extent of
    proprietary interest compared with the similarity of the debt
    instrument to a cash payment. One important factor is the term
    of the debt instrument. Generally, a debt instrument with an
    original maturity of ten years or more constitutes a security,
    while a debt instrument with an original maturity of less than
    five years or arising out of the extension of trade credit does
    not. Each US Airways Creditor with a claim against
    US&nbsp;Airways Group, as opposed to a domestic corporate
    subsidiary of US&nbsp;Airways Group, should consult with a tax
    advisor to determine whether the claim should be treated as a
    security for these purposes.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Although the matter is not entirely clear, US Airways Creditors
    with claims against US&nbsp;Airways Group that are treated as
    securities for United States federal income tax purposes should
    be treated as having received the rights in a
    &#147;recapitalization&#148; within the meaning of
    Section&nbsp;368(a)(1)(E) of the Internal Revenue Code. If the
    exchange is treated as a recapitalization, the rights will be
    treated as securities with a zero principal amount and such US
    Airways Creditor will recognize gain, but not loss, in the
    exchange in an amount equal to the lesser of (i)&nbsp;the cash
    received by the US&nbsp;Airways Creditor in the US&nbsp;Airways
    bankruptcy reorganization and (ii)&nbsp;the amount of gain, if
    any, realized by the US&nbsp;Airways Creditor upon the exchange
    of its claim for cash and rights. Gain recognized under
    (ii)&nbsp;if any, will be equal to the excess of amount of cash
    and the fair market value of the rights received over the
    US&nbsp;Airways Creditor&#146;s tax basis in its claim at the
    time of the exchange. It is unclear whether the fair market
    value of the rights should be determined for these purposes as
    of the date on which the rights are received or the effective
    date of the merger. Any such gain will be capital gain and will
    be long-term capital gain if the US&nbsp;Airways Creditor&#146;s
    holding period for its claim was more than one year on the date
    of the exchange. The aggregate tax basis in the rights received
    by such a US Airways Creditor will equal the aggregate adjusted
    tax basis in the US Airways Group claims given up in the
    exchange, increased by the amount of gain recognized and reduced
    by the amount of any cash received in the exchange. The holding
    period for the rights will include the holding period of the US
    Airways Group claims given up in the exchange. Notwithstanding
    the foregoing, it is possible that such US Airways Creditors
    would be treated as having received the rights as part of a
    taxable exchange, with the same resulting tax treatment as
    described in the second preceding paragraph. Such
    US&nbsp;Airways Creditors are urged to consult with their tax
    advisor concerning the treatment of the rights received in this
    rights offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The tax treatment of America West Holders is as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="5%"></TD>
    <TD width="85%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Although not free from doubt, America West Holdings and US
    Airways Group intend to take the position that the receipt of
    rights pursuant to the rights offering should be characterized
    as part of the merger consideration. Under this
    characterization, an America West Holder will not recognize any
    gain or loss as a result of receiving rights pursuant to this
    rights offering. The America West Holder&#146;s aggregate tax
    basis in the rights and New US Airways Group common stock
    received in the merger will be equal to its aggregate tax basis
    in its America West Holdings common stock surrendered in the
    merger (subject</TD>
</TR>

</TABLE>

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    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    to the discussion below regarding exercise of rights and except
    for tax basis allocable to any fractional share for which cash
    is received). The tax basis of the rights and the tax basis of
    the New US Airways Group common stock will be determined by
    allocating the aggregate tax basis in the America West Holdings
    common stock surrendered (reduced by tax basis allocable to any
    fractional share for which cash is received) between the rights
    and New US Airways Group common stock received based on their
    relative fair market values. It is unclear when the fair market
    value of the rights should be determined for purposes of
    allocating basis. The appropriate date may be either the date on
    which the rights are received or the effective date of the
    merger. In either event, relative fair market values will not be
    known until the effective date of the merger.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Notwithstanding the intended position described in the paragraph
    above, it is possible that the receipt of rights in this rights
    offering may be characterized as a taxable payment by
    US&nbsp;Airways Group to an America West Holdings stockholder.
    Under this characterization, an America West Holdings
    stockholder receiving rights in this rights offering would
    recognize ordinary taxable income on the receipt of rights in an
    amount equal to their fair market value on the date of receipt,
    without reduction or offset for its tax basis in its America
    West Holdings common stock. Under this characterization,
    (i)&nbsp;no portion of the taxable income would be eligible for
    the reduced federal income tax rates applicable to long-term
    capital gains or &#147;qualified dividend income&#148; within
    the meaning of Section&nbsp;1(h) of the Internal Revenue Code,
    (ii)&nbsp;an America West Holdings stockholder&#146;s tax basis
    in the rights received would be equal to their fair market value
    at the time of receipt, and (iii)&nbsp;the stockholder&#146;s
    tax basis in its America West Holdings common stock surrendered,
    or New US airways Group common stock received, in the merger
    would not be affected by the receipt of rights.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Disposition of the Rights.</I></B> An America West Holder
will recognize taxable gain or loss upon a sale, exchange or
other disposition of a right in an amount equal to the
difference, if any, between the amount received therefor and the
Holder&#146;s tax basis in the right (as determined above). This
gain or loss will be short-term capital gain or loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Exercise of the Rights.</I></B> A Holder will not
recognize gain or loss upon the exercise of the rights. The
basis of the New US Airways Group common stock acquired through
a Holder&#146;s exercise of the rights will be equal to the sum
of (i)&nbsp;the price paid for the New US Airways Group common
stock acquired by exercise of the rights and (ii)&nbsp;the
Holder&#146;s basis, if any, in the rights. The holding period
for the New US Airways Group common stock acquired through the
exercise of the rights will begin on the date the rights are
exercised.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Expiration of the Rights.</I></B> If a Holder receives the
rights and allows the rights to expire (i.e., the Holder does
not exercise the rights), then that Holder will recognize a
capital loss equal to the amount of the Holder&#146;s basis in
the rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Sale of the New US Airways Group Common Stock.</I></B> If
a Holder sells New US Airways Group common stock acquired
through the exercise of the rights, that Holder will recognize
capital gain or loss in an amount equal to the difference
between the amount realized on the sale and its tax basis in the
New US Airways Group common stock, which will include the
Subscription Price. Such capital gain or loss will be long-term
capital gain or loss if the Holder has held the shares for more
than one year beginning on the date of the exercise of the
rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Backup Withholding and Information Reporting.</I></B> A
Holder&#146;s receipt, sale, exchange or disposition of rights
or New US Airways Group common stock may, under certain
circumstances, be subject to information reporting and
&#147;backup withholding&#148; at a rate of 28&nbsp;percent,
unless you provide proof of an applicable exemption or furnish
your taxpayer identification number, and otherwise comply with
all applicable requirements of the backup withholding rules. Any
amounts withheld under the backup withholding rules are not
additional tax and will be allowed as a refund or credit against
your federal income tax liability, provided the required
information is furnished to the Internal Revenue Service.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
THIS DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES THAT MAY VARY
WITH, OR ARE CONTINGENT ON, INDIVIDUAL CIRCUMSTANCES. MOREOVER,
IT DOES NOT ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE OR
LOCAL TAX CONSEQUENCES OF THIS RIGHTS OFFERING. TAX MATTERS ARE
VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THIS RIGHTS
OFFERING AND THE RELATED ISSUANCE OF NEW US AIRWAYS GROUP COMMON
STOCK TO YOU WILL DEPEND UPON THE FACTS OF YOUR PARTICULAR
SITUATION. ACCORDINGLY, WE STRONGLY URGE YOU TO CONSULT WITH A
TAX ADVISOR TO DETERMINE THE PARTICULAR UNITED STATES FEDERAL,
STATE, LOCAL, OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES TO YOU
OF THIS RIGHTS OFFERING AND THE RELATED ISSUANCE OF NEW US
AIRWAYS GROUP COMMON STOCK.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='186'></A>
</DIV>

<!-- link1 "INFORMATION WITH RESPECT TO US AIRWAYS GROUP, INC. PRIOR TO THE MERGER" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INFORMATION WITH RESPECT TO US&nbsp;AIRWAYS GROUP, INC. PRIOR
TO THE MERGER</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Business</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD></TD>
    <TD>
    <B><I>Overview</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group is a corporation organized under the laws
of the State of Delaware. US&nbsp;Airways&nbsp;Group&#146;s
executive offices are located at 2345 Crystal Drive, Arlington,
Virginia 22227 (telephone number (703)&nbsp;872-7000).
US&nbsp;Airways Group&#146;s internet address is
www.usairways.com.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group&#146;s primary business activity is the
operation of a major network air carrier through its ownership
of the common stock of US&nbsp;Airways, Inc., Piedmont Airlines,
Inc., PSA Airlines, Inc., Material Services Company, Inc.,
Airways Assurance Limited, and, until July&nbsp;1, 2004,
Allegheny Airlines, Inc. Effective July&nbsp;1, 2004, Allegheny
Airlines merged with Piedmont Airlines, with Piedmont Airlines
as the surviving entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in more detail below, on September&nbsp;12, 2004,
the debtors filed voluntary petitions for relief under
Chapter&nbsp;11 of the United States Bankruptcy Code in the
United States bankruptcy court for the Eastern District of
Virginia, Alexandria Division (Case Nos.&nbsp;04-13819-SSM
through 04-13823-SSM).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways, Inc., which is also a corporation organized
under the laws of the State of Delaware, is US&nbsp;Airways
Group&#146;s principal operating subsidiary. US&nbsp;Airways,
Inc. is a certificated air carrier engaged primarily in the
business of transporting passengers, property and mail.
US&nbsp;Airways, Inc. enplaned approximately 42&nbsp;million
passengers in 2004 and was the seventh largest U.S.&nbsp;air
carrier, based on ASMs. As of March&nbsp;31, 2005,
US&nbsp;Airways, Inc. operated 279 jet aircraft and 25 regional
jet aircraft (see the section entitled &#147;Properties&#148;
below for additional information related to aircraft operated by
US&nbsp;Airways, Inc.) and provided regularly scheduled service
at 101 airports in the continental United States, Canada, the
Caribbean, Latin America and Europe. For information concerning
operating revenue in US&nbsp;Airways Group&#146;s principal
geographic areas, see note&nbsp;11 to the consolidated financial
statements of US&nbsp;Airways Group included in its Annual
Report on Form&nbsp;10-K attached as an annex to this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain air carriers have code share arrangements with
US&nbsp;Airways, Inc. to operate under the trade name
US&nbsp;Airways Express. Typically, under a code share
arrangement, one air carrier places its designator code and
sells tickets on the flights of another air carrier, referred to
as its code share partner. US&nbsp;Airways Express carriers are
an integral component of US&nbsp;Airways Group&#146;s operating
network. Due to the relatively small local traffic base at some
of its hubs, US&nbsp;Airways, Inc. has historically relied
heavily on feed traffic from its US&nbsp;Airways Express
affiliates, which carry passengers from low-density markets that
are uneconomical for US&nbsp;Airways, Inc. to serve with large
jets, to US&nbsp;Airways, Inc.&#146;s hubs. As of March&nbsp;31,
2005, the US&nbsp;Airways Express network operated 156 regional
jet aircraft and 107 turboprop aircraft and served 133 airports
in the continental United States, Canada and the Bahamas,
including 51 airports also served by US&nbsp;Airways, Inc.
During 2004, US&nbsp;Airways Express air carriers enplaned
approximately 15.2&nbsp;million passengers, approximately 48% of
whom connected to US&nbsp;Airways Group&#146;s flights. Of these
15.2&nbsp;million passengers, approximately 6.2&nbsp;million
were enplaned by US&nbsp;Airways Group&#146;s wholly owned
regional airlines, PSA Airlines, Inc. and PSA Airlines, Inc.,
approximately 7.4&nbsp;million were enplaned by third-party
carriers operating under capacity purchase agreements and
approximately 1.6&nbsp;million were enplaned by carriers
operating under prorate agreements, as described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The US&nbsp;Airways Express code share arrangements are either
in the form of capacity purchase or prorate agreements. The two
wholly owned regional airlines and the regional jet affiliate
operators are capacity purchase relationships. The wholly owned
subsidiary PSA Airlines, Inc. operated 49 regional jets as of
March&nbsp;31, 2005, while the wholly owned subsidiary Piedmont
Airlines, Inc. operated 57 turboprop aircraft as of
March&nbsp;31, 2005. The regional jet affiliates with capacity
purchase agreements are Chautauqua Airlines, Inc., which
operated 35 regional jets as US&nbsp;Airways Express as of
March&nbsp;31, 2005; Mesa Airlines, Inc., which operated 59
regional jets as US&nbsp;Airways Express as of March&nbsp;31,
2005; and Trans States Airlines, Inc., which operated 13
regional jets as US&nbsp;Airways Express as of March&nbsp;31,
2005. Air Wisconsin Airlines Corporation will also begin
operating 70 regional jets under a capacity purchase agreement
in August 2005.
</DIV>

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The capacity purchase agreements provide that all revenues,
including passenger, mail and freight revenues, go to
US&nbsp;Airways, Inc. In return, US&nbsp;Airways, Inc. agrees to
pay predetermined fees to these airlines for operating an agreed
upon number of aircraft, without regard to the number of
passengers on board. In addition, these agreements provide that
certain variable costs, such as fuel and airport landing fees,
will be reimbursed 100% by US&nbsp;Airways, Inc.
US&nbsp;Airways, Inc. controls marketing, scheduling, ticketing,
pricing and seat inventories. The regional jet capacity purchase
agreements have expiration dates between 2008 to 2013 and
provide for optional extensions at US&nbsp;Airways Inc.&#146;s
discretion. Certain other regional jet agreements are expected
to be amended as a result of the Air Wisconsin agreement. The
carriers with prorate agreements are non-owned turboprop
operators and include all or a portion of the turboprop
operations of Colgan Airlines, Inc., which operated 28
turboprops as US&nbsp;Airways Express as of March&nbsp;31, 2005;
Trans States Airlines, which operated 8 turboprops as
US&nbsp;Airways Express as of March&nbsp;31, 2005; and Air
Midwest, Inc., which operated 14 turboprops as US&nbsp;Airways
Express as of March&nbsp;31, 2005. Under the prorate agreements
the prorate carriers pay certain service fees to
US&nbsp;Airways, Inc. and to receive a prorated share of revenue
for connecting customers. US&nbsp;Airways, Inc. is responsible
for pricing and marketing of connecting services to and from the
prorate carrier. The prorate carrier is responsible for pricing
and marketing the local, point to point markets, and is
responsible for all costs incurred operating the aircraft. All
US&nbsp;Airways Express carriers use US&nbsp;Airways,
Inc.&#146;s reservation systems, and have logos, service marks,
aircraft paint schemes and uniforms similar to those of
US&nbsp;Airways, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2004, MidAtlantic Airways, US&nbsp;Airways, Inc.&#146;s
new regional jet division, began operating as part of the
US&nbsp;Airways Express network. As of March&nbsp;31, 2005,
MidAtlantic Airways operates 25 Embraer ERJ-170 regional jets
with 72&nbsp;seats. MidAtlantic Airways served approximately one
million passengers in 2004. On June&nbsp;23, 2005,
US&nbsp;Airways, Inc. exercised its option under its agreement
with Republic Airways Holdings, Inc. and Wexford Capital LLC to
sell the assets of MidAtlantic Airways, including the regional
jets, a flight simulator and certain commuter slots at Ronald
Reagan Washington National Airport and LaGuardia Airport. If the
sale is completed, Republic Airways Holdings will operate the
aircraft as a US&nbsp;Airways Express carrier under a capacity
purchase agreement and will lease the slots back to
US&nbsp;Airways, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group&#146;s major connecting hubs are at
airports in Charlotte and Philadelphia.
US&nbsp;Airways&nbsp;Group also has substantial operations at
Boston&#146;s Logan International Airport, New York&#146;s
LaGuardia Airport, Pittsburgh International Airport, and
Washington D.C.&#146;s Ronald Reagan Washington National
Airport. Measured by departures, US&nbsp;Airways, Inc. is among
the largest at each of the foregoing airports. US&nbsp;Airways,
Inc. is also a leading airline from the Northeast United States
to Florida. US&nbsp;Airways, Inc.&#146;s East coast-based hubs,
combined with its strong presence at many East coast airports,
have made it among the largest intra-East coast carriers,
comprising approximately 30% of the industry&#146;s intra-East
coast revenues based on the most recent industry revenue data
available.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the years ended December&nbsp;31, 2004, 2003 and 2002,
passenger revenues accounted for approximately 89%, 90% and 90%,
respectively, of US&nbsp;Airways Group&#146;s consolidated
operating revenues. Cargo revenues and other sources accounted
for 11%, 10% and 10% of US&nbsp;Airways Group&#146;s
consolidated operating revenues in 2004, 2003 and 2002,
respectively. US&nbsp;Airways Group&#146;s results are seasonal
with operating results typically highest in the second and third
quarters due to US&nbsp;Airways, Inc.&#146;s combination of
business traffic and North-South leisure traffic in the eastern
United States during those periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Material Services Company and Airways Assurance Limited operate
in support of US&nbsp;Airways Group&#146;s airline subsidiaries
in areas such as the procurement of aviation fuel and insurance.
</DIV>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <B><I>Prior Bankruptcy</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the debtors in the current Chapter&nbsp;11 cases had
previously filed a voluntary petition for relief under
Chapter&nbsp;11 in the United States bankruptcy court for the
Eastern District of Virginia (Case Nos. 02-83984-SSM through
02-83991-SSM) on August&nbsp;11, 2002, which we sometimes refer
to as the prior bankruptcy. The debtors emerged from the prior
bankruptcy under a plan of reorganization that was confirmed
pursuant to an order of the bankruptcy court on March&nbsp;18,
2003 and became effective on
</DIV>

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<DIV align="left" style="font-size: 10pt;">
March&nbsp;31, 2003. The 2003 plan of reorganization constituted
a separate plan of reorganization for each of US&nbsp;Airways
Group and its domestic subsidiaries, who we sometimes refer to
as the filing entities. In accordance with the bankruptcy code,
the 2003 plan of reorganization divided claims against, and
interests in, each of the filing entities into classes according
to their relative seniority and other criteria and provided the
same treatment for each claim or interest of a particular class
unless the holder of a particular claim or interest agreed to a
less favorable treatment of its claim or interest. Among other
things, the 2003 plan of reorganization generally provided for
full payment of all allowed administrative and priority claims,
and the distribution of shares, or warrants to purchase shares,
of new equity in the reorganized US&nbsp;Airways Group, Inc. to
the ATSB, the Retirement Systems of Alabama Holdings LLC, or
RSA, US&nbsp;Airways Group&#146;s management and labor unions,
General Electric Capital Corporation and Bank of America, N.A.,
as well as to certain unsecured creditors of the filing
entities, including the Pension Benefit Guaranty Corporation, or
PBGC, in satisfaction of their allowed claims. Persons holding
equity in US&nbsp;Airways Group prior to March&nbsp;31, 2003
were not entitled to any distribution for their equity holdings
under the 2003 plan of reorganization and their shares of common
stock were cancelled. For a complete discussion of the
distributions provided for under the 2003 plan of
reorganization, you should refer to the 2003 plan of
reorganization confirmed by the bankruptcy court on
March&nbsp;18, 2003 and filed with the SEC on April&nbsp;2, 2003
as an exhibit to US&nbsp;Airways Group&#146;s Current Report on
Form&nbsp;8-K dated March&nbsp;18, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;31, 2003, RSA invested $240&nbsp;million in cash
in the reorganized US&nbsp;Airways&nbsp;Group pursuant to an
investment agreement, in exchange for approximately 36.2%, on a
fully diluted basis, of the equity in the reorganized
US&nbsp;Airways Group. As of March&nbsp;31, 2003, in connection
with its investment, RSA was granted a voting interest of
approximately 71.6% in the reorganized
US&nbsp;Airways&nbsp;Group and became entitled to designate and
vote to elect eight of 15&nbsp;directors to reorganized
US&nbsp;Airways Group&#146;s board of directors. See
notes&nbsp;10 and 12(a) in the notes to US&nbsp;Airways
Group&#146;s consolidated financial statements included in this
prospectus for a summary of the equity structure following the
prior bankruptcy and related party transactions with RSA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Chapter&nbsp;11 Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with and as a part of emergence from the prior
bankruptcy in 2003, US&nbsp;Airways Group undertook a thorough
review of its operations and significantly reduced its costs.
US&nbsp;Airways Group also reduced its mainline capacity,
realigned its network to maximize yield, initiated a business
plan to use more regional jets and procured financing for these
aircraft, and expanded its alliances with other carriers.
However, after emerging from the prior bankruptcy,
US&nbsp;Airways Group continued to incur substantial losses from
operations. The primary factors contributing to these losses
included the reduction in domestic industry unit revenue and
significant increases in fuel prices. The downward pressure on
domestic industry revenue is a result of the rapid growth of
low-fare, low-cost airlines, the increased transparency of fares
through Internet sources and other changes in fare structures
that have resulted in substantially lower fares for many
business and leisure travelers. The competitive environment
continued to intensify throughout 2004, particularly in key
markets such as Philadelphia, Washington,&nbsp;D.C., Boston and
New York.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Throughout the spring and summer of 2004, US&nbsp;Airways Group
communicated with key stakeholders and the public its plan to
transform US&nbsp;Airways, Inc. into a fully competitive and
profitable airline. US&nbsp;Airways Group referred to this plan
as the transformation plan. A key element of the transformation
plan was significant reductions in labor costs through changes
to US&nbsp;Airways Group&#146;s collective bargaining
agreements. US&nbsp;Airways Group aggressively sought the
necessary agreements to allow full implementation of the
transformation plan without the need for filing new
Chapter&nbsp;11 cases but was unable to do so in a timely
manner. As a result of the recurring losses, declining available
cash and risk of defaults or cross defaults under certain key
financing and operating agreements, it was necessary for the
debtors to file voluntary petitions for reorganization under
Chapter&nbsp;11 of the bankruptcy code on September&nbsp;12,
2004.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At hearings held on September&nbsp;13, 2004, the bankruptcy
court granted US&nbsp;Airways&nbsp;Group&#146;s first day
motions for relief designed to stabilize its operations and
business relationships with customers, vendors, employees and
others, and entered orders granting permission to the debtors
to, among other things:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    pay employee wages and continue certain benefits, such as
    medical and dental insurance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    honor prepetition obligations to customers and continue customer
    programs, including US&nbsp;Airways, Inc.&#146;s Dividend Miles
    program;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    pay for fuel under existing supply contracts, and honor existing
    fuel supply, distribution and storage agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    assume certain contracts related to interline agreements with
    other airlines;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    pay prepetition obligations to certain foreign vendors, foreign
    service providers and foreign governments;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    continue maintenance of existing bank accounts and existing cash
    management systems.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The bankruptcy court also approved the interim agreement reached
between US&nbsp;Airways Group, the ATSB and the lenders under
the $1&nbsp;billion loan, obtained upon emergence from the prior
bankruptcy and substantially guaranteed by the ATSB, to allow
US&nbsp;Airways Group continued use of the cash collateral
securing the loan. This agreement is discussed in more detail
below under &#147;Financing during the Chapter&nbsp;11
Proceedings.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since filing for bankruptcy on September&nbsp;12, 2004,
US&nbsp;Airways, Inc. has achieved cost-savings agreements with
all of its collective bargaining groups. Through a motion filed
under Section&nbsp;1113(e) of the bankruptcy code on
September&nbsp;24, 2004, US&nbsp;Airways, Inc. sought interim
relief from collective bargaining agreements with the Air Line
Pilots Association, or ALPA, the Association of Flight
Attendants-Communications Workers of America, or the AFA, the
Transport Workers Union, or the TWU, the Communications Workers
of America, or the CWA, and the International Association of
Machinists and Aerospace Workers, or the IAM. On
October&nbsp;15, 2004, the bankruptcy court approved 21%
reductions to base rates of pay until February&nbsp;15, 2005 or
until entry of an order approving a new collective bargaining
agreement or granting final relief under Section&nbsp;1113(c) of
the bankruptcy code. The bankruptcy court also approved
reductions to pension contributions and certain work rule
changes. The interim relief order did not apply to TWU, whose
members reached and ratified collective bargaining agreements
that were approved by the bankruptcy court prior to the interim
relief going into effect. ALPA ratified its tentative agreement
with US&nbsp;Airways, Inc. in October 2004, and subsequent
bankruptcy court approval eliminated the need for interim relief
as to pilots. Tentative collective bargaining agreements with
the CWA and AFA were reached in December 2004 and were
subsequently ratified and approved by the bankruptcy court. On
January&nbsp;6, 2005, the bankruptcy court approved
US&nbsp;Airways, Inc.&#146;s request to reject all three IAM
collective bargaining agreements and approved the termination of
US&nbsp;Airways, Inc.&#146;s three defined benefit plans. The
IAM subsequently ratified US&nbsp;Airways, Inc.&#146;s
cost-savings proposals on January&nbsp;21, 2005. As part of
these negotiations and subsequent ratifications, the two
remaining defined benefit pension plans for collectively
bargained groups were eliminated, and some groups had their
defined contribution pension plans reduced. In addition, the
bankruptcy court also approved a settlement agreement between
US&nbsp;Airways, Inc. and the court-appointed Section&nbsp;1114
Committee, representing retirees other than those represented by
the IAM, for the significant curtailment of postretirement
medical benefits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;12, 2004, US&nbsp;Airways, Inc. filed a motion
requesting a determination from the bankruptcy court that
US&nbsp;Airways, Inc. satisfied the financial requirements for a
&#147;distress termination&#148; of the Retirement Plan for
Flight Attendants in the Service of US&nbsp;Airways, Inc., or
the AFA pension plan, the Pension Plan for Employees of
US&nbsp;Airways, Inc. Who Are Represented by the International
Association of Machinists and Aerospace Workers, or the IAM
pension plan, and the Retirement Plan for Certain Employees of
US&nbsp;Airways, Inc., or the Certain Employees pension plan,
under section&nbsp;4041(c)(2)(B)(ii)(IV) of the Employee
Retirement Income Security Act of 1974, as amended, or ERISA,
and approval of each such plan&#146;s termination. These plans
were projected to have benefit obligations aggregating
$2.7&nbsp;billion and plan assets
</DIV>

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<DIV align="left" style="font-size: 10pt;">
aggregating $1.7&nbsp;billion as of September&nbsp;30, 2004, the
most recent valuation date. On January&nbsp;6, 2005, the
bankruptcy court entered an order (i)&nbsp;finding that the
financial requirements under section&nbsp;4041(c)(2)(B)(ii)(IV)
of ERISA for a distress termination of the plans had been met
and (ii)&nbsp;approving termination of the plans. The AFA
pension plan and the IAM pension plan were terminated effective
January&nbsp;10, 2005 by agreement between the PBGC and
US&nbsp;Airways&nbsp;Group. The Certain Employees pension plan
was terminated effective January&nbsp;17, 2005 by agreement
between the PBGC and US&nbsp;Airways, Inc. Effective
February&nbsp;1, 2005, the PBGC was appointed trustee for each
of the three plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the transformation plan and newly ratified
collective bargaining agreements, US&nbsp;Airways, Inc.
implemented voluntary furlough and termination programs across
several of its employee groups. In the first quarter of 2005,
US&nbsp;Airways Group recognized a $51&nbsp;million charge
associated with termination payments and health care benefits
for approximately 2,300 employees participating in these
voluntary programs. The majority of employees expected to
participate in voluntary terminations notified US&nbsp;Airways,
Inc. by March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the outsourcing of a portion of its aircraft
maintenance and certain fleet service operations, the closing of
its Pittsburgh reservation center, and the closing of certain
airport clubs and city ticket offices, US&nbsp;Airways, Inc.
involuntarily terminated or furloughed approximately 2,300
employees. In the first quarter of 2005, US&nbsp;Airways Group
recognized a $44&nbsp;million charge associated with contractual
severance payments and healthcare benefits for those employees.
Notification for the majority of planned involuntary
terminations was completed in the first quarter of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the cost savings achieved with labor groups,
US&nbsp;Airways, Inc. also implemented pay and benefit
reductions for its current management and other non-union
employees, including reductions to base pay, elimination of jobs
and modifications to vacation and sick time accruals.
US&nbsp;Airways, Inc. also reduced the amount it contributes to
its defined contribution pension plans on behalf of employees
and implemented modifications to its retiree health benefits.
The pay rate and defined contribution plan reductions went into
effect October&nbsp;11, 2004 and the reductions to retiree
medical benefits became effective March&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group has reached agreements with certain of its
lessors and lenders restructuring existing aircraft lease and
debt financings. On December&nbsp;17, 2004, the bankruptcy court
approved US&nbsp;Airways&nbsp;Group&#146;s agreements for the
continued use and operation of substantially all of its mainline
and Express fleet. US&nbsp;Airways Group reached a comprehensive
agreement with GE on aircraft leasing and financing and engine
services, which provided US&nbsp;Airways Group with short-term
liquidity, reduced debt, lower aircraft ownership costs,
enhanced engine maintenance services, and operating leases for
new regional jets. In June 2005, US&nbsp;Airways Group reached
an agreement with GE on the terms and conditions of an agreement
which amends and supplements certain provisions of the earlier
agreement and provides for additional agreements regarding rent
obligations under aircraft leases and the early redelivery of
certain aircraft. US&nbsp;Airways Group also reached agreements
with EMBRAER-Empresa Brasileira de Aeronautica SA and
Bombardier, Inc. providing for continued use and operation of
its aircraft, short term liquidity and new financing for
regional jets, which were approved by the bankruptcy court in
January 2005. Each of these agreements is discussed in detail
below in &#147;US&nbsp;Airways Group Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&nbsp;&#151; Liquidity and Capital Resources.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the merger, US&nbsp;Airways Group and America
West Holdings entered into a Memorandum of Understanding with
Airbus which includes, among other things, adjustments to the
delivery schedules for narrow-body and wide-body aircraft, a new
order for twenty A350 wide-body aircraft for which Airbus has
agreed to provide backstop financing for a substantial number of
aircraft, substantial elimination of cancellation penalties on
US&nbsp;Airways Group&#146;s existing order for ten A330-200
aircraft provided that New US&nbsp;Airways Group has met certain
predelivery payment obligations under the A350 order, and a term
loan of up to $250&nbsp;million. Up to $175&nbsp;million of the
term loan may be drawn down on US&nbsp;Airways Group&#146;s
emergence from bankruptcy, with the remainder expected to be
drawn down by June&nbsp;30, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The debtors have notified all known potential creditors of the
Chapter&nbsp;11 filing for the purposes of identifying and
quantifying all prepetition claims. Subject to certain
exceptions under the bankruptcy code, the Chapter&nbsp;11 filing
automatically stayed the continuation of any judicial or
administrative proceedings or
</DIV>

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<DIV align="left" style="font-size: 10pt;">
other actions against the debtors or their property to recover
on, collect or secure a claim arising prior to
September&nbsp;12, 2004. The deadline for filing proofs of claim
with the bankruptcy court was February&nbsp;3, 2005, with a
limited exception for governmental entities, which had until
March&nbsp;11, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the debtors to exit Chapter&nbsp;11 successfully, the
bankruptcy court must issue an order confirming a plan of
reorganization. US&nbsp;Airways, Inc. filed a Chapter&nbsp;11
plan of reorganization for each of the affiliated debtors on
[date], 2005, and as a result of this filing no other person or
party may file a different plan of reorganization prior to
October&nbsp;31, 2005. This deadline could potentially be
extended. The plan of reorganization would, among other things,
establish a framework for the treatment of prepetition
obligations, contemplate the completion of the merger, set forth
a revised capital structure and establish the corporate
governance for US&nbsp;Airways Group following the merger and
subsequent to emergence from bankruptcy. US&nbsp;Airways Group
is currently working towards emerging from Chapter&nbsp;11 no
later than October&nbsp;31, 2005, but that timing is dependent
upon, among other things, the timely confirmation of a plan of
reorganization. The final amount of the total value used to pay
creditors will not be determined until confirmation of a plan of
reorganization. No assurance can be given as to what values, if
any, will be ascribed in the Chapter&nbsp;11 cases to these
creditors or what type or amount of distributions, if any, they
would receive. The plan of reorganization is expected to result
in holders of US&nbsp;Airways Group&#146;s common stock
receiving no distribution on account of their interests as well
as cancellation of their existing stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Financing During the Chapter&nbsp;11 Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of its reorganization under the prior bankruptcy,
US&nbsp;Airways, Inc. received a $900&nbsp;million loan
guarantee under the Air Transportation Safety and System
Stabilization Act from the ATSB in connection with a
$1&nbsp;billion term loan financing, which is sometimes referred
to in this prospectus as the ATSB loan. As of March&nbsp;31,
2005, the outstanding principal amount of the ATSB loan was
$712&nbsp;million. In connection with the September&nbsp;12,
2004 Chapter&nbsp;11 filing, the ATSB and the lenders under the
ATSB loan agreed to allow US&nbsp;Airways Group to continue to
use cash collateral securing the ATSB loan on an interim basis.
US&nbsp;Airways Group has access to the cash collateralizing the
ATSB loan as working capital, subject to certain on-going
conditions and limitations. As a result, US&nbsp;Airways Group
has been able to use this cash instead of obtaining debtor in
possession financing. This interim agreement was approved by the
bankruptcy court on September&nbsp;13, 2004 as part of the first
day motions, and was scheduled to expire on October&nbsp;15,
2004. The bankruptcy court approved two subsequent agreements
extending US&nbsp;Airways Group&#146;s ability to use the cash
collateral, including an agreement approved on January&nbsp;13,
2005 extending US&nbsp;Airways Group&#146;s use of cash
collateral through June&nbsp;30, 2005, subject to certain
conditions and limitations. Under the current agreement, which
is referred to in this prospectus as the ATSB cash collateral
agreement, US&nbsp;Airways Group may continue to access this
cash collateral to support daily operations so long as it
maintains an agreed upon minimum amount of cash on hand each
week. The amount declines from approximately $500&nbsp;million
at the end of January to $341&nbsp;million on June&nbsp;30,
2005. US&nbsp;Airways Group reached agreement with the ATSB
concerning an interim extension to the ATSB cash collateral
agreement while US&nbsp;Airways Group and America West Holdings
work to finalize the post-merger terms of both loans. The
interim agreement will expire on July&nbsp;29, 2005 and will
require US&nbsp;Airways Group, among other conditions, to
maintain a weekly minimum unrestricted cash balance of
$325&nbsp;million. See the section entitled &#147;Liquidity and
Capital Resources&#148; in &#147;US&nbsp;Airways Group
Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations&#148; for a complete discussion on
US&nbsp;Airways Group&#146;s financing while in Chapter&nbsp;11.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Efforts to Implement the Transformation Plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group undertook substantial efforts to implement
its transformation plan, which was built on several aspects of
proven success in the airline industry. Specifically,
US&nbsp;Airways Group has undertaken the following initiatives:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Lower labor costs. These include decreased rates of pay and
    benefits, increased productivity, as well as a narrowing of the
    scope of work that must be performed under union contracts.
    US&nbsp;Airways, Inc. has achieved significant productivity
    enhancements with its internal workforce, particularly its
    pilots and flight attendants, through significant changes to</TD>
</TR>

</TABLE>

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<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    longstanding work rules. In addition, US&nbsp;Airways, Inc.
    obtained scope of work changes that allowed for significant
    outsourcing to competitive third party providers of work
    formerly performed internally, particularly in the areas of
    passenger reservations, aircraft cleaning and aircraft heavy
    maintenance.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Lower, simplified pricing and lower distribution costs.
    US&nbsp;Airways, Inc. has already taken steps to simplify its
    fares by introducing its GoFares pricing plan in many markets
    served from Philadelphia, Washington,&nbsp;D.C., and
    Fort&nbsp;Lauderdale, and has stated its intent to expand that
    pricing plan across its system in conjunction with achieving
    lower costs. A redesigned website and more airport technology
    will also lower distribution costs, enhance customer service and
    improve airport processing.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Enhanced low-cost product offering. US&nbsp;Airways Group
    customers will continue to benefit from a combination of product
    offerings that is unique among low-cost carriers, including
    two-class service, international flights to Canada, the
    Caribbean, Latin America and Europe, service to airports that
    business travelers prefer, access to a global network via the
    Star Alliance, a premium frequent flyer program and competitive
    onboard service.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Network enhancements. Leveraging its strong positions in major
    Northeast markets, US&nbsp;Airways, Inc. intends to use its
    airport slot and facilities assets to offer nonstop service to
    more major business and leisure destinations. Pittsburgh is no
    longer a hub and service has been reduced in accordance with
    previously announced operational changes. Fort&nbsp;Lauderdale
    is being expanded to handle additional Latin America service.
    Operations at Charlotte have been expanded, and new routes from
    Washington Ronald Reagan National Airport have been introduced.
    In addition, changes are being made to the scheduling practices
    at Philadelphia to improve reliability, adding new destinations
    in the Caribbean and Latin America as well as seasonal service
    to Barcelona, Spain and Venice, Italy introduced in May 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Lower unit operating costs. In conjunction with more
    point-to-point flying, US&nbsp;Airways, Inc. is flying its fleet
    more hours per day than formerly as it decreases the time
    aircraft sit on the ground at hubs, waiting for connecting
    passengers. Productivity increases have been gained through this
    more efficient scheduling in conjunction with the contractual
    labor changes.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Airline Industry and US&nbsp;Airways Group&#146;s Position in
the Marketplace</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most of the markets in which US&nbsp;Airways Group&#146;s
airline subsidiaries and affiliates operate are highly
competitive. These airline subsidiaries and affiliates compete
to varying degrees with other air carriers and with other forms
of transportation. US&nbsp;Airways, Inc. competes with at least
one major airline on most of its routes between major cities.
Airlines, including US&nbsp;Airways&nbsp;Group, typically use
discount fares and other promotions to stimulate traffic during
normally slack travel periods to generate cash flow and to
maximize revenue per available seat mile. Discount and
promotional fares are often non-refundable and may be subject to
various restrictions such as minimum stay requirements, advance
ticketing, limited seating and change fees.
US&nbsp;Airways&nbsp;Group has often elected to match discount
or promotional fares initiated by other air carriers in certain
markets in order to compete in those markets. Competition
between air carriers also involves certain route structure
characteristics, such as flight frequencies, availability of
nonstop flights, markets served and the time certain flights are
operated. To a lesser extent, competition can involve other
products, such as frequent flyer programs and airport clubs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group considers the growth of low-fare low-cost
competition to be its foremost competitive threat. Recent years
have seen the entrance and growth of low-fare low-cost
competitors in many of the markets in which
US&nbsp;Airways&nbsp;Group&#146;s airline subsidiaries and
affiliates operate. These competitors, based on low costs of
operations and low-fare structures, include Southwest Airlines,
AirTran Airways and JetBlue Airways. Southwest Airlines has
steadily increased operations within the Eastern United States
since first offering service in this region in late 1993. In May
2004, Southwest began service at the Philadelphia International
Airport, a hub airport for US&nbsp;Airways, Inc. Southwest also
began service from Pittsburgh International Airport, a former
hub, in May 2005. AirTran and JetBlue also have growing
presences in the
</DIV>

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Eastern United States. In January 2005, Delta Air Lines, Inc.
announced a broad low-fare pricing scheme. US&nbsp;Airways Group
anticipates the continued growth of low-fare competition in the
industry in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A substantial portion of the flights of US&nbsp;Airways
Group&#146;s airline subsidiaries and affiliates are to or from
cities in the Eastern United States. Accordingly, severe
weather, air traffic control problems and downturns in the
economy in the Eastern United States adversely affect
US&nbsp;Airways Group&#146;s results of operations and financial
condition. With their concentration in the Eastern United
States, the airline subsidiaries&#146; and affiliates&#146;
average stage length, or trip distance, is shorter than those of
other major airlines. This makes US&nbsp;Airways Group more
susceptible than other major airlines to competition from
surface transportation, such as automobiles and trains. The
increased airport security charges and procedures have also had
a disproportionate impact on short-haul travel, which
constitutes a significant portion of flying for US&nbsp;Airways
Group&#146;s airline subsidiaries and affiliates. Additional
terrorist attacks or fear of these attacks, even if not made
directly on the airline industry, including elevated national
threat warnings, negatively affect US&nbsp;Airways Group and the
airline industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In recent years, US&nbsp;Airways Group&#146;s profitability was
significantly eroded by competitive pressures, including the
incursion of regional jets, the expansion of low-fare low-cost
carriers and the entry of additional carriers into its operating
territories, including key focus cities and hubs; unfavorable
economic trends; and rising fuel and labor costs. The May 2000
proposed merger of United Airlines and US&nbsp;Airways Group was
designed to address this profitability erosion by adding
US&nbsp;Airways Group into a global network. During the period
in which the merger was pending, US&nbsp;Airways Group was
effectively precluded from restructuring its operations as a
stand-alone carrier. That period ended in the termination of the
merger agreement in late July 2001 after the merger failed to
receive approval from the U.S.&nbsp;Department of Justice.
Following the merger termination, US&nbsp;Airways Group embarked
on a phased, stand-alone restructuring plan to address the
problems facing its airline subsidiaries and affiliates;
however, this plan was preempted almost immediately by the
September&nbsp;11th terrorist attacks, which were then followed
by the filing for Chapter&nbsp;11 in the prior bankruptcy in
August 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Marketing Agreements with Other Airlines</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways, Inc. has entered into a number of bilateral and
multilateral alliances with other airlines to provide customers
with more choices and to access markets worldwide that
US&nbsp;Airways Group does not serve directly. In May 2004,
US&nbsp;Airways, Inc. joined the Star Alliance, the world&#146;s
largest airline alliance, with 16 member airlines serving 795
destinations in 139 countries. Membership in the Star Alliance
further enhances the value of US&nbsp;Airways Group&#146;s
domestic and international route network by allowing customers
access to the global marketplace. Expanded benefits for
customers include network expansion through code share service,
benefits under US&nbsp;Airways Inc.&#146;s frequent traveler
program, Dividend Miles, airport lounge access, convenient
single-ticket pricing, and one-stop check-in and coordinated
baggage handling.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways, Inc. also has comprehensive marketing
agreements with United Airlines, a member of the Star Alliance,
which began in July 2002. United Airlines, as well as its parent
company, UAL Corporation, and certain of its affiliates, filed
for protection under Chapter&nbsp;11 of the bankruptcy code on
December&nbsp;9, 2002. United Airlines immediately requested
bankruptcy court authority to assume these agreements and the
court granted United Airlines&#146; request. US&nbsp;Airways,
Inc. also has marketing agreements with Lufthansa, Spanair, bmi
and other Star Alliance carriers, as well as with several
smaller regional carriers in the Caribbean operating
collectively as the GoCaribbean Network.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Industry Regulation and Airport Access</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group&#146;s airline subsidiaries operate under
certificates of public convenience and necessity or commuter
authority issued by the U.S.&nbsp;Department of Transportation,
or the DOT. The DOT may alter, amend, modify or suspend these
certificates if the public convenience and necessity so require,
or may revoke the certificates for failure to comply with the
terms and conditions of the certificates. Airlines are also
regulated by the U.S.&nbsp;Federal Aviation Administration, or
the FAA, a division of the DOT, primarily in the areas of flight
operations, maintenance, ground facilities and other technical
matters. Pursuant to these
</DIV>

<P align="center" style="font-size: 10pt;">116

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<DIV align="left" style="font-size: 10pt;">
regulations, US&nbsp;Airways Group&#146;s airline subsidiaries
have FAA-approved maintenance programs for each type of aircraft
they operate that provide for the ongoing maintenance of these
aircraft, ranging from periodic routine inspections to major
overhauls. From time to time, the FAA issues airworthiness
directives and other regulations affecting US&nbsp;Airways
Group&#146;s airline subsidiaries or one or more of the aircraft
types they operate. In recent years, for example, the FAA has
issued or proposed these mandates relating to, among other
things, enhanced ground proximity warning systems, fuselage
pressure bulkhead reinforcement, fuselage lap joint inspection
rework, increased inspections and maintenance procedures to be
conducted on certain aircraft, increased cockpit security, fuel
tank flammability reductions and domestic reduced vertical
separation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The DOT allows local airport authorities to implement procedures
designed to abate special noise problems, provided that these
procedures do not unreasonably interfere with interstate or
foreign commerce or the national transportation system. Certain
locales, including Boston, Washington,&nbsp;D.C., Chicago,
San&nbsp;Diego and San&nbsp;Francisco, among others, have
established airport restrictions to limit noise, including
restrictions on aircraft types to be used and limits on the
number of hourly or daily operations or the time of these
operations. In some instances these restrictions have caused
curtailments in services or increases in operating costs and
these restrictions could limit the ability of US&nbsp;Airways,
Inc. to expand its operations at the affected airports.
Authorities at other airports may consider adopting similar
noise regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The airline industry is also subject to increasingly stringent
federal, state and local laws protecting the environment. Future
regulatory developments and actions could affect operations and
increase operating costs for the airline industry, including
US&nbsp;Airways Group&#146;s airline subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group&#146;s airline subsidiaries are obligated
to collect a federal excise tax on domestic and international
air transportation, commonly referred to as the ticket tax.
US&nbsp;Airways Group&#146;s airline subsidiaries collect these
taxes, along with certain other U.S. and foreign taxes and user
fees on air transportation, and pass through the collected
amounts to the appropriate governmental agencies. Although these
taxes are not operating expenses of US&nbsp;Airways&nbsp;Group,
they represent an additional cost to
US&nbsp;Airways&nbsp;Group&#146;s customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Aviation Security Act was enacted in November 2001. Under
the Aviation and Transportation Security Act, substantially all
aspects of civil aviation passenger security screening were
federalized and a new TSA, under the DOT was created. TSA was
then transferred to the Department of Homeland Security pursuant
to the Homeland Security Act of 2002. The Aviation and
Transportation Security Act, among other matters, mandates:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    improved flight deck security;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    carriage at no charge of federal air marshals;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    enhanced security screening of passengers, baggage, cargo, mail,
    employees and vendors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    enhanced security training;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    fingerprint-based background checks of all employees and vendor
    employees with access to secure areas of airports pursuant to
    regulations issued in connection with the Aviation and
    Transportation Security Act;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the provision of passenger data to U.S.&nbsp;Customs.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Funding for TSA is provided, in part, by a fee collected by air
carriers from their passengers of $2.50&nbsp;per flight segment,
but not more than $10.00&nbsp;per round trip. From time to time,
legislation is proposed to increase this fee. Implementation of
the requirements of the Aviation and Transportation Security Act
have resulted and will continue to result in increased costs for
US&nbsp;Airways Group and its passengers and has and will likely
continue to result in service disruptions and delays.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most major U.S.&nbsp;airports impose passenger facility charges.
The ability of airlines to contest increases in these charges is
restricted by federal legislation, DOT regulations and judicial
decisions. Legislation enacted in 2000 permitted airports to
increase passenger facility charges effective April&nbsp;1,
2001. With certain
</DIV>

<P align="center" style="font-size: 10pt;">117

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<DIV align="left" style="font-size: 10pt;">
exceptions, air carriers pass these charges on to passengers.
However, the ability of US&nbsp;Airways Group to pass-through
security fees and passenger facility charges to its customers is
subject to various factors, including market conditions and
competitive factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FAA has designated John F. Kennedy International Airport,
LaGuardia Airport and Ronald Reagan Washington National Airport
as &#147;high-density traffic airports&#148; and has limited the
number of departure and arrival slots available to air carriers
at those airports. In April 2000, legislation was enacted that
eliminates slot restrictions in 2007 at LaGuardia Airport and
Kennedy Airport. Among other things, the legislation encouraged
the development of air service to smaller communities from
slot-controlled airports. During the interim period while slot
restrictions remained in effect at LaGuardia Airport, airlines
could apply for slot exemptions to serve smaller communities
using aircraft with a maximum seating capacity of less than 71.
In connection with this legislation, US&nbsp;Airways Group and
several other airlines increased service from LaGuardia Airport,
which led to excessive flight delays. In response to these
delays, the FAA implemented a slot lottery system in December
2000 limiting the number of new flights at LaGuardia Airport. As
a result, several airlines, including US&nbsp;Airways Group,
were required to reduce the number of flights added at LaGuardia
Airport in connection with this legislation. The resulting
allocation of slots from the slot lottery system was initially
scheduled to expire on September&nbsp;15, 2001, but on
August&nbsp;3, 2001, the FAA announced an extension until
October&nbsp;26, 2002. On July&nbsp;8, 2002, the FAA announced
another extension until October&nbsp;30, 2004, and subsequently
announced a further extension through October&nbsp;30, 2005. As
a result of the 2007 slot elimination, the FAA has indicated an
intent to rethink its approach to regulating operations at
LaGuardia Airport. Several proposals, including auctions,
congestion pricing and other market-based solutions, are being
considered along with more traditional regulatory approaches.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At Washington Ronald Reagan National Airport an additional
eleven roundtrips were awarded by the DOT, pursuant to the
Vision 100&#150;Century of Aviation Reauthorization Act, which
created additional slots for distribution by the DOT. Although
US&nbsp;Airways, Inc. participated in the proceeding and was
awarded slots, most of the slots were awarded to new entrant
carriers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Where the FAA has seen congestion and delay increases, it has
stepped in and worked with the carriers to freeze operations at
current or somewhat reduced levels. Specifically, incumbent
carriers, including US&nbsp;Airways, Inc., are not permitted to
increase operations at Chicago O&#146;Hare Airport as a result
of an agreement reached between the FAA and these airlines in
August 2004. This agreement has been extended through the Fall
2005. Currently, a rulemaking on extending the agreement with
some modifications is underway at the FAA. US&nbsp;Airways, Inc.
has actively participated in the rulemaking. A broader
rulemaking to address congestion at other crowded airports could
be forthcoming sometime in 2005 or 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The availability of international routes to domestic air
carriers is regulated by agreements between the U.S. and foreign
governments. Changes in U.S.&nbsp;or foreign government aviation
policy could result in the alteration or termination of these
agreements and affect US&nbsp;Airways, Inc.&#146;s international
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, US&nbsp;Airways Group and its
subsidiaries employed approximately 30,700 active employees, or
28,600 employees on a full-time equivalent basis.
US&nbsp;Airways, Inc. employed approximately 25,200 active
employees including approximately 8,000 station personnel, 5,300
flight attendants, 4,000 mechanics and related employees, 3,000
pilots, 1,500 reservations personnel and 3,400 personnel in
administrative and miscellaneous job categories. US&nbsp;Airways
Group&#146;s remaining subsidiaries employed 5,500 employees
including approximately 3,000 station personnel, 1,000 pilots,
550 flight attendants, 450 mechanics and related employees and
500 personnel in administrative and miscellaneous job categories.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, approximately 80% of US&nbsp;Airways
Group&#146;s active employees were covered by collective
bargaining agreements with various labor unions.
</DIV>

<P align="center" style="font-size: 10pt;">118

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The status of US&nbsp;Airways, Inc.&#146;s labor agreements with
its major employee groups as of March&nbsp;31, 2005 is as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Union (1)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Class or Craft</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Employees&nbsp;(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Date&nbsp;Contract Amendable</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ALPA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Pilots</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12/31/09</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    IAMAW</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mechanics and related employees</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12/31/09</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    IAMAW</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fleet service employees</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12/31/09</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CWA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Passenger service employees</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12/31/11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AFA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Flight attendants</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12/21/11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    TWU</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Dispatchers and other</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>12/31/09&nbsp;&#38; 12/31/11</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="82%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    ALPA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Air Line Pilots Association</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    IAMAW</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    International Association of Machinists and Aerospace Workers</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    CWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Communications Workers of America</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    AFA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Association of Flight Attendants-Communications Workers of
    America</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    TWU</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Transport Workers Union</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="bottom">
    Approximate number of active employees covered by the contract.</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Aviation Fuel</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Aviation fuel is typically US&nbsp;Airways Group&#146;s second
largest expense. Because the operations of the airline are
dependent upon aviation fuel, increases in aviation fuel costs
could materially and adversely affect liquidity, results of
operations and financial condition. The following table shows
US&nbsp;Airways Group&#146;s aircraft fuel consumption and costs
for 2002-2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Aviation fuel</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage of Total</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gallons</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>expense&nbsp;(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Operating</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in millions)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>per gallon (1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in millions)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expenses</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Includes fuel taxes and the impact of fuel hedges.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
For the first quarter of 2005, the average price per gallon
increased to $1.480, and aviation fuel as a percentage of total
operating expenses was 20.1%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prices and availability of all petroleum products are subject to
political, economic and market factors that are generally
outside of US&nbsp;Airways Group&#146;s control. Accordingly,
the price and availability of aviation fuel, as well as other
petroleum products, can be unpredictable. Prices may be affected
by many factors, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the impact of political instability on crude production,
    especially in Russia and OPEC countries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    unexpected changes to the availability of petroleum products due
    to disruptions in distribution systems or refineries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    unpredicted increases to oil demand due to weather or the pace
    of economic growth;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    inventory levels of crude, refined products and natural
    gas;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    other factors, such as the relative fluctuation between the
    U.S.&nbsp;dollar and other major currencies and influence of
    speculative positions on the futures exchanges.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To reduce the exposure to changes in fuel prices,
US&nbsp;Airways Group periodically enters into certain fixed
price swaps, collar structures and other similar derivative
contracts. US&nbsp;Airways Group&#146;s current financial
position and credit rating negatively affect its ability to
hedge fuel in the future. See the section entitled
&#147;US&nbsp;Airways&nbsp;Group Management&#146;s Discussion
and Analysis of Financial Condition and Results of
Operations&nbsp;&#151; Selected Operating and Financial
Statistics&#148; for additional information related to aviation
fuel.
</DIV>

<P align="center" style="font-size: 10pt;">119

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Airline Ticket Distribution</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The now common usage of electronic tickets within North America,
and its rapid expansion in Europe and the rest of the world, has
allowed for the streamlining of processes and the increased
efficiency of customer servicing and support. US&nbsp;Airways
Group began to support the issuance of electronic tickets in
1996. During 2004, electronic tickets represented 96% of all
tickets issued to customers flying US&nbsp;Airways, Inc. The
addition of a $50 surcharge to most customers requiring paper
tickets has allowed US&nbsp;Airways&nbsp;Group to continue to
support the exceptional requests, while offsetting any cost
variance associated with the issuance and postal fulfillment of
paper tickets. Airlines based in North America have recently
proposed a requested mandate that airlines move to 100%
electronic ticketing over the next few years, which will only
serve to enhance customer service and control costs for
ticketing services supported by the airline and distribution
partners.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The shift of consumer bookings from traditional travel agents,
airline ticket offices and reservation centers to online travel
agent sites, such as Orbitz, Travelocity, Expedia and others, as
well as airline direct websites, such as usairways.com,
continues to grow within the industry. Historically, traditional
and online travel agencies used Global Distribution Systems, or
GDSs, such as Sabre, to obtain their fare and inventory data
from airlines. Bookings made through these agencies result in a
fee, referred to as the GDS fee, that is charged to the airline.
Bookings made directly with the airline, through its reservation
call centers or website, do not incur a GDS fee. The growth of
the airline direct websites and travel agent sites that connect
directly to airline host systems, effectively by-passing the
traditional connection via GDSs, helps US&nbsp;Airways Group
reduce distribution costs from the channels of distribution on
the internet. In the first quarter of 2005, US&nbsp;Airways,
Inc. received over 33% of its sales from internet sites.
US&nbsp;Airways, Inc.&#146;s direct website, usairways.com,
comprised over 13% of its sales, while the rest of the internet
sites accounted for the remaining 20% of its sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Due to the continued pressure on legacy airlines to lower
distribution fees more aggressively than anytime in the past in
order to compete with low-cost airlines, many
&#147;newcomers&#148; have entered the distribution industry.
New low-cost GDSs, such as ITA Software, G2 Switchworks,
Navitaire and others, are providing airlines with alternative
economic models to do business with traditional travel agents.
These new low-cost GDSs substantially reduce the fees charged to
airlines by this distribution channel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In an effort to further reduce distribution costs through
internal channels, US&nbsp;Airways, Inc. and other airlines have
instituted service fees for interaction in channels requiring
specialized service such as reservation call centers
($5.00&nbsp;per ticket), Airline Ticket Offices ($10.00&nbsp;per
ticket) and City Ticket Offices ($10.00&nbsp;per ticket), while
continuing to offer free service via the airlines&#146;
websites. The goals of these service fees are to reduce the cost
to provide customer service as required by the traveler and
promote the continued goal of shifting customers to
US&nbsp;Airways Inc.&#146;s lowest cost distribution channel,
usairways.com. For the first quarter of 2005, internal channels
of distribution account for approximately 24% of all
US&nbsp;Airways Group sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In July 2004, the DOT eliminated most of its regulations
governing GDSs. Airlines and GDSs continue to have open dialogue
regarding possible cost savings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Frequent Traveler Program</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways, Inc. operates a frequent traveler program known
as Dividend Miles under which participants earn mileage credits
for each paid flight segment on US&nbsp;Airways, Inc.,
US&nbsp;Airways Shuttle, US&nbsp;Airways Express, Star Alliance
carriers, and certain other airlines that participate in the
program. Participants flying on First Class or Envoy class
tickets receive additional mileage credits. Participants can
also receive mileage credits through special promotions
periodically offered by US&nbsp;Airways, Inc. and may also earn
mileage credits by utilizing certain credit cards and purchasing
services from various non-airline partners. Mileage credits can
be redeemed for various free, discounted, or upgraded travel
awards on US&nbsp;Airways, Inc., Star Alliance carriers or other
participating airlines.
</DIV>

<P align="center" style="font-size: 10pt;">120

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways, Inc. and the other participating airline
partners limit the number of seats allocated per flight for
award recipients by using various inventory management
techniques. Award travel for all but the highest-level Dividend
Miles participants is generally not permitted on blackout dates,
which correspond to certain holiday periods or peak travel
dates. US&nbsp;Airways, Inc. reserves the right to terminate
Dividend Miles or portions of the program at any time. Program
rules, partners, special offers, blackout dates, awards and
requisite mileage levels for awards are subject to change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Insurance</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways&nbsp;Group and its subsidiaries maintain
insurance of the types and in amounts deemed adequate to protect
themselves and their property. Principal coverage includes:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    liability for injury to members of the public, including
    passengers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    damage to property of US&nbsp;Airways&nbsp;Group, its
    subsidiaries and others;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    loss of or damage to flight equipment, whether on the ground or
    in flight;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    fire and extended coverage;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    directors and officers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    fiduciary;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    workers&#146; compensation and employer&#146;s liability.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to customary deductibles, US&nbsp;Airways Group
self-insures for all or a portion of its losses from claims
related to environmental liabilities and medical insurance for
employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since September&nbsp;11, 2001, US&nbsp;Airways Group and other
airlines have been unable to obtain coverage for liability to
persons other than employees and passengers for claims resulting
from acts of terrorism, war or similar events, referred to as
war risk coverage, at reasonable rates from the commercial
insurance market. US&nbsp;Airways, Inc. has, as have most other
U.S.&nbsp;airlines, therefore purchased its war risk coverage
through a special program administered by the FAA. The Emergency
Wartime Supplemental Appropriations Act extended this insurance
protection until August 2005. The Secretary of Transportation
may extend this policy until December&nbsp;31, 2005. If the
federal insurance program terminates, US&nbsp;Airways Group
would likely face a material increase in the cost of war risk
coverage, and because of competitive pressures in the industry,
US&nbsp;Airways Group&#146;s ability to pass this additional
cost to passengers would be limited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There can be no assurances that US&nbsp;Airways Group can
maintain insurance coverages and costs at its current levels.
</DIV>

<P align="center" style="font-size: 10pt;">121

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Properties</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Flight Equipment</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, US&nbsp;Airways, Inc. operated the
following jet and regional jet aircraft:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Seat</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Type</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capacity</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age (years)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Owned&nbsp;(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leased&nbsp;(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Airbus A330</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Boeing 767-200ER</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Boeing 757-200</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Airbus A321</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Boeing 737-400</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Airbus A320</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Boeing 737-300</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Airbus A319</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>279</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EMB-170</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    All owned aircraft are pledged as collateral for various secured
    financing agreements.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    The terms of the leases expire between 2005 and 2023.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, US&nbsp;Airways Group&#146;s wholly
owned regional airline subsidiaries operated the following
turboprop and regional jet aircraft:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Seat</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Type</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capacity</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age (years)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Owned</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leased (1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CRJ-700</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CRJ-200</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    De Havilland Dash 8-300</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    De Havilland Dash 8-100</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    De Havilland Dash 8-200</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>109</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The terms of the leases expire between 2005 and 2021.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, US&nbsp;Airways Group had 19
A320-family aircraft on firm order with Airbus scheduled for
delivery in the years 2008 through 2010. US&nbsp;Airways Group
also had ten A330-200 aircraft on firm order with Airbus
scheduled for delivery in the years 2008 and 2009. Subsequently,
a Memorandum of Understanding was executed on May&nbsp;18, 2005
between Airbus, US&nbsp;Airways Group, US&nbsp;Airways, Inc. and
America West Airlines, Inc. which, in addition to providing for
a $250&nbsp;million line of credit from Airbus upon the
satisfaction of various conditions precedent (including the
completion of the merger and the emergence of US&nbsp;Airways,
Inc. from bankruptcy), provides for the rescheduling of
US&nbsp;Airways Inc.&#146;s A320-family and A330-200 delivery
commitments, and an order for 20 A350&nbsp;aircraft, for which
Airbus has agreed to provide a backstop financing for a
substantial number of aircraft, subject to certain terms and
conditions. Under the Airbus Memorandum of Understanding,
US&nbsp;Airways Inc.&#146;s A320-family aircraft will be
rescheduled for delivery in 2009 and 2010, with US&nbsp;Airways
Inc.&#146;s A330-200 aircraft orders rescheduled for delivery in
2009 and 2010. The new A350 aircraft deliveries are currently
scheduled to occur during the period 2011 through 2013. The
Airbus MOU also eliminates cancellation penalties on US Airways
Group&#146;s orders for the ten A330-200 aircraft, provided that
New&nbsp;US&nbsp;Airways Group has met certain predelivery
payment obligations under the A350 order.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the regional jet leasing term sheet of the GE Master
Memorandum of Understanding approved by the bankruptcy court on
December&nbsp;17, 2004, General Electric Capital Corporation,
referred to as GECC, or its affiliates agreed to provide lease
financing for up to 31 regional jet aircraft, consisting of 70-
to
</DIV>

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100-seat regional jet aircraft manufactured by Bombardier and/or
Embraer in a mix and subject to other terms to be agreed
mutually by GECC and US&nbsp;Airways, Inc. Under the Master
Memorandum of Understanding, GECC leased six Bombardier CRJ-700s
to US&nbsp;Airways, Inc. in the first quarter of 2005 with terms
expiring on the earlier of US&nbsp;Airways Group&#146;s
emergence from Chapter&nbsp;11 and June&nbsp;30, 2005, which
leases will be converted to long-term leases. Subsequent to
closing on the six Bombardier CRJ-700 aircraft, GECC and
US&nbsp;Airways Group agreed, pursuant to a Merger Memorandum of
Understanding approved by the bankruptcy court on June&nbsp;23,
2005, to eliminate the obligation of GECC to provide the
remaining regional jet financing directly to US&nbsp;Airways
Group, although GE agreed to provide single investor and
operating lease financing to Republic Airways for the three
EMB-170 aircraft already on order, and for ten EMB-170/190/195
aircraft for delivery to acceptable third-party carriers, which
aircraft will be flown by those carriers for the benefit of
US&nbsp;Airways Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, US&nbsp;Airways Group reached aircraft leasing
and financing agreements with Embraer and Bombardier, which were
approved by the bankruptcy court in January 2005. Pursuant to
the agreement reached with Embraer, US&nbsp;Airways, Inc.
purchased and took delivery of three EMB-170 aircraft in January
2005 and endeavored to purchase and take delivery of three
additional EMB-170 aircraft by March&nbsp;31, 2005.
US&nbsp;Airways, Inc. did not take delivery of the second three
aircraft in March 2005. As a result, damages accrue from and
after April&nbsp;1, 2005 until the delivery of the aircraft at
the rate of $162,795&nbsp;per month per aircraft. If the
aircraft are not delivered by July&nbsp;31, 2005, Embraer&#146;s
obligation to deliver these aircraft will terminate and its
damages with respect to the undelivered aircraft may be as much
as $10&nbsp;million for all three aircraft (rather than at the
rate of $162,795&nbsp;per month per aircraft), with Embraer
having the right to apply any remaining purchase deposits
against Embraer&#146;s aggregate damages. US&nbsp;Airways Group
is currently working to arrange financing for these aircraft,
and has secured GE&#146;s agreement to provide that financing
under the Merger Memorandum of Understanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the agreement reached with Bombardier, US&nbsp;Airways
Group acquired three new CRJ-700 aircraft in January 2005. The
purchase was financed through the application of
$28&nbsp;million of existing purchase deposits held by
Bombardier, $2&nbsp;million in cash and a financed lease
facility with DVB&nbsp;Bank&nbsp;AG. Additionally,
$4&nbsp;million of existing purchase deposits held by Bombardier
were used to satisfy existing defaults and cure payments. So
long as US&nbsp;Airways Group continues to operate under the
protection of Chapter&nbsp;11 in compliance with the bankruptcy
code, no obligations will arise on the part of
US&nbsp;Airways&nbsp;Group or Bombardier with respect to the
purchase and delivery of any aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways&nbsp;Group maintains inventories of spare
engines, spare parts, accessories and other maintenance supplies
sufficient to meet its operating requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, US&nbsp;Airways&nbsp;Group owned or
leased the following aircraft that were not considered part of
its operating fleet presented in the tables above. These
aircraft were either parked at storage facilities or, as shown
in the far right column, leased or subleased to third parties or
related parties.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leased/</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Type</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age (years)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Owned</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leased</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subleased</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    De Havilland Dash 8</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Douglas DC-9-30</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in &#147;Overview&#148; above, US&nbsp;Airways Inc.
has code share agreements in the form of capacity purchase
agreements with certain US&nbsp;Airways Express regional jet
affiliate operators. Collectively, these regional jet affiliate
operators flew 107 50-seat regional jet aircraft as part of
US&nbsp;Airways Express as of March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways, Inc. is a participant in the Civil Reserve Air
Fleet, a voluntary program administered by the Air Mobility
Command. The General Services Administration of the
U.S.&nbsp;government requires that airlines participate in Civil
Reserve Air Fleet in order to receive U.S.&nbsp;government
business. US&nbsp;Airways, Inc.&#146;s commitment under Civil
Reserve Air Fleet is to provide up to its entire widebody fleet
of ten 767-200ER aircraft and nine A330-300 aircraft in support
of military missions. US&nbsp;Airways, Inc. is reimbursed at
</DIV>

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<DIV align="left" style="font-size: 10pt;">
compensatory rates when aircraft are activated under Civil
Reserve Air Fleet. US&nbsp;Airways, Inc. is reimbursed during
peacetime proportionally to its commitment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Inc.&#146;s 767-200ER aircraft are committed to
the Aeromed Program of the Civil Reserve Air Fleet. Under this
program, the aircraft are converted to flying hospitals for
transportation of injured troops. US&nbsp;Airways, Inc., Delta
Air Lines and United Airlines are participants in the Aeromed
Program. Participation in this program provides increased
U.S.&nbsp;government revenues for US&nbsp;Airways Inc. Since the
Civil Reserve Air Fleet activation of 2003, US&nbsp;Airways,
Inc. has not provided &#147;voluntary&#148; lift to Air Mobility
Command, due to operational limitations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Ground Facilities</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways, Inc. leases the majority of its ground
facilities, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    executive and administrative offices in Arlington, Virginia near
    Washington Ronald Reagan National Airport;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    its principal operating, overhaul and maintenance bases at the
    Pittsburgh International Airport and Charlotte/ Douglas
    International Airports;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    training facilities in Pittsburgh and Charlotte;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    central reservations offices in Pittsburgh and Winston-Salem,
    North Carolina;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    line maintenance bases and local ticket, cargo and
    administrative offices throughout its system.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways, Inc. owns a training facility in Winston-Salem
and previously owned a reservation facility in Orlando. The
Orlando facility was closed on January&nbsp;10, 2003 and was
sold in May 2005. The Pittsburgh reservations call and service
center will be closed in 2005 and consolidated into one location
in Winston-Salem.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Terminal Construction Projects</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group uses public airports for its flight
operations under lease arrangements with the government entities
that own or control these airports. Airport authorities
frequently require airlines to execute long-term leases to
assist in obtaining financing for terminal and facility
construction. Any future requirements for new or improved
airport facilities and passenger terminals at airports at which
US&nbsp;Airways&nbsp;Group operates could result in additional
expenditures and long-term commitments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1998, US&nbsp;Airways, Inc. reached an agreement with the
Philadelphia Authority for Industrial Development and the City
of Philadelphia to construct a new international terminal and a
new US&nbsp;Airways Express terminal at the Philadelphia
International Airport, one of US&nbsp;Airways Group&#146;s
connecting hubs and US&nbsp;Airways, Inc.&#146;s principal
international gateway. The international terminal includes 12
gates for widebody aircraft and new federal customs and
immigration facilities. The international terminal gates were
put into operation in May 2003 and the ticket lobby opened in
September 2003. The US&nbsp;Airways Express facility, completed
in June 2001, can accommodate 38 regional aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Legal Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;12, 2004, the debtors filed voluntary
petitions for relief under Chapter&nbsp;11 of the bankruptcy
code in the United States bankruptcy court for the Eastern
District of Virginia, Alexandria Division (Case Nos.
04-13819-SSM through 03-13823-SSM). Each of the debtors
continues to operate its business and manage its property as a
debtor in possession pursuant to Sections&nbsp;1107 and 1108 of
the bankruptcy code. As a result of the current Chapter&nbsp;11
filing, attempts to collect, secure or enforce remedies with
respect to prepetition claims against the debtors are subject to
the automatic stay provisions of Section&nbsp;362(a) of the
bankruptcy code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;26, 2004, a company called I.A.P. Intermodal,
LLC filed suit against US&nbsp;Airways Group and its wholly
owned airline subsidiaries in the United States District Court
for the Eastern District of Texas
</DIV>

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<DIV align="left" style="font-size: 10pt;">
alleging that the defendants&#146; computer scheduling system
infringes upon three patents held by plaintiffs, all of which
patents are entitled, &#147;Method to Schedule a Vehicle in
Real-Time to Transport Freight and Passengers.&#148; Plaintiff
seeks various injunctive relief as well as costs, fees and
treble damages. US&nbsp;Airways Group and its subsidiaries were
formally served with the complaint on June&nbsp;21, 2004.
US&nbsp;Airways Group is unable to ascertain at this time the
likelihood or potential scale of liability. On the same date,
the same plaintiff filed what US&nbsp;Airways&nbsp;Group
believes to be substantially similar cases against nine other
major airlines, including British Airways, Northwest Airlines
Corporation, Korean Airlines Co., Ltd., Deutsche Lufthansa AG,
Air France, Air Canada, Singapore Airlines Ltd., Delta Air Lines
and Continental Airlines, Inc., and had filed a suit against the
parent company of American Airlines in December 2003. This
action was stayed as to US&nbsp;Airways Group and its wholly
owned subsidiaries as a result of the bankruptcy filing on
September&nbsp;12, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Port Authority of New York and New Jersey, or the Port
Authority, filed a proof of claim against US&nbsp;Airways, Inc.
in the prior bankruptcy. The claim was in the amount of
$8.5&nbsp;million and it alleged environmental contamination and
building deficiencies at LaGuardia Airport. US&nbsp;Airways,
Inc.&#146;s liability and defenses to this liability were
unaffected by the prior bankruptcy. US&nbsp;Airways, Inc. has
received no notice, inquiry or other communication from the Port
Authority other than in connection with the proof of claim, and
therefore is unable to evaluate at this time the validity of the
underlying claim, the degree to which US&nbsp;Airways, Inc.
might share responsibility with other parties, or the cost of
cleanup or correction of the alleged building deficiencies. In
connection with the current bankruptcy, the Port Authority filed
a proof of claim in the amount of approximately $2&nbsp;million
again alleging environmental contamination and building
deficiencies at LaGuardia Airport.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;7, 2003, the IRS, issued a notice of proposed
adjustment to US&nbsp;Airways&nbsp;Group proposing to disallow
$573&nbsp;million of capital losses that
US&nbsp;Airways&nbsp;Group sustained in the tax year 1999 on the
sale of stock of USLM Corporation, referred to as the USLM
matter. On February&nbsp;5, 2003, the IRS filed a proof of claim
with the bankruptcy court in connection with the prior
bankruptcy asserting the following claims against
US&nbsp;Airways, Inc. with respect to the USLM matter:
(1)&nbsp;secured claims for U.S.&nbsp;federal income tax and
interest of $1&nbsp;million; (2)&nbsp;unsecured priority claims
for U.S.&nbsp;federal income tax of $68&nbsp;million and
interest of $14&nbsp;million; and (3)&nbsp;an unsecured general
claim for penalties of $25&nbsp;million. On May&nbsp;8, 2003,
US&nbsp;Airways Group reached a tentative agreement with the IRS
on the amount of U.S.&nbsp;federal income taxes, interest and
penalties due subject to final approval from the Joint Committee
on Taxation. By letter dated September&nbsp;11, 2003,
US&nbsp;Airways Group was notified that the Joint Committee on
Taxation had accepted the tentative agreement with the IRS,
including a settlement of all federal income taxes through the
end of 2002. Due to the bankruptcy filing on September&nbsp;12,
2004, which suspended payment of prepetition liabilities, final
payment terms under the agreement have not been submitted to the
bankruptcy court for approval. The IRS has submitted a proof of
claim relating to the USLM matter in the present bankruptcy in
the amount of approximately $31&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Williard, Inc., together with the joint venture of Williard,
Inc. and Len Parker Associates, was awarded construction
contracts with US&nbsp;Airways, Inc. for work to be performed at
the Philadelphia International Airport. On May&nbsp;29, 2002,
US&nbsp;Airways, Inc. terminated the largest contract between
the parties. Williard, Inc. and the joint venture sued
US&nbsp;Airways, Inc. in Pennsylvania state court for over
$14&nbsp;million in damages representing termination costs and
lost profits, along with other alleged contractual damage
claims. Subsequently, Limbach Company, LLC alleged that it
purchased the claims of Williard, Inc. After a trial, the
bankruptcy court, on June&nbsp;7, 2004, determined the value of
the Limbach Company and the joint venture claims to be
approximately $3&nbsp;million. Limbach Company and the joint
venture are challenging on appeal various rulings of the
bankruptcy court, including the amount of the claim and its
status as an unsecured claim. US&nbsp;Airways, Inc. has also
filed an appeal. Limbach Company and Limbach/ Parker have filed
an action in state court against the City of Philadelphia and
the Philadelphia Authority for Industrial Development and
received permission to include US&nbsp;Airways, Inc. as a
co-defendant, provided that Limbach Company and the joint
venture did not make any claims against US&nbsp;Airways, Inc. in
that action. In the lawsuit against the City of Philadelphia and
the Philadelphia Authority for Industrial Development, Limbach
Company and the joint venture are seeking the same sums as in
their earlier lawsuit and proofs of claim against
US&nbsp;Airways, Inc.,
</DIV>

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<DIV align="left" style="font-size: 10pt;">
but this time under the equitable theories of third-party
beneficiary, quantum meruit and constructive trust. The court in
the Philadelphia action dismissed US&nbsp;Airways, Inc. from the
lawsuit and dismissed the third-party beneficiary claims against
the City of Philadelphia and the Philadelphia Authority for
Industrial Development. These rulings are subject to appeal at a
later date. On May&nbsp;21, 2004, the City of Philadelphia and
the Philadelphia Authority for Industrial Development filed a
Motion for Summary Judgment seeking dismissal of the lawsuit.
Should Limbach Company and/or the joint venture recover in the
Philadelphia action against the City of Philadelphia and the
Philadelphia Authority for Industrial Development, that award
would be paid at 100 cents on the dollar. US&nbsp;Airways, Inc.
may have an obligation to indemnify the City of Philadelphia and
the Philadelphia Authority for Industrial Development under its
agreements related to the airport development, which
US&nbsp;Airways, Inc. assumed as part of the prior bankruptcy.
Therefore, any recovery by Limbach Company and/or the joint
venture against the City of Philadelphia and the Philadelphia
Authority for Industrial Development could result in an
indemnification claim that US&nbsp;Airways, Inc. may have to pay
at full value. Proceedings in the bankruptcy court were stayed
by the bankruptcy filing on September&nbsp;12, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group and US&nbsp;Airways, Inc. have been named
as defendants in two lawsuits filed in federal district court
for the Eastern District of Michigan. Delta Air Lines is also
named as a defendant in both actions, while Northwest Airlines
and the Airlines Reporting Corporation were sued separately in a
third action. The complaints were filed on behalf of a class of
airline passengers who originated or terminated their trips at
the defendant carriers&#146; respective hubs. These passengers
allege that they paid excessive fares due to the respective
airlines&#146; enforcement of ticketing rules that prohibit the
use of a connecting segment coupon that is part of a
through-fare ticket where the passenger does not fly or intend
to fly the entire ticketed itinerary. Plaintiffs allege
monopolization and restraint of trade in violation of federal
antitrust laws. They seek recovery of treble damages from all
named defendants in the amount of $390&nbsp;million and an
injunction prohibiting future enforcement of the rules at issue.
On May&nbsp;16, 2002, the court denied the defendant
airlines&#146; Motion for Summary Judgment and granted the
plaintiffs&#146; Motion for Class&nbsp;Certification in each of
the cases. On May&nbsp;31, 2002, US&nbsp;Airways Group and
US&nbsp;Airways, Inc. filed a petition with the United States
Court of Appeals for the Sixth Circuit seeking a discretionary
review of the certification order. On November&nbsp;21, 2002,
the petition for permission to appeal the class certification
decision was denied. On December&nbsp;4, 2002, Delta Air Lines
and Northwest Airlines filed a rehearing petition seeking en
banc review of the initial Sixth Circuit denial. On
February&nbsp;24, 2003, Northwest Airlines&#146; and Delta Air
Lines&#146; petition for rehearing en banc was denied.
Notwithstanding the district court&#146;s denial of summary
judgment and the petition, US&nbsp;Airways Group and
US&nbsp;Airways, Inc. believe the claims are without merit and
intend to pursue a vigorous defense. The automatic stay under
Section&nbsp;362(a) of the bankruptcy code was lifted when
US&nbsp;Airways Group emerged from bankruptcy on March&nbsp;31,
2003, but the action was subsequently stayed once more as a
result of the debtors&#146; bankruptcy filing on
September&nbsp;12, 2004. On April&nbsp;29, 2005, Northwest
Airlines and Delta Air Lines filed a renewed motion for summary
judgment on all counts. That motion is now pending.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 1995, US&nbsp;Airways Group, US&nbsp;Airways, Inc. and
the Retirement Plan for Pilots of US&nbsp;Airways, Inc.,
referred to as the Pilot Retirement Plan, were sued in federal
district court for the District of Columbia by 481 active and
retired pilots, alleging that defendants had incorrectly
interpreted the plan provisions and erroneously calculated
benefits under the Pilot Retirement Plan. The plaintiffs sought
damages in excess of $70&nbsp;million. In May 1996, the court
issued a decision granting US&nbsp;Airways, Inc.&#146;s Motion
to Dismiss the majority of the complaint for lack of
jurisdiction, deciding that the dispute must be resolved through
the arbitration process under the Railway Labor Act because the
Pilot Retirement Plan was collectively bargained. The plaintiffs
appealed the district court&#146;s dismissal and in February
1999, the U.S.&nbsp;Court of Appeals upheld the district
court&#146;s decision originally granted in May 1996, in the
defendants&#146; favor. In May 1999, the plaintiffs filed a
petition for certiorari with the U.S.&nbsp;Supreme Court. In
October 1999, the U.S.&nbsp;Supreme Court denied the
plaintiffs&#146; petition for certiorari. The U.S.&nbsp;District
Court retained jurisdiction over one count of the complaint,
alleging violation of a disclosure requirement under ERISA. In
August 2000, the U.S.&nbsp;District Court dismissed the
remaining count without prejudice, giving plaintiffs the right
to reinstate their claims after completion of the arbitration.
Certain of the plaintiffs filed a claim before the
US&nbsp;Airways Pilot Retirement Board, requesting arbitration
of their claim for benefits that they believe were erroneously
</DIV>

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<DIV align="left" style="font-size: 10pt;">
calculated, and the Pilot Retirement Board selected an
arbitrator to decide certain issues related to the
plaintiffs&#146; claims for benefits. However, the Pilot
Retirement Plan was terminated on March&nbsp;31, 2003, and on
April&nbsp;1, 2003 the PBGC became trustee of the plan. Also,
claims related to this matter were expunged in the prior
bankruptcy. Accordingly, US&nbsp;Airways Group does not believe
there is any continuing risk of material liability associated
with this matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;29, 2000, US&nbsp;Airways, Inc. intervened in
a proceeding that was originally brought on January&nbsp;26,
1998, by the Pennsylvania Department of Environment Protection
against Allegheny County, Pennsylvania, and the Allegheny County
Aviation Administration alleging that a variety of airfield and
aircraft de-icing activities at Pittsburgh International Airport
violated the requirements of (a)&nbsp;a 1994 Consent Order and
Adjudication issued to Allegheny County and air carrier tenants
at the Pittsburgh International Airport, (b)&nbsp;the Pittsburgh
International Airport&#146;s National Pollutant Discharge
Elimination System Permit, and (c)&nbsp;the Pennsylvania Clean
Streams Law. The action was brought before the Pennsylvania
Environmental Hearing Board. During March 2001, the
Environmental Hearing Board approved Allegheny County&#146;s
Motion to Withdraw the Appeal without Prejudice, thereby
terminating the appeal. However, during the course of settlement
discussions leading to the termination of the appeal, the
Pennsylvania Department of Environment Protection advised
Allegheny County and US&nbsp;Airways, Inc. that the Department
of Environment Protection will require additional measures to be
taken to control de-icing materials at the Pittsburgh
International Airport, and will assess a civil penalty against
Allegheny County and US&nbsp;Airways, Inc. for the alleged
violations described above. The Allegheny County Aviation
Administration, US&nbsp;Airways, Inc. and the Pennsylvania
Department of Environment Protection have continued to work
together with the goal of fashioning an ultimate resolution to
the de-icing issues. US&nbsp;Airways&nbsp;Group does not believe
that the settlement of this matter will have a material adverse
effect on its financial condition, results of operations or
liquidity.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='187'></A>
</DIV>

<!-- link1 "US AIRWAYS GROUP MANAGEMENT&#146;S DISCUSSION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US&nbsp;AIRWAYS GROUP MANAGEMENT&#146;S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>General Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following discussion and analysis presents factors that
had a material effect on US&nbsp;Airways Group&#146;s results of
operations during the three months ended March&nbsp;31, 2005 and
2004 and the years ended December&nbsp;31, 2004, 2003 and 2002.
Also discussed is US&nbsp;Airways Group&#146;s financial
position as of the end of those periods. You should read this
discussion in conjunction with US&nbsp;Airways Group&#146;s
consolidated financial statements and the notes to those
consolidated financial statements included in the annexes to
this prospectus. This discussion and analysis contains
forward-looking statements. Please refer to the section entitled
&#147;Cautionary Statement Concerning Forward-Looking
Statements&#148; for a discussion of the uncertainties, risks
and assumptions associated with these statements.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the first quarter of 2005, US&nbsp;Airways Group&#146;s
operating revenues were $1.63&nbsp;billion, operating loss was
$201&nbsp;million and diluted loss per common share was $5.13 on
a net loss of $282&nbsp;million. Operating revenues were
$1.70&nbsp;billion, operating loss was $143&nbsp;million and the
diluted loss per common share was $3.28 on a net loss of
$177&nbsp;million for the same period in 2004. As discussed in
&#147;Results of Operations&#148; below, operating results for
the quarter reflect high fuel prices and the continued weak
revenue environment in US&nbsp;Airways&nbsp;Group&#146;s primary
operating region.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Operating revenues for 2004 were $7.12&nbsp;billion, operating
loss was $378&nbsp;million, and diluted loss per common share
was $11.19 on a net loss of $611&nbsp;million. For 2003,
combining US&nbsp;Airways Group&#146;s results prior to
March&nbsp;31, 2003, the date of emergence from the prior
bankruptcy, with US&nbsp;Airways Group&#146;s results after that
date for comparability with 2004, operating revenues were
$6.85&nbsp;billion, operating loss was $251&nbsp;million and net
income was $1.46&nbsp;billion, driven by gains recognized in
connection with our emergence from the prior bankruptcy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Chapter&nbsp;11 Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;12, 2004, the debtors filed voluntary
petitions for relief under Chapter&nbsp;11 of the bankruptcy
code in the United States bankruptcy court for the Eastern
District of Virginia, Alexandria Division (Case Nos.
04-13819-SSM through 04-13823-SSM). Each of the debtors in these
cases had previously filed a voluntary petition for relief under
Chapter&nbsp;11 on August&nbsp;11, 2002. The debtors emerged
from the prior bankruptcy under a plan of reorganization which
was confirmed pursuant to an order of the bankruptcy court on
March&nbsp;18, 2003 and became effective on March&nbsp;31, 2003.
In accordance with AICPA Statement of Position&nbsp;90-7,
&#147;Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code,&#148; or SOP&nbsp;90-7, US&nbsp;Airways
Group adopted fresh-start reporting on March&nbsp;31, 2003.
References to predecessor company refer to
US&nbsp;Airways&nbsp;Group prior to March&nbsp;31, 2003.
References to successor company refer to
US&nbsp;Airways&nbsp;Group on and after March&nbsp;31, 2003,
after giving effect to the cancellation of the then-existing
common stock and the issuance of new securities in accordance
with the 2003 plan of reorganization and application of fresh
start reporting. As a result of the application of fresh-start
reporting, the successor company&#146;s financial statements are
not comparable with the predecessor company&#146;s financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with and as a part of its emergence from the prior
bankruptcy in 2003, US&nbsp;Airways Group undertook a thorough
review of its operations and significantly reduced its costs.
US&nbsp;Airways Group also reduced its mainline capacity,
realigned its network to maximize yield, initiated a business
plan to use more regional jets and procured financing for these
aircraft, and expanded its alliances with other carriers.
However, after emerging from the prior bankruptcy,
US&nbsp;Airways Group continued to incur substantial losses from
operations. The primary factors contributing to these losses
included the reduction in domestic industry unit revenue and
significant increases in fuel prices. The downward pressure on
domestic industry revenue is a result of the rapid growth of
low-fare, low-cost airlines, the increased transparency of fares
through Internet sources and other changes in fare structures
that have resulted in substantially lower fares for many business
</DIV>

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<DIV align="left" style="font-size: 10pt;">
and leisure travelers. The competitive environment continued to
intensify throughout 2004, particularly in key markets such as
Philadelphia, Washington,&nbsp;D.C., Boston and New York.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Throughout the spring and summer of 2004, US&nbsp;Airways Group
communicated with key stakeholders and the public its plan to
transform US&nbsp;Airways, Inc. into a fully competitive and
profitable airline. A key element of the transformation plan was
significant reductions in labor costs through changes to
US&nbsp;Airways&nbsp;Group&#146;s collective bargaining
agreements. US&nbsp;Airways Group aggressively sought the
necessary agreements to allow full implementation of the
transformation plan without the need for filing new
Chapter&nbsp;11 cases but was unable to do so in a timely
manner. As a result of the recurring losses, declining available
cash and risk of defaults or cross defaults under certain key
financing and operating agreements, it was necessary for the
debtors to file voluntary petitions for reorganization under
Chapter&nbsp;11 of the bankruptcy code on September&nbsp;12,
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At hearings held on September&nbsp;13, 2004, the bankruptcy
court granted US&nbsp;Airways&nbsp;Group&#146;s first day
motions for relief designed to stabilize its operations and
business relationships with customers, vendors, employees and
others and entered orders granting permission to the debtors to,
among other things:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    pay employee wages and continue certain benefits, such as
    medical and dental insurance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    honor prepetition obligations to customers and continue customer
    programs, including US&nbsp;Airways, Inc.&#146;s Dividend Miles
    program;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    pay for fuel under existing supply contracts, and honor existing
    fuel supply, distribution and storage agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    assume certain contracts related to interline agreements with
    other airlines;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    pay prepetition obligations to certain foreign vendors, foreign
    service providers and foreign governments;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    continue maintenance of existing bank accounts and existing cash
    management systems.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The bankruptcy court also approved the interim agreement reached
between US&nbsp;Airways Group, the ATSB and the lenders under
the $1&nbsp;billion loan, obtained upon emergence from the prior
bankruptcy and substantially guaranteed by the ATSB, to allow
US&nbsp;Airways Group continued use of the cash collateral
securing the loan. The agreement is discussed in more detail
below under &#147;Liquidity and Capital Resources.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since filing for bankruptcy on September&nbsp;12, 2004,
US&nbsp;Airways, Inc. has achieved cost-savings agreements with
all of its collective bargaining groups. Through a motion filed
under Section&nbsp;1113(e) of the bankruptcy code on
September&nbsp;24, 2004, US&nbsp;Airways, Inc. sought interim
relief from collective bargaining agreements with ALPA, the AFA,
the TWU, the CWA, and the IAM. On October&nbsp;15, 2004, the
bankruptcy court approved 21% reductions to base rates of pay
until February&nbsp;15, 2005 or until entry of an order
approving a new collective bargaining agreement or granting
final relief under Section&nbsp;1113(c) of the bankruptcy code.
The bankruptcy court also approved reductions to pension
contributions and certain work rule changes. The interim relief
order did not apply to TWU, whose members reached and ratified
collective bargaining agreements that were approved by the
bankruptcy court prior to the interim relief going into effect.
ALPA ratified its tentative agreement with US&nbsp;Airways, Inc.
in October 2004, and subsequent bankruptcy court approval
eliminated the need for interim relief as to pilots. Tentative
collective bargaining agreements with the CWA and AFA were
reached in December 2004 and were subsequently ratified and
approved by the bankruptcy court. On January&nbsp;6, 2005, the
bankruptcy court approved US&nbsp;Airways, Inc.&#146;s request
to reject all three IAM collective bargaining agreements and
approved the termination of US&nbsp;Airways, Inc.&#146;s three
defined benefit plans. The IAM subsequently ratified
US&nbsp;Airways, Inc.&#146;s cost-savings proposals on
January&nbsp;21, 2005. As part of these negotiations and
subsequent ratifications, the two remaining defined benefit
pension plans for collectively bargained groups were eliminated,
and some groups had their defined contribution pension plans
reduced. In addition, the bankruptcy court also approved a
settlement agreement between US&nbsp;Airways, Inc. and the
court-appointed Section&nbsp;1114 Committee, representing
retirees other than those represented by the IAM, for the
significant curtailment of postretirement medical benefits.
</DIV>

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On November&nbsp;12, 2004, US&nbsp;Airways, Inc. filed a motion
requesting a determination from the bankruptcy court that
US&nbsp;Airways, Inc. satisfied the financial requirements for a
distress termination of the AFA pension plan, the IAM pension
plan, and the Certain Employees pension plan under
section&nbsp;4041(c)(2)(B)(ii)(IV) of ERISA, and approval of
each plan&#146;s termination. These plans were projected to have
benefit obligations aggregating $2.7&nbsp;billion and plan
assets aggregating $1.7&nbsp;billion as of September&nbsp;30,
2004, the most recent valuation date. On January&nbsp;6, 2005,
the bankruptcy court entered an order (i)&nbsp;finding that the
financial requirements under section&nbsp;4041(c)(2)(B)(ii)(IV)
of ERISA for a distress termination of the plans had been met
and (ii)&nbsp;approving termination of the plans. The AFA
pension plan and the IAM pension plan were terminated effective
January&nbsp;10, 2005, by agreement between the PBGC and
US&nbsp;Airways, Inc. The Certain Employees pension plan was
terminated effective January&nbsp;17, 2005, by agreement between
the PBGC and US&nbsp;Airways, Inc. Effective February&nbsp;1,
2005, the PBGC was appointed trustee for each of the three plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the transformation plan and newly ratified
collective bargaining agreements, US&nbsp;Airways, Inc.
implemented voluntary furlough and termination programs across
several of its employee groups. In the first quarter of 2005,
US&nbsp;Airways Group recognized a $51&nbsp;million charge,
which is included in reorganization items in US&nbsp;Airways
Group&#146;s consolidated statement of operations, associated
with termination payments and health care benefits for
approximately 2,300 employees participating in these voluntary
programs. The majority of employees expected to participate in
voluntary terminations notified US&nbsp;Airways, Inc. by
March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the outsourcing of a portion of its aircraft
maintenance and certain fleet service operations, the closing of
its Pittsburgh reservation center, and the closing of certain
airport clubs and city ticket offices, US&nbsp;Airways, Inc.
involuntarily terminated or furloughed approximately 2,300
employees. In the first quarter of 2005, US&nbsp;Airways Group
recognized a $44&nbsp;million charge, which is included in
reorganization items in US&nbsp;Airways Group&#146;s
consolidated statement of operations, associated with
contractual severance payments and healthcare benefits for those
employees. Notification for the majority of planned involuntary
terminations was completed in the first quarter of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the cost savings achieved with labor groups,
US&nbsp;Airways, Inc. also implemented pay and benefit
reductions for its current management and other non-union
employees, including reductions to base pay, elimination of jobs
and modifications to vacation and sick time accruals.
US&nbsp;Airways, Inc. also reduced the amount it contributes to
its defined contribution pension plans on behalf of employees
and implemented modifications to its retiree health benefits.
The pay rate and defined contribution plan reductions went into
effect October&nbsp;11, 2004 and the reductions to retiree
medical benefits became effective March&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group has reached agreements with certain of its
lessors and lenders restructuring existing aircraft lease and
debt financings. On December&nbsp;17, 2004, the bankruptcy court
approved US&nbsp;Airways&nbsp;Group&#146;s agreements for the
continued use and operation of substantially all of its mainline
and Express fleet. US&nbsp;Airways Group reached a comprehensive
agreement with GE on aircraft leasing and financing and engine
services, which provided US&nbsp;Airways Group with short-term
liquidity, reduced debt, lower aircraft ownership costs,
enhanced engine maintenance services, and operating leases for
new regional jets. In June 2005, US&nbsp;Airways Group reached
an agreement with GE on the terms and conditions of an agreement
which amends and supplements certain provisions of the earlier
agreement and provides for additional agreements regarding rent
obligations under aircraft leases and the early redelivery of
certain aircraft. US&nbsp;Airways Group also reached agreements
with EMBRAER&nbsp;&#151; Empresa Brasileria de Aeronautica SA
and Bombardier, Inc. providing for continued use and operation
of its aircraft, short term liquidity and new financing for
regional jets, which were approved by the bankruptcy court in
January 2005. Each of these agreements are discussed in more
detail below in &#147;Liquidity and Capital Resources.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the merger, US&nbsp;Airways Group and America
West Holdings entered into a Memorandum of Understanding with
Airbus which includes, among other things, adjustments to the
delivery schedules for narrow-body and wide-body aircraft, a new
order for 20 A350 wide-body aircraft for which Airbus has agreed
to provide backstop financing for a substantial number of
aircraft, substantial elimination of cancellation penalties on
US&nbsp;Airways Group&#146;s existing order for ten A330-200
aircraft provided that New US&nbsp;Airways Group has met certain
predelivery payment obligations under the A350 order. Up to
</DIV>

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<DIV align="left" style="font-size: 10pt;">
$175&nbsp;million of the term loan may be drawn down on
US&nbsp;Airways Group&#146;s emergence from bankruptcy, with the
remainder expected to be drawn down by June&nbsp;30, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The debtors have notified all known potential creditors of the
Chapter&nbsp;11 filing for the purposes of identifying and
quantifying all prepetition claims. The Chapter&nbsp;11 filing
triggered defaults on substantially all debt and lease
obligations. Subject to certain exceptions under the bankruptcy
code, the Chapter&nbsp;11 filing automatically stayed the
continuation of any judicial or administrative proceedings or
other actions against the debtors or their property to recover
on, collect or secure a claim arising prior to
September&nbsp;12, 2004. The deadline for filing proofs of claim
with the bankruptcy court was February&nbsp;3, 2005, with a
limited exception for governmental entities, which had until
March&nbsp;11, 2005. The debtors&#146; claims agent received
approximately 4,800 timely-filed proofs of claims as of
February&nbsp;3, 2005 totaling approximately $26.0&nbsp;billion
in the aggregate, and approximately 350 proofs of claims
timely-filed by governmental entities totaling approximately
$13.4&nbsp;billion in the aggregate. As is typical in
reorganization cases, differences between amounts scheduled by
the debtors and claims by creditors are being investigated and
resolved in connection with the claims resolution process. The
aggregate amount of claims filed with the bankruptcy court far
exceeds the debtors&#146; estimate of their liability. The
debtors believe that many of these claims are duplicative,
including those filed alleging joint and several liability
against each of the debtors, based upon contingencies that have
not occurred, or otherwise are overstated, and are therefore
invalid. In light of the number of creditors of the debtors, the
claims resolution process may take considerable time to
complete. Accordingly, the ultimate number and amount of allowed
claims is not presently known.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the debtors to exit Chapter&nbsp;11 successfully, the
bankruptcy court must issue an order confirming a plan of
reorganization. US&nbsp;Airways, Inc. filed a Chapter&nbsp;11
plan of reorganization for each of the affiliated debtors on
[date], 2005, and as a result of this filing, no other person or
party may file a different plan of reorganization prior to
October&nbsp;31, 2005. This deadline could potentially be
extended. The plan of reorganization would, among other things,
establish a framework for the treatment of prepetition
obligations, contemplate the completion of the merger, set forth
a revised capital structure and establish the corporate
governance for US&nbsp;Airways Group following the merger and
subsequent to emergence from bankruptcy. US&nbsp;Airways Group
is currently working towards emerging from Chapter&nbsp;11 no
later than October&nbsp;31, 2005, but that timing is dependent
upon, among other things, the timely confirmation of a plan of
reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;13, 2004, US&nbsp;Airways Group received
written notice from the Nasdaq Stock Market that its
Class&nbsp;A common stock would be delisted in accordance with
Marketplace Rules&nbsp;4300 and 4450(f), effective with the
opening of business on September&nbsp;22, 2004. Nasdaq indicated
in its letter that the delisting determination followed its
review of US&nbsp;Airways Group&#146;s press release announcing
that US&nbsp;Airways&nbsp;Group had filed for bankruptcy
protection. As a result of this notification, a fifth character
&#147;Q&#148; was added to the trading symbol, changing it from
&#147;UAIR&#148; to &#147;UAIRQ&#148; at the opening of business
on September&nbsp;15, 2004. Shares of the Class&nbsp;A common
stock are currently trading on the Nasdaq over-the-counter
market under the symbol as changed above. The plan of
reorganization contemplates that the existing
US&nbsp;Airways&nbsp;Group common stock will be cancelled and
that new common stock will be issued in connection with the
merger.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Prior Bankruptcy Information</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed above, US&nbsp;Airways Group emerged from the prior
bankruptcy under the 2003 plan of reorganization. The 2003 plan
of reorganization constituted a separate plan of reorganization
for each of US&nbsp;Airways Group and its domestic subsidiaries,
which we sometimes refer to as the filing entities. In
accordance with the bankruptcy code, the 2003 plan of
reorganization divided claims against, and interests in, each of
the filing entities into classes according to their relative
seniority and other criteria and provided the same treatment for
each claim or interest of a particular class unless the holder
of a particular claim or interest agreed to a less favorable
treatment of its claim or interest. Among other things, the 2003
plan of reorganization generally provided for full payment of
all allowed administrative and priority claims, and the
distribution of shares, or warrants to purchase shares, of new
equity in the reorganized US&nbsp;Airways Group, Inc. to the
ATSB, RSA, US&nbsp;Airways Group&#146;s management and labor
unions, General Electric Capital Corporation and Bank of
America, N.A., as well as to certain unsecured creditors of the
filing entities, including the PBGC, in satisfaction of their
allowed claims. Persons holding equity in US&nbsp;Airways Group
</DIV>

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<DIV align="left" style="font-size: 10pt;">
prior to March&nbsp;31, 2003 were not entitled to any
distribution under the 2003 plan of reorganization and their
shares of common stock were cancelled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;31, 2003, RSA invested $240&nbsp;million in cash
in the reorganized US&nbsp;Airways&nbsp;Group pursuant to an
investment agreement, in exchange for approximately 36.2%, on a
fully diluted basis, of the equity in the reorganized
US&nbsp;Airways&nbsp;Group. As of March&nbsp;31, 2003, in
connection with its investment, RSA was granted a voting
interest of approximately 71.6% in the reorganized
US&nbsp;Airways&nbsp;Group and became entitled to designate and
vote to elect eight of 15&nbsp;directors to
US&nbsp;Airways&nbsp;Group&#146;s board of directors. See
notes&nbsp;10 and 12(a) in the notes to
US&nbsp;Airways&nbsp;Group&#146;s consolidated financial
statements for a summary of the equity structure following the
prior bankruptcy and related party transactions with RSA.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Results of Operations</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed above, US&nbsp;Airways&nbsp;Group emerged from the
prior bankruptcy and adopted fresh-start reporting on
March&nbsp;31, 2003. As a result of the application of
fresh-start reporting, the successor company&#146;s financial
statements are not comparable with the predecessor
company&#146;s financial statements. However, for purposes of
discussion of the results of operations, 2004 has been compared
to the full year 2003 and full year 2003 has been compared to
2002, as included, in part, in US&nbsp;Airways&nbsp;Group&#146;s
consolidated statements of operations, which are included in
this prospectus and in &#147;Selected Operating and Financial
Statistics&#148; below. Except where noted, operating statistics
referred to below are for scheduled service only.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Three Months Ended March&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Compared with the</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Three Months Ended March&nbsp;31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating Revenues</I>&nbsp;&#151; <I>Passenger
transportation </I>revenues decreased $66&nbsp;million, or 4.4%.
This was due to a 12.7% decrease in yield, which reduced revenue
by $211&nbsp;million, partially offset by a 9.6% increase in
revenue passenger miles, or RPMs, which increased revenue by
$145&nbsp;million. <I>Cargo and freight </I>revenue decreased
$13&nbsp;million, or 38.2%, due to the temporary suspension of
mail delivery and lower volume of transatlantic freight during
the first quarter of 2005. <I>Other </I>operating revenues
increased 3.9% primarily due to revenue generated through
airline partner travel after US&nbsp;Airways&nbsp;Group joined
the Star Alliance in May 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating Expenses</I>&nbsp;&#151; Operating expenses
decreased $15&nbsp;million, or 0.8%, on a capacity increase of
5.1%, as measured by available seat miles, or ASMs. <I>Personnel
costs </I>decreased 25.6% primarily due to lower wage and
benefits rates as a result of the implementation of the
cost-savings agreements achieved with each of the collective
bargaining groups, including the termination of US&nbsp;Airways,
Inc.&#146;s defined benefit plans and the curtailment of
postretirement benefits, as well as lower headcount as compared
to the period in 2004. These reductions were partially offset by
increases to the workers compensation and pilots&#146; long-term
disability liabilities. <I>Aviation fuel </I>increased 57.9% due
primarily to a 48.1% increase in average fuel prices and a small
increase in consumption. <I>US&nbsp;Airways Express capacity
purchases </I>increased 7.4% due to higher fuel prices that are
paid by US&nbsp;Airways, Inc. on capacity purchases, partially
offset by a decrease in purchased ASMs. <I>Aircraft rent
</I>increased 5.5% due to new aircraft leases for regional jets
delivered throughout 2004 and the first quarter of 2005.
<I>Selling expenses </I>decreased 1.0% due to decreases in
commissions and computer reservation fees offset by increases in
advertising expense. <I>Depreciation and amortization
</I>increased slightly due to depreciation associated with new
regional jets offset by reduced amortization associated with
capitalized software costs. <I>Other </I>operating expenses
increased $2&nbsp;million, or less than 1%, due to increases in
expenses associated with the redemption of Dividend Miles on
partner airlines and passenger compensation expense partially
offset by decreases in expense related to outside services,
ordinary course legal fees and general insurance expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other Income (Expense)</I>&nbsp;&#151; Other Income
(Expense), net increased by $47&nbsp;million. See note&nbsp;1 to
US&nbsp;Airways&nbsp;Group&#146;s condensed consolidated
financial statements for additional information on the
components of <I>Reorganization items, net. Interest income
</I>was flat due to higher average interest rates, offset by the
classification of $2&nbsp;million of interest income as a
reorganization item. <I>Interest expense, net </I>increased
</DIV>

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<DIV align="left" style="font-size: 10pt;">
34.5% as a result of interest associated with new regional jets
and increased interest expense on the ATSB loan, including
penalty interest incurred as a result of the current
Chapter&nbsp;11 proceedings. <I>Other, net </I>for the three
months ended March&nbsp;31, 2005 decreased as compared to the
same period in 2004 as a result of mark-to-market adjustments on
certain stock options held by US&nbsp;Airways&nbsp;Group.
<I>Other, net </I>for the three month period ended
March&nbsp;31, 2004 included a credit of $13&nbsp;million
related to a business interruption insurance recovery.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Provision for Income Taxes</I>&nbsp;&#151;
US&nbsp;Airways&nbsp;Group recorded no income tax provision for
the first quarter of 2005 or 2004 and continues to record a full
valuation allowance against its net deferred tax asset.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Selected Operating and Financial Statistics (1)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenue passenger miles (millions):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,079</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,119</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Available seat miles (millions):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,769</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,988</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total available seat miles (millions):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,771</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,990</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger load factor&nbsp;(2):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Yield&nbsp;(3):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.10</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.01</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline&nbsp;(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.74</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.27</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger revenue per available seat mile&nbsp;(5):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.32</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.24</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline&nbsp;(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.59</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.32</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenue passengers (thousands):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,851</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline revenue per available seat mile&nbsp;(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.91</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.62</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline cost per available seat mile (Mainline CASM)&nbsp;(7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.89</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.68</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline average stage length (miles)*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>773</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline cost of aviation fuel per gallon&nbsp;(8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.994</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline cost of aviation fuel per gallon (excluding fuel taxes)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.938</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline gallons of aviation fuel consumed (millions)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>216</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline number of aircraft in operating fleet at period-end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>283</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline full-time equivalent employees at period end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,854</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;*&nbsp;&nbsp;</TD>
    <TD align="left">
    Scheduled service only (excludes charter service).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Operating statistics include free frequent travelers and the
    related miles flown. System statistics encompass all wholly
    owned airline subsidiaries of US&nbsp;Airways Group, including
    US&nbsp;Airways, Inc., Allegheny Airlines (through June 2004),
    Piedmont Airlines and PSA Airlines as well as operating and
    financial results from capacity purchase agreements with Mesa
    Airlines, Chautauqua Airlines and Trans States Airlines. For
    purposes of mainline statistical calculations and to provide
    better comparability between periods, mainline statistics
    exclude revenue and expenses associated with US&nbsp;Airways,
    Inc. capacity purchase arrangements with certain affiliated
    airlines and US&nbsp;Airways, Inc.&#146;s regional jet division,
    MidAtlantic Airways.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Percentage of aircraft seating capacity that is actually
    utilized (RPMs/ ASMs).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Passenger transportation revenue divided by RPMs.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">133

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Mainline passenger revenue excludes US&nbsp;Airways Express and
    MidAtlantic Airways passenger revenue of $314&nbsp;million and
    $303&nbsp;million for the three months ended March&nbsp;31, 2005
    and 2004, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Passenger transportation revenue divided by ASMs (a measure of
    unit revenue).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Mainline operating revenues divided by ASMs (a measure of unit
    revenue). Mainline operating revenues exclude US&nbsp;Airways
    Express and MidAtlantic Airways operating revenues of
    $315&nbsp;million and $304&nbsp;million for the three months
    ended March&nbsp;31, 2005 and 2004, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Mainline operating expenses divided by mainline ASMs (a measure
    of unit cost). Mainline operating expenses exclude
    US&nbsp;Airways, Inc. capacity purchases of $327&nbsp;million
    and $313&nbsp;million for the three months ended March&nbsp;31,
    2005 and 2004, respectively, and MidAtlantic Airways operating
    expenses of $41&nbsp;million for the three months ended
    March&nbsp;31, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    Includes fuel taxes and transportation charges and excludes
    service fees.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">134

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2004 Compared With 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating Revenues</I>&nbsp;&#151; Operating revenues
increased $271&nbsp;million, or 4.0%. <I>Passenger
transportation </I>revenues increased $212&nbsp;million or 3.5%.
RPMs were up 8.7%, which increased revenues by
$536&nbsp;million, partially offset by a 4.9% decrease in yield,
which decreased revenues by $324&nbsp;million. Passenger
transportation revenues were negatively impacted by the
debtors&#146; bankruptcy proceedings. Passenger transportation
revenue in 2003 included a favorable $34&nbsp;million adjustment
to the traffic balances payable account for unused and now
expired tickets. <I>Cargo and freight </I>revenue was flat.
<I>Other </I>operating revenue increased as a result of
increased third party fuel sales due to higher fuel prices and
revenue associated with certain marketing arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating Expenses</I>&nbsp;&#151; Operating expenses
increased by $398&nbsp;million, or 5.6%. Operating expenses
excluding <I>Government compensation </I>and <I>Special items
</I>increased 3.0% on a capacity increase, as measured by ASMs,
of 5.8%. Personnel costs decreased 8.4% due to lower employee
pension, medical and dental, and postretirement medical benefit
expense, an $89&nbsp;million decrease in stock-based
compensation expense related to the issuance of US&nbsp;Airways
Group Class&nbsp;A common stock to employees covered by
collective bargaining agreements following emergence from the
prior bankruptcy in 2003, reduced headcount in 2004 and lower
wage rates in the fourth quarter of 2004 as the result of
interim or permanent relief from labor contracts. These
decreases were partially offset by an increase in expense
associated with long-term disability. <I>Aviation fuel
</I>increased 32.4% primarily due to higher average fuel prices
and, to a lesser extent, schedule-driven increases in
consumption. <I>US&nbsp;Airways Express capacity purchases
</I>increased 24.2% reflecting an increase in purchased ASMs
from third-party regional jet operators and other airline
subsidiaries of Group. <I>Aircraft rent </I>increased 4.2% as a
result of new leases due to the conversion of mortgaged aircraft
to leased aircraft and the addition of new regional jet leases.
<I>Other rent and landing fees </I>decreased slightly as a
result of decreases in landing fees partially offsetting
increased airport rental expenses. <I>Selling expenses
</I>decreased 3.2% due to a decrease in commissions partially
offset by increases to advertising expense and sales volume
driven increases in credit card fees. <I>Depreciation and
amortization </I>increased 2.5% due to depreciation associated
with new regional jets and the write-off of certain ground
equipment and an indefinite lived foreign slot, partially offset
by lower book values on the existing fleet as a result of
fresh-start reporting effective March&nbsp;31, 2003 and by
reduced amortization associated with capitalized software.
<I>Other </I>operating expenses increased 4.6% due to increases
in the cost associated with the redemption of Dividend Miles for
travel on partner airlines and future travel on US&nbsp;Airways,
Inc. as well as increases to costs associated with passenger and
baggage screening and navigation fees, partially offset by
decreases in insurance expenses and schedule-related expenses
including passenger food expenses. 2003 included
$28&nbsp;million in reductions to an accrual upon the resolution
of previously outstanding contingencies. Refer to
&#147;Description of Unusual Items&#148; below for information
on <I>Special items and Government compensation.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other Income (Expense)</I>&nbsp;&#151; Other Income
(Expense), net decreased $2&nbsp;billion primarily as a result
of the reorganization items directly associated with the
emergence from the prior bankruptcy. See &#147;Description of
Unusual Items&#148; below for additional information on the
components of <I>Reorganization items, net </I>in 2004 and 2003.
<I>Interest income </I>decreased as the result of the
reclassification of interest income on cash, cash equivalents
and short term investments to <I>Reorganization items, net
</I>subsequent to the Chapter&nbsp;11 filing on
September&nbsp;12, 2004. Interest expense was flat as a result
of the conversion of mortgaged aircraft to leased aircraft and
the abandonment of certain aircraft, offset by interest related
to the ATSB loan and penalty interest incurred as a result of
the current Chapter&nbsp;11 proceedings. <I>Other, net
</I>income in 2004 includes $13&nbsp;million related to a
business interruption insurance recovery and a $2&nbsp;million
gain on the sale of four aircraft, while the 2003 results
reflect a $30&nbsp;million gain recognized in connection with
US&nbsp;Airways Group&#146;s sale of its investment in Hotwire,
Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Provision (Credit) for Income Taxes</I>&nbsp;&#151;
US&nbsp;Airways Group recorded an income tax benefit of
$10&nbsp;million for the year ended December&nbsp;31, 2004, as
compared to $11&nbsp;million of income tax expense in 2003. The
benefit recognized in 2004 related to revisions to prior
estimates upon completion of US&nbsp;Airways Group&#146;s
consolidated 2003 tax return. US&nbsp;Airways Group continues to
record a full valuation allowance against its net deferred tax
assets due to the uncertainty regarding their ultimate
realization.
</DIV>

<P align="center" style="font-size: 10pt;">135

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selected Operating and Financial Statistics</I>&nbsp;&#151;
System capacity, as measured by ASMs, increased 5.8% and
passenger volume, as measured by RPMs, increased 8.7% in 2004.
These increases resulted in a 73.5% system passenger load
factor, representing a 2.0&nbsp;percentage point increase over
2003. However, system yield declined by 4.9% reflecting the
continued downward pressure on fares. Weather conditions related
primarily to hurricanes adversely impacted US&nbsp;Airways
Group&#146;s operating and financial performance in 2004 and
2003. US&nbsp;Airways, Inc.&#146;s full-time equivalent
employees at December&nbsp;31, 2004 declined 8.1% reflecting the
headcount reduction measures put in place in connection with
US&nbsp;Airways Group&#146;s transformation plan.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2003 Compared With 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating Revenues</I>&nbsp;&#151; Operating revenues
decreased $131&nbsp;million, or 1.9%. <I>Passenger
transportation </I>revenue decreased $149&nbsp;million or 2.4%.
RPMs declined 4.4%, which decreased revenues by
$277&nbsp;million, partially offset by a 2.1% improvement in
yield, which increased revenues by $127&nbsp;million. Passenger
transportation revenue for 2003 included a favorable
$34&nbsp;million adjustment to the traffic balances payable
account for unused and now expired tickets. <I>Other
</I>operating revenue increased 4.9% due to increased third
party fuel sales and mileage credit sales partially offset by
lower ticket change and cancellation fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating Expenses</I>&nbsp;&#151; Operating expenses
declined by $1.20&nbsp;billion, or 14.4%. Operating expenses
excluding <I>Government compensation </I>and <I>Special items
</I>were lower by 8.7% on a capacity decrease, as measured by
ASMs, of 6.9%. <I>Personnel costs </I>decreased 18.2% due to
lower headcount levels, wage rates and employee pension and
benefit expenses partially offset by $125&nbsp;million of
stock-based compensation expenses resulting from the issuance of
Class&nbsp;A common stock to employees covered by collective
bargaining agreements following emergence from the prior
bankruptcy. <I>Aviation fuel </I>increased 6.1% due to higher
average fuel prices partially offset by schedule-driven
decreases in consumption. <I>US&nbsp;Airways Express capacity
purchases </I>increased 33.8% reflecting a 32% increase in
purchased ASMs from third-party regional jet operators.
<I>Aircraft rent </I>decreased 17.9% due to favorably
restructured leases and lease rejections made in connection with
the prior bankruptcy, which was partially offset by new leases
as a result of the conversion of mortgaged aircraft to leased
aircraft. <I>Other rent and landing fees </I>were flat as a
result of schedule-driven decreases in landing fees offsetting
increased airport rental expenses associated with the new
terminal in Philadelphia. <I>Selling expenses </I>decreased 7.9%
due to sales volume driven decreases in credit card fees and
sales- and rate-driven decreases in computer reservation system
fees. Travel agent commission rates decreased due to the
elimination of the base domestic commissions in March 2002 and
increases in internet bookings which are less costly to
US&nbsp;Airways Group. <I>Depreciation and amortization
</I>decreased 21.7% due to fewer owned aircraft in the operating
fleet and lower book values on the existing fleet as a result of
fresh-start reporting. <I>Other </I>operating expenses decreased
8.4% due to decreases in insurance expenses and schedule-related
expenses including passenger food expenses and crew travel
expenses and a $17&nbsp;million and $12&nbsp;million reduction
to an accrual upon the resolution of previously outstanding
contingencies partially offset by increases in expenses
associated with third-party fuel sales. Refer to
&#147;Description of Unusual Items&#148; below for information
on <I>Special items and Government compensation.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other Income (Expense)</I>&nbsp;&#151; Other Income
(Expense), net increased $2.3&nbsp;billion from an expense of
$598&nbsp;million in 2002 to income of $1.7&nbsp;billion in
2003. <I>Interest income </I>decreased due to lower return rates
partially offset by higher average investment balances.
<I>Interest expense </I>decreased as a result of the conversion
of mortgaged aircraft to leased aircraft and the abandonment of
certain aircraft partially offset by interest related to the
ATSB loan. <I>Other, net </I>income increased as a result of a
$30&nbsp;million gain recognized in connection with
US&nbsp;Airways Group&#146;s sale of its investment in Hotwire,
Inc. and mark-to-market adjustments on certain stock options
held by US&nbsp;Airways Group. Refer to &#147;Description of
Unusual Items&#148; below for information on <I>Reorganization
items, net.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Provision (Credit) for Income Taxes</I>&nbsp;&#151;
US&nbsp;Airways Group&#146;s federal and state income tax
expense was $11&nbsp;million in 2003 representing an effective
tax rate of 0.7%. This differed from statutory rates primarily
due to utilization of net operating loss carryforwards. During
2001, US&nbsp;Airways Group recognized a valuation allowance
against its net deferred tax asset. US&nbsp;Airways Group
continues to record a full valuation allowance against its net
deferred tax assets due to the uncertainty regarding their
ultimate realization. As a result of the
</DIV>

<P align="center" style="font-size: 10pt;">136

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
March 2002 enactment of the Job Creation and Worker Assistance
Act of 2002, also referred to as the Job Act, US&nbsp;Airways
Group recognized an income tax credit equal to US&nbsp;Airways
Group&#146;s carryback potential. The Job Act provides, among
other things, an extension of the net operating loss carryback
period to five years from two years for net operating losses
arising from tax years that end in 2001 or 2002 and the
elimination of the 90% limitation for alternative minimum tax
purposes on those loss carrybacks. The tax credit recorded in
2002 includes $74&nbsp;million related to 2001 losses realizable
due to the enactment of the Job Act and recorded in the period
of enactment. US&nbsp;Airways&nbsp;Group continued to record a
valuation allowance against its net deferred tax asset which
resulted in a 2002 effective tax rate of 13%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cumulative Effect of Accounting Change</I>&nbsp;&#151;
Effective January&nbsp;1, 2002, PSA Airlines, a wholly owned
subsidiary of US&nbsp;Airways&nbsp;Group, changed its method of
accounting for engine maintenance from accruing on the basis of
hours flown to expensing as incurred. In connection with the
change, PSA Airlines recognized a $17&nbsp;million credit
representing the cumulative effect of the accounting change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selected Operating and Financial Statistics</I>&nbsp;&#151;
System capacity, as measured by ASMs, decreased 6.9% and
passenger volume, as measured by RPMs, decreased 4.4% in 2003.
These decreases resulted in a 71.5% system passenger load
factor, representing a 1.9&nbsp;percentage point increase over
2002. System yield improved 2.1% reflecting a modest improvement
in economic conditions. Both RPMs and ASMs were significantly
affected by the schedule reductions initiated following the
prior bankruptcy filing. In addition, hurricanes Isabel, Fabian
and Henri adversely impacted US&nbsp;Airways&nbsp;Group&#146;s
operating and financial performance in 2003. US&nbsp;Airways,
Inc. full-time equivalent employees at December&nbsp;31, 2003
declined 12.4% reflecting the headcount reduction measures put
in place in connection with US&nbsp;Airways&nbsp;Group&#146;s
2002 restructuring.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Description of Unusual Items</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Special Items</I>&nbsp;&#151; Special items included within
operating expenses on US&nbsp;Airways&nbsp;Group&#146;s
consolidated statements of operations include the following
components (dollars in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft order cancellation penalty</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft impairments and related charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>392</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(b)</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension and postretirement benefit curtailments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(90</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(c)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employee severance including benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(d)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)&nbsp;(d)</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD align="left" valign="bottom" nowrap>&nbsp;(e)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>320</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    During the quarter ended June&nbsp;30, 2003,
    US&nbsp;Airways&nbsp;Group recorded a $35&nbsp;million charge in
    connection with its intention not to take delivery of certain
    aircraft scheduled for future delivery.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    During the fourth quarter of 2002, US&nbsp;Airways, Inc.
    conducted an impairment analysis in accordance with
    SFAS&nbsp;No.&nbsp;144, &#147;Accounting for the Impairment or
    Disposal of Long-Lived Assets,&#148; on its B737-300, B737-400,
    B757-200 and B767-200 aircraft fleets as a result of changes to
    the aircraft&#146;s recoverability periods (the planned
    conversion of owned aircraft to leased aircraft) as well as
    indications of possible material changes to the market values of
    these aircraft. The analysis revealed that estimated
    undiscounted future cash flows generated by these aircraft were
    less than their carrying values for four B737-300s, 15
    B737-400s, 21 B757-200s and three B767-200s. In accordance with
    SFAS&nbsp;144, the carrying values were reduced to fair market
    value. This analysis resulted in a pretax charge of
    $392&nbsp;million. Management estimated fair market value using
    third-party appraisals and recent leasing transactions.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    During the fourth quarter of 2002, US&nbsp;Airways, Inc.
    recorded a curtailment credit of $120&nbsp;million related to
    certain postretirement benefit plans and a $30&nbsp;million
    curtailment charge related to certain defined benefit pension
    plans.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    In September 2001, US&nbsp;Airways, Inc. announced that in
    connection with its reduced flight schedule it would terminate
    or furlough approximately 11,000 employees across all employee
    groups. Approximately 10,200 of the affected employees were
    terminated or furloughed on or prior to January&nbsp;1, 2002.
    Substantially all the remaining affected employees were
    terminated or furloughed by May 2002. US&nbsp;Airways,
    Inc.&#146;s headcount reduction was largely accomplished through
    involuntary terminations/furloughs. In connection with this
    headcount reduction, US&nbsp;Airways, Inc. offered a voluntary
    leave program to certain employee groups. Voluntary leave
    program participants generally received extended benefits, such
    as medical, dental and life insurance benefits, but</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">137

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    did not receive any furlough pay benefit. In accordance with
    Emerging Issues Task Force Issue No.&nbsp;94-3, US&nbsp;Airways,
    Inc. recorded a pretax charge of $75&nbsp;million representing
    the involuntary severance pay and the benefits for affected
    employees during the third quarter of 2001. In the fourth
    quarter of 2001, US&nbsp;Airways, Inc. recognized a
    $10&nbsp;million charge representing the estimated costs of
    extended benefits for those employees who elected to take
    voluntary leave and a $2&nbsp;million reduction in accruals
    related to the involuntary severance as a result of employees
    electing to accept voluntary furlough. During the quarters ended
    June&nbsp;30, 2003 and 2002, US&nbsp;Airways Group recognized
    $1&nbsp;million and $3&nbsp;million, respectively, in reductions
    to severance pay and benefit accruals related to the involuntary
    termination or furlough of certain employees.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    During the fourth quarter of 2002, US&nbsp;Airways, Inc.
    recognized an impairment charge of $21&nbsp;million related to
    capitalized gates at certain airports in accordance with
    SFAS&nbsp;No.&nbsp;142, &#147;Goodwill and Other Intangible
    Assets.&#148; The carrying values of the affected gates were
    reduced to fair value based on a third party appraisal.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<I>Reorganization Items, Net</I>&nbsp;&#151; Reorganization
items, net represent amounts incurred as a direct result of
US&nbsp;Airways Group&#146;s Chapter&nbsp;11 filings and are
presented separately in US&nbsp;Airways Group&#146;s
consolidated statements of operations. These items consist of
the following (dollars in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discharge of liabilities (a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructured aircraft financings (b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Termination of pension plans (c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income on accumulated cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Damage and deficiency claims (d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,167</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revaluation of assets and liabilities (a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,107</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Professional fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft order cancellation penalties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on aircraft abandonment (e)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(68</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Severance including benefits (f)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of ESOP deferred compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(43</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(294</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects the discharge or reclassification of liabilities
    subject to compromise in the prior bankruptcy. Most of these
    obligations were only entitled to receive such distributions of
    cash and common stock as provided under the 2003 plan of
    reorganization. A portion of the liabilities subject to
    compromise in the prior bankruptcy were restructured and
    continued, as restructured, to be liabilities of
    US&nbsp;Airways&nbsp;Group.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    As of March&nbsp;31, 2003, US&nbsp;Airways Group restructured
    aircraft debt and lease agreements related to 200 aircraft in
    connection with the prior bankruptcy, including the conversion
    of 52 mortgages to operating leases. The restructured terms
    generally provide for shorter lease periods and lower lease
    rates.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Effective March&nbsp;31, 2003, US&nbsp;Airways, Inc. terminated
    its qualified and nonqualified pilot defined benefit pension
    plans. The PBGC was appointed trustee of the qualified plan
    effective with the termination. US&nbsp;Airways Group recognized
    a gain in connection with the termination which is partially
    offset by the PBGC claim.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    Damage and deficiency claims largely arose as a result of
    US&nbsp;Airways Group electing to either restructure, abandon or
    reject aircraft debt and leases during the bankruptcy
    proceedings.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    Includes aircraft (seven A319s for 2003 and 34 F-100s, two
    B757-200s and one B737-400 for 2002) that were legally abandoned
    as part of the prior bankruptcy. Related aircraft liabilities
    were adjusted for each aircraft&#146;s expected allowed
    collateral value.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (f)</TD>
    <TD></TD>
    <TD valign="top">
    As a result of schedule reductions made in connection with the
    prior bankruptcy, US&nbsp;Airways, Inc. terminated or furloughed
    approximately 6,600 employees across all employee groups.
    Substantially all affected employees were terminated or
    furloughed prior to March&nbsp;31, 2003. US&nbsp;Airways,
    Inc.&#146;s headcount reduction was largely accomplished through
    involuntary terminations/furloughs. In connection with this
    headcount reduction, US&nbsp;Airways, Inc. offered a voluntary
    leave program to certain employee groups. Voluntary leave
    program participants generally received extended benefits, such
    as medical, dental and life insurance benefits, but did not
    receive any furlough pay benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<I>Government Compensation</I>&nbsp;&#151; In April 2003,
President George W. Bush signed into law the Emergency Wartime
Supplemental Appropriations Act, which included
$2.4&nbsp;billion for reimbursement to the airlines for certain
aviation-related security expenses. Certain airlines that
received the aviation-related assistance were
</DIV>

<P align="center" style="font-size: 10pt;">138

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
required to agree to limit the total cash compensation for
specified executive officers during the 12-month period
beginning April&nbsp;1, 2003 to an amount equal to the annual
salary paid to that officer during the air carrier&#146;s fiscal
year 2002. Any violation of this agreement would require the
carrier to repay to the government the amount reimbursed for
airline security fees. US&nbsp;Airways Group complied with this
limitation on executive compensation. US&nbsp;Airways
Group&#146;s security fee reimbursement was $214&nbsp;million,
net of amounts due to certain affiliates, and was recorded as a
reduction to operating expenses during the second quarter of
2003. In September 2003, US&nbsp;Airways Group received
approximately $6&nbsp;million of compensation associated with
flight deck door expenditures which was recorded as an offset to
capital costs.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Selected Operating and Financial Statistics&nbsp;(1)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenue passengers miles (millions)*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,374</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,038</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Available seat miles (millions):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,329</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger load factor&nbsp;(2):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Yield&nbsp;(3):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.07</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.79</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.48</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline&nbsp;(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.43</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.05</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.05</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger revenue per available seat mile (5):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.34</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.57</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.08</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline&nbsp;(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.33</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.56</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.27</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenue passengers (thousands):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,389</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,155</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline revenue per available seat mile&nbsp;(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.69</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.75</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.38</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline cost per available seat mile (Mainline CASM)&nbsp;(7)(8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.34</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.36</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.67</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline average stage length (miles)*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>685</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline cost of aviation fuel per gallon&nbsp;(9)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112.08</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88.29</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74.36</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline cost of aviation fuel per gallon (excluding fuel taxes)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106.35</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83.02</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68.90</TD>
    <TD align="left" valign="bottom" nowrap>&#162;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline gallons of aviation fuel consumed (millions)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>972</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline number of aircraft in operating fleet at period-end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>280</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline full-time equivalent employees at period end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,585</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;*&nbsp;&nbsp;</TD>
    <TD align="left">
    Denotes scheduled service only (excludes charter service).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Operating statistics include free frequent flyer travelers and
    the related miles they flew. System statistics encompass all
    wholly owned airline subsidiaries of US&nbsp;Airways&nbsp;Group,
    including US&nbsp;Airways, Inc., Allegheny Airlines (through
    June 2004), Piedmont Airlines, PSA Airlines, as well as
    operating and financial results from capacity purchase
    agreements with Mesa Airlines, Chautauqua Airlines, Trans States
    Airlines and Midway Airlines (through October 2003). Where
    noted, revenues and expenses associated with US&nbsp;Airways,
    Inc.&#146;s capacity purchase arrangements with certain
    affiliated airlines and US&nbsp;Airways, Inc.&#146;s regional
    jet division, MidAtlantic Airways, have been excluded from
    US&nbsp;Airways, Inc.&#146;s financial results for purposes of
    mainline financial statistical calculation and to provide better
    comparability between periods (see details below).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Percentage of aircraft seating capacity that is actually
    utilized (RPMs/ ASMs).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Passenger transportation revenue divided by RPMs.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Mainline passenger revenue excludes US&nbsp;Airways Express and
    MidAtlantic Airways passenger revenue of $1,379&nbsp;million,
    $1,208&nbsp;million, and $1,058&nbsp;million for the years ended
    December&nbsp;31, 2004, 2003 and 2002, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Passenger transportation revenue divided by ASMs (a measure of
    unit revenue).</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">139

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<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Mainline operating revenues divided by ASMs (a measure of unit
    revenue). Mainline operating revenues exclude US&nbsp;Airways
    Express and MidAtlantic Airways operating revenues of
    $1,385&nbsp;million, $1,214&nbsp;million and $1,063&nbsp;million
    for the years ended December&nbsp;31, 2004, 2003 and 2002,
    respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Total Operating Expenses divided by ASMs (a measure of unit
    cost).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    Mainline operating expenses exclude US&nbsp;Airways, Inc.
    capacity purchases of $1,304&nbsp;million, $1,145&nbsp;million,
    and $1,094&nbsp;million for the years ended December&nbsp;31,
    2004, 2003 and 2002, respectively, and MidAtlantic Airways
    operating expenses of $79&nbsp;million for the year ended
    December&nbsp;31, 2004. Operating expenses for each period
    include unusual items as follows:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="4%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    For the year ended December&nbsp;31, 2003, operating expenses
    include an aircraft order penalty of $35&nbsp;million
    (0.07&#162;) and government compensation of $212&nbsp;million
    (0.41&#162;).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    For the year ended December&nbsp;31, 2002, operating expenses
    include aircraft impairment and related charges of
    $392&nbsp;million (0.70&#162;), a benefit on the pension and
    postretirement curtailment of $90&nbsp;million (0.16&#162;), an
    impairment charge related to capitalized gates at certain
    airports of $21&nbsp;million (0.04&#162;) and a reduction to the
    involuntary severance accrual of $3&nbsp;million (0.01&#162;).</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    Includes fuel taxes and transportation charges and excludes
    service fees.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Liquidity and Capital Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, US&nbsp;Airways Group&#146;s cash and
cash equivalents totaled $513&nbsp;million compared to
$738&nbsp;million as of December&nbsp;31, 2004. The decline in
cash during the first quarter was a result of continued net
losses during seasonally weak winter months and aircraft debt
and lease payments of $317&nbsp;million on aircraft essential to
the transformation plan. The airline industry continues to be
adversely affected by the historically high aircraft fuel prices
and the continued downward pressure on domestic revenue. As of
December&nbsp;31, 2004, US&nbsp;Airways Group&#146;s cash, cash
equivalents and short-term investments of $738&nbsp;million
compared to $1.29&nbsp;billion as of December&nbsp;31, 2003.
US&nbsp;Airways Group requires substantial liquidity in order to
meet scheduled debt and lease payments and to finance day-to-day
operations. As a result of the recurring losses, decline in
available cash, and risk of defaults or cross defaults under
certain key financing and operating agreements, US&nbsp;Airways
Group filed a voluntary petition for reorganization under
Chapter&nbsp;11 of the bankruptcy code on September&nbsp;12,
2004. All of US&nbsp;Airways Group&#146;s unrestricted cash
constitutes cash collateral under the ATSB loan. US&nbsp;Airways
Group has been operating with the use of the ATSB cash
collateral since its Chapter&nbsp;11 filing on
September&nbsp;12, 2004. Failure to have continued use of the
ATSB cash collateral could necessitate asset sales and layoffs,
and result in an inability to continue operating.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>ATSB Loan and Cash Collateral Agreement</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of its reorganization under the prior bankruptcy,
US&nbsp;Airways, Inc. received a $900&nbsp;million loan
guarantee under the Air Transportation Safety and System
Stabilization Act from the ATSB in connection with a
$1&nbsp;billion term loan financing that was funded on
March&nbsp;31, 2003. US&nbsp;Airways Group required this loan
and related guarantee in order to provide the additional
liquidity necessary to carry out its 2003 plan of
reorganization. US&nbsp;Airways, Inc. is the primary obligor
under the ATSB loan, which is guaranteed by US&nbsp;Airway Group
and each of its other domestic subsidiaries. The ATSB loan is
secured by substantially all of the present and future assets of
the debtors not otherwise encumbered (including certain cash and
investment accounts, previously unencumbered aircraft, aircraft
engines, spare parts, flight simulators, real property, takeoff
and landing slots, ground equipment and accounts receivable),
other than certain specified assets, including assets which are
subject to other financing agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the September&nbsp;12, 2004 Chapter&nbsp;11
filing, the ATSB and the lenders under the ATSB loan agreed to
authorize US&nbsp;Airways Group to continue to use cash
collateral securing the ATSB loan on an interim basis.
US&nbsp;Airways Group has access to the cash collateralizing the
ATSB loan as working capital, subject to certain on-going
conditions and limitations. As a result, US&nbsp;Airways Group
has been able to use this cash instead of obtaining debtor in
possession financing. This interim agreement was approved by the
bankruptcy court on September&nbsp;13, 2004 as part of the first
day motions, and was scheduled to expire on October&nbsp;15,
2004. The bankruptcy court approved two subsequent agreements
extending US&nbsp;Airways Group&#146;s ability to use the cash
collateral, including an agreement approved on January&nbsp;13,
2005 extending US&nbsp;Airways Group&#146;s use of cash
collateral through June&nbsp;30, 2005, subject to certain
conditions and limitations. Under the current agreement, which
is referred to in this prospectus as the ATSB cash collateral
</DIV>

<P align="center" style="font-size: 10pt;">140

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<DIV align="left" style="font-size: 10pt;">
agreement, US&nbsp;Airways Group may continue to access this
cash collateral to support daily operations so long as it
maintains an agreed upon minimum amount of cash on hand each
week. The amount declines from approximately $500&nbsp;million
at the end of January to $341&nbsp;million on June&nbsp;30,
2005. US&nbsp;Airways Group reached agreement with the ATSB
concerning an interim extension to the ATSB cash collateral
agreement while US&nbsp;Airways Group and America West Holdings
work to finalize the post-merger terms of both loans. The
interim agreement will expire on July&nbsp;29, 2005 and will
require US&nbsp;Airways Group, among other conditions, to
maintain a weekly minimum unrestricted cash balance of
$325&nbsp;million. US&nbsp;Airways Group must also maintain and
achieve certain cumulative earnings levels during the period, as
defined in the agreement. Further, US&nbsp;Airways Group must
comply with restrictions on its ability to make capital
expenditures. In light of rising fuel prices and continued
downward pressure on fares across the industry, there can be no
assurance that US&nbsp;Airways Group can comply with the ATSB
cash collateral agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ATSB loan also contains covenants that limit, among other
things, US&nbsp;Airways&nbsp;Group&#146;s ability to pay
dividends, make additional corporate investments and
acquisitions, enter into mergers and consolidations and modify
certain concessions obtained as part of the prior bankruptcy.
The ATSB loan contains certain mandatory prepayment events
including, among other things, (i)&nbsp;the occurrence of
certain asset sales and the issuance of certain debt or equity
securities and (ii)&nbsp;the decrease in value of the collateral
pledged in respect of the ATSB loan below specified coverage
levels. During the three months ended March&nbsp;31, 2005,
US&nbsp;Airways Group made approximately $6&nbsp;million in
prepayments on the ATSB loan with proceeds received from asset
sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ATSB loan bears interest as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    90% of the ATSB loan (Tranche&nbsp;A) was funded through a
    participating lender&#146;s commercial paper conduit program and
    bears interest at a rate equal to the conduit provider&#146;s
    weighted average cost related to the issuance of certain
    commercial paper notes and other short-term borrowings plus
    0.30%,&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    10% of the ATSB loan (Tranche&nbsp;B) bears interest at LIBOR
    plus 4.0%.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, US&nbsp;Airways, Inc. is charged an annual
guarantee fee in respect of the ATSB guarantee currently equal
to 4.1% of the guaranteed amount (initially $900&nbsp;million),
with the guarantee fee increasing by ten basis points annually.
Due to US&nbsp;Airways Group&#146;s September 2004 bankruptcy
filing and subsequent loss of certain regional jet financing,
the guarantee fee increased by 2%&nbsp;per annum and the
interest rate on Tranche&nbsp;A and Tranche&nbsp;B each
increased by an additional 2% and 4%&nbsp;per annum,
respectively, for an effective increase in the interest rate on
the loan balance of four percentage points.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, $712&nbsp;million was outstanding
under the ATSB loan. The ATSB loan is reflected as a current
liability on US&nbsp;Airways Group&#146;s accompanying balance
sheet at March&nbsp;31, 2005 at a book value of
$697&nbsp;million, which is net of $15&nbsp;million of
unamortized discount, and is not subject to compromise. As of
March&nbsp;31, 2005, US&nbsp;Airways Group&#146;s
$513&nbsp;million in unrestricted cash and cash equivalents was
available to support daily operations, subject to certain
conditions and limitations under the ATSB cash collateral
agreement.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>2004 Amendments to the ATSB Loan</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2004, US&nbsp;Airways, Inc. and the ATSB amended the
financial covenants of the ATSB loan to provide covenant relief
for the measurement periods beginning June&nbsp;30, 2004 through
December&nbsp;31, 2005. The ratios used in the financial
covenants were adjusted and reset to align with US&nbsp;Airways
Group&#146;s forecast for 2004 and 2005 as of the date of the
amendment, which assumed a return to profitability by 2005. In
exchange for this covenant relief and other changes described
below, US&nbsp;Airways, Inc. made a voluntary prepayment of
$250&nbsp;million on March&nbsp;12, 2004, which reduced, pro
rata, all future scheduled principal payments of the ATSB loan,
rather than shortening the remaining life of the loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In consideration for the lenders agreeing to amend the provision
in the loan agreement related to the going concern paragraph in
the independent auditor&#146;s report for US&nbsp;Airways
Group&#146;s audited financial statements for the year ended
December&nbsp;31, 2003, US&nbsp;Airways, Inc. agreed to revised
financial covenants.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective May&nbsp;21, 2004, US&nbsp;Airways, Inc. and the ATSB
again amended the ATSB loan to permit use of its regional jets
financed by General Electric, or GE, as cross collateral for
other obligations of US&nbsp;Airways, Inc. to GE. In
consideration for this amendment, US&nbsp;Airways, Inc. agreed
to revised covenants relating to minimum required unrestricted
cash balances. US&nbsp;Airways, Inc. made a prepayment of
$5&nbsp;million in connection with this amendment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ATSB loan contains financial covenants that must be
satisfied by US&nbsp;Airways, Inc. at the end of each fiscal
quarter. US&nbsp;Airways, Inc. was uncertain as to its ability
to satisfy these covenants as of June&nbsp;30, 2004. Effective
June&nbsp;30, 2004, US&nbsp;Airways, Inc. and the ATSB amended
the ATSB loan to remove the uncertainty relating to
US&nbsp;Airways Group&#146;s ability to satisfy its financial
covenant tests for the second quarter of 2004. In consideration
for this amendment, US&nbsp;Airways Group agreed to change the
loan amortization schedule, by increasing each of the first six
principal repayment installments commencing on October&nbsp;1,
2006 by approximately $16&nbsp;million, and reducing the last
principal repayment installment on October&nbsp;1, 2009 by
$94&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All of the foregoing rights and obligations of the parties
relating to the ATSB loan are subject to the terms of the cash
collateral orders entered by the bankruptcy court and the terms
of the bankruptcy code.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
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<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Eastshore and Wexford Agreements</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;18, 2005, US&nbsp;Airways Group announced that
it reached an agreement with Eastshore Aviation, LLC, an
investment entity owned by Air Wisconsin Airlines Corporation
and its shareholders, on a $125&nbsp;million financing
commitment to provide equity funding for a plan of
reorganization. The $125&nbsp;million facility is in the form of
a debtor in possession term loan. After receiving approval from
the bankruptcy court, $75&nbsp;million was drawn under the
facility on March&nbsp;1, 2005 and $25&nbsp;million was drawn on
April&nbsp;4, 2005. The final $25&nbsp;million will be available
on or before September&nbsp;30, 2005. This loan is second only
to the ATSB loan with regard to US&nbsp;Airways Group&#146;s
assets that are pledged as collateral. The interest on the
facility is LIBOR plus 6.5% as determined as of the draw date of
each increment. Interest is payable quarterly in arrears. As
part of this agreement, US&nbsp;Airways, Inc. and Air Wisconsin
also entered into a regional jet services agreement under which
Air Wisconsin may, but is not required to, provide regional jet
service under a US&nbsp;Airways Express code share arrangement.
On April&nbsp;8, 2005, Air Wisconsin notified US&nbsp;Airways
Group of its intention to deploy 70 regional jets, the maximum
number provided for in the agreement, into the US&nbsp;Airways
Express network. US&nbsp;Airways Group and Eastshore entered
into an amendment to the facility that provides for the
conversion of the outstanding loan amounts upon completion of
the merger pursuant to their investment agreement, as described
in the section entitled &#147;The New Equity Investments.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;14, 2005, US&nbsp;Airways Group announced that it
reached an agreement with Republic Airways Holdings, Inc. and
its majority shareholder, Wexford Capital LLC, on an equity and
financing package that includes a $125&nbsp;million equity
investment upon emergence from Chapter&nbsp;11 and options for
obtaining $110&nbsp;million of other liquidity enhancements
prior to emergence. US&nbsp;Airways Group has elected not to
require an equity investment under the agreement, but has
exercised its option for obtaining the $110&nbsp;million of
additional liquidity. The implementation of transactions under
the agreement was approved by the bankruptcy court on
March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways, Inc. may obtain the $110&nbsp;million of
additional liquidity through the sale of certain assets,
including ten currently owned EMB-170 regional aircraft operated
by the MidAtlantic Airways division of US&nbsp;Airways, Inc.,
three EMB-170 regional jet aircraft currently scheduled for
delivery, other regional jet related assets such as a flight
simulator and other items and certain commuter slots at Ronald
Reagan Washington National Airport and LaGuardia Airport.
US&nbsp;Airways, Inc. also has the option to assign the leases
for an additional 15 EMB-170 regional jet aircraft currently
operated by its MidAtlantic Airways division. Upon the sale and
assignment of the leases for the aircraft, Republic Airways
Holdings would enter into a regional jet services agreement with
US&nbsp;Airways Group that would continue the operation of the
aircraft as US&nbsp;Airways Express. Republic Airways Holdings
would lease back the slots to US&nbsp;Airways, Inc. and
US&nbsp;Airways, Inc. would have the right to repurchase the
slots at a predetermined price. In the event that
</DIV>

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<DIV align="left" style="font-size: 10pt;">
US&nbsp;Airways Group does not exercise the slot sale/leaseback
option, Republic Airways Holdings has the option to purchase and
assume the debt and leases for all of US&nbsp;Airways
Group&#146;s Embraer regional jets and fly them as
US&nbsp;Airways Express. On June&nbsp;23, 2005, US&nbsp;Airways,
Inc. exercised its option under its agreement with Republic
Airways Holdings, Inc. and Wexford Capital LLC to sell the
assets of MidAtlantic Airways, including the regional jets, a
flight simulator and certain commuter slots at Ronald Reagan
Washington National Airport and LaGuardia Airport. If the sale
is completed, Republic Airways Holdings will operate the
aircraft as a US&nbsp;Airways Express carrier under a capacity
purchase agreement and will lease the slots back to
US&nbsp;Airways, Inc.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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    <TD></TD>
    <TD>
    <B><I>General Electric</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
General Electric and its affiliates, referred to collectively as
GE, is US&nbsp;Airways Group&#146;s largest aircraft creditor,
having financed or leased a substantial portion of
US&nbsp;Airways Group&#146;s aircraft prior to the current
Chapter&nbsp;11 filing. In addition, in November 2001,
US&nbsp;Airways, Inc. obtained a $404&nbsp;million credit
facility from GE, which was secured by collateral including
11&nbsp;A320-family aircraft and 28 spare engines. Borrowings
under the 2001 GE credit facility bear interest at the rate of
LIBOR plus&nbsp;3.5%, and the term of the facility is 2012.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the 2001 GE credit facility, GE has provided
financing or guarantees with respect to over 140 of
US&nbsp;Airways Group&#146;s current operating aircraft, and
also maintains the engines on US&nbsp;Airways Group&#146;s
B737-family aircraft, A320-family aircraft, B767 aircraft,
EMB-170 aircraft and CRJ-200 aircraft. In connection with the
prior bankruptcy, US&nbsp;Airways Group reached a settlement
with GE that resolved substantially all aircraft, aircraft
engine and loan-related issues, and provided US&nbsp;Airways
Group with additional financing from GE in the form of a
liquidity facility of up to $360&nbsp;million that bears
interest at a rate of LIBOR plus&nbsp;4.25%. Most obligations of
US&nbsp;Airways&nbsp;Group to GE are cross-defaulted to the 2001
GE credit facility, the 2003 GE liquidity facility, the GE
regional jet leases and the GE regional jet mortgage financings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, US&nbsp;Airways Group reached a comprehensive
agreement with GE and its affiliates as described in a Master
Memorandum of Understanding, which we refer to as the
GE&nbsp;Master MOU, that was approved by the bankruptcy court on
December&nbsp;17, 2004. The GE Master MOU, together with the
transactions contemplated by the term sheets attached to the GE
Master MOU, provided US&nbsp;Airways&nbsp;Group with short-term
liquidity, reduced debt, lower aircraft ownership costs,
enhanced engine maintenance services and operating leases for
new regional jets, while preserving the vast majority of
US&nbsp;Airways, Inc.&#146;s mainline fleet owned or otherwise
financed by GE. The key terms of the GE Master MOU included:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    agreements providing for continued use by US&nbsp;Airways Group
    of certain Airbus, Boeing and regional jet aircraft, and the
    return to GECC of certain other leased Airbus&nbsp;and Boeing
    aircraft;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a bridge facility of up to approximately $56&nbsp;million for
    use by the debtors during the pendency of the Chapter&nbsp;11
    proceedings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    GE&#146;s purchase and immediate leaseback to US&nbsp;Airways,
    Inc. of: (a)&nbsp;11&nbsp;Airbus aircraft, 28&nbsp;spare engines
    and the engine stands securing the 2001 GE&nbsp;credit facility,
    the 2003 GE liquidity facility and certain other GE obligations,
    and (b)&nbsp;ten regional jet aircraft currently debt financed
    by GECC;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a restructuring of the balance of the 2001 GE&nbsp;credit
    facility to provide additional liquidity, subject to the pledge
    of junior liens on four CRJ&nbsp;aircraft and a first lien on
    one spare engine to secure the restructured 2001 GE credit
    facility;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    subject to US&nbsp;Airways Group&#146;s satisfaction of certain
    financial tests and other conditions, financing for up to 31
    additional regional jet aircraft;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the modification and assumption of certain of US&nbsp;Airways,
    Inc.&#146;s engine maintenance agreements with GE Engine
    Services;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    upon emergence from bankruptcy, the issuance of convertible
    notes of the reorganized US&nbsp;Airways, Inc. to GECC in the
    aggregate principal amount of $125&nbsp;million.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the merger, US&nbsp;Airways Group and America
West Holdings have renegotiated certain of their respective
existing agreements, and entered into new agreements, with GE.
These agreements are set forth in a comprehensive agreement with
GE and certain of its affiliates in a Master Merger Memorandum
of Understanding, referred to as the GE Merger MOU, that was
approved by the bankruptcy court on June&nbsp;23, 2005. In part,
the GE&nbsp;Merger MOU modified and supplemented the agreements
reached between US&nbsp;Airways Group and GE in the
GE&nbsp;Master MOU. As a result of the GE&nbsp;Master MOU, as
modified, amended and supplemented by the GE&nbsp;Merger MOU,
US&nbsp;Airways Group and GE have reached the agreements
discussed below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Bridge Facility.</I> The bridge facility entered into between
US&nbsp;Airways Group and GE pursuant to the GE&nbsp;Master MOU
on December&nbsp;20, 2004 will continue in effect during the
pendancy of the Chapter&nbsp;11 cases. The bridge facility
provides for a loan in the amount of up to approximately
$56&nbsp;million, which has been drawn down by US&nbsp;Airways
Group. The bridge facility bears interest at the rate of LIBOR
plus 4.25%, matures on the date US&nbsp;Airways Group emerges
from the Chapter&nbsp;11 cases, and is payable in cash or, upon
maturity, by issuance of a portion of the $125&nbsp;million of
convertible notes, as described below. The bridge facility is
cross-collateralized and cross-defaulted with all other
GE&nbsp;obligations owed by any of the debtors to GE, and is
entitled to administrative expense claim status in the
Chapter&nbsp;11 cases, with priority over all other
administrative claims other than for aircraft financing, which
are <I>pari passu,</I> and subordinate only to (i)&nbsp;the
super-priority administrative expense claim of the lenders under
the ATSB loan, (ii)&nbsp;post-petition wages and benefits and
(iii)&nbsp;any new money debtor in possession financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Sale-Leaseback Transaction.</I> Pursuant to the
GE&nbsp;Master MOU, as amended and supplemented by the
GE&nbsp;Merger MOU, US&nbsp;Airways will sell all of the
collateral securing the 2001 GE&nbsp;credit facility, the 2003
GE&nbsp;liquidity facility and certain of the GE&nbsp;Engine
Services maintenance agreements, consisting of 11&nbsp;Airbus
aircraft and 28&nbsp;spare engines, together with ten
CRJ&nbsp;aircraft, to affiliates of GE for approximately
$633&nbsp;million, with US&nbsp;Airways, Inc. immediately
leasing back the aircraft and engines under agreed upon
operating leases at market rates. The lease terms will commence
upon the closing of the sale of each aircraft and spare engine,
and will expire:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    with respect to the Airbus aircraft, on either October&nbsp;31,
    2005, or if the debtors emerge from the Chapter&nbsp;11 cases
    prior to that date, on agreed upon dates, with six of the Airbus
    leases to expire by the end of 2005, without regard to the
    merger, and the balance expiring during 2017;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    with respect to the CRJ&nbsp;aircraft, on the earlier of the
    debtors&#146; emergence from the Chapter&nbsp;11 cases and
    October&nbsp;31, 2005, provided that US&nbsp;Airways, Inc. has
    agreed to convert the leases for the CRJ aircraft into permanent
    long term leases on or before July&nbsp;29, 2005, with only rent
    payable through October&nbsp;31, 2005 (or a later date as the
    parties may agree) and return condition obligations being
    afforded administrative expense status in the Chapter&nbsp;11
    cases;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    as to the spare engines, on either of October&nbsp;31, 2005, or,
    if the debtors emerge from the Chapter&nbsp;11 cases prior to
    that date, then, with respect to 14&nbsp;CFM56-5B6 engines on
    agreed upon dates in 2015 (subject to the debtors&#146; right to
    select one engine for early delivery in November 2005, and
    further subject to the debtors&#146; right to swap the expiry
    date for each CFM56-5B6 lease with the expiry date for any other
    CFM56-5B6 lease), and with respect to the 14&nbsp;CFM56-3B2
    engines on agreed upon dates in 2010. The expiration of the
    lease terms with respect to the 14&nbsp;CFM56-3B2 engines is
    subject to the debtors&#146; right to terminate the lease for
    one CFM56-3B2 engine upon the scheduled lease expiration date
    for a related Boeing 737-300 aircraft, on the basis of one spare
    engine for every fifth Boeing 737-300 lease terminated, up to a
    maximum of five CFM56-3B2 engine leases, and subject further to
    the debtors&#146; right to terminate any CFM56-3B2 lease upon
    not less than 60&nbsp;days notice, provided that the debtors pay
    GE an amount equal to the balance of the basic rent due under
    such lease, with a credit for any maintenance adjustment credit
    payable to the debtors on account of the redelivery of the
    applicable engine.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The sale proceeds realized from the sale-leaseback transaction
will be applied to repay the 2003 GE&nbsp;liquidity facility,
the mortgage financing associated with the CRJ&nbsp;aircraft and
a portion of the 2001
</DIV>

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<DIV align="left" style="font-size: 10pt;">
GE&nbsp;credit facility. The operating leases will be
cross-defaulted with all other GE&nbsp;obligations, other than
excepted obligations, and will be subject to return conditions
as agreed to by the parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>2001 GE Credit Facility.</I> Following the application of the
proceeds realized from the sale-leaseback transaction, the
remaining balance due on the 2001 GE credit facility will be
restructured into an amended and restated 2001 GE&nbsp;credit
agreement, pursuant to which US&nbsp;Airways Group will be
entitled to borrow additional amounts, which will result in a
total principal outstanding balance thereunder of approximately
$28&nbsp;million. The additional borrowing will bear interest at
LIBOR plus 4.25%, and will be repayable over eight quarters
commencing September 2005, provided that if the merger occurs,
amortization will commence in September 2006 with a final
maturity in 2010. The amended and restated GE&nbsp;credit
agreement will be secured by a third lien on three CRJ-700
aircraft and a second lien on one CRJ-700 aircraft (in each
case, subject to senior lien positions and subject to the
consent of the senior lien holders pursuant to inter-creditor
agreements reasonably acceptable to GE), and a first lien on one
CF34&nbsp;spare engine owned by US&nbsp;Airways, Inc., with the
aggregate of any senior liens on the collateral not to exceed
$62&nbsp;million. GE will release its liens on the four
CRJ&nbsp;aircraft in connection with the sale of all of the
aircraft for a repayment on the loan of an agreed upon amount.
Although US&nbsp;Airways Group&#146;s entry into the amended and
restated GE&nbsp;2001 credit agreement will not constitute an
assumption of the amended and restated GE&nbsp;2001 credit
agreement, US&nbsp;Airways Group is required to reinstate the
amended and restated GE&nbsp;2001 credit agreement and related
guaranty in connection with the debtors&#146; emergence from the
Chapter&nbsp;11 cases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Regional Jet Financing.</I> Pursuant to the GE&nbsp;Master
MOU, GE agreed to provide lease financing for up to
31&nbsp;regional jet aircraft, to consist of 70- to 100-seat
regional jet aircraft in a mix and on terms to be agreed to
between US&nbsp;Airways Group and GE. During the first quarter
of 2005, GE provided lease financing for six CRJ-700 aircraft,
with terms expiring on the earlier of the debtors&#146;
emergence from bankruptcy and June&nbsp;30, 2005. Under the
terms and conditions of the GE&nbsp;Merger MOU, US&nbsp;Airways
Group and GE have agreed to convert the leases for the six
CRJ&nbsp;aircraft into long term leases by July&nbsp;29, 2005,
with the long term leases being post-petition agreements,
subject to a limitation on administrative expense status to rent
payable through October&nbsp;31, 2005 (or a later date agreed to
by the parties) and return condition obligations. The
GE&nbsp;Merger MOU also eliminates any further obligation on GE
to provide regional jet financing directly to US&nbsp;Airways
Group, but GE has agreed to provide single investor or operating
leases to third party carriers meeting financial tests and
otherwise acceptable to GE for ten EMB-170/190/195 aircraft
delivering between 2007 and 2008, on a schedule and terms to be
agreed on by the parties, and subject to manufacturer support.
GE will also provide single investor or operating lease
financing to Republic Airways for three EMB-170 aircraft that
are currently committed to be delivered to the debtors, subject
to manufacturer support and other terms and conditions
acceptable to GE. Finally, to facilitate a transaction agreed to
between US&nbsp;Airways Group and Republic Airways, GE will also
consent to the assignment to Republic Airways of up to
15&nbsp;EMB-170 leases, subject to manufacturer support and
other conditions acceptable to GE.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Aircraft Transactions.</I> The GE&nbsp;Master MOU
contemplated a series of transactions intended to provide the
debtors with additional liquidity and lower aircraft ownership
costs. Pursuant to the GE&nbsp;Merger MOU, certain of these
transactions were modified, with the parties also reaching new
agreements regarding the restructuring of lease payments
relative to certain aircraft and the early redelivery of
additional aircraft. Under the GE&nbsp;Master MOU, as modified
and supplemented by the GE&nbsp;Merger MOU, the parties have now
reached the agreements discussed below relative to aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
With respect to certain B737-300, B757 and B737-400 aircraft,
US&nbsp;Airways Group agreed, pursuant to the GE&nbsp;Master MOU
and applicable Section&nbsp;1110 agreements, to pay and perform
all of its obligations under the applicable leases for those
aircraft during the pendency of the Chapter&nbsp;11 cases, with
a &#147;true-up&#148; payment to be made with respect to the
B737-300 and B757 aircraft for accrued rent owing on
June&nbsp;30, 2005, at an assumed lease rental rate per
aircraft, pro-rated for partial months. From and after the
debtors&#146; emergence from bankruptcy, the average monthly
rent on the B737-300, B757 and B737-400 aircraft would be at
reduced rates per month, provided that US&nbsp;Airways Group
could further reduce the postpetition rent for the B737-400
aircraft by either paying GE cash or issuing the convertible
notes of the reorganized US&nbsp;Airways, Inc. in an agreed upon
amount. Under the GE&nbsp;Merger MOU, GE has agreed that,
following the &#147;true-up&#148; payment being made, as
determined as of June&nbsp;30, 2005, with respect to the
B737-300 and B757
</DIV>

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<DIV align="left" style="font-size: 10pt;">
aircraft, the rent payments due on the B737-300, B757 and
B737-400 aircraft will be adjusted to the agreed upon reduced
rates effective as of July&nbsp;1, 2005, even though the debtors
have not yet emerged from bankruptcy, and, with respect to the
B737-400, without the agreed upon cash payment or the issuance
of the required amount of convertible notes. Each of the leases
for these Boeing aircraft, as modified, will be assumed by the
debtors, provided that, if the debtors fail to emerge from
bankruptcy, only rent, return conditions and deferred rent
(being the difference between current contractual rentals and
the amended lease rentals) payable through the later of
October&nbsp;31, 2005 or the return of the aircraft will be
entitled to administrative expense status, with all other claims
under those leases, including rejection damages, being unsecured
pre-petition claims. In the event that US&nbsp;Airways Group
fails to complete the merger, the terms for the Boeing leases,
including the rental rates, return conditions and expiry dates,
will revert to their original terms (with the debtors receiving
credit for all previously paid rent), subject to administrative
expense status, as set forth above, and
US&nbsp;Airways&nbsp;Group will again have the benefit of the
provisions of the GE&nbsp;Master MOU in respect of the Boeing
aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
With respect to 23 CRJ-200 aircraft, GE has agreed to
restructure the timing of the rental payments under the leases
applicable to the aircraft to reduce the quarterly rent payments
for a period of 30&nbsp;months following the debtors&#146;
emergence from bankruptcy. The amount of the rent reductions
will be deferred and added to the rents payable under the
applicable leases over the 24&nbsp;month period immediately
following the 30&nbsp;month deferral, so that the lessors&#146;
lease economics are maintained. Fourteen of the leases for the
CRJ-200 aircraft will also be extended for an additional three
months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the GE&nbsp;Master MOU, the debtors have agreed to enter
into short-term leases with respect to 16&nbsp;CRJ aircraft,
consisting of nine CRJ-200 aircraft and seven CRJ 700 aircraft,
with those leases to be converted to long-term leases in
connection with the debtors&#146; emergence from the
Chapter&nbsp;11 cases. Pursuant to the GE&nbsp;Merger MOU, the
debtors have agreed to enter into the contemplated long-term
leases by July&nbsp;29, 2005, with those leases being
postpetition agreements, subject to administrative expense
status only for (i)&nbsp;rent payable through the later of the
October&nbsp;31, 2005 and the return of the aircraft and
(ii)&nbsp;return conditions, with all other claims under such
leases, including rejection damages, being unsecured prepetition
claims.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the GE&nbsp;Master MOU, US&nbsp;Airways Group agreed
to modify the expiry dates for the leases relative to ten
A319/A320 aircraft in order to provide for the early redelivery
of the associated aircraft to GE, and also agreed to modify the
expiry dates of the single investor documentation relating to
certain Boeing aircraft, with redelivery conditions to be agreed
upon. GE agreed to waive cross-default provisions and consent to
the foreclosure of its interest in five B737-400 aircraft
without any resulting claims in order to facilitate the
debtors&#146; restructuring of the lease financing with respect
to the aircraft with SNECMA which restructuring occurred in
February 2005. As a result of the GE&nbsp;Merger MOU, in
addition to the ten A319/ A320 aircraft referred to above,
US&nbsp;Airways Group agreed on the terms and conditions for the
early return of 41&nbsp;aircraft and up to six spare engines,
with related return condition concessions to facilitate these
redeliveries, all as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    With respect to six A319/320 aircraft that are subject to the
    sale-leaseback transaction, and one B737-300 aircraft, the
    applicable leases will be amended to modify the expiry dates
    under the leases to provide for their early termination and
    return of the subject aircraft to GE during the last six months
    of 2005. The amendments to the applicable leases and the early
    return of the aircraft will be effectuated without regard to the
    completion of the merger or the occurrence of an event of
    default.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    The leases for five B737-300s currently operated by the debtors
    will be amended to provide for their termination, and attendant
    early redelivery of the subject aircraft between July 2005 and
    October&nbsp;31, 2005, provided that, as of the date of each
    such termination and redelivery, no event of default has
    occurred and is continuing and there has been no public
    announcement by US&nbsp;Airways Group or America West Holdings,
    any SEC filing or any governmental authority pronouncement,
    which evidences that any significant term or condition of the
    merger will not be complied with or that an applicable milestone
    as provided for in the GE&nbsp;Merger MOU will not be met.</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Leases in respect of an additional 29 Boeing aircraft from
    US&nbsp;Airways&nbsp;Group&#146;s fleet will be amended to
    modify the expiry dates under the leases so as to provide for
    their early termination and accompanying early return of the
    subject aircraft to GE between 2005 and 2009, subject to
    completion of the merger. With respect to eleven of the Boeing
    aircraft, however, which will be scheduled for removal from
    service during 2009 pursuant to the applicable amended leases,
    US&nbsp;Airways&nbsp;Group will grant GE an option exercisable
    on or before October&nbsp;31, 2006 to further modify the expiry
    dates of those leases to provide for the removal of those
    aircraft during an earlier period, from July 2007 through July
    2008, unless US&nbsp;Airways Group has, as of September&nbsp;30,
    2006, achieved an agreed upon corporate credit rating or
    satisfied certain financial covenant tests.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In connection with the removal of the above-referenced Boeing
    aircraft from US&nbsp;Airways Group&#146;s fleet,
    US&nbsp;Airways Group will be permitted to terminate an agreed
    upon number of the spare engine leases entered into by the
    debtors pursuant to the sale-leaseback transaction, from time to
    time, as and when an agreed upon number of those aircraft have
    been redelivered to GE.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    To facilitate the early redelivery of the Airbus&nbsp;Aircraft
    from US&nbsp;Airways&nbsp;Group&#146;s fleet, GE has agreed to
    grant certain return condition concessions relative to such
    aircraft. Prior to the debtors&#146; emergence from the
    Chapter&nbsp;11 cases, GE and US&nbsp;Airways Group have agreed
    to net (a)&nbsp;any redelivery payment obligations payable by GE
    to the debtors against (b)&nbsp;any redelivery payment
    obligations payable by the debtors to GE relative to redelivered
    aircraft, and to the extent that any net balance is owing to the
    debtors by GE, the balance will be payable to the debtors upon
    US&nbsp;Airways Group&#146;s emergence from the Chapter&nbsp;11
    cases.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the GE&nbsp;Master MOU, US&nbsp;Airways Group and GE
reached an agreement with respect to five engine repair and
maintenance agreements, and certain other matters. This
agreement included, among other things, the agreement of
US&nbsp;Airways&nbsp;Group to assume three of the agreements,
subject to a limitation on possible administrative expense
claims, and also provided for GE&#146;s agreement to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    forgive and release US&nbsp;Airways, Inc. from certain
    prepetition obligations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    defer certain payment obligations arising under these agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    extend one maintenance agreement;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    continue certain existing deferrals;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    determine the treatment of certain removal charges.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the GE Merger MOU, US&nbsp;Airways Group and GE
further agreed, among other things, to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    forgive certain removal charges relative to CFM56-3 engines, in
    addition to those removal charges to be forgiven pursuant to the
    GE Master MOU;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    provide US&nbsp;Airways, Inc. with the right to remove certain
    CFM56-3 engines otherwise subject to agreements with GE Engine
    Services, with all removal credits owing to the debtors in
    connection with those agreements to be applied against
    outstanding amounts otherwise owing to GE Engine Services by the
    debtors under the term note issued to GE Engine Services
    pursuant to GE Master MOU;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    modify the debtors&#146; obligations with respect to deferred
    obligations (as defined in the GE Master MOU) to provide that
    those obligations will be payable in two installments, due on
    each of June&nbsp;30, 2005 and September&nbsp;30, 2005;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    extend the term of the CFM56-5 engine maintenance agreement with
    GE Engine Services, with the debtors waiving certain conversion
    rights; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    modify the CFM56-3 engine maintenance agreement to provide for
    an agreement upon minimum monthly payments on account of accrued
    engine flight hours.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In consideration of the foregoing, US&nbsp;Airways Group agreed,
among other things, on:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a last right of offer for GE Engine Services with respect to any
    follow-on engine maintenance agreement for the debtors&#146;
    CF6-80C2 fleet;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    certain arrangements relative to engine selection in the event
    US&nbsp;Airways&nbsp;Group elects to assume an existing A320
    aircraft purchase agreement between Airbus and US&nbsp;Airways
    Group upon its emergence from the Chapter&nbsp;11 cases;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    certain arrangements relative to engine selection in the event
    New US&nbsp;Airways&nbsp;Group, following the merger, proceeds
    to take delivery of certain A350 aircraft from Airbus.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Convertible Notes.</I> Pursuant to the GE Master MOU,
US&nbsp;Airways Group agreed that upon its emergence from the
Chapter&nbsp;11 cases, as partial consideration for entering
into the GE Master MOU, an affiliate of GECC will receive
convertible notes of the reorganized US&nbsp;Airways, Inc. in
the aggregate principal amount of $125&nbsp;million. The
convertible notes will be convertible at any time, at the
holders&#146; election, into shares of common stock of New
US&nbsp;Airways Group at a conversion price equal to the product
of (x)&nbsp;140%-150% (at US&nbsp;Airways, Inc.&#146;s option)
and (y)&nbsp;the average closing price of New US&nbsp;Airways
Group common stock for the sixty consecutive trading days
following emergence from bankruptcy and the listing of New
US&nbsp;Airways Group common stock on Nasdaq or a national stock
exchange. The convertible notes will bear interest at a rate to
be determined no later than thirty days prior to the
debtors&#146; scheduled date of emergence from bankruptcy and
interest will be payable semi-annually, in arrears, and will
mature in 2020. US&nbsp;Airways, Inc. will be permitted to
redeem some or all of the convertible notes at any time on or
after the fifth anniversary of the issuance of the notes, at a
redemption price payable in cash or, subject to certain
conditions, New US&nbsp;Airways Group common stock. Holders of
the convertible notes may require US&nbsp;Airways, Inc. to
repurchase all or a portion of their convertible notes on the
fifth and tenth anniversary of the issuance of the notes at 100%
of the principal amount of the convertible notes, plus accrued
and unpaid interest to the date of repurchase, payable, at
US&nbsp;Airways, Inc. election, in cash or New US&nbsp;Airways
Group common stock. The convertible notes will be senior
unsecured obligations and will rank equally in right of payment
with all existing and future unsecured senior obligations of the
reorganized US&nbsp;Airways, Inc. The convertible notes will be
guaranteed by New US&nbsp;Airways Group, the parent holding
company of the reorganized US&nbsp;Airways, Inc.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Regional Jet Financing</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2003 plan of reorganization sought to boost revenue and
enhance competitiveness through the increased use of regional
jets. Regional jets are faster, quieter and more comfortable
than turboprops and are generally preferred by customers over
turboprops. In May 2003, US&nbsp;Airways Group entered into
agreements to purchase a total of 170 regional jets from
Bombardier and Embraer. US&nbsp;Airways Group had previously
secured financing commitments from GE and from the respective
airframe manufacturers for approximately 85% to 90% of these
jets. These commitments were subject to certain credit or
financial tests, as well as customary conditions precedent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Despite US&nbsp;Airways Group&#146;s failure to meet one of the
applicable credit standards as of May&nbsp;5, 2004,
US&nbsp;Airways Group reached agreements with GE, Embraer and
Bombardier for continued financing of regional jet deliveries
through September&nbsp;30, 2004. As part of the agreement
reached with Bombardier, US&nbsp;Airways Group converted 23
CRJ-200 deliveries (50-seat regional jets) to CRJ-700 deliveries
(70-seat regional jets) and retained the right to convert some
or all of the CRJ-700 deliveries to CRJ-900 deliveries (90-seat
regional jets). US&nbsp;Airways, Inc. agreed to refinance with
third parties four aircraft originally financed by Bombardier.
DVB Bank AG provided US&nbsp;Airways, Inc. with 18&nbsp;month
bridge financing for two aircraft, with the objective of
arranging long-term market financing for these aircraft upon
successful implementation of US&nbsp;Airways Group&#146;s
transformation plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
GE&#146;s financing commitment with respect to regional jets
through September&nbsp;30, 2004 was also conditioned on
US&nbsp;Airways, Inc. gaining permission under its ATSB loan to
use its regional jets mortgage financed by GE as
cross-collateral for other obligations of US&nbsp;Airways, Inc.
to GE. On May&nbsp;21, 2004,
</DIV>

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<DIV align="left" style="font-size: 10pt;">
US&nbsp;Airways Group amended the ATSB loan to allow this
cross-collateralization. At the same time GE waived the
application of the credit rating condition precedent for
regional jet financing through September&nbsp;30, 2004, thus
securing the continued financing support from GE through
September 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the September&nbsp;12, 2004 Chapter&nbsp;11
filing, US&nbsp;Airways Group failed to meet the conditions
precedent for continued financing of regional jets and
temporarily ceased taking delivery of new regional jet aircraft.
As a result, US&nbsp;Airways Group incurred aircraft order
cancellation penalties of $7&nbsp;million in the fourth quarter
of 2004. These penalties were offset against purchase deposits
held by the aircraft manufacturers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways&nbsp;Group has reached agreements with certain
of its lessors and lenders restructuring existing aircraft lease
and debt financings. On December&nbsp;17, 2004, the bankruptcy
court approved US&nbsp;Airways&nbsp;Group&#146;s agreements for
the continued use and operation of substantially all of its
mainline and Express fleet. Under the GE Master MOU,
US&nbsp;Airways&nbsp;Group reached a comprehensive agreement
with GE on aircraft leasing and financing and engine services,
which provided US&nbsp;Airways&nbsp;Group with short-term
liquidity, reduced debt, lower aircraft ownership costs,
enhanced engine maintenance services, and operating leases for
new regional jets. Pursuant to the GE Merger MOU,
US&nbsp;Airways&nbsp;Group and GE reached agreement on further
rent concessions related to single investor and operating
leases, and the terms and conditions of the redelivery of
aircraft and engines, all as described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the regional jet leasing term sheet under the GE
Master MOU, GECC or its affiliates agreed to provide leases for
up to 31 regional jet aircraft, which were to consist of 70- to
100-seat regional jet aircraft manufactured by Bombardier and/or
Embraer in a mix and subject to other terms to be mutually
agreed upon by GECC and US&nbsp;Airways, Inc. During the first
quarter of 2005, GECC leased six CRJ-700s to US&nbsp;Airways,
Inc. with terms expiring on the earlier of the debtors&#146;
emergence from Chapter&nbsp;11 and June&nbsp;30, 2005. Under the
GE Merger MOU, these leases will be converted into long-term
leases by July&nbsp;29, 2005. Although the GE Merger MOU
eliminated the obligation of GECC to provide regional jet
financing directly to US&nbsp;Airways&nbsp;Group, GE will
provide single investor or operating leases to Republic Airways
for three EMB-170 aircraft, and to third-party carriers
acceptable to GE for ten EMB-170/190/195 to be delivered between
2007 and 2008 on a schedule and on terms acceptable to GE, and
the satisfaction of certain other conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, US&nbsp;Airways Group reached aircraft leasing
and financing agreements with Embraer and Bombardier, which were
approved by the bankruptcy court in January 2005. Pursuant to
the agreement reached with Embraer, US&nbsp;Airways Group
purchased and took delivery of three EMB-170 aircraft in January
2005 and undertook to purchase and take delivery of three
additional EMB-170 aircraft by March&nbsp;31, 2005. The purchase
of the three EMB-170s delivered in January 2005 was financed by
Embraer through a mortgage loan facility and the application of
$17&nbsp;million of existing purchase deposits held by Embraer.
As discussed below, US&nbsp;Airways Group did not take delivery
of the second three aircraft in March 2005. Additionally,
approximately $12&nbsp;million of purchase deposits held by
Embraer will be used to fund an Embraer loan reserve. Embraer
will apply the reserve funds in the amounts and on the dates as
and when payments are due under the Embraer loans during the
period from October&nbsp;1, 2004 through July&nbsp;31, 2005 in
full satisfaction of US&nbsp;Airways Group&#146;s payment
obligations with respect to those Embraer loans during that
period. Upon delivery of the first three EMB-170s, which
occurred in January 2005, unless US&nbsp;Airways Group assumes
the Embraer aircraft purchase agreement pursuant to
Section&nbsp;365 of the bankruptcy code, no further obligations
arise on the part of US&nbsp;Airways Group or Embraer with
respect to the purchase and delivery of any aircraft, other than
those obligations that arise from or are related to the purchase
and delivery of the final three EMB-170s originally scheduled
for March 2005. Embraer and US&nbsp;Airways Group have agreed to
negotiate a new delivery schedule upon US&nbsp;Airways
Group&#146;s assumption of the Embraer aircraft purchase
agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Due to US&nbsp;Airways Group&#146;s failure to take delivery by
March&nbsp;31, 2005 of the remaining three EMB-170 aircraft,
damages accrue from and after April&nbsp;1, 2005 until the
delivery of the aircraft at the rate of $162,795&nbsp;per month
per aircraft. If the aircraft are not delivered by July&nbsp;31,
2005, Embraer&#146;s obligation to deliver these aircraft will
terminate and its damages with respect to the undelivered
aircraft may be as much as $10&nbsp;million for all three
aircraft, rather than at the rate of $162,795&nbsp;per month per
aircraft, with Embraer
</DIV>

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<DIV align="left" style="font-size: 10pt;">
having the right to apply any remaining purchase deposits
against Embraer&#146;s aggregate damages.
US&nbsp;Airways&nbsp;Group is currently working to arrange
financing for these aircraft, and anticipates that GE&#146;s
commitment to finance the aircraft, as discussed above, will be
realized, but recorded a charge of $2&nbsp;million in the first
quarter of 2005, which is included in reorganization items in
US&nbsp;Airways Group&#146;s consolidated statement of
operations, associated with penalties expected to be incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the agreement reached with Bombardier, US&nbsp;Airways
Group acquired three new CRJ-700 aircraft in January 2005. The
purchase was financed through the application of
$28&nbsp;million of existing purchase deposits held by
Bombardier, $2&nbsp;million in cash and a financed lease
facility with DVB Bank AG. Additionally, $4&nbsp;million of
existing purchase deposits held by Bombardier were used to
satisfy existing defaults and cure payments. So long as
US&nbsp;Airways Group continues to operate under the protection
of Chapter&nbsp;11 in compliance with the bankruptcy code, no
obligations will arise on the part of US&nbsp;Airways Group or
Bombardier with respect to the purchase and delivery of any
aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, regional aircraft manufacturers held
purchase deposits of $26&nbsp;million related to the acquisition
of aircraft.
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

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    <TD></TD>
    <TD>
    <B><I>Airbus</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, US&nbsp;Airways Group had 19
A320-family aircraft on firm order scheduled for delivery in the
years 2007 through 2009. US&nbsp;Airways Group also had ten
A330-200 aircraft on firm order scheduled for delivery in the
years 2007 through 2009. On February&nbsp;3, 2005, the
bankruptcy court approved US&nbsp;Airways Group&#146;s agreement
with Airbus providing for, among other things, delivery of the
19 A320-family aircraft in years 2008 through 2010, and delivery
of the ten A330-200 aircraft in years 2008 through 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the merger, US&nbsp;Airways&nbsp;Group and
America West Holdings entered into a Memorandum of Understanding
with Airbus, which we refer to as the Airbus MOU, that includes,
among other things:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    adjustments to the delivery schedules for the narrow-body and
    wide-body aircraft, and an agreement by
    US&nbsp;Airways&nbsp;Group to assume the related purchase
    agreements in connection with its emergence from Chapter&nbsp;11;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a new order for 20 A350 wide-body aircraft, subject to
    US&nbsp;Airways&nbsp;Group&#146;s right to convert up to ten
    A350 orders to A330 orders, and a backstop financing commitment
    by Airbus with respect to a substantial number of the A350
    aircraft;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    elimination of cancellation penalties on
    US&nbsp;Airways&nbsp;Group&#146;s existing order for ten
    A330-200 aircraft, provided that New US&nbsp;Airways Group has
    met certain predelivery payment obligations under the A350
    order;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a term loan of up to $250&nbsp;million, of which $213 million
    can be used for general corporate purposes.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, Airbus held purchase deposits related
to US&nbsp;Airways&nbsp;Group&#146;s order for ten
A330-200&#146;s, which, under the Airbus MOU will be applied, in
part, as a non-refundable restructuring fee on account of the
agreements reached relating to the A330-200&#146;s, and in part
as purchase deposits on account of the A350 orders and the
rescheduled A330-200 orders.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD></TD>
    <TD>
    <B><I>Other</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways, Inc. relies heavily on credit card processing
for its sales, and utilizes credit card issuers and third-party
service providers to process credit card transactions under
agreements which require US&nbsp;Airways Group to provide cash
collateral and to comply with certain other financial and
nonfinancial requirements. If US&nbsp;Airways, Inc. fails to
meet any such conditions, these issuers and providers can
require additional cash collateral and, under certain
circumstances, terminate these credit card processing
agreements. The termination of credit card agreements would have
a material adverse affect on US&nbsp;Airways, Inc.&#146;s
financial condition and results of operations.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the second quarter of 2004, US&nbsp;Airways, Inc. amended
its agreement with American Express Travel Related Services
Company, Inc. The new agreement has been extended to
December&nbsp;31, 2006 and provides for additional cash
collateral to reduce the exposure borne by American Express
against potential customer liabilities relating to unflown
tickets purchased by customers using the American Express card.
The agreement required additional cash collateral in the event
that US&nbsp;Airways, Inc.&#146;s regional jet financing
programs were terminated or if US&nbsp;Airways Group failed to
demonstrate by September&nbsp;30, 2004 its ability to
successfully implement its transformation plan. This amendment
effectively aligned the American Express agreement with the
arrangements in place for certain other credit card processors.
As of March&nbsp;31, 2005, $376&nbsp;million in cash collateral
classified as restricted cash on US&nbsp;Airways Groups&#146;
consolidated balance sheet secured credit card sales. This
amount fluctuates with the amount of sold but unflown tickets.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Statement of Cash Flows Narrative</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the first three months of 2005, US&nbsp;Airways Group&#146;s
operating activities before reorganization items used net cash
of $98&nbsp;million, compared to operating activities for the
three months ended March&nbsp;31, 2004 which provided cash of
$75&nbsp;million. Operating cash flows during the first quarter
of 2005 included the use of $11&nbsp;million for reorganization
items. Cash flows for 2005 were adversely affected by the same
factors that affected financial results, including continued
reductions in unit revenue and significant increases in fuel
prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the first three months of 2005, net cash used by investing
activities was $174&nbsp;million due primarily to the increase
in restricted cash of $139&nbsp;million. The increase in
restricted cash reflects additional collateral deposits related
to US&nbsp;Airways Group&#146;s third-party credit card
processors. US&nbsp;Airways&nbsp;Group, in the ordinary course
of business, withholds from employees and collects from
passengers funds that are required to be paid to applicable
governmental authorities, which include withholding for payroll
taxes, transportation excise taxes, passenger facility charges,
transportation security charges and other related fees, and has
established trust accounts to fund these obligations. Net cash
flows from investing activities in the first quarter of 2005
also includes $39&nbsp;million in capital expenditures,
primarily related to the acquisition of new regional jets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the first three months of 2004, investing activities
included net cash outflows of $2&nbsp;million related to capital
expenditures and net equipment purchase deposit activity.
Capital expenditures reflects the early return of aircraft
purchase deposits by an aircraft manufacturer of
$31&nbsp;million. The decrease in short-term investments in the
first quarter of 2004 reflects a shift in the investment
portfolio to investments with maturities less than 90&nbsp;days
as of March&nbsp;31, 2004. Investing activities in 2004 also
included an increase in restricted cash of $113&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by financing activities during the three
months ended March&nbsp;31, 2005 was $58&nbsp;million. Principal
payments on debt and capital lease obligations of
$72&nbsp;million includes $6&nbsp;million in prepayments on the
ATSB loan with proceeds from sales of assets. On March&nbsp;1,
2005, US&nbsp;Airways Group made the first draw of
$75&nbsp;million under the debtor in possession loan provided by
Air Wisconsin. Net cash used by financing activities for the
three months ended March&nbsp;31, 2004 was $272&nbsp;million.
Principal payments on long-term debt and capital lease
obligations of $295&nbsp;million included the $250&nbsp;million
prepayment made in connection with the ATSB loan amendment in
March 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in &#147;Results of Operations&#148; above, the
successor company&#146;s financial statements are not comparable
with the predecessor company&#146;s financial statements.
However, for purposes of discussion of liquidity and capital
resources, 2004 has been compared to the full year 2003 as
included, in part, in US&nbsp;Airways Group&#146;s consolidated
statements of cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For 2004, US&nbsp;Airways Group&#146;s operating activities
before reorganization items used net cash of $89&nbsp;million,
compared to 2003, which used net cash of $77&nbsp;million.
Included in 2003 cash flows from operating activities is
$218&nbsp;million received from TSA in connection with the
Emergency Wartime Supplemental Appropriations Act. Cash flows
from operating activities for 2004 were favorably impacted by an
increase in accounts payable and other accrued expenses as a
result of the Chapter&nbsp;11 filing in September 2004, as
US&nbsp;Airways Group received liquidity protection under the
automatic stay provisions of the bankruptcy code related to
prepetition liabilities. Cash flows from operating activities
were also favorably
</DIV>

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<DIV align="left" style="font-size: 10pt;">
impacted for this reason during the prior bankruptcy for the
period from August 2002 to March 2003. Cash flows for all
periods have been adversely affected by the same factors that
adversely affected financial results, as discussed above in
&#147;Results of Operations,&#148; including reductions in unit
revenue and significant increases in fuel prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For 2004, net cash provided by investing activities was
$83&nbsp;million. Investing activities include a
$358&nbsp;million decrease in short term investments, reflecting
a shift to cash and cash equivalents, and an increase in
restricted cash of $76&nbsp;million. The increase in restricted
cash in 2004 and 2003 reflects the additional cash collateral
deposits required by US&nbsp;Airways Group&#146;s credit card
processors, letters of credit and trust accounts described
below, partially offset by the decline in cash collateral
required for fuel hedging. Capital expenditures and net
equipment purchase deposit activity in 2004 of $217&nbsp;million
reflect the early return of aircraft purchase deposits by an
aircraft manufacturer of $31&nbsp;million in the first quarter
of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For 2003, net cash used for investing activities was
$511&nbsp;million. Investing activities included cash outflows
of $215&nbsp;million related to capital expenditures, including
$174&nbsp;million for purchase deposits on future regional jet
aircraft deliveries and payments made in connection with the
delivery of two regional jets with the balance related to
rotables, ground equipment and miscellaneous assets. The
increase in short-term investments in 2003 reflects activity
intended to increase the returns on US&nbsp;Airways Group&#146;s
higher cash balances. Other investing activity in 2003 also
reflects $24&nbsp;million in proceeds received related to the
sale of US&nbsp;Airways Group&#146;s investment in Hotwire, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For 2002, net cash provided by investing activities was
$22&nbsp;million. Investing activities included cash outflows of
$146&nbsp;million related to capital expenditures. Capital
expenditures included $106&nbsp;million for three A321 aircraft
(two other A321s were purchased in noncash transactions) with
the balance related to rotables, ground equipment and
miscellaneous assets. Proceeds from disposition of property
includes, among other things, proceeds related to surplus
aircraft and related parts. During the first quarter of 2002,
US&nbsp;Airways, Inc. sold 97 surplus DC-9, B737-200 and MD-80
aircraft. The increase in short-term investments reflects
proceeds from the sale of short-term investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group, in the ordinary course of business,
withholds from employees and collects from passengers funds that
are required to be paid to applicable governmental authorities,
which funds include withholding for payroll taxes,
transportation excise taxes, passenger facility charges,
transportation security charges and other related fees. During
the second quarter of 2002, US&nbsp;Airways&nbsp;Group
established trusts to fund these obligations. The initial
funding, which totaled approximately $201&nbsp;million, and the
net cash flows of the trusts are reflected in decrease
(increase) in restricted cash on
US&nbsp;Airways&nbsp;Group&#146;s consolidated statements of
cash flows. The funds in the trust accounts, which totaled
$138&nbsp;million and $164&nbsp;million as of December&nbsp;31,
2004 and 2003, respectively, are classified as restricted cash
on US&nbsp;Airways Group&#146;s consolidated balance sheets,
including $99&nbsp;million and $124&nbsp;million in current
restricted cash and $39&nbsp;million and $39&nbsp;million in
noncurrent restricted cash, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group used $185&nbsp;million in cash for
financing activities in 2004. Principal payments on debt and
capital lease obligations of $425&nbsp;million include
$255&nbsp;million of prepayments made in connection with
amendments to the ATSB loan in March and May 2004. The financing
activities in 2003 were significantly impacted by
US&nbsp;Airways Group&#146;s emergence from the prior bankruptcy
in March 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by financing activities during 2003 was
$1.02&nbsp;billion. US&nbsp;Airways, Inc. received proceeds of
$1&nbsp;billion from the ATSB loan. Additionally, prior to
emergence from Chapter&nbsp;11 US&nbsp;Airways&nbsp;Group
borrowed $69&nbsp;million under a debtor in possession facility
provided by RSA, and $62&nbsp;million under a debtor in
possession liquidity facility provided by GE. US&nbsp;Airways
Group borrowed $114&nbsp;million under an exit liquidity
facility provided by GE and $20&nbsp;million under a credit
facility provided by GE. US&nbsp;Airways&nbsp;Group also
received proceeds of $240&nbsp;million in connection with the
RSA investment agreement and $34&nbsp;million related to a
private placement offering, as discussed below. US&nbsp;Airways
Group used a portion of the proceeds it received in connection
with its emergence from Chapter&nbsp;11 to repay
$369&nbsp;million that was then outstanding under the RSA debtor
in possession facility (including the $69&nbsp;million discussed
above) on March&nbsp;31, 2003. US&nbsp;Airways Group also used a
portion of the proceeds to repay the $62&nbsp;million then
outstanding under the GE debtor in possession liquidity
facility. US&nbsp;Airways Group also
</DIV>

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<DIV align="left" style="font-size: 10pt;">
made principal payments of debt of $85&nbsp;million, including a
$24&nbsp;million required prepayment on the ATSB loan related to
the sale of its investment in Hotwire, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by financing activities during 2002 was
$334&nbsp;million. US&nbsp;Airways, Inc. received proceeds of
$116&nbsp;million from the mortgage financing of three A321
aircraft (two other A321s were financed in noncash
transactions). Additionally, US&nbsp;Airways, Inc. received
proceeds of $33&nbsp;million with the private placement of pass
through certificates that partially financed five previously
delivered A330 aircraft and $18&nbsp;million from an engine
manufacturer credit facility. US&nbsp;Airways Group also
borrowed $300&nbsp;million under the RSA debtor in possession
facility and $75&nbsp;million under a senior secured debtor in
possession financing facility provided by Credit Suisse First
Boston, Cayman Islands Branch, and Bank of America, N.A., with
participation from the Texas Pacific Group, which we refer to as
the original debtor in possession facility. US&nbsp;Airways
Group used a portion of the RSA debtor in possession facility
funds to repay the full $75&nbsp;million that was then
outstanding under the original debtor in possession facility.
Prior to the 2002 bankruptcy filing, US&nbsp;Airways Group made
scheduled principal repayments of debt in the amount of
$77&nbsp;million. Subsequent to the 2002 bankruptcy filing,
US&nbsp;Airways Group made principal repayments of debt of
$56&nbsp;million, including $38&nbsp;million to the engine
manufacturer credit facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group sold 4,679,000&nbsp;shares of its
Class&nbsp;A common stock at a price of $7.34&nbsp;per share
before transaction fees during August 2003 in a private
placement transaction with Aviation Acquisition L.L.C., Goldman,
Sachs and Co. and OCM Principal Opportunities Fund&nbsp;II, L.P.
These shares related to Class&nbsp;A common stock retained by
US&nbsp;Airways Group from those shares allocated to employees
pursuant to the 2003 plan of reorganization that vested at
July&nbsp;31, 2003. The retained shares represented the employee
tax withholding obligation with respect to the vested portion of
the restricted stock grants. The amount of withholding was
determined on the basis of a price of $7.34&nbsp;per
Class&nbsp;A common share and applicable federal, state, and
local taxes. US&nbsp;Airways&nbsp;Group received net proceeds of
$34&nbsp;million related to this transaction, which offset
US&nbsp;Airways Group&#146;s remittance to taxing authorities.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Contractual Obligations</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides detail of US&nbsp;Airways
Group&#146;s future cash contractual obligations as of
December&nbsp;31, 2004, including classification of the ATSB
loan as current and without regard to liabilities subject to
compromise (dollars in millions).
</DIV>

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</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>Payments Due by Period</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2006</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2007</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2008</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2009</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Thereafter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt and capital lease obligations (1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,325</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating lease commitments (2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,711</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft purchase commitments (3)(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,939</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Regional jet capacity purchase agreements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,521</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,496</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Excludes related interest amounts.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Includes aircraft obligations financed under enhanced equipment
    trust certificates.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    As long as US&nbsp;Airways Group operates under the protection
    of Chapter&nbsp;11 in compliance with the bankruptcy code and
    unless US&nbsp;Airways Group assumes the aircraft purchase
    agreements pursuant to Section&nbsp;365 of the bankruptcy code,
    neither US&nbsp;Airways&nbsp;Group nor the aircraft
    manufacturers have any obligation in respect to the purchase or
    delivery of regional jet aircraft beyond the commitments for
    deliveries in the first quarter of 2005 discussed below.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    The minimum determinable payments associated with these
    acquisition agreements for all firm-order aircraft include
    progress payments, payments at delivery, spares, capitalized
    interest and nonrefundable deposits.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, US&nbsp;Airways Group had 19
A320-family aircraft on firm order scheduled for delivery in the
years 2007 through 2009. US&nbsp;Airways Group also had ten
A330-200 aircraft on firm order scheduled for delivery in the
years 2007 through 2009. On February&nbsp;3, 2005, the
bankruptcy court approved US&nbsp;Airways Group&#146;s agreement
with Airbus providing for, among other things, delivery of the
19 A320-
</DIV>

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<DIV align="left" style="font-size: 10pt;">
family aircraft in years 2008 through 2010, and delivery of the
ten A330-200 aircraft in years 2008 through 2009. Subsequently,
a Memorandum of Understanding was executed on May&nbsp;18, 2005
among Airbus, US&nbsp;Airways Group, US&nbsp;Airways, Inc. and
America West Airlines, Inc. which provides for a
$250&nbsp;million financing commitment from Airbus upon the
satisfaction of various conditions precedent (including the
completion of the merger and the emergence of US&nbsp;Airways,
Inc. from bankruptcy), the rescheduling of US&nbsp;Airways
Inc.&#146;s A320-family and A330-200 delivery commitments, and
the order of 20 A350 aircraft for which Airbus has agreed to
provide a substantial portion of the financing, subject to
certain terms and conditions. Pursuant to the Airbus MOU,
US&nbsp;Airways Inc.&#146;s A320-family aircraft are scheduled
for delivery in 2009 and 2010, US&nbsp;Airways Inc.&#146;s
A330-200 aircraft will be scheduled for delivery in 2009 and
2010 and the A350 aircraft deliveries are scheduled to occur
during the period 2011 through 2013. The Airbus MOU also
substantially eliminates cancellation penalties on
US&nbsp;Airways Group&#146;s orders for ten A330-200 aircraft,
provided that New US Airways Group has met certain predelivery
payment obligations under the related A350 order.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group acquired three new Embraer EMB-170
aircraft and three new Bombardier CRJ-700 aircraft in January
2005. US&nbsp;Airways Group also has firm orders for three
additional EMB-170 aircraft which were scheduled to be delivered
by March&nbsp;31, 2005. Due to US&nbsp;Airways Group&#146;s
failure to take delivery by March&nbsp;31, 2005 of the remaining
three EMB-170 aircraft, damages are accruing from and after
April&nbsp;1, 2005 at the rate of $162,795&nbsp;per month per
aircraft until July&nbsp;31, 2005, at which time Embraer&#146;s
obligation to deliver those aircraft will terminate and its
damages with respect to the undelivered aircraft may be as much
as $10&nbsp;million, rather than at the rate of
$162,795&nbsp;per month, with Embraer having the right to apply
any remaining purchase deposits against Embraer&#146;s aggregate
damages. As a result of regional jet aircraft acquisitions,
US&nbsp;Airways Group did not take delivery of certain
previously ordered narrow-body aircraft and recorded an accrual
of $35&nbsp;million for related penalties during the three
months ended June&nbsp;30, 2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Off-Balance Sheet Arrangements</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An off-balance sheet arrangement is any transaction, agreement
or other contractual arrangement involving an unconsolidated
entity under which a company has (1)&nbsp;made guarantees,
(2)&nbsp;a retained or a contingent interest in transferred
assets, (3)&nbsp;an obligation under derivative instruments
classified as equity or (4)&nbsp;any obligation arising out of a
material variable interest in an unconsolidated entity that
provides financing, liquidity, market risk or credit risk
support to US&nbsp;Airways Group, or that engages in leasing,
hedging or research and development arrangements with
US&nbsp;Airways Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group has no off-balance sheet arrangements of
the types described in the first three categories that it
believes may have a material current or future effect on its
financial condition, liquidity or results of operations. Certain
guarantees that US&nbsp;Airways Group does not expect to have a
material current or future effect on its financial condition,
liquidity or results of operations are disclosed in
note&nbsp;7(e) to the consolidated financial statements included
in US&nbsp;Airways Group&#146;s Annual Report on Form 10-K,
attached to this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group does have obligations arising out of
variable interests in unconsolidated entities. In 2003,
US&nbsp;Airways Group adopted Financial Accounting Standards
Board Interpretation No.&nbsp;46, &#147;Consolidation of
Variable Interest Entities,&#148; or FIN&nbsp;46, which
addresses the accounting for these variable interests. An entity
is subject to FIN&nbsp;46 and is called a variable interest
entity, or VIE, if it has (1)&nbsp;equity that is insufficient
to permit the entity to finance its activities without
additional subordinated financial support from other parties, or
(2)&nbsp;equity investors that cannot make significant decisions
about the entity&#146;s operations, or that do not absorb the
expected losses or receive the expected returns of the entity. A
VIE is consolidated by its primary beneficiary, which is the
party involved with the VIE that has a majority of the expected
losses or a majority of the expected residual returns or both,
as a result of ownership, contractual or other financial
interests in the VIE. The adoption of FIN&nbsp;46 did not
materially affect US&nbsp;Airways Group&#146;s financial
statements. In reaching this conclusion, US&nbsp;Airways Group
identified certain lease arrangements that were within the scope
of FIN&nbsp;46. This included a review of 62 aircraft operating
leases for which US&nbsp;Airways Group was the lessee and a pass
through trust established specifically to purchase, finance and
lease the aircraft to US&nbsp;Airways&nbsp;Group served as
lessor. These trusts, which issue certificates, also known as
Enhanced
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Equipment Trust&nbsp;Certificates or EETC, allow US&nbsp;Airways
Group to raise the financing for several aircraft at one time
and place these funds in escrow pending the purchase or delivery
of the relevant aircraft. The trusts are also structured to
provide for certain credit enhancements, such as liquidity
facilities to cover certain interest payments, that reduce the
risks to the purchasers of the trust certificates and, as a
result, reduce the cost of aircraft financing to US&nbsp;Airways
Group. Each of these leases contains a fixed-price purchase
option that allows US&nbsp;Airways Group to purchase the
aircraft at predetermined prices on specified dates during the
latter part of the lease term. However, US&nbsp;Airways Group
does not guarantee the residual value of the aircraft, and
US&nbsp;Airways Group does not believe it is the primary
beneficiary under these lease arrangements based upon its cash
flow analysis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group also reviewed long-term operating leases
at a number of airports, including leases where US&nbsp;Airways
Group is also the guarantor of the underlying debt. These leases
are typically with municipalities or other governmental
entities. FIN&nbsp;46, as revised in December 2003, provided a
scope exception that generally precludes the consolidation of
governmental organizations or financing entities established by
a governmental organization. US&nbsp;Airways Group believes that
its arrangements meet the scope exception.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Critical Accounting Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group&#146;s discussion and analysis of its
financial condition and results of operations are based upon
US&nbsp;Airways Group&#146;s consolidated financial statements,
which have been prepared in conformity with accounting
principles generally accepted in the United States of America.
The preparation of these financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Critical accounting policies are defined as those that are
reflective of significant judgments and uncertainties and
potentially result in materially different results under
different assumptions and conditions. US&nbsp;Airways Group has
identified the following critical accounting policies that
impact the preparation of its financial statements. See also
note&nbsp;2, Summary of Significant Accounting Policies, to the
notes to US&nbsp;Airways Group&#146;s consolidated financial
statements included in US&nbsp;Airways Group&#146;s Annual
Report on Form&nbsp;10-K for the year ended December&nbsp;31,
2004 and Quarterly Report on Form&nbsp;10-Q for the quarterly
period ended March&nbsp;31, 2005, attached as annexes to this
prospectus, for additional discussion of the application of
these estimates and other accounting policies.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Impairment of Goodwill</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective January&nbsp;1, 2002 US&nbsp;Airways Group adopted the
provisions of Statement of Financial Accounting Standards, or
SFAS, No.&nbsp;142, &#147;Goodwill and Other Intangible
Assets.&#148; SFAS&nbsp;142 requires management to make
judgments about the fair value of the reporting unit to
determine whether goodwill is impaired. The reporting unit is
US&nbsp;Airways Group. US&nbsp;Airways Group believes that this
accounting estimate is a critical accounting estimate because:
(1)&nbsp;goodwill is a significant asset and (2)&nbsp;the impact
that recognizing an impairment would have on the assets reported
on its consolidated balance sheet, as well as its consolidated
statement of operations, could be material. Goodwill is tested
annually for impairment or more frequently if events or changes
in circumstances indicate that it might be impaired.
US&nbsp;Airways&nbsp;Group assesses the fair value of the
reporting unit considering both the income approach and market
approach. Under the market approach, the fair value of the
reporting unit is based on quoted market prices and the number
of shares outstanding for US&nbsp;Airways Group common stock.
Under the income approach, the fair value of the reporting unit
is based on the present value of estimated future cash flows.
The income approach is dependent on a number of factors
including estimates of future market growth trends, forecasted
revenues and expenses, expected periods the assets will be
utilized, appropriate discount rates and other variables.
US&nbsp;Airways&nbsp;Group bases its estimates on assumptions
that it believes to be reasonable, but which are unpredictable
and inherently uncertain. Actual future results may differ from
those estimates. US&nbsp;Airways&nbsp;Group concluded that the
fair value of the reporting unit was in excess of the carrying
value and
</DIV>

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<DIV align="left" style="font-size: 10pt;">
therefore not impaired during 2004. Cash flow projections for
US&nbsp;Airways Group&#146;s 2004 test were prepared on a
going-concern basis. Additionally, in the third and fourth
quarters of 2004, the carrying value of
US&nbsp;Airways&nbsp;Group&#146;s net assets was less than zero.
See note&nbsp;2(g) to US&nbsp;Airways Group&#146;s consolidated
financial statements for details regarding past goodwill
impairment tests.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Impairment of Long-Lived Assets and Intangible
    Assets</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group assesses the impairment of long-lived
assets and intangible assets whenever events or changes in
circumstances indicate that the carrying value may not be
recoverable. Factors which could trigger an impairment review
include the following: significant changes in the manner of use
of the assets; significant underperformance relative to
historical or projected future operating results; or significant
negative industry or economic trends. US&nbsp;Airways Group
determines that an impairment has occurred when the future
undiscounted cash flows estimated to be generated by those
assets are less than the carrying amount of those items. Cash
flow estimates are based on historical results adjusted to
reflect US&nbsp;Airways Group&#146;s best estimate of future
market and operating conditions. The net carrying value of
assets not recoverable is reduced to fair value. Estimates of
fair value represent US&nbsp;Airways Group&#146;s best estimate
based on appraisals, industry trends and reference to market
rates and transactions. Changes in industry capacity and demand
for air transportation can significantly impact the fair value
of aircraft and related assets. US&nbsp;Airways Group recorded
an aircraft impairment charge of $392&nbsp;million in 2002. See
&#147;Description of Unusual Items&#148; above for details
regarding this impairment charge.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Passenger Revenue Recognition</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group recognizes passenger transportation
revenue and related commission expense when transportation is
rendered. Passenger ticket sales collected prior to the
transportation taking place are reflected in traffic balances
payable and unused tickets on US&nbsp;Airways Group&#146;s
consolidated balance sheet. Due to various factors including
refunds, exchanges, unused tickets and transactions involving
other carriers, certain amounts are recorded based on estimates.
These estimates are based upon historical experience and have
been consistently applied to record revenue. US&nbsp;Airways
Group routinely performs evaluations of the liability that may
result in adjustments which are recognized as a component of
passenger transportation revenue. Actual refund, exchange and
expiration activity may vary from estimated amounts.
US&nbsp;Airways Group has experienced changes in customer travel
patterns resulting from various factors, including new airport
security measures, concerns about further terrorist attacks and
an uncertain economy, resulting in more forfeited tickets and
fewer refunds. Therefore, during the fourth quarter of 2003, a
$34&nbsp;million favorable adjustment was made to passenger
transportation revenue to reflect an increase in expired tickets.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Frequent Traveler Program</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways, Inc.&#146;s Dividend Miles frequent traveler
program awards miles to passengers who fly on US&nbsp;Airways,
Inc., US&nbsp;Airways Express, Star Alliance carriers and
certain other airlines that participate in the program.
US&nbsp;Airways, Inc. also sells mileage credits to
participating airline partners and non-airline business
partners. US&nbsp;Airways Group has an obligation to provide
this future travel and has therefore recognized an expense and
recorded a liability for mileage awards to passengers redeeming
on US&nbsp;Airways, Inc. or an airline partner. Members may
redeem outstanding miles for travel on any airline that
participates in the program, in which case US&nbsp;Airways, Inc.
pays a designated amount to the transporting carrier.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Members may not reach the threshold necessary for a free ticket
and outstanding miles may not be redeemed for free travel.
Therefore, US&nbsp;Airways Group estimates how many miles will
never be used for an award and excludes those miles from the
estimate of the liability. A portion of the mileage credits of
Dividend Miles participants who have excessive balances are also
excluded from the liability. Estimates are also made for the
number of miles that will be used per award and the number of
awards that will be redeemed on partner airlines. These
estimates are based upon past customer behavior. Estimated
future travel awards for travel on US&nbsp;Airways, Inc. are
valued at the estimated average incremental cost of carrying one
additional passenger. Incremental costs include unit costs for
passenger food, beverages and supplies, credit card fees, fuel,
communications, insurance and denied boarding compensation. No
profit or overhead margin
</DIV>

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<DIV align="left" style="font-size: 10pt;">
is included in the accrual for incremental costs. For travel
awards on partner airlines, the liability is based upon the
gross payment to be paid to the other airline for redemption on
the other airline. A change to these costs estimates, actual
redemption activity or award redemption level could have a
significant impact on the liability in the year of change as
well as future years. Incremental changes in the liability
resulting from participants earning or redeeming mileage credits
or changes in assumptions used for the related calculations are
recorded as part of the regular review process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004 and 2003, Dividend Miles
participants had accumulated mileage credits for approximately
4.0&nbsp;million and 6.3&nbsp;million awards, respectively. The
reduction in estimated awards from 2003 to 2004 is a result of
changes in the program and related assumptions, including the
increase in redemptions on partner airlines. Because
US&nbsp;Airways, Inc. expects that some potential awards will
never be redeemed, the calculation of the frequent traveler
liability is based on approximately 80% of potential awards. The
liability for the future travel awards was $73&nbsp;million and
$85&nbsp;million as of December&nbsp;31, 2004 and 2003,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The number of awards redeemed for free travel during the years
ending December&nbsp;31, 2004, 2003 and 2002 was approximately
1.5&nbsp;million, 1.2&nbsp;million and 1.3&nbsp;million,
respectively, representing approximately 8% of US&nbsp;Airways,
Inc.&#146;s RPMs in each of those years. These low percentages
as well as the use of certain inventory management techniques
minimize the displacement of revenue passengers by passengers
traveling on Dividend Miles award tickets. In addition to the
awards issued for travel on US&nbsp;Airways, Inc., approximately
20% of the total awards redeemed in 2004 were for travel on
partner airlines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways, Inc. defers a portion of the revenue from the
sale of mileage credits to participating airline and non-airline
partners. The deferred revenue is recognized over the period in
which the credits are expected to be redeemed for travel. A
change to either the period over which the credits are used or
the estimated fair value of credits sold could have a
significant impact on revenue in the year of change as well as
future years.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Pensions and Other Postretirement Benefits</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group accounts for its defined benefit pension
plans using SFAS&nbsp;No.&nbsp;87, &#147;Employer&#146;s
Accounting for Pensions,&#148; and its other postretirement
benefit plans using SFAS&nbsp;No.&nbsp;106,
&#147;Employer&#146;s Accounting for Postretirement Benefits
Other than Pensions.&#148; Under both SFAS&nbsp;87 and
SFAS&nbsp;106, expense is recognized on an accrual basis over
employees&#146; approximate service periods. Expenses calculated
under SFAS&nbsp;87 and SFAS&nbsp;106 are generally independent
of funding decisions or requirements. Exclusive of fresh-start
charges, curtailment and settlement items, US&nbsp;Airways Group
recognized defined benefit pension plan expense of
$66&nbsp;million, $52&nbsp;million, $50&nbsp;million and
$326&nbsp;million for the year ended December&nbsp;31, 2004, the
nine months ended December&nbsp;31, 2003, the three months ended
March&nbsp;31, 2003 and the year ended December&nbsp;31, 2002,
respectively, and other postretirement benefit expense of
$105&nbsp;million, $96&nbsp;million, $36&nbsp;million and
$145&nbsp;million for the year ended December&nbsp;31, 2004, the
nine months ended December&nbsp;31, 2003, the three months ended
March&nbsp;31, 2003 and the year ended December&nbsp;31, 2002,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;12, 2004, US&nbsp;Airways, Inc. filed a motion
requesting a determination from the bankruptcy court that
US&nbsp;Airways, Inc. satisfied the financial requirements for a
distress termination of the three mainline defined benefit plans
under section&nbsp;4041(c)(2)(B)(ii)(IV) of ERISA, and approval
of each plan&#146;s termination. These plans were projected to
have benefit obligations aggregating $2.7&nbsp;billion and plan
assets aggregating $1.7&nbsp;billion as of September&nbsp;30,
2004, the most recent valuation date. On January&nbsp;6, 2005,
the bankruptcy court entered an order (i)&nbsp;finding that the
financial requirements under section&nbsp;4041(c)(2)(B)(ii)(IV)
of ERISA for a distress termination of the plans had been met
and (ii)&nbsp;approving termination of the plans. The AFA
pension plan and the IAM pension plan were terminated effective
January&nbsp;10, 2005 by agreement between the PBGC and
US&nbsp;Airways, Inc. The Certain Employees pension plan was
terminated effective January&nbsp;17, 2005 by agreement between
the PBGC and US&nbsp;Airways, Inc. Effective February&nbsp;1,
2005, the PBGC was appointed trustee for each of the three plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During hearings in late 2004 and January 2005, the bankruptcy
court approved various settlement agreements between
US&nbsp;Airways, Inc. and its unions, and between
US&nbsp;Airways Group and the court-appointed Section&nbsp;1114
Committee, representing retirees other than those represented by
the IAM, to begin the significant curtailments of
US&nbsp;Airways Group&#146;s other postretirement benefits.
US&nbsp;Airways Group&#146;s
</DIV>

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<DIV align="left" style="font-size: 10pt;">
unfunded obligations for these benefits aggregated
$1.4&nbsp;billion as of September&nbsp;30, 2004, the most recent
valuation date.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Fresh-start Reporting</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with SOP&nbsp;90-7, US&nbsp;Airways Group adopted
fresh-start reporting upon emergence from the prior bankruptcy.
Accordingly, US&nbsp;Airways Group valued its assets,
liabilities and equity at fair value. The excess of the
reorganization value over tangible assets and identifiable
intangible assets has been reflected as goodwill on
US&nbsp;Airways Group&#146;s consolidated balance sheet.
Estimates of fair value represent
US&nbsp;Airways&nbsp;Group&#146;s best estimate based on
independent appraisals and valuations and, where the foregoing
are not available, industry trends and by reference to market
rates and transactions. US&nbsp;Airways Group&#146;s fresh-start
equity value of $438&nbsp;million at March&nbsp;31, 2003 was
determined with the assistance of financial advisors. The
estimates and assumptions are inherently subject to significant
uncertainties and contingencies beyond the control of
US&nbsp;Airways Group. Accordingly, there can be no assurance
that the estimates, assumptions, and values reflected in the
valuations will be realized, and actual results could vary
materially. See note&nbsp;13 to US&nbsp;Airways Group&#146;s
consolidated financial statements for further detail related to
the fresh-start fair value adjustments.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Recent Accounting and Reporting Developments</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September 2004, the Financial Accounting Standards Board, or
FASB, issued FASB Staff Position Emerging Issues Task Force, or
EITF, Issue&nbsp;03-1-1, Effective Date of
Paragraphs&nbsp;10&#150;20 of EITF Issue No.&nbsp;03-1,
&#147;The Meaning of Other Than Temporary Impairment and Its
Application to Certain Investments,&#148; which delays the
effective date for the recognition and measurement guidance in
EITF Issue No.&nbsp;03-1. In addition, the FASB has issued a
proposed Staff Position to consider whether further application
guidance is necessary for securities analyzed for impairment
under EITF Issue No.&nbsp;03-1. US&nbsp;Airways Group continues
to assess the potential impact that the adoption of the proposed
Staff Position could have on its financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the FASB issued SFAS&nbsp;No.&nbsp;151,
&#147;Inventory Costs,&#148; which clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling
costs and wasted material. SFAS&nbsp;151 will be effective for
inventory costs incurred beginning January&nbsp;1, 2006.
US&nbsp;Airways Group does not believe the adoption of
SFAS&nbsp;151 will have a material impact on its financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;153,
&#147;Exchanges of Nonmonetary Assets,&#148; which eliminates
the exception for nonmonetary exchanges of similar productive
assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance.
SFAS&nbsp;153 will be effective for nonmonetary asset exchanges
occurring after July&nbsp;1, 2005. US&nbsp;Airways&nbsp;Group is
currently evaluating the impact of SFAS&nbsp;153 on its
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;123(R),
&#147;Share-Based Payment,&#148; SFAS&nbsp;123(R), which
establishes standards for transactions in which an entity
exchanges its equity instruments for goods or services. This
standard requires a public entity to measure the cost of
employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award.
This eliminates the exception to account for these awards using
the intrinsic method previously allowable under Accounting
Principle Board Opinion No.&nbsp;25. US&nbsp;Airways Group
previously adopted the fair value recognition provisions of
SFAS&nbsp;123, &#147;Accounting for Stock-Based
Compensation,&#148; upon emergence from the prior bankruptcy on
March&nbsp;31, 2003. Accordingly, US&nbsp;Airways Group believes
SFAS&nbsp;123(R) will not have a material impact on its
financial statements. US&nbsp;Airways&nbsp;Group currently
expects to adopt SFAS&nbsp;123(R) upon the earlier of emergence
from Chapter&nbsp;11 or January&nbsp;1, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Quantitative and Qualitative Disclosures About Market Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group&#146;s primary market risk exposures
include commodity price risk (i.e., the price paid to obtain
aviation fuel), interest rate risk and equity price risk. The
potential impact of adverse increases in these risks and general
strategies employed by US&nbsp;Airways Group to manage these
risks are discussed below. The risks identified below are
consistent from year to year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following sensitivity analyses do not consider the effects
that an adverse change may have on the overall economy nor do
they consider additional actions US&nbsp;Airways Group may take
to mitigate its exposure to these changes. Actual results of
changes in prices or rates may differ materially from the
following hypothetical results.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Commodity Price Risk</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prices and availability of all petroleum products are subject to
political, economic and market factors that are generally
outside of US&nbsp;Airways Group&#146;s control. Accordingly,
the price and availability of aviation fuel, as well as other
petroleum products, can be unpredictable. Prices may be affected
by many factors, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the impact of political instability on crude production,
    especially in Russia and OPEC countries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    unexpected changes to the availability of petroleum products due
    to disruptions in distribution systems or refineries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    unpredicted increases to oil demand due to weather or the pace
    of economic growth;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    inventory levels of crude, refined products and natural
    gas;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    other factors, such as the relative fluctuation between the
    U.S.&nbsp;dollar and other major currencies and influence of
    speculative positions on the futures exchanges.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because the operations of US&nbsp;Airways Group are dependent
upon aviation fuel, significant increases in aviation fuel costs
materially and adversely affect US&nbsp;Airways Group&#146;s
liquidity, results of operations and financial condition. Given
forecasted fuel consumption of approximately 1.14&nbsp;billion
gallons per year for US&nbsp;Airways Group, a one cent per
gallon increase in fuel price results in a $1&nbsp;million per
month increase in expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group has utilized financial derivatives,
including fixed price swap agreements, collar structures and
other similar instruments to manage some of the risk associated
with changes in aviation fuel prices. As of March&nbsp;31, 2005,
US&nbsp;Airways Group had no open fuel hedge positions in place.
US&nbsp;Airways&nbsp;Group previously liquidated hedges
representing approximately 4% of its 2005 anticipated fuel
requirements and recognized a $6&nbsp;million reduction to fuel
expense for the three months ended March&nbsp;31, 2005.
US&nbsp;Airways Group will continue to recognize a
$2&nbsp;million reduction to expense per month through December
2005. US&nbsp;Airways Group had $16&nbsp;million of unrealized
gains related to fuel hedge positions recorded in accumulated
other comprehensive income, net of income tax effect, on its
consolidated balance sheet at March&nbsp;31, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Interest Rate Risk</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Exposure to interest rate risk relates primarily to
US&nbsp;Airways Group&#146;s cash equivalents and short-term
investments portfolios and debt obligations. As of
December&nbsp;31, 2004 and 2003, US&nbsp;Airways Group had
$1.63&nbsp;billion and $1.53&nbsp;billion of variable-rate debt
outstanding, respectively. Assuming a hypothetical 10% increase
in average interest rates during 2005 as compared to 2004,
interest expense would increase by
</DIV>

<P align="center" style="font-size: 10pt;">159

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
$8&nbsp;million. Additional information regarding
US&nbsp;Airways Group&#146;s debt obligations as of
December&nbsp;31, 2004 is as follows (dollars in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>Expected Maturity Date</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2006</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2007</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2008</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2009</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Thereafter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fixed-rate debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$&nbsp;66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$1,296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$1,698</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted avg. interest rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Variable-rate debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$&nbsp;572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>$1,627</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted avg. interest rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of US&nbsp;Airways Group&#146;s Chapter&nbsp;11
filing, the fair value of the debt outstanding could not be
reasonably determined as of December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As noted in &#147;Contractual Obligations&#148; above,
US&nbsp;Airways Group has future aircraft purchase commitments
of $1.93&nbsp;billion. US&nbsp;Airways Group expects to lease or
mortgage a majority of those commitments. Changes in interest
rates will impact the cost of these financings.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Equity Price Risk</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways, Inc. holds Sabre Holdings Corporation stock
options that have a fair value and carrying value of
$10&nbsp;million as of December&nbsp;31, 2004. Fair value is
computed using the Black-Scholes stock option pricing model. A
hypothetical ten percent decrease in the December&nbsp;31, 2004
value of the Sabre Holdings Corporation stock price would
decrease the fair value of the stock options by $2&nbsp;million.
See note&nbsp;3(b) to US&nbsp;Airways Group&#146;s notes to its
consolidated financial statements for information related to the
fair value of these options.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='188'></A>
</DIV>

<!-- link1 "LEGAL MATTERS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>LEGAL MATTERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The validity of the issuance of the shares of New
US&nbsp;Airways Group common stock offered by this prospectus
will be passed upon for us by Elizabeth K. Lanier, US Airways
Group Executive Vice President&nbsp;&#151; Corporate Affairs and
General Counsel. As of June&nbsp;27, 2005, Ms.&nbsp;Lanier was
the beneficial owner of approximately 188,400 shares of
US&nbsp;Airways Group Class&nbsp;A common stock and had warrants
to purchase an aggregate of 111,600&nbsp;shares of
US&nbsp;Airways Group Class&nbsp;A common stock within the next
60&nbsp;days. We expect that these shares and warrants will be
cancelled pursuant to the debtors&#146; plan of reorganization.
Certain matters in connection with this rights offering will be
passed upon for Merrill Lynch by Cahill Gordon&nbsp;&#38;
Reindel <FONT style="font-variant:SMALL-CAPS">llp</FONT>, New
York, New York.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='189'></A>
</DIV>

<!-- link1 "EXPERTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EXPERTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>US Airways Group.</I> The consolidated financial statements
of US Airways Group and its subsidiaries as of December&nbsp;31,
2004 and 2003, and for the year ended December&nbsp;31, 2004 and
the nine months ended December&nbsp;31, 2003 for the successor
company and the three months ended March&nbsp;31, 2003 and the
year ended December&nbsp;31, 2002 for the predecessor company,
and management&#146;s assessment of the effectiveness of
internal control over financial reporting as of
December&nbsp;31, 2004, have been included herein and in the
registration statement in reliance upon the reports of KPMG LLP,
an independent registered public accounting firm, appearing
elsewhere herein, and upon the authority of said firm as experts
in accounting and auditing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The audit report of KPMG LLP, dated February&nbsp;25, 2005, on
the December&nbsp;31, 2004 consolidated financial statements
contains an explanatory paragraph that states that US Airways
Group&#146;s significant recurring losses from operations,
accumulated deficit and ongoing reorganization under
Chapter&nbsp;11 of the federal bankruptcy laws raise substantial
doubt about the entity&#146;s ability to continue as a going
concern. The consolidated financial statements do not include
any adjustments that might result from the outcome of that
uncertainty.
</DIV>

<P align="center" style="font-size: 10pt;">160

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The audit report of KPMG LLP, dated February&nbsp;25, 2005, on
the December&nbsp;31, 2004 consolidated financial statements
refers to the adoption of fresh-start reporting pursuant to
Statement of Position&nbsp;90-7, &#147;Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code&#148; as of
March&nbsp;31, 2003. As a result, the consolidated financial
statements of the successor company are presented on a different
basis than those of the predecessor company and, therefore, are
not comparable in all respects. The audit report covering the
December&nbsp;31, 2004 financial statements also refers to a
change in accounting for stock-based compensation as described
by SFAS&nbsp;No.&nbsp;148, &#147;Accounting for Stock-Based
Compensation&nbsp;&#151; Transition and Disclosure&#148; as of
April&nbsp;1, 2003 and a change in accounting for engine
maintenance effective January&nbsp;1, 2002 at PSA Airlines,
Inc., a wholly owned subsidiary of US Airways Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>America West Holdings.</I> The consolidated financial
statements of America West Holdings and America West Airlines,
Inc. (a wholly owned subsidiary of America West Holdings) as of
December&nbsp;31, 2004 and 2003, and for the years then ended
and America West Holdings management&#146;s assessment of the
effectiveness of internal control over financial reporting as of
December&nbsp;31, 2004 have been included herein and in the
registration statement in reliance upon the reports of KPMG LLP,
independent registered public accounting firm, appearing
elsewhere herein, and upon the authority of said firm as experts
in accounting and auditing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The report of KPMG LLP, dated March&nbsp;11, 2005, on America
West Holdings management&#146;s assessment of the effectiveness
of internal control over financial reporting and the
effectiveness of internal control over financial reporting as of
December&nbsp;31, 2004, expresses KPMG&#146;s opinion that
America West Holdings did not maintain effective internal
control over financial reporting as of December&nbsp;31, 2004
because of the effect of a material weakness on the achievement
of the control criteria and contains an explanatory paragraph
that states that America West Holdings did not maintain
effective internal control over financial reporting due to a
material weakness associated with its accounting for America
West Airlines, Inc.&#146;s fuel hedging transactions. Management
concluded that America West Airlines Inc.&#146;s fuel hedging
transactions did not qualify for hedge accounting under
U.S.&nbsp;generally accepted accounting principles and that
America West Holdings&#146; and America West Airlines,
Inc.&#146;s financial statements for prior periods required
restatement to reflect the fair value of fuel hedging contracts
in the balance sheets and statements of stockholders&#146;
equity and comprehensive income of America West Holdings and
America West Airlines, Inc. These accounting errors were the
result of deficiencies in its internal control over financial
reporting from the lack of effective reviews of hedge
transaction documentation and of quarterly mark-to-market
accounting entries on open fuel hedging contracts by personnel
at an appropriate level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated statements of operations, of cash flows and of
stockholders&#146; equity and comprehensive income and the
related financial statement schedule of America West Holdings
and its subsidiaries for the year ended December&nbsp;31, 2002
included in Annex&nbsp;B-1 to this prospectus have been so
included in reliance on the reports of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on
the authority of said firm as experts in auditing and accounting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated statements of operations, of cash flows and of
stockholder&#146;s equity and comprehensive income and the
related financial statement schedule of America West Airlines,
Inc. (a wholly-owned subsidiary of America West Holdings) for
the year ended December&nbsp;31, 2002 included in Annex&nbsp;B-1
to this prospectus have been so included in reliance on the
reports of PricewaterhouseCoopers LLP, an independent registered
public accounting firm, given on the authority of said firm as
experts in auditing and accounting.
</DIV>

<P align="center" style="font-size: 10pt;">161
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<DIV align="left" style="font-size: 10pt;">
 <A name='192'></A>
</DIV>

<!-- link1 "ANNEX A-1" -->

<DIV align="right" style="font-size: 10pt;">
<B>ANNEX A-1</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US&nbsp;Airways Group, Inc.&#146;s Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2004</B>
</DIV>

<P align="center" style="font-size: 10pt;">A-1

<!-- PAGEBREAK -->
<P><HR noshade><P>
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<DIV align="center" style="font-size: 2pt;">
<FONT style="font-size: 10pt">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</FONT>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt;">
<B>Form 10-K</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 12pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
</TR>

<TR style="font-size: 10pt;">
    <TD align="center" nowrap>(Mark One)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="wingdings">&#254;
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>ANNUAL REPORT PURSUANT TO SECTION&nbsp;13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>For the fiscal year ended December&nbsp;31, 2004</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <B>or</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="wingdings">&#111;</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>TRANSITION REPORT PURSUANT TO SECTION&nbsp;13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>For the transition period
    from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="p70803k7080300.gif" alt="(US AIRWAYS GROUP, INC. LOGO)">
</DIV>

<DIV align="center" style="font-size: 24pt;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 24pt;">
<B>(Debtor-in-Possession)</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact name of registrant as specified in its charter)</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>State of Incorporation: Delaware</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2345 Crystal Drive</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Arlington, Virginia 22227</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Address of principal executive offices)</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>(703)&nbsp;872-7000</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Registrant&#146;s telephone number, including area code)</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>(Commission file number: 1-8444)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(I.R.S. Employer Identification No: 54-1194634)</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Securities registered pursuant to Section&nbsp;12(b) of the
Act: None</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Securities registered pursuant to Section&nbsp;12(g) of the
Act:</B>
</DIV>

<DIV align="center" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><U>Title of Each Class</U></B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
Class&nbsp;A common stock, par value $1.00&nbsp;per share
(Class&nbsp;A Common Stock)
</DIV>

<DIV align="center" style="font-size: 10pt;">
Class&nbsp;B common stock, par value $1.00&nbsp;per share
(Class&nbsp;B Common Stock)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark whether the registrant: (1)&nbsp;has
filed all reports required to be filed by Section&nbsp;13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12&nbsp;months (or for such shorter period that the
registrant was required to file such reports), and (2)&nbsp;has
been subject to such filing requirements for the past
90&nbsp;days.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;<FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark if disclosure of delinquent filers
pursuant to Item&nbsp;405 of Regulation&nbsp;S-K is not
contained herein, and will not be contained, to the best of
registrant&#146;s knowledge, in definitive proxy or information
statements incorporated by reference in Part&nbsp;III of this
Form&nbsp;10-K or any amendment to this
Form&nbsp;10-K.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule&nbsp;12b-2 of the
Act).&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;<FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The aggregate market value of common stock held by
non-affiliates of the registrant as of June&nbsp;30, 2004 was
approximately $11,676,500.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section&nbsp;12,
13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a
court.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;<FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;18, 2005, there were outstanding approximately
51,643,527&nbsp;shares of Class&nbsp;A Common Stock and
5,000,000&nbsp;shares of Class&nbsp;B Common Stock.
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Form&nbsp;10-K</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Year Ended December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TABLE OF CONTENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="18%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>&nbsp;<A HREF='#201'>Part&nbsp;I</A></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#202'>Item&nbsp;1.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#202'>Business</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#203'>Overview</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#204'>Airline Industry and the
    Company&#146;s Position in the Marketplace</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#205'>Marketing Agreements with Other
    Airlines</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#206'>Industry Regulation and Airport
    Access</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#207'>Employees</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#208'>Aviation Fuel</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#209'>Airline Ticket Distribution</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#210'>Frequent Traveler Program</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#211'>Insurance</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#212'>Item&nbsp;2.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#212'>Properties</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#213'>Flight Equipment</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#214'>Ground Facilities</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#215'>Terminal Construction
    Projects</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#216'>Item&nbsp;3.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#216'>Legal Proceedings</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>13</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#217'>Item&nbsp;4.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#217'>Submission of Matters to a Vote of Security
    Holders</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Part&nbsp;II</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#219'>Item&nbsp;5.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#219'>Market for US Airways Group&#146;s Common
    Equity, Related Stockholder Matters and Issuer Purchases of
    Equity Securities</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#220'>Stock Exchange Listing</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#221'>Market Prices of Common
    Stock</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#221'>Foreign Ownership
    Restrictions</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#223'>Item&nbsp;6.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#223'>Selected Financial Data</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#224'>Consolidated Statements of
    Operations</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#225'>Consolidated Balance Sheets</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#226'>Item&nbsp;7.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#226'>Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;Introduction</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#228'>Chapter&nbsp;11 Proceedings</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#229'>Results of Operations</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#230'>Selected Operating and
    Financial Statistics</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>28</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#231'>Liquidity and Capital
    Resources</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#232'>Off-Balance Sheet
    Arrangements</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>39</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#233'>Critical Accounting Policies</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>39</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;&nbsp;<A HREF='#234'>Recent Accounting and Reporting
    Developments</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#235'>Item&nbsp;7A.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#235'>Quantitative and Qualitative Disclosures
    About Market Risk</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>43</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#236'>Item&nbsp;8.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#236'>Financial Statements and Supplementary
    Data</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>45</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#237'>Item&nbsp;9.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#237'>Changes In and Disagreements With
    Accountants on Accounting and Financial Disclosure</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#238'>Item&nbsp;9A.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#238'>Controls and Procedures</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#239'>Item&nbsp;9B.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#239'>Other Information</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
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<CENTER>
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<TR style="font-size: 1pt;">
    <TD width="18%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>&nbsp;<A HREF='#240'>Part&nbsp;III</A></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#241'>Item&nbsp;10.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#241'>Directors and Executive Officers of US
    Airways Group</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>94</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#242'>Item&nbsp;11.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#242'>Executive Compensation</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>102</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#243'>Item&nbsp;12.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#243'>Security Ownership of Certain Beneficial
    Owners and Management</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>121</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#244'>Item&nbsp;13.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#244'>Certain Relationships and Related
    Transactions</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>127</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#245'>Item&nbsp;14.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#245'>Principal Accountant Fees and Services</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>&nbsp;<A HREF='#246'>Part&nbsp;IV</A></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#247'>Item&nbsp;15.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#247'>Exhibits and Financial Statement
    Schedules</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#248'>Consolidated Financial Statements</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>131</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#249'>Consolidated Financial Statement
    Schedules</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>131</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;<A HREF='#250'>Exhibits</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>131</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <B>&nbsp;<A HREF='#251'>Signatures</A></B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>140</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

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<DIV align="left" style="font-size: 10pt;">
<A name='201'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;I</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='202'></A>
</DIV>

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    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;1.&nbsp;</B></TD>
    <TD>
    <B>Business</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='203'></A>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways Group, Inc. (US Airways Group and collectively with
its consolidated subsidiaries, the Company) is a corporation
organized under the laws of the State of Delaware. The
Company&#146;s executive offices are located at 2345 Crystal
Drive, Arlington, Virginia 22227 (telephone number
(703)&nbsp;872-7000). The Company&#146;s internet address is
<I>usairways.com.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways Group&#146;s primary business activity is the
operation of a major network air carrier through its ownership
of the common stock of US Airways, Inc. (US Airways), Piedmont
Airlines, Inc. (Piedmont), PSA Airlines, Inc. (PSA), Material
Services Company, Inc. (MSC)&nbsp;and Airways Assurance Limited,
LLC (AAL). Effective July&nbsp;1, 2004, Allegheny Airlines, Inc.
merged with Piedmont, with Piedmont as the surviving entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in more detail below, on September&nbsp;12, 2004,
US Airways Group and its domestic subsidiaries, including its
principal operating subsidiary, US Airways, (collectively, the
Debtors), which account for substantially all of the operations
of the Company, filed voluntary petitions for relief under
Chapter&nbsp;11 of the United States Bankruptcy Code (Bankruptcy
Code) in the United States Bankruptcy Court for the Eastern
District of Virginia, Alexandria Division (Bankruptcy Court)
(Case Nos. 04-13819-SSM through 04-13823-SSM). The Debtors
continue to operate their businesses as
&#147;Debtors-in-Possession&#148; under the jurisdiction of the
Bankruptcy Court and in accordance with the applicable
provisions of the Bankruptcy Code and orders of the Bankruptcy
Court.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the Debtors in these cases had previously filed a
voluntary petition for relief under Chapter&nbsp;11 on
August&nbsp;11, 2002 (the Prior Bankruptcy). The Debtors emerged
from the Prior Bankruptcy under the First Amended Joint Plan of
Reorganization of US Airways Group, Inc. and Affiliated Debtors
and Debtors-in-Possession, As Modified (the 2003 Plan), which
was confirmed pursuant to an order of the Bankruptcy Court on
March&nbsp;18, 2003 and became effective on March&nbsp;31, 2003.
In accordance with AICPA Statement of Position&nbsp;90-7,
&#147;Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code,&#148; and in connection with the Prior
Bankruptcy, the Company adopted fresh-start reporting on
March&nbsp;31, 2003. References in the Consolidated Financial
Statements and the Notes to the Consolidated Financial
Statements to &#147;Predecessor Company&#148; refer to the
Company prior to March&nbsp;31, 2003. References to
&#147;Successor Company&#148; refer to the Company on and after
March&nbsp;31, 2003, after giving effect to the cancellation of
then-existing common stock and the issuance of new securities in
accordance with the 2003 Plan, and the application of
fresh-start reporting. As a result of the application of
fresh-start reporting, the Successor Company&#146;s financial
statements are not comparable with the Predecessor
Company&#146;s financial statements, because they are, in
effect, those of a new entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways, which is also a corporation organized under the laws
of the State of Delaware, is the Company&#146;s principal
operating subsidiary. US Airways is a certificated air carrier
engaged primarily in the business of transporting passengers,
property and mail. US Airways enplaned approximately
42&nbsp;million passengers in 2004 and was the seventh largest
U.S.&nbsp;air carrier (as ranked by revenue passenger miles
(RPMs)). As of December&nbsp;31, 2004, US Airways operated 281
jet aircraft and 22 regional jet aircraft (see Item&nbsp;2.
&#147;Properties&#148; for additional information related to
aircraft operated by US Airways) and provided regularly
scheduled service at 89 airports in the continental United
States, Canada, Mexico, France, Germany, Italy, Spain, Ireland,
the Netherlands, the United Kingdom and the Caribbean.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain air carriers have code share arrangements with US
Airways to operate under the trade name &#147;US&nbsp;Airways
Express.&#148; Typically, under a code share arrangement, one
air carrier places its designator code and sells tickets on the
flights of another air carrier (its code share partner). US
Airways Express carriers are an integral component of the
Company&#146;s operating network. Due to the relatively small
local traffic base at its hubs, US Airways relies heavily on
feed traffic from its US Airways Express affiliates, who carry
passengers from low-density markets that are uneconomical for US
Airways to serve with large jets to US&nbsp;Airways&#146; hubs.
As of December 2004, the US Airways Express network served 127
airports in the
</DIV>

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<DIV align="left" style="font-size: 10pt;">
continental United States, Canada and the Bahamas, including 42
airports also served by US&nbsp;Airways. During 2004, US Airways
Express air carriers enplaned approximately 15.2&nbsp;million
passengers, approximately 48% of whom connected to the
Company&#146;s flights. Of these 15.2&nbsp;million passengers,
approximately 6.2&nbsp;million were enplaned by the
Company&#146;s wholly owned regional airlines, approximately
7.4&nbsp;million were enplaned by third-party carriers operating
under capacity purchase agreements and approximately
1.6&nbsp;million were enplaned by carriers operating under
prorate agreements, as described below. In addition, US Airways
Express operators offer complementary service in existing US
Airways markets by operating flights during off-peak periods
between US Airways flights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The US Airways Express code share arrangements are either in the
form of capacity purchase or prorate agreements. The two wholly
owned regional airlines and the regional jet affiliate operators
are capacity purchase relationships. The regional jet affiliates
with capacity purchase agreements are Chautauqua Airlines
(Chautauqua), Mesa Airlines, Inc. (Mesa), Trans States Airlines,
Inc. (Trans States) and Midway Airlines Corporation (Midway)
prior to Midway ceasing service in October 2003. The capacity
purchase agreements provide that all revenues (passenger, mail
and freight) go to US Airways. In return, US Airways agrees to
pay predetermined fees to such airlines for operating an agreed
number of aircraft, without regard to the number of passengers
onboard. In addition, these agreements provide that certain
variable costs, such as fuel and airport landing fees, will be
reimbursed 100% by US Airways. US Airways controls marketing,
scheduling, ticketing, pricing and seat inventories. The
regional jet capacity purchase agreements have expirations from
2008 to 2013 and provide for optional extensions at the
Company&#146;s discretion. The carriers with prorate agreements
are non-owned turboprop operators and include all or a portion
of the turboprop operations of Colgan Airlines, Inc., Trans
States, Shuttle Acquisition LLC (through October 2004), and Air
Midwest, Inc. The prorate agreements provide for affiliate
carriers to pay certain service fees to US Airways as well as to
receive a prorated share of revenue for connecting customers. US
Airways is responsible for pricing and marketing of connecting
services to and from the prorate carrier. The prorate carrier is
responsible for pricing and marketing the local, point to point
markets. All US Airways Express carriers use US Airways&#146;
reservation systems, and have logos, service marks, aircraft
paint schemes and uniforms similar to those of US Airways.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2004, MidAtlantic Airways (MidAtlantic), US
Airways&#146; new regional jet division, began operating as part
of the US Airways Express network. As of December&nbsp;31, 2004,
MidAtlantic operates 22&nbsp;Embraer ERJ-170 regional jets with
72&nbsp;seats. These larger regional jets help fill the gap
between 50-seat and 120-seat fleet-types, allow for a better
match with demand in certain existing markets and have enabled
US Airways to add flights to markets it did not previously
serve. MidAtlantic served approximately one million passengers
in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s major connecting hubs are at airports in
Charlotte and Philadelphia. The Company also has substantial
operations at Boston&#146;s Logan International Airport (Logan),
New York&#146;s LaGuardia Airport (LaGuardia), Pittsburgh
International Airport (Pittsburgh) and Washington&#146;s Ronald
Reagan Washington National Airport (Reagan National). Measured
by departures, US&nbsp;Airways is among the largest at each of
the foregoing airports. US Airways is also a leading airline
from the Northeast United States to Florida.
US&nbsp;Airways&#146; East coast-based hubs, combined with its
strong presence at many East coast airports, have made it among
the largest intra-East coast carriers, comprising approximately
30% of the industry&#146;s intra-East coast revenues based on
the most recent industry revenue data available.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 2004, passenger revenues
accounted for approximately 89% of the Company&#146;s
consolidated operating revenues. Cargo revenues and other
sources accounted for 11% of the Company&#146;s consolidated
operating revenues in 2004. The Company&#146;s results are
seasonal with operating results typically highest in the second
and third quarters due to US Airways&#146; combination of
business traffic and North-South leisure traffic in the eastern
United States during those periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
MSC and AAL operate in support of the Company&#146;s airline
subsidiaries in areas such as the procurement of aviation fuel
and insurance.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Available Information</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A copy of this annual report on Form&nbsp;10-K, as well as other
annual reports on Form&nbsp;10-K, quarterly reports on
Form&nbsp;10-Q, current reports on Form&nbsp;8-K and amendments
to those reports are accessible free of charge at
<I>investor.usairways.com/edgar.cfm </I>as soon as reasonably
possible after such report is filed with or furnished to the
Securities and Exchange Commission (SEC).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Chapter&nbsp;11 Proceedings</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Before emerging from the Prior Bankruptcy in 2003, the Company
examined virtually every phase of its contracts and operations
and had significantly reduced costs. The Company reduced its
mainline capacity, realigned its network to maximize yield,
initiated a business plan to use more regional jets and procured
financing for these aircraft, and expanded its alliances with
other carriers. However, after emerging from the Prior
Bankruptcy, the Company continued to incur substantial losses
from operations. The primary factors contributing to these
losses include the reduction in domestic industry unit revenue
and significant increases in fuel prices. The downward pressure
on domestic industry revenue is a result of the rapid growth of
low-fare, low-cost airlines, the increasing transparency of
fares through Internet sources and other changes in fare
structures that have resulted in substantially lower fares for
many business and leisure travelers. The competitive environment
continued to intensify throughout 2004, particularly in key
markets such as Philadelphia, Washington,&nbsp;D.C., Boston and
New York.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Throughout the spring and summer of 2004, the Company
communicated with key stakeholders and the public its plan to
transform US Airways into a fully competitive and profitable
airline (the Transformation Plan). A key element of the
Transformation Plan is significant reductions in labor costs
through changes to the Company&#146;s collective bargaining
agreements. The Company aggressively sought the necessary
agreements to allow full implementation of the Transformation
Plan without the need for filing new Chapter&nbsp;11 cases but
was unable to do so in a timely manner. As a result of the
recurring losses, declining available cash and risk of defaults
or cross defaults under certain key financing and operating
agreements, it was necessary for the Debtors to file voluntary
petitions for reorganization under Chapter&nbsp;11 of the
Bankruptcy Code on September&nbsp;12, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At hearings held on September&nbsp;13, 2004, the Bankruptcy
Court granted the Company&#146;s first day motions for relief
designed to stabilize its operations and business relationships
with customers, vendors, employees and others, and entered
orders granting permission to the Debtors to, among other
things: (a)&nbsp;pay employee wages and continue benefits, such
as medical and dental insurance; (b)&nbsp;honor prepetition
obligations to customers and continue customer programs,
including US Airways&#146; Dividend Miles program; (c)&nbsp;pay
for fuel under existing supply contracts, and honor existing
fuel supply, distribution and storage agreements;
(d)&nbsp;assume certain contracts related to interline
agreements with other airlines; (e)&nbsp;pay prepetition
obligations to certain foreign vendors, foreign service
providers and foreign governments; and (f)&nbsp;continue
maintenance of existing bank accounts and existing cash
management systems. The Bankruptcy Court also approved the
interim agreement reached between the Company, the Air
Transportation Stabilization Board (ATSB)&nbsp;and the lenders
under the $1&nbsp;billion loan, obtained upon emergence from the
Prior Bankruptcy and substantially guaranteed by the ATSB, to
allow the Company continued use of the cash collateral securing
the loan (see further discussion below).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since filing for bankruptcy on September&nbsp;12, 2004, the
Company has achieved cost-savings agreements with all of its
collective bargaining groups. Through a motion filed under
Section&nbsp;1113(e) of the Bankruptcy Code on
September&nbsp;24, 2004, the Company sought interim relief from
collective bargaining agreements (CBAs) with the Air Line Pilots
Association (ALPA), Association of Flight
Attendants-Communications Workers of America (AFA), Transport
Workers Union (TWU), Communications Workers of America
(CWA)&nbsp;and International Association of Machinists and
Aerospace Workers (IAM). On October&nbsp;15, 2004, the
Bankruptcy Court approved base rates of pay reductions of 21%
through February&nbsp;15, 2005 or entry of an order approving a
new CBA or granting final relief under Section&nbsp;1113(c) of
the Bankruptcy Code. Reductions to pension contributions and
certain work rule changes were also approved. The interim relief
order did not apply to ALPA or TWU, whose members reached and
ratified CBAs prior to the interim relief
</DIV>

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<DIV align="left" style="font-size: 10pt;">
going into effect. CBAs with the CWA and AFA were reached in
December 2004 and were subsequently ratified. On January&nbsp;6,
2005, the Bankruptcy Court approved the Company&#146;s request
to reject the IAM CBAs and approved the termination of US
Airways&#146; three defined benefit plans. The IAM subsequently
ratified Company cost-savings proposals on January&nbsp;21,
2005. As part of these negotiations and subsequent
ratifications, all collective bargaining groups had their
pension plans reduced or eliminated. In addition, the Bankruptcy
Court has also approved various settlement agreements between
the Company and the court-appointed Section&nbsp;1114 Committee
representing retirees other than those represented by the IAM to
begin the significant curtailment of postretirement benefits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the cost savings achieved with labor groups, the
Company also implemented pay and benefit reductions for its
current management and other non-union employees, including
reductions to base pay, workforce reductions and modifications
to vacation and sick time accruals. The Company also implemented
modifications to its defined contribution pension plans and will
implement modifications to retiree benefits in 2005. The pay
rate and defined contribution plan reductions went into effect
October&nbsp;11, 2004 and the reductions to retiree medical
benefits will become effective March&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has reached agreements with certain of its lessors
and lenders restructuring existing aircraft lease and debt
financings. On November&nbsp;19, 2004, the Bankruptcy Court
approved the Company&#146;s agreements for the continued use and
operation of substantially all of its mainline and Express
fleet. As discussed in detail below, the Company reached a
comprehensive agreement with GE Capital Aviation Services
(GECAS)&nbsp;and GE Engine Service (GEES)&nbsp;on aircraft
leasing and financing and engine services, which will provide
the Company with short-term liquidity, reduced debt, lower
aircraft ownership costs, enhanced engine maintenance services,
and operating leases for new regional jets. The Company also
reached agreements with EMBRAER-Empresa Brasileria de
Aeronautica SA (Embraer) and Bombardier, Inc. (Bombardier)
providing for continued use and operation of its aircraft, short
term liquidity and new financing for regional jets, which were
approved by the Bankruptcy Court in January 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has notified all known or potential creditors of the
Chapter&nbsp;11 filing for the purposes of identifying and
quantifying all prepetition claims. The Chapter&nbsp;11 filing
triggered defaults on substantially all debt and lease
obligations. Subject to certain exceptions under the Bankruptcy
Code, the Chapter&nbsp;11 filing automatically stayed the
continuation of any judicial or administrative proceedings or
other actions against the Debtors or their property to recover
on, collect or secure a claim arising prior to
September&nbsp;12, 2004. The deadline for filing proofs of claim
with the Bankruptcy Court was February&nbsp;3, 2005, with a
limited exception for governmental entities, which have until
March&nbsp;11, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The potential adverse publicity associated with the
Chapter&nbsp;11 filings and the resulting uncertainty regarding
the Company&#146;s future prospects may hinder the
Company&#146;s ongoing business activities and its ability to
operate, fund and execute its business plan by impairing
relations with existing and potential customers; negatively
impacting the ability of the Company to attract and retain key
employees; limiting the Company&#146;s ability to obtain trade
credit; limiting the Company&#146;s ability to effectively hedge
rising aviation fuel costs; and impairing present and future
relationships with vendors and service providers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the Chapter&nbsp;11 filings, realization of
assets and liquidation of liabilities are subject to significant
uncertainty. While operating as debtors-in-possession under the
protection of Chapter&nbsp;11, and subject to Bankruptcy Court
approval or otherwise as permitted in the normal course of
business, US Airways may sell or otherwise dispose of assets and
liquidate or settle liabilities for amounts other than those
reflected in the financial statements. Further, a plan of
reorganization could materially change the amounts and
classifications reported in the historical financial statements,
which do not give effect to any adjustments to the carrying
value of assets or amounts of liabilities that might be
necessary as a consequence of confirmation of a plan of
reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To exit Chapter&nbsp;11 successfully, the Company must obtain
confirmation by the Bankruptcy Court of a plan of
reorganization. The Company currently has the exclusive right to
file a plan of reorganization until March&nbsp;31, 2005 and
solicit acceptance of the plan through June&nbsp;30, 2005. Under
the terms of the agreement reached with General Electric, the
Company has until March&nbsp;15, 2005 to file a plan of
reorganization. These deadlines could potentially be extended. A
plan of reorganization would, among other things, resolve all
</DIV>

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<DIV align="left" style="font-size: 10pt;">
prepetition obligations, set forth a revised capital structure
and establish the corporate governance subsequent to exiting
from bankruptcy. The Company is currently working towards
emerging from Chapter&nbsp;11 mid-year 2005, but that timing is
dependent upon, among other things, the timely and successful
confirmation and implementation of a plan of reorganization. The
ultimate recovery to creditors and/or holders of the common
stock, if any, will not be determined until confirmation of a
plan of reorganization. No assurance can be given as to what
values, if any, will be ascribed in the Chapter&nbsp;11 cases to
each of these constituencies or what type or amount of
distributions, if any, they would receive. A plan of
reorganization could result in holders of the Company&#146;s
common stock receiving no distribution on account of their
interests and cancellation of their existing stock. The value of
the common stock is highly speculative. The Company urges that
appropriate caution be exercised with respect to existing and
future investments in the securities of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Financing during the Chapter&nbsp;11 Proceedings</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of its reorganization under the Prior Bankruptcy, US
Airways received a $900&nbsp;million loan guarantee (ATSB
Guarantee) under the Air Transportation Safety and System
Stabilization Act from the ATSB in connection with a
$1&nbsp;billion term loan financing (ATSB Loan). In connection
with the September&nbsp;12, 2004 Chapter&nbsp;11 filing, the
ATSB and the lenders under the ATSB Loan agreed to authorize the
Company to continue to use cash collateral securing the ATSB
Loan on an interim basis. Therefore, in lieu of
debtor-in-possession financing, the Company has access to the
cash collateralizing the ATSB Loan as working capital, subject
to certain on-going conditions and limitations. This interim
agreement was approved by the Bankruptcy Court on
September&nbsp;13, 2004 as part of the first day motions, and
was scheduled to expire on October&nbsp;15, 2004. The Bankruptcy
Court approved two subsequent agreements extending the
Company&#146;s ability to use the cash collateral, including an
agreement approved on January&nbsp;13, 2005 extending the
Company&#146;s use of cash collateral through June&nbsp;30,
2005, subject to certain conditions and limitations. Under the
current agreement, the Company may continue to access such cash
collateral to support daily operations so long as it maintains
an agreed minimum amount of cash on hand each week. The amount
declines from approximately $500&nbsp;million at the end of
January to $341&nbsp;million on June&nbsp;30, 2005, with weekly
cash levels permitted as low as $325&nbsp;million in March 2005.
See &#147;Liquidity and Capital Resources&#148; in Item&nbsp;7.
Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operation, for a complete discussion on the
Company&#146;s financing while in Chapter&nbsp;11.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='204'></A>
</DIV>

<!-- link1 "Airline Industry and the Company&#146;s Position in the Marketplace" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Airline Industry and the Company&#146;s Position in the
Marketplace</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most of the markets in which US Airways Group&#146;s airline
subsidiaries operate are highly competitive. These airline
subsidiaries compete to varying degrees with other air carriers
and with other forms of transportation. US Airways competes with
at least one major airline on most of its routes between major
cities. Airlines, including US Airways, typically use discount
fares and other promotions to stimulate traffic during normally
slack travel periods to generate cash flow and to maximize
revenue per available seat mile. Discount and promotional fares
are often non-refundable and may be subject to various
restrictions such as minimum stay requirements, advance
ticketing, limited seating and change fees. US Airways has often
elected to match discount or promotional fares initiated by
other air carriers in certain markets in order to compete in
those markets. Competition between air carriers also involves
certain route structure characteristics, such as flight
frequencies, availability of nonstop flights, markets served and
the time certain flights are operated. To a lesser extent,
competition can involve other products, such as frequent flier
programs and airport clubs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways considers the growth of low-fare low-cost competition
to be its foremost competitive threat. Recent years have seen
the entrance and growth of low-fare low-cost competitors in many
of the markets in which the Company&#146;s airline subsidiaries
operate. These competitors, based on low costs of operations and
low-fare structures, include Southwest Airlines Co. (Southwest),
AirTran Airways, Inc., and JetBlue Airways. Southwest has
steadily increased operations within the eastern United States
since first offering service in this region in late 1993. In May
2004, Southwest began service at the Philadelphia International
Airport, a hub airport for US&nbsp;Airways. Southwest has also
announced that it will begin service from Pittsburgh
International
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Airport, a former hub, in May 2005. In January 2005, Delta
Airlines, Inc. (Delta) announced a broad low-fare pricing
scheme. The Company anticipates continued low-fare competition
in the industry in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A substantial portion of US Airways&#146; flights are to or from
cities in the eastern United States. Accordingly, severe
weather, air traffic control problems and downturns in the
economy in the eastern United States adversely affect US Airways
Group&#146;s results of operations and financial condition. With
its concentration in the eastern United States, US Airways&#146;
average stage length (i.e., trip distance) is shorter than those
of other major airlines. This makes US Airways more susceptible
than other major airlines to competition from surface
transportation (e.g., automobiles, trains, etc.). The increased
airport security charges and procedures have also had a
disproportionate impact on short-haul travel, which constitutes
a significant portion of the Company&#146;s flying. Additional
terrorist attacks or fear of such attacks, even if not made
directly on the airline industry, including elevated national
threat warnings, negatively affect the Company and the airline
industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In recent years, the Company&#146;s profitability was
significantly eroded by competitive pressures (including the
incursion of regional jets, the expansion of low-fare low-cost
carriers and the entry of additional carriers into its operating
territories, including key focus cities and hubs), unfavorable
economic trends, and rising fuel and labor costs. The May 2000
proposed merger of United Airlines (United) and US Airways Group
was designed to address this profitability erosion by adding US
Airways Group into a global network. During the period in which
the merger was pending, which ended in the termination of the
merger agreement in late July 2001 after failing to receive
approval from the United States Department of Justice, the
Company was effectively precluded from restructuring its
operations as a stand-alone carrier. Following the merger
termination, the Company embarked on a phased, stand-alone
restructuring plan to address the problems facing its airline
subsidiaries; however, this plan was preempted by the
September&nbsp;11th terrorist attacks, which was then followed
by the filing for Chapter&nbsp;11 in the Prior Bankruptcy in
August 2002.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='205'></A>
</DIV>

<!-- link1 "Marketing Agreements with Other Airlines" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Marketing Agreements with Other Airlines</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into a number of bilateral and
multilateral alliances with other airlines to provide customers
with more choices and to access markets worldwide that the
Company does not serve directly. In May 2004, US Airways joined
the Star Alliance, the world&#146;s largest airline alliance,
with 15 member airlines servicing 772 destinations in 133
countries. Membership in the Star Alliance will further enhance
the value of US Airways&#146; domestic and international route
network by allowing customers access to the global marketplace.
Expanded benefits for customers include network expansion
through code share service, Dividend Miles benefits, airport
lounge access, convenient single-ticket pricing, and one-stop
check-in and coordinated baggage handling.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways also has comprehensive marketing agreements with
United, a member of the Star Alliance, which began in July 2002.
United, as well as its parent company, UAL Corporation (UAL),
and certain of its affiliates, filed for protection under
Chapter&nbsp;11 of the Bankruptcy Code on December&nbsp;9, 2002.
United immediately requested bankruptcy court authority to
assume these agreements and the court granted United&#146;s
request. US Airways also has marketing agreements with
Lufthansa, Spanair, bmi and other Star Alliance carriers, as
well as several smaller regional carriers in the Caribbean,
operating collectively as the &#147;GoCaribbean&#148; network.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='206'></A>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Industry Regulation and Airport Access</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s airline subsidiaries operate under
certificates of public convenience and necessity or commuter
authority issued by the Department of Transportation (DOT). Such
certificates may be altered, amended, modified or suspended by
the DOT if the public convenience and necessity so require, or
may be revoked for failure to comply with the terms and
conditions of the certificates. Airlines are also regulated by
the U.S.&nbsp;Federal Aviation Administration (FAA), a division
of the DOT, primarily in the areas of flight operations,
maintenance, ground facilities and other technical matters.
Pursuant to these regulations, the Company&#146;s airline
subsidiaries have FAA-approved maintenance programs for each
type of aircraft they operate that provide for the ongoing
maintenance of such aircraft, ranging from periodic routine
inspections
</DIV>

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<DIV align="left" style="font-size: 10pt;">
to major overhauls. From time to time, the FAA issues
airworthiness directives and other regulations affecting the
Company&#146;s airline subsidiaries or one or more of the
aircraft types they operate. In recent years, for example, the
FAA has issued or proposed such mandates relating to, among
other things, enhanced ground proximity warning systems;
fuselage pressure bulkhead reinforcement; fuselage lap joint
inspection rework; increased inspections and maintenance
procedures to be conducted on certain aircraft; increased
cockpit security; fuel tank flammability reductions and domestic
reduced vertical separation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The DOT allows local airport authorities to implement procedures
designed to abate special noise problems, provided such
procedures do not unreasonably interfere with interstate or
foreign commerce or the national transportation system. Certain
locales, including Boston, Washington,&nbsp;D.C., Chicago,
San&nbsp;Diego and San&nbsp;Francisco, among others, have
established airport restrictions to limit noise, including
restrictions on aircraft types to be used and limits on the
number of hourly or daily operations or the time of such
operations. In some instances these restrictions have caused
curtailments in services or increases in operating costs and
such restrictions could limit the ability of US Airways to
expand its operations at the affected airports. Authorities at
other airports may consider adopting similar noise regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The airline industry is also subject to increasingly stringent
federal, state and local laws protecting the environment. Future
regulatory developments and actions could affect operations and
increase operating costs for the airline industry, including the
Company&#146;s airline subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s airline subsidiaries are obligated to collect
a federal excise tax on domestic and international air
transportation (commonly referred to as the &#147;ticket
tax&#148;). The Company&#146;s airline subsidiaries collect
these taxes, along with certain other U.S. and foreign taxes and
user fees on air transportation, and pass through the collected
amounts to the appropriate governmental agencies. Although such
taxes are not operating expenses of the Company, they represent
an additional cost to the Company&#146;s customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Aviation and Transportation Security Act (Security Act) was
enacted in November 2001. Under the Security Act, substantially
all aspects of civil aviation passenger security screening were
federalized and a new Transportation Security Administration
(TSA)&nbsp;under the DOT was created. TSA was then transferred
to the Department of Homeland Security pursuant to the Homeland
Security Act of 2002. The Security Act, among other matters,
mandates improved flight deck security; carriage at no charge of
federal air marshals; enhanced security screening of passengers,
baggage, cargo, mail, employees and vendors; enhanced security
training; fingerprint-based background checks of all employees
and vendor employees with access to secure areas of airports
pursuant to regulations issued in connection with the Security
Act; and the provision of passenger data to U.S.&nbsp;Customs.
Funding for TSA is provided, in part, by a fee collected by air
carriers from their passengers of $2.50&nbsp;per flight segment
(which is proposed to increase to up to $5.50&nbsp;per flight
segment in 2005, but not more than $8.00&nbsp;per one-way trip),
and a fee on air carriers that is limited to the amount that the
carrier spent on passenger security screening in 2000.
Implementation of the requirements of the Security Act have
resulted and will continue to result in increased costs for US
Airways, Piedmont and PSA and their passengers and has and will
likely continue to result in service disruptions and delays.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most major U.S.&nbsp;airports impose passenger facility charges.
The ability of airlines to contest increases in these charges is
restricted by federal legislation, DOT regulations and judicial
decisions. Legislation enacted in 2000 permitted airports to
increase passenger facility charges effective April&nbsp;1,
2001. With certain exceptions, air carriers pass these charges
on to passengers. However, the ability of the Company to
pass-through security fees and passenger facility charges to its
customers is subject to various factors, including market
conditions and competitive factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FAA has designated John F. Kennedy International Airport
(Kennedy), LaGuardia and Reagan National as &#147;high-density
traffic airports&#148; and limited the number of departure and
arrival slots available to air carriers at those airports. In
April 2000, legislation was enacted which eliminates slot
restrictions in 2007 at LaGuardia and Kennedy. Among other
things, the legislation encouraged the development of air
service to smaller communities from slot-controlled airports.
During the interim period while slot restrictions remained in
effect at LaGuardia, airlines could apply for slot exemptions to
serve smaller communities using aircraft with a maximum seating
capacity of less than 71. In connection with this legislation,
the Company and
</DIV>

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<DIV align="left" style="font-size: 10pt;">
several other airlines increased service from LaGuardia, which
led to excessive flight delays. In response to such delays, the
FAA implemented a slot lottery system in December 2000 limiting
the number of new flights at LaGuardia. As a result, several
airlines, including US Airways, were required to reduce the
number of flights added at LaGuardia in connection with this
legislation. The resulting allocation of slots from the slot
lottery system was initially scheduled to expire on
September&nbsp;15, 2001, but on August&nbsp;3, 2001, the FAA
announced an extension until October&nbsp;26, 2002. On
July&nbsp;8, 2002, the FAA announced another extension until
October&nbsp;30, 2004, and subsequently announced a further
extension through October&nbsp;30, 2005. As a result of the 2007
slot elimination, the FAA has indicated an intent to rethink its
approach to regulating operations at LaGuardia. Several
proposals, including auctions, congestion pricing and other
market-based solutions, are being considered along with more
traditional regulatory approaches.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At Reagan National an additional eleven roundtrips were awarded
by the DOT, pursuant to the Vision 100&nbsp;&#151; Century of
Aviation Reauthorization Act, which created additional slots for
distribution by the DOT. Although US Airways participated in the
proceeding and was awarded slots, most of the slots were awarded
to new entrant carriers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Where the FAA has seen congestion and delay increases, it has
stepped in and worked with the carriers to freeze operations at
current or somewhat reduced levels. Specifically, incumbent
carriers, including US&nbsp;Airways, are not permitted to
increase operations at Chicago O&#146;Hare as a result of an
agreement reached between the FAA and these airlines in August
2004. US Airways expects that the current operations freeze will
continue at least through the summer 2005 travel season. FAA
rulemaking to address congestion issues at crowded airports is
expected sometime in 2005. It is not yet clear how many airports
or issues will be encompassed by the rulemaking, the exact
timing and outcome of which cannot be ascertained at this time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of widely-reported operational difficulties
experienced by US Airways during the Christmas 2004 time period,
the DOT&#146;s Inspector General (IG)&nbsp;commenced an inquiry
into the causes of the operational problems. The IG plans to
issue a report summarizing its findings, including
recommendations for avoiding similar incidents in the future.
The Company is cooperating with the IG in its inquiry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The availability of international routes to domestic air
carriers is regulated by agreements between the U.S. and foreign
governments. Changes in U.S.&nbsp;or foreign government aviation
policy could result in the alteration or termination of these
agreements and affect US Airways&#146; international operations.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='207'></A>
</DIV>

<!-- link1 "Employees" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, on a full-time equivalent basis,
the Company and its subsidiaries employed approximately
29,500&nbsp;active employees. US&nbsp;Airways employed
approximately 24,600&nbsp;active employees including
approximately 6,600&nbsp;station personnel, 5,600&nbsp;flight
attendants, 4,600&nbsp;mechanics and related employees,
3,100&nbsp;pilots, 1,600&nbsp;reservations personnel and
3,100&nbsp;personnel in administrative and miscellaneous job
categories. The Company&#146;s remaining subsidiaries employed
4,900&nbsp;employees including approximately 2,400&nbsp;station
personnel, 900&nbsp;pilots, 500&nbsp;flight attendants,
500&nbsp;mechanics and related employees and 600&nbsp;personnel
in administrative and miscellaneous job categories.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, approximately 81% of the
Company&#146;s active employees were covered by collective
bargaining agreements with various labor unions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The status of US&nbsp;Airways&#146; labor agreements with its
major employee groups as of December&nbsp;31, 2004 is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Union(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Class or Craft</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Employees(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Date Contract Amendable</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>ALPA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Pilots</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12/31/09</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>IAMAW</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Mechanics and related employees</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12/31/09</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>IAMAW</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fleet service employees</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12/31/09</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>CWA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Passenger service employees</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12/31/11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>AFA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Flight attendants</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12/21/11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>TWU</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Dispatchers and other</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom" nowrap>12/31/09&nbsp;&#38; 12/31/11</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="2%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    ALPA&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Air Line Pilots Association</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 8pt;">&nbsp;&nbsp;&nbsp;
IAMAW&nbsp;&nbsp;&nbsp;International Association of Machinists
and Aerospace Workers
</DIV>

<DIV align="left" style="font-size: 8pt;">&nbsp;&nbsp;&nbsp;
CWA&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Communications Workers of
America
</DIV>

<DIV align="left" style="font-size: 8pt;">&nbsp;&nbsp;&nbsp;
AFA&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Association of Flight
Attendants<B>-</B>Communications Workers of America
</DIV>

<DIV align="left" style="font-size: 8pt;">&nbsp;&nbsp;&nbsp;
TWU&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transport Workers Union
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Approximate number of active employees covered by the contract.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='208'></A>
</DIV>

<!-- link1 "Aviation Fuel" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Aviation Fuel</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Aviation fuel is typically the Company&#146;s second largest
expense. Because the operations of the airline are dependent
upon aviation fuel, increases in aviation fuel costs could
materially and adversely affect liquidity, results of operations
and financial condition. The following table shows aircraft fuel
consumption and costs for 2002-2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage of Total</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Aviation fuel</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Operating</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gallons</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>per gallon(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>expense(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expenses</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in millions)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in millions)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Includes fuel taxes and the impact of fuel hedges.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Prices and availability of all petroleum products are subject to
political, economic and market factors that are generally
outside of the Company&#146;s control. Accordingly, the price
and availability of aviation fuel, as well as other petroleum
products, can be unpredictable. Prices may be affected by many
factors, including: the impact of political instability on crude
production, especially in Russia and OPEC countries; unexpected
changes to the availability of petroleum products due to
disruptions in distribution systems or refineries; unpredicted
increases to oil demand due to weather or the pace of economic
growth; inventory levels of crude, refined products and natural
gas; and other factors, such as the relative fluctuation between
the U.S.&nbsp;dollar and other major currencies and influence of
speculative positions on the futures exchanges. To reduce the
exposure to changes in fuel prices, the Company periodically
enters into certain fixed price swaps, collar structures and
other similar derivative contracts. The Company&#146;s current
financial position and credit rating negatively affect its
ability to hedge fuel in the future. See &#147;Selected
Operating and Financial Statistics&#148; in Item&nbsp;7.
Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operation, for additional information related to
aviation fuel.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='209'></A>
</DIV>

<!-- link1 "Airline Ticket Distribution" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Airline Ticket Distribution</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The now common usage of electronic tickets within North America,
and the rapid expansion in Europe and the rest of the world, has
allowed for the streamlining of processes and the increased
efficiency of customer servicing and support. The Company began
to support the issuance of electronic tickets in 1996. During
2004, electronic tickets represented 96% of all tickets issued
to customers flying US Airways. The addition of a $50 surcharge
to most customers requiring paper tickets has allowed the
Company to continue to support the exceptional requests, while
offsetting any cost variance associated with the issuance and
postal fulfillment of paper tickets. Airlines based in North
America have recently proposed a requested mandate that airlines
move to 100% electronic ticketing over the next couple of years,
which will only serve to enhance customer service and control
costs for ticketing services supported by the airline and
distribution partners.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The shift of consumer bookings from traditional travel agents,
airline ticket offices and reservation centers to online travel
agent sites (e.g., Orbitz, Travelocity, Expedia and others) as
well as airline direct websites (e.g., <I>usairways.com</I>)
continues to grow within the industry. Historically, traditional
and online travel agencies used Global Distribution Systems
(GDS), such as Sabre, to obtain their fare and inventory data
from airlines. Bookings made through these agencies result in a
fee, the &#147;GDS fee&#148;, that is charged to the airline.
Bookings made directly with the airline, through its reservation
call centers or website, do not incur a GDS
</DIV>

<P align="center" style="font-size: 10pt;">9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
fee. The growth of the airline direct websites and travel agent
sites (e.g., Orbitz) that connect directly to airline host
systems, effectively by-passing the traditional connection via
GDSs, helps the Company reduce distribution costs from the
channels of distribution on the internet. In the fourth quarter
of 2004, the Company received over 31% of its sales from
internet sites. The Company&#146;s direct website,
<I>usairways.com</I>, comprised over 12% of Company sales, while
the rest of the internet sites accounted for the remaining 19%
of Company sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Due to the continued pressure on legacy airlines to lower
distribution fees more aggressively than anytime in the past in
order to compete with low-cost airlines, many
&#147;new-comers&#148; have entered the distribution industry.
New low-cost GDSs, such as ITA Software, G2 Switchworks,
Navitaire and others, are providing airlines with alternative
economic models to do business with traditional travel agents.
These new low-cost GDSs substantially reduce the fees charged to
airlines by this distribution channel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In an effort to further reduce distribution costs through
internal channels, US Airways and other airlines have instituted
service fees for interaction in channels requiring specialized
service such as reservation call centers ($5.00&nbsp;per
ticket), Airline Ticket Offices ($10.00&nbsp;per ticket) and
City Ticket Offices ($10.00), while continuing to offer free
service via the airlines&#146; websites. The goals of these
service fees are to reduce the cost to provide customer service
as required by the traveler and promote the continued goal of
shifting customers to the Company&#146;s lowest cost
distribution channel, <I>usairways.com.</I> Internal channels of
distribution account for 25% of all Company sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In July 2004, the DOT eliminated most regulations governing
GDSs. Airlines and GDSs continue to have open dialogue regarding
possible cost savings.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='210'></A>
</DIV>

<!-- link1 "Frequent Traveler Program" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Frequent Traveler Program</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways operates a frequent traveler program known as
&#147;Dividend Miles&#148; under which participants earn mileage
credits for each paid flight segment on US Airways, US Airways
Shuttle, US Airways Express, Star Alliance carriers, and certain
other airlines that participate in the program. Participants
flying on first class or Envoy class tickets receive additional
mileage credits. Participants can also receive mileage credits
through special promotions periodically offered by US Airways
and may also earn mileage credits by utilizing certain credit
cards and purchasing services from various non-airline partners.
Mileage credits can be redeemed for various free, discounted, or
upgraded travel awards on US Airways, Star Alliance carriers or
other participating airlines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways and the other participating airline partners limit
the number of seats allocated per flight for award recipients by
using various inventory management techniques. Award travel for
all but the highest-level Dividend Miles participants is
generally not permitted on blackout dates, which correspond to
certain holiday periods or peak travel dates. US Airways
reserves the right to terminate Dividend Miles or portions of
the program at any time. Program rules, partners, special
offers, blackout dates, awards and requisite mileage levels for
awards are subject to change.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='211'></A>
</DIV>

<!-- link1 "Insurance" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Insurance</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company and its subsidiaries maintain insurance of the types
and in amounts deemed adequate to protect themselves and their
property. Principal coverage includes: liability for injury to
members of the public, including passengers; damage to property
of the Company, its subsidiaries and others; loss of or damage
to flight equipment, whether on the ground or in flight; fire
and extended coverage; directors and officers; fiduciary; and
workers&#146; compensation and employer&#146;s liability. In
addition to customary deductibles, the Company self-insures for
all or a portion of its losses from claims related to
environmental liabilities and medical insurance for employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since September&nbsp;11, 2001, the Company and other airlines
have been unable to obtain coverage for liability to persons
other than employees and passengers for claims resulting from
acts of terrorism, war or similar events (war risk coverage) at
reasonable rates from the commercial insurance market. US
Airways has, as have most other U.S.&nbsp;airlines, therefore
purchased its war risk coverage through a special program
</DIV>

<P align="center" style="font-size: 10pt;">10

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
administered by the FAA. The Emergency Wartime Supplemental
Appropriations Act extended this insurance protection until
August 2005. The Secretary of Transportation may extend this
policy until December&nbsp;31, 2005. If the federal insurance
program terminates, the Company would likely face a material
increase in the cost of war risk coverage, and because of
competitive pressures in the industry, the Company&#146;s
ability to pass this additional cost to passengers would be
limited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There can be no assurances that the Company can maintain
insurance coverages and costs at its current levels.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='212'></A>
</DIV>

<!-- link1 "Item 2. Properties" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;2.&nbsp;</B></TD>
    <TD>
    <B>Properties</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='213'></A>
</DIV>

<!-- link1 "Flight Equipment" -->

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Flight Equipment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, US Airways operated the following
jet and regional jet aircraft:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Seat</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Type</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capacity</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age (years)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Owned(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leased(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Airbus A330</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Boeing 767-200ER</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Boeing 757-200</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Airbus A321</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Boeing 737-400</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Airbus A320</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Boeing 737-300</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Airbus A319</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>281</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EMB-170</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    All owned aircraft are pledged as collateral for various secured
    financing agreements.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    The terms of the leases expire between 2005 and 2023.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, the Company&#146;s wholly owned
regional airline subsidiaries operated the following turboprop
and regional jet aircraft:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Seat</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Type</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capacity</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age (years)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Owned</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leased(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CRJ-700</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CRJ-200</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    De Havilland Dash 8-300</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    De Havilland Dash 8-100</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    De Havilland Dash 8-200</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The terms of the leases expire between 2005 and 2021.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, US Airways Group had 19
A320-family aircraft on firm order scheduled for delivery in the
years 2007 through 2009. US Airways Group also had ten A330-200
aircraft on firm order scheduled for delivery in the years 2007
through 2009. On February&nbsp;3, 2005, the Bankruptcy Court
approved the Company&#146;s agreement with Airbus providing for,
among other things, delivery of the 19 A320-family aircraft in
years 2008 through 2010 and delivery of the ten A330-200
aircraft in years 2008 through 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Regional Jet Leasing Term Sheet of the Master
Memorandum of Understanding approved by the Bankruptcy Court in
December 2004, General Electric Credit Corporation
(GECC)&nbsp;or its affiliates will provide lease financing for
up to 31 regional jet aircraft. The aircraft to be financed will
consist of 70- to 100-seat regional jet aircraft manufactured by
Bombardier and/or Embraer in a mix and subject to other terms
</DIV>

<P align="center" style="font-size: 10pt;">11

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<DIV align="left" style="font-size: 10pt;">
to be agreed mutually by GECC and US Airways. In the first
quarter of 2005, GECC will lease six Bombardier CRJ-700s to US
Airways with terms expiring on the earlier of the Company&#146;s
emergence from Chapter&nbsp;11 and June&nbsp;30, 2005; these
leases may be extended upon the Company&#146;s emergence from
bankruptcy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company acquired three new Embraer ERJ-170 aircraft in
January 2005 and has firm orders for three additional ERJ-170
aircraft scheduled to be delivered by March&nbsp;31, 2005. The
Company also acquired three new CRJ-700 aircraft in January 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company maintains inventories of spare engines, spare parts,
accessories and other maintenance supplies sufficient to meet
its operating requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, the Company owned or leased the
following aircraft that were not considered part of its
operating fleet presented in the tables above. These aircraft
were either parked at storage facilities or, as shown in the far
right column, leased or subleased to third parties or related
parties.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leased/</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Type</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age (years)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Owned</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leased</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subleased</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    De Havilland Dash 8</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Douglas DC-9-30</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in Item&nbsp;1, &#147;Overview&#148; above, the
Company has code share agreements in the form of capacity
purchase agreements with certain US Airways Express regional jet
affiliate operators. Collectively, these regional jet affiliate
operators flew 107 50-seat regional jet aircraft as part of US
Airways Express as of December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways is a participant in the Civil Reserve Air Fleet
(CRAF), a voluntary program administered by the Air Mobility
Command (AMC). The General Services Administration of the
U.S.&nbsp;Government requires that airlines participate in CRAF
in order to receive U.S.&nbsp;Government business. US
Airways&#146; commitment under CRAF is to provide up to its
entire widebody fleet of ten 767-200ER aircraft and nine
A330-300 aircraft in support of military missions. US Airways is
reimbursed at compensatory rates when aircraft are activated
under CRAF. US Airways is reimbursed during peacetime
proportionally to its commitment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s 767-200ER aircraft are committed to the
Aeromed Program of CRAF. Under this program, the aircraft are
converted to flying hospitals for transportation of injured
troops. US Airways, Delta and United are participants in the
Aeromed Program. Participation in this program provides
increased U.S.&nbsp;government revenues for the Company. Since
the CRAF activation of 2003, US Airways has not provided
&#147;voluntary&#148; lift to AMC, due to operational
limitations.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='214'></A>
</DIV>

<!-- link1 "Ground Facilities" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Ground Facilities</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company leases the majority of its ground facilities,
including executive and administrative offices in Arlington,
Virginia adjacent to Reagan National Airport; its principal
operating, overhaul and maintenance bases at the Pittsburgh
International Airport and Charlotte/Douglas International
Airports; training facilities in Pittsburgh and Charlotte;
central reservations offices in Pittsburgh and Winston-Salem
(North Carolina); and line maintenance bases and local ticket,
cargo and administrative offices throughout its system. US
Airways owns a training facility in Winston-Salem and a
reservation facility in Orlando. The Orlando facility was closed
on January&nbsp;10, 2003 and is currently available for sale.
The Pittsburgh reservations call and service center will be
closed in 2005 and consolidated into one location in
Winston-Salem.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='215'></A>
</DIV>

<!-- link1 "Terminal Construction Projects" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Terminal Construction Projects</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company utilizes public airports for its flight operations
under lease arrangements with the government entities that own
or control these airports. Airport authorities frequently
require airlines to execute long-term leases to assist in
obtaining financing for terminal and facility construction. Any
future
</DIV>

<P align="center" style="font-size: 10pt;">12

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<DIV align="left" style="font-size: 10pt;">
requirements for new or improved airport facilities and
passenger terminals at airports at which the Company operates
could result in additional expenditures and long-term
commitments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1998, US Airways reached an agreement with the Philadelphia
Authority for Industrial Development (PAID) and the City of
Philadelphia to construct a new international terminal and a new
US Airways Express terminal at the Philadelphia International
Airport, one of US Airways&#146; connecting hubs and US
Airways&#146; principal international gateway. The international
terminal includes 12 gates for widebody aircraft and new federal
customs and immigration facilities. The international terminal
gates were put into operation in May 2003 and the ticket lobby
opened in September 2003. The US Airways Express facility,
completed in June 2001, can accommodate 38 regional aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='216'></A>
</DIV>

<!-- link1 "Item 3. Legal Proceedings" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;3.&nbsp;</B></TD>
    <TD>
    <B>Legal Proceedings</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;12, 2004, US Airways Group and its domestic
subsidiaries, including its principal operating subsidiary, US
Airways, filed voluntary petitions for relief under
Chapter&nbsp;11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Eastern District of
Virginia, Alexandria Division (Case Nos.&nbsp;04-13819-SSM
through 03-13823-SSM). Each of the Debtors continues to operate
its business and manage its property as a debtor-in-possession
pursuant to Sections&nbsp;1107 and 1108 of the Bankruptcy Code.
As a result of the current Chapter&nbsp;11 filing, attempts to
collect, secure or enforce remedies with respect to prepetition
claims against the Debtors are subject to the automatic stay
provisions of Section&nbsp;362(a) of the Bankruptcy Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;26, 2004, a company called I.A.P. Intermodal,
LLC filed suit against US Airways Group and its wholly owned
airline subsidiaries in the United States District Court for the
Eastern District of Texas alleging that the defendants infringed
upon three patents held by plaintiffs, all of which patents are
entitled, &#147;Method to Schedule a Vehicle in Real-Time to
Transport Freight and Passengers.&#148; Plaintiff seeks various
injunctive relief as well as costs, fees and treble damages. US
Airways Group and its subsidiaries were formally served with the
complaint on June&nbsp;21, 2004. US Airways Group is unable to
ascertain at this time the likelihood or potential scale of
liability. On the same date, the same plaintiff filed what the
Company believes to be substantially similar cases against nine
other major airlines, including British Airways, Northwest
Airlines Corporation (Northwest), Korean Airlines Co., Ltd.,
Deutsche Lufthansa AG, Air France, Air Canada, Singapore
Airlines Ltd., Delta, and Continental Airlines, Inc., and had
filed a suit against the parent company of American Airlines in
December 2003. This action was stayed as to US Airways Group and
its wholly owned subsidiaries as a result of the bankruptcy
filing on September&nbsp;12, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Port Authority of New York and New Jersey filed a proof of
claim against US Airways in the Prior Bankruptcy. The claim was
in the amount of $8.5&nbsp;million and it alleged environmental
contamination and building deficiencies at LaGuardia. US
Airways&#146; liability and defenses to such liability were
unaffected by the Prior Bankruptcy. US Airways has received no
notice, inquiry or other communication from the Port Authority
other than in connection with the proof of claim, and therefore
is unable to evaluate at this time the validity of the
underlying claim, the degree to which US Airways might share
responsibility with other parties, or the cost of cleanup or
correction of the alleged building deficiencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;7, 2003, the Internal Revenue Service (IRS)
issued a notice of proposed adjustment to US&nbsp;Airways Group
proposing to disallow $573&nbsp;million of capital losses that
US Airways Group sustained in the tax year 1999 on the sale of
stock of USLM Corporation (USLM). On February&nbsp;5, 2003, the
IRS filed a proof of claim with the Bankruptcy Court in
connection with the Prior Bankruptcy asserting the following
claims with respect to USLM: (1)&nbsp;secured claims for
U.S.&nbsp;federal income tax and interest of $0.7&nbsp;million;
(2)&nbsp;unsecured priority claims for U.S.&nbsp;federal income
tax of $68&nbsp;million and interest of $14&nbsp;million; and
(3)&nbsp;an unsecured general claim for penalties of
$25&nbsp;million. On May&nbsp;8, 2003, US Airways Group reached
a tentative agreement with the IRS on the amount of
U.S.&nbsp;federal income taxes, interest and penalties due
subject to final approval from the Joint Committee on Taxation.
By letter dated September&nbsp;11, 2003, US&nbsp;Airways Group
was notified that the Joint Committee on Taxation had accepted
the tentative agreement with the IRS, including a settlement of
all federal income taxes through the end of 2002. Due to the
</DIV>

<P align="center" style="font-size: 10pt;">13

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<DIV align="left" style="font-size: 10pt;">
bankruptcy filing on September&nbsp;11, 2004, which suspended
payment of prepetition liabilities, final payment terms under
the agreement have not been submitted to the Bankruptcy Court
for approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways is named as a defendant along with most of the major
domestic airlines, several national carriers and a number of
international carriers, in a class action lawsuit on behalf of
all United States-based travel agents filed in federal court in
North Carolina. The complaint alleges violation of the federal
antitrust laws with respect to commission rate reductions and/or
commission cap reductions implemented by various airlines in
1997, 1998, 1999, 2001 and 2002. Plaintiffs seek unspecified
damages for lost commissions, as well as injunctive relief. On
October&nbsp;30, 2003, the federal court granted a motion for
summary judgment dismissing all claims against airline
defendants other than the carriers then in bankruptcy, including
US&nbsp;Airways, because proceedings had been stayed against
those bankrupt defendants. That grant of summary judgment was
affirmed by the Fourth Circuit Court of Appeals. On
January&nbsp;28, 2004, the federal court in North Carolina
dismissed all claims against US Airways. The plaintiffs in this
proceeding had also filed a claim in Bankruptcy Court for
prepetition and continuing postpetition damages. The Bankruptcy
Court determined that the entire claim was prepetition and
unsecured, and the plaintiffs appealed this decision to the
District Court. The parties agreed to stay this appeal pending
the outcome of the plaintiffs&#146; appeal of the grant of
summary judgment in the North Carolina action. Following the
Fourth Circuit&#146;s decision to affirm the summary judgment
ruling, the plaintiffs dismissed their appeal of the Bankruptcy
Court decision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Williard, Inc. (Williard), together with the joint venture of
Williard and Len Parker Associates (Williard/Parker), was
awarded construction contracts with US Airways for work to be
performed at the Philadelphia International Airport. On
May&nbsp;29, 2002, US Airways terminated the largest contract
between the parties. Williard and Williard/Parker sued US
Airways in Pennsylvania state court for over $14&nbsp;million in
damages representing termination costs and lost profits, along
with other alleged contractual damage claims. Subsequently,
Limbach Company, LLC (Limbach) alleged that it purchased the
claims of Williard. After a trial, the Bankruptcy Court, on
June&nbsp;7, 2004, determined the value of the Limbach and
Limbach/Parker claims to be $2,542,843. Limbach and
Limbach/Parker are challenging on appeal various rulings of the
Bankruptcy Court, including the amount of the claim and its
status as an unsecured claim. US Airways has also filed an
appeal. Limbach and Limbach/Parker have filed an action in state
court against the City of Philadelphia (the City) and the
Philadelphia Authority for Industrial Development (PAID) and
received permission to include US Airways as a co-defendant,
provided that Limbach and Limbach/Parker did not make any claims
against US Airways in that action. In the lawsuit against the
City and PAID, Limbach and Limbach/Parker are seeking the same
sums as in their earlier lawsuit and proofs of claim against
US&nbsp;Airways, but this time under the equitable theories of
third-party beneficiary, quantum meruit and constructive trust.
The court in the Philadelphia action dismissed US Airways from
the lawsuit and dismissed the third-party beneficiary claims
against the City and PAID. These rulings are subject to appeal
at a later date. On May&nbsp;21, 2004, the City and PAID filed a
Motion for Summary Judgment seeking dismissal of the lawsuit.
Should Limbach and/or Limbach/Parker recover in the Philadelphia
action against the City and PAID, that award would be paid at
100 cents on the dollar. US Airways may have an obligation to
indemnify the City and PAID under its agreements related to the
airport development, which US Airways assumed as part of the
Prior Bankruptcy. Therefore, any recovery by Limbach and/or
Limbach/Parker against the City and PAID could result in an
indemnification claim that US Airways may have to pay at full
value. Proceedings in the Bankruptcy Court were stayed by the
bankruptcy filing on September&nbsp;12, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;4, 2004, the System Board of Adjustment (the
System Board) issued a ruling in which US&nbsp;Airways&#146;
outsourcing of heavy maintenance visits was deemed to be in
violation of the collective bargaining agreement between US
Airways and the IAM as the representative of Mechanic and
Related Employees. The System Board ordered US Airways to cease
and desist from outsourcing the work, and ordered that affected
employees be made whole. The System Board did not specify any
particular monetary remedy and none has since been decided or
agreed upon by the parties. However, the Bankruptcy Court&#146;s
order granting in part US&nbsp;Airways&#146; motion for relief
under Section&nbsp;1113(e) of the Bankruptcy Code included
relief from any restrictions on US Airways&#146; right to
outsource the work covered by this award through
February&nbsp;15, 2005. Neither US&nbsp;Airways&#146;
Section&nbsp;1113(e) motion nor the Bankruptcy Court&#146;s
order addressed the make-whole portion of this award. On
November&nbsp;12, 2004, US Airways filed a motion asking the
</DIV>

<P align="center" style="font-size: 10pt;">14

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<DIV align="left" style="font-size: 10pt;">
Bankruptcy Court for permission to reject the IAM collective
bargaining agreement under which the grievance had been filed.
On January&nbsp;6, 2005, the Bankruptcy Court granted US
Airways&#146; motion. On January&nbsp;21, 2005, the IAM ratified
a new collective bargaining agreement to replace the one that
had been rejected, and as part of the new agreement, the IAM
agreed not to pursue any claims for damages associated with the
rejection of the previous agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company and US Airways have been named as defendants in two
lawsuits filed in federal district court for the Eastern
District of Michigan. Delta is also named as a defendant in both
actions, while Northwest and the Airlines Reporting Corporation
were sued separately in a third action. The complaints were
filed on behalf of a class of airline passengers who originated
or terminated their trips at the defendant carriers&#146;
respective hubs. These passengers allege that they paid
excessive fares due to the respective airlines&#146; enforcement
of ticketing rules that prohibit the use of a connecting segment
coupon that is part of a through-fare ticket where the passenger
does not fly or intend to fly the entire ticketed itinerary.
Plaintiffs allege monopolization and restraint of trade in
violation of federal antitrust laws. They seek recovery of
treble damages from all named defendants in the amount of
$390&nbsp;million and an injunction prohibiting future
enforcement of the rules at issue. On May&nbsp;16, 2002, the
court denied the defendant airlines&#146; Motion for Summary
Judgment and granted the plaintiffs&#146; Motion for Class
Certification in each of the cases. On May&nbsp;31, 2002, the
Company and US Airways filed a petition with the United States
Court of Appeals for the Sixth Circuit seeking a discretionary
review of the certification order. On November&nbsp;21, 2002,
the petition for permission to appeal the class certification
decision was denied. On December&nbsp;4, 2002, Delta and
Northwest filed a rehearing petition seeking en banc review of
the initial Sixth Circuit denial. On February&nbsp;24, 2003,
Northwest and Delta&#146;s petition for rehearing en banc was
denied. Notwithstanding the district court&#146;s denial of
summary judgment and the petition, the Company and US Airways
believe the claims are without merit and intend to pursue a
vigorous defense. The automatic stay under Section&nbsp;362(a)
of the Bankruptcy Code was lifted when the Company emerged from
bankruptcy on March&nbsp;31, 2003, but the action was
subsequently stayed once more as a result of the Company&#146;s
bankruptcy filing on September&nbsp;12, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 1995, the Company, US Airways and the Retirement Plan for
Pilots of US Airways, Inc. (Pilot Retirement Plan) were sued in
federal district court for the District of Columbia by 481
active and retired pilots, alleging that defendants had
incorrectly interpreted the plan provisions and erroneously
calculated benefits under the Pilot Retirement Plan. The
plaintiffs sought damages in excess of $70&nbsp;million. In May
1996, the court issued a decision granting US Airways&#146;
Motion to Dismiss the majority of the complaint for lack of
jurisdiction, deciding that the dispute must be resolved through
the arbitration process under the Railway Labor Act because the
Pilot Retirement Plan was collectively bargained. The plaintiffs
appealed the district court&#146;s dismissal and in February
1999, the U.S.&nbsp;Court of Appeals upheld the district
court&#146;s decision originally granted in May 1996, in the
defendants&#146; favor. In May 1999, the plaintiffs filed a
petition for certiorari with the U.S.&nbsp;Supreme Court. In
October 1999, the U.S.&nbsp;Supreme Court denied the
plaintiffs&#146; petition for certiorari. The U.S.&nbsp;District
Court retained jurisdiction over one count of the complaint,
alleging violation of a disclosure requirement under ERISA. In
August 2000, the U.S.&nbsp;District Court dismissed the
remaining count without prejudice, giving plaintiffs the right
to reinstate their claims after completion of the arbitration.
Certain of the plaintiffs filed a claim before the US Airways
Pilot Retirement Board, requesting arbitration of their claim
for benefits that they believe were erroneously calculated, and
the Retirement Board selected an arbitrator to decide certain
issues related to the plaintiffs&#146; claims for benefits.
However, the Pilot Retirement Plan was terminated on
March&nbsp;31, 2003, and on April&nbsp;1, 2003 the Pension
Benefit Guaranty Corporation (PBGC) became trustee of the plan.
Also, claims related to this matter were expunged in the Prior
Bankruptcy. Accordingly, the Company does not believe there is
any continuing risk of material liability associated with this
matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;29, 2000, US Airways intervened in a
proceeding that was originally brought on January&nbsp;26, 1998,
by the Pennsylvania Department of Environment Protection (DEP)
against Allegheny County, Pennsylvania and the Allegheny County
Aviation Administration (ACAA), alleging that a variety of
airfield and aircraft de-icing activities at Pittsburgh
International Airport (Airport) violated the requirements of
(a)&nbsp;a 1994 Consent Order and Adjudication issued to
Allegheny County and air carrier tenants at the Airport,
(b)&nbsp;the Airport&#146;s National Pollutant Discharge
Elimination System Permit, and (c)&nbsp;the Pennsylvania
</DIV>

<P align="center" style="font-size: 10pt;">15

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<DIV align="left" style="font-size: 10pt;">
Clean Streams Law. The action was brought before the
Pennsylvania Environmental Hearing Board. During March 2001, the
Environmental Hearing Board approved Allegheny County&#146;s
Motion to Withdraw the Appeal without Prejudice, thereby
terminating the appeal. However, during the course of settlement
discussions leading to the termination of the appeal, the DEP
advised Allegheny County and US Airways that DEP (i)&nbsp;will
require additional measures to be taken to control de-icing
materials at the Airport, and (ii)&nbsp;will assess a civil
penalty against Allegheny County and US Airways for the alleged
violations described above. The ACAA, US Airways and the DEP
have continued to work together with the goal of fashioning an
ultimate resolution to the de-icing issues. The Company does not
believe that the settlement of this matter will have a material
adverse effect on its financial condition, results of operations
or liquidity.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='217'></A>
</DIV>

<!-- link1 "Item 4. Submission of Matters to a Vote of Security Holders" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;4.&nbsp;</B></TD>
    <TD>
    <B>Submission of Matters to a Vote of Security Holders</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No matters were submitted to a vote of security holders during
the fourth quarter of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='219'></A>
</DIV>

<!-- link1 "Item 5. Market for US Airways Group&#146;s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;5.&nbsp;</B></TD>
    <TD>
    <B>Market for US Airways Group&#146;s Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity Securities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='220'></A>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stock Exchange Listing</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Through September&nbsp;24, 2002, the Predecessor Company&#146;s
common stock was traded on the New York Stock Exchange
(NYSE)&nbsp;under the Symbol &#147;U&#148;. As a result of the
Prior Bankruptcy, the NYSE announced on August&nbsp;14, 2002
that it would suspend trading and move to delist US Airways
Group&#146;s common stock. The SEC approved the delisting and
the common stock was delisted effective September&nbsp;25, 2002.
As a result, on September&nbsp;25, 2002, the Common Stock began
trading on the NASDAQ over-the-counter market under the Symbol
&#147;UAWGQ.&#148; On March&nbsp;31, 2003, in conjunction with
the effective date of the 2003 Plan, all then-outstanding equity
securities of the Predecessor Company were cancelled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;21, 2003, the Company&#146;s Class&nbsp;A Common
Stock began trading on the NASDAQ National Market under the
symbol &#147;UAIR.&#148; Prior to listing on the NASDAQ National
Market, the Class&nbsp;A Common Stock had limited trading
activity on the Over-the-Counter Bulletin&nbsp;Board and in the
Pink Sheets, which provide trading for the over-the-counter
securities markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;13, 2004, the Company received written notice
from The NASDAQ Stock Market that the Class&nbsp;A Common Stock
would be delisted in accordance with Marketplace Rules&nbsp;4300
and 4450(f), effective with the opening of business on
September&nbsp;22, 2004. NASDAQ indicated in its letter that the
delisting determination followed its review of the
Company&#146;s press release announcing that the Company had
filed for bankruptcy protection. As a result of this
notification, a fifth character &#147;Q&#148; was added to the
trading symbol, changing it from &#147;UAIR&#148; to
&#147;UAIRQ&#148; at the opening of business on
September&nbsp;15, 2004. Shares are currently trading on the
NASDAQ over-the-counter market under the symbol as changed
above. The Company cannot assure that an active trading market
for its stock will exist in the future. As of February&nbsp;18,
2005, there were 491 holders of record of Class&nbsp;A Common
Stock. This number does not include beneficial owners of the
Company&#146;s Class&nbsp;A Common Stock whose shares are held
in the names of various dealers, clearing agencies, banks,
brokers and other fiduciaries. In addition, the Company has five
million shares of Class&nbsp;B Common Stock outstanding. The
Class&nbsp;B Common Stock has no public trading market and is
held by one shareholder of record as of February&nbsp;18, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='221'></A>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Market Prices of Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The high and low sale prices of the Successor Company&#146;s
Class&nbsp;A Common Stock and the Predecessor Company&#146;s
common stock were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>High</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Low</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fourth Quarter</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.76</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Third Quarter</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.58</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Second Quarter</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.44</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    First Quarter</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.11</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">16

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>High</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Low</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Fourth Quarter</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5.01</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Third Quarter*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.85</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Second Quarter</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    First Quarter</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.06</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    As a result of emergence from the Prior Bankruptcy, the
    Predecessor Company&#146;s common stock was cancelled effective
    March&nbsp;31, 2003. An established public trading market,
    defined as more than limited or sporadic trading, did not exist
    for the Successor Company Class&nbsp;A Common Stock until
    September&nbsp;8, 2003.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The Company, organized under the laws of the State of Delaware,
is subject to Sections&nbsp;160 and 170 of the Delaware General
Corporation Law with respect to the payment of dividends on or
the repurchase or redemption of its capital stock. The Company
is restricted from engaging in any of these activities unless it
maintains a capital surplus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has not declared or paid cash or other dividends on
common stock since 1990 and currently does not intend to do so
on its Class&nbsp;A Common Stock. Under the provisions of
certain debt agreements, including the ATSB Loan, its ability to
pay dividends on or repurchase its Class&nbsp;A Common Stock is
restricted. Any future determination to pay cash dividends will
be at the discretion of the Company&#146;s board of directors,
subject to applicable limitations under Delaware law and the
Bankruptcy Code, and will depend upon its results of operations,
financial condition, contractual restrictions and other factors
deemed relevant by its board of directors. See &#147;Liquidity
and Capital Resources&#148; in Item&nbsp;7. Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operation below for more information, including information
related to dividend restrictions associated with the ATSB Loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ultimate recovery, if any, to holders of the common stock
will not be determined until confirmation of a plan of
reorganization. The plan of reorganization could result in
holders of US Airways Group&#146;s common stock and related
equity securities receiving no distribution on account of their
interest and cancellation of the equity.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='222'></A>
</DIV>

<!-- link1 "Foreign Ownership Restrictions" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Foreign Ownership Restrictions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under current federal law, non-U.S.&nbsp;citizens cannot own or
control more than 25% of the outstanding voting securities of a
domestic air carrier. The Company believes that it was in
compliance with this statute during the time period covered by
this report.
</DIV>

<P align="center" style="font-size: 10pt;">17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='223'></A>
</DIV>

<!-- link1 "Item 6. Selected Financial Data" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;6.&nbsp;</B></TD>
    <TD>
    <B>Selected Financial Data</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='224'></A>
</DIV>

<!-- link1 "Consolidated Statements of Operations" -->

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Consolidated Statements of Operations</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>(in millions, except per share amounts)(1)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,269</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,322</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(378</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(207</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,317</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,683</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(53</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (Loss) Before Cumulative Effect of Accounting Change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(611</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,663</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,124</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(166</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative Effect of Accounting Change, Net of Applicable Income
    Taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(103</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Income (Loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(611</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,646</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,117</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(269</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (Loss) per Common Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Before Cumulative Effect of Accounting Change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(31.59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative Effect of Accounting Change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.55</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Earnings (Loss) per Common Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(31.48</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Before Cumulative Effect of Accounting Change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(31.59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative Effect of Accounting Change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.55</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Earnings (Loss) per Common Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(31.48</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.02</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash Dividends per Common Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Includes unusual items. See Note&nbsp;16 to the Company&#146;s
    Notes to Consolidated Financial Statements for related
    information.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='225'></A>
</DIV>

<!-- link1 "Consolidated Balance Sheets" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Consolidated Balance Sheets</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,127</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-Term Obligations and Redeemable Preferred Stock(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,379</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Stockholders&#146; Equity (Deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(434</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,921</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,615</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(358</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares of Common Stock Outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67.0</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Includes debt, capital leases and postretirement benefits other
    than pensions (noncurrent). Also includes liabilities subject to
    compromise at December&nbsp;31, 2004 and December&nbsp;31, 2002.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">18

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<DIV align="left" style="font-size: 10pt;">
<A name='226'></A>
</DIV>

<!-- link1 "Item 7. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item&nbsp;7.&nbsp;Management&#146;s Discussion and Analysis
of Financial Condition and Results of Operations</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>General Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of the statements contained herein should be considered
&#147;forward-looking statements&#148; within the meaning of the
Private Securities Litigation Reform Act of 1995, which reflect
the current views of the Company with respect to current events
and financial performance. You can identify these statements by
forward-looking words such as &#147;may,&#148; &#147;will,&#148;
&#147;expect,&#148; &#147;intend,&#148; &#147;anticipate,&#148;
&#147;believe,&#148; &#147;estimate,&#148; &#147;plan,&#148;
&#147;could,&#148; &#147;should,&#148; and &#147;continue&#148;
or similar words. These forward-looking statements may also use
different phrases. Such forward-looking statements are and will
be, as the case may be, subject to many risks, uncertainties and
factors relating to the Company&#146;s operations and business
environment which may cause the actual results of the Company to
be materially different from any future results, express or
implied, by such forward-looking statements. Factors that could
cause actual results to differ materially from these
forward-looking statements include, but are not limited to, the
following: the ability of the Company to continue as a going
concern; the ability of the Company to obtain and maintain any
necessary financing for operations and other purposes, whether
debtor-in-possession financing or other financing; the ability
of the Company to maintain adequate liquidity; the ability of
the Company to absorb escalating fuel costs; the Company&#146;s
ability to obtain court approval with respect to motions in the
Chapter&nbsp;11 proceedings prosecuted by it from time to time;
the ability of the Company to develop, prosecute, confirm and
consummate one or more plans of reorganization with respect to
the Chapter&nbsp;11 proceedings; risks associated with third
parties seeking and obtaining court approval to terminate or
shorten the exclusivity period for the Company to propose and
confirm one or more plans of reorganization, to appoint a
Chapter&nbsp;11 trustee or to convert the cases to
Chapter&nbsp;7 cases; the ability of the Company to obtain and
maintain normal terms with vendors and service providers; the
Company&#146;s ability to maintain contracts that are critical
to its operations; the potential adverse impact of the
Chapter&nbsp;11 proceedings on the Company&#146;s liquidity or
results of operations; the ability of the Company to operate
pursuant to the terms of its financing facilities (particularly
the financial covenants); the ability of the Company to fund and
execute its Transformation Plan during the Chapter&nbsp;11
proceedings and in the context of a plan of reorganization and
thereafter; the ability of the Company to attract, motivate
and/or retain key executives and associates; the ability of the
Company to attract and retain customers; the ability of the
Company to maintain satisfactory labor relations; demand for
transportation in the markets in which the Company operates;
economic conditions; labor costs; financing availability and
costs; security-related and insurance costs; competitive
pressures on pricing (particularly from lower-cost competitors)
and on demand (particularly from low-cost carriers and
multi-carrier alliances); weather conditions; government
legislation and regulation; impact of the continued military
activities in Iraq; other acts of war or terrorism; and other
risks and uncertainties listed from time to time in the
Company&#146;s reports to the SEC. There may be other factors
not identified above of which the Company is not currently aware
that may affect matters discussed in the forward-looking
statements, and may also cause actual results to differ
materially from those discussed. The Company assumes no
obligation to update such estimates to reflect actual results,
changes in assumptions or changes in other factors affecting
such estimates other than as required by law. Similarly, these
and other factors, including the terms of any reorganization
plan ultimately confirmed, can affect the value of the
Company&#146;s various prepetition liabilities, common stock
and/or other equity securities. Accordingly, the Company urges
that the appropriate caution be exercised with respect to
existing and future investments in any of these liabilities
and/or securities.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='228'></A>
</DIV>

<!-- link1 "Chapter 11 Proceedings" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Chapter&nbsp;11 Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;12, 2004, US Airways Group and its domestic
subsidiaries (collectively, the Debtors), which account for
substantially all of the operations of the Company, including
its principal operating subsidiary, US Airways, filed voluntary
petitions for relief under Chapter&nbsp;11 of the Bankruptcy
Code in the United States Bankruptcy Court for the Eastern
District of Virginia, Alexandria Division (Case Nos.
04-13819-SSM through 04-13823-SSM). Each of the Debtors in these
cases had previously filed a voluntary petition for relief under
Chapter&nbsp;11 on August&nbsp;11, 2002 (the Prior Bankruptcy).
The Debtors emerged from the Prior Bankruptcy under the First
Amended Joint Plan of Reorganization of US Airways
</DIV>

<P align="center" style="font-size: 10pt;">19

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<DIV align="left" style="font-size: 10pt;">
Group, Inc. and Affiliated Debtors and Debtors-in-Possession, As
Modified (the 2003 Plan), which was confirmed pursuant to an
order of the Bankruptcy Court on March&nbsp;18, 2003 and became
effective on March&nbsp;31, 2003. In accordance with AICPA
Statement of Position&nbsp;90-7, &#147;Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code&#148;
(SOP&nbsp;90-7), the Company adopted fresh-start reporting on
March&nbsp;31, 2003. References to &#147;Predecessor
Company&#148; refer to the Company prior to March&nbsp;31, 2003.
References to &#147;Successor Company&#148; refer to the Company
on and after March&nbsp;31, 2003, after giving effect to the
cancellation of the then-existing common stock and the issuance
of new securities in accordance with the 2003 Plan and
application of fresh-start reporting. As a result of the
application of fresh-start reporting, the Successor
Company&#146;s financial statements are not comparable with the
Predecessor Company&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Before emerging from the Prior Bankruptcy in 2003, the Company
examined virtually every phase of its contracts and operations
and had significantly reduced costs. The Company reduced its
mainline capacity, realigned its network to maximize yield,
initiated a business plan to use more regional jets and procured
financing for these aircraft, and expanded its alliances with
other carriers. However, after emerging from the Prior
Bankruptcy, the Company continued to incur substantial losses
from operations. The primary factors contributing to these
losses include the reduction in domestic industry unit revenue
and significant increases in fuel prices. The downward pressure
on domestic industry revenue is a result of the rapid growth of
low-fare, low-cost airlines, the increasing transparency of
fares through Internet sources and other changes in fare
structures that have resulted in substantially lower fares for
many business and leisure travelers. The competitive environment
continued to intensify throughout 2004, particularly in key
markets such as Philadelphia, Washington,&nbsp;D.C., Boston and
New York.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Throughout the spring and summer of 2004, the Company
communicated with key stakeholders and the public its plan to
transform US Airways into a fully competitive and profitable
airline (the Transformation Plan). A key element of the
Transformation Plan is significant reductions in labor costs
through changes to the Company&#146;s collective bargaining
agreements. The Company aggressively sought the necessary
agreements to allow full implementation of the Transformation
Plan without the need for filing new Chapter&nbsp;11 cases but
was unable to do so in a timely manner. As a result of the
recurring losses, declining available cash and risk of defaults
or cross defaults under certain key financing and operating
agreements, it was necessary for the Debtors to file voluntary
petitions for reorganization under Chapter&nbsp;11 of the
Bankruptcy Code on September&nbsp;12, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At hearings held on September&nbsp;13, 2004, the Bankruptcy
Court granted the Company&#146;s first day motions for relief
designed to stabilize its operations and business relationships
with customers, vendors, employees and others and entered orders
granting permission to the Debtors to, among other things:
(a)&nbsp;pay employee wages and continue benefits, such as
medical and dental insurance; (b)&nbsp;honor prepetition
obligations to customers and continue customer programs,
including US Airways&#146; Dividend Miles program; (c)&nbsp;pay
for fuel under existing supply contracts, and honor existing
fuel supply, distribution and storage agreements;
(d)&nbsp;assume certain contracts related to interline
agreements with other airlines; (e)&nbsp;pay prepetition
obligations to certain foreign vendors, foreign service
providers and foreign governments; and (f)&nbsp;continue
maintenance of existing bank accounts and existing cash
management systems. The Bankruptcy Court also approved the
interim agreement reached between the Company, the ATSB and the
lenders under the $1&nbsp;billion loan, obtained upon emergence
from the Prior Bankruptcy and substantially guaranteed by the
ATSB, to allow the Company continued use of the cash collateral
securing the loan (see further discussion below).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since filing for bankruptcy on September&nbsp;12, 2004, the
Company has achieved cost-savings agreements with all of its
collective bargaining groups. Through a motion filed under
Section&nbsp;1113(e) of the Bankruptcy Code on
September&nbsp;24, 2004, the Company sought interim relief from
their collective bargaining agreements (CBAs) with ALPA, AFA,
TWU, CWA and IAM. On October&nbsp;15, 2004, the Bankruptcy Court
approved base rates of pay reductions of 21% through
February&nbsp;15, 2005 or entry of an order approving a new CBA
or granting final relief under Section&nbsp;1113(c) of the
Bankruptcy Code. Reductions to pension contributions and certain
work rule changes were also approved. The interim relief order
did not apply to ALPA or TWU, whose members reached and ratified
CBAs prior to the interim relief going into effect. CBAs with
the CWA and AFA were reached in December 2004 and were
subsequently ratified. On January&nbsp;6, 2005, the
</DIV>

<P align="center" style="font-size: 10pt;">20

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<DIV align="left" style="font-size: 10pt;">
Bankruptcy Court approved the Company&#146;s request to reject
the IAM CBAs and approved the termination of the three mainline
defined benefit plans. The IAM subsequently ratified Company
cost-savings proposals on January&nbsp;21, 2005. In addition,
the Bankruptcy Court has also approved various settlement
agreements between the Company and the court-appointed
Section&nbsp;1114 Committee representing retirees other than
those represented by the IAM to begin the significant
curtailment of postretirement benefits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;12, 2004, US Airways filed a motion requesting
a determination from the Bankruptcy Court that US Airways
satisfied the financial requirements for a &#147;distress
termination&#148; of the Retirement Plan for Flight Attendants
in the Service of US Airways, Inc. (AFA Plan), the Pension Plan
for Employees of US Airways, Inc. Who Are Represented by the
International Association of Machinists and Aerospace Workers
(IAM Plan), and the Retirement Plan for Certain Employees of US
Airways, Inc. (CE Plan) under section&nbsp;4041(c)(2)(B)(ii)(IV)
of the Employee Retirement Income Security Act of 1974, as
amended (ERISA), and approval of each such plan&#146;s
termination. These plans were projected to have benefit
obligations and plan assets aggregating $2.7&nbsp;billion and
$1.7&nbsp;billion, respectively, as of September&nbsp;30, 2004,
the most recent valuation date. On January&nbsp;6, 2005, the
Bankruptcy Court entered an order (i)&nbsp;finding that the
financial requirements under section&nbsp;4041(c)(2)(B)(ii)(IV)
of ERISA for a distress termination of the plans had been met
and (ii)&nbsp;approving termination of the plans. The AFA Plan
and the IAM Plan were terminated effective January&nbsp;10,
2005, by agreement between the PBGC and the Company. The CE Plan
was terminated effective January&nbsp;17, 2005, by agreement
between the PBGC and US Airways. Effective February&nbsp;1,
2005, the PBGC was appointed trustee for each of the three plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the cost savings achieved with labor groups, the
Company also implemented pay and benefit reductions for its
current management and other non-union employees, including
reductions to base pay, workforce reductions and modifications
to vacation and sick time accruals. The Company also implemented
modifications to its defined contribution pension plans and will
implement modifications to retiree benefits in 2005. The pay
rate and defined contribution plan reductions went into effect
October&nbsp;11, 2004 and the reductions to retiree medical
benefits will become effective March&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has reached agreements with certain of its lessors
and lenders restructuring existing aircraft lease and debt
financings. On November&nbsp;19, 2004, the Bankruptcy Court
approved the Company&#146;s agreements for the continued use and
operation of substantially all of its mainline and Express
fleet. As discussed in detail below, the Company reached a
comprehensive agreement with GE Capital Aviation Services
(GECAS)&nbsp;and GE Engine Service (GEES)&nbsp;on aircraft
leasing and financing and engine services, which will provide
the Company with short-term liquidity, reduced debt, lower
aircraft ownership costs, enhanced engine maintenance services,
and operating leases for new regional jets. The Company also
reached agreements with EMBRAER-Empresa Brasileria de
Aeronautica SA (Embraer) and Bombardier, Inc. (Bombardier)
providing for continued use and operation of its aircraft, short
term liquidity and new financing for regional jets, which were
approved by the Bankruptcy Court in January 2005. These
agreements are discussed in more detail below in &#147;Liquidity
and Capital Resources.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has notified all known or potential creditors of the
Chapter&nbsp;11 filing for the purposes of identifying and
quantifying all prepetition claims. The Chapter&nbsp;11 filing
triggered defaults on substantially all debt and lease
obligations. Subject to certain exceptions under the Bankruptcy
Code, the Chapter&nbsp;11 filing automatically stayed the
continuation of any judicial or administrative proceedings or
other actions against the Debtors or their property to recover
on, collect or secure a claim arising prior to
September&nbsp;12, 2004. The deadline for filing proofs of claim
with the Bankruptcy Court was February&nbsp;3, 2005, with a
limited exception for governmental entities, which have until
March&nbsp;11, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The potential adverse publicity associated with the
Chapter&nbsp;11 filings and the resulting uncertainty regarding
the Company&#146;s future prospects may hinder the
Company&#146;s ongoing business activities and its ability to
operate, fund and execute its business plan by impairing
relations with existing and potential customers; negatively
impacting the ability of the Company to attract and retain key
employees; limiting the Company&#146;s ability to obtain trade
credit; limiting the Company&#146;s ability to effectively hedge
rising aviation fuel costs; and impairing present and future
relationships with vendors and service providers.
</DIV>

<P align="center" style="font-size: 10pt;">21

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the Chapter&nbsp;11 filings, realization of
assets and liquidation of liabilities are subject to significant
uncertainty. While operating as a debtor-in-possession under the
protection of Chapter&nbsp;11, and subject to Bankruptcy Court
approval or otherwise as permitted in the normal course of
business, US Airways may sell or otherwise dispose of assets and
liquidate or settle liabilities for amounts other than those
reflected in the financial statements. Further, a plan of
reorganization could materially change the amounts and
classifications reported in the historical financial statements,
which do not give effect to any adjustments to the carrying
value of assets or amounts of liabilities that might be
necessary as a consequence of confirmation of a plan of
reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To exit Chapter&nbsp;11 successfully, the Company must obtain
confirmation by the Bankruptcy Court of a plan of
reorganization. The Company currently has the exclusive right to
file a plan of reorganization until March&nbsp;31, 2005 and
solicit acceptance of the plan through June&nbsp;30, 2005. Under
the terms of the agreement reached with General Electric, the
Company has until March&nbsp;15, 2005 to file a plan of
reorganization. These deadlines could potentially be extended. A
plan of reorganization would, among other things, resolve all
prepetition obligations, set forth a revised capital structure
and establish the corporate governance subsequent to exiting
from bankruptcy. The Company is currently working towards
emerging from Chapter&nbsp;11 mid-year 2005, but that timing is
dependent upon, among other things, the timely and successful
confirmation and implementation of a plan of reorganization. The
ultimate recovery to creditors and/or holders of the common
stock, if any, will not be determined until confirmation of a
plan of reorganization. No assurance can be given as to what
values, if any, will be ascribed in the Chapter&nbsp;11 cases to
these constituencies or what type or amount of distributions, if
any, they would receive. A plan of reorganization could result
in holders of the Company&#146;s common stock receiving no
distribution and cancellation of existing stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;13, 2004, the Company received written notice
from The NASDAQ Stock Market that its Class&nbsp;A Common Stock
would be delisted in accordance with Marketplace Rules&nbsp;4300
and 4450(f), effective with the opening of business on
September&nbsp;22, 2004. NASDAQ indicated in its letter that the
delisting determination followed its review of the
Company&#146;s press release announcing that the Company had
filed for bankruptcy protection. As a result of this
notification, a fifth character &#147;Q&#148; was added to the
trading symbol, changing it from &#147;UAIR&#148; to
&#147;UAIRQ&#148; at the opening of business on
September&nbsp;15, 2004. Shares of the Class&nbsp;A Common Stock
are currently trading on the NASDAQ over-the-counter market
under the symbol as changed above. The Company cannot assure
that an active trading market for its stock will exist in the
future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The value of the common stock is highly speculative. The Company
urges that appropriate caution be exercised with respect to
existing and future investments in the securities of the Company.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Transformation Plan</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company continues to implement its Transformation Plan,
which is built on several aspects of proven success in the
airline industry, beyond the necessary lower labor costs that
have been achieved. Those include lower overall costs, a
simplified fare structure and expanded services in the eastern
United States, the Caribbean and Latin America. Specifically,
the Company has taken or is currently undertaking the following
initiatives:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Lower, simplified pricing and lower distribution costs. US
    Airways has already taken steps to simplify its fares by
    introducing its GoFares pricing plan in many markets served from
    Philadelphia, Washington,&nbsp;D.C., and Fort&nbsp;Lauderdale,
    and has stated its intent to expand that pricing plan across its
    system in conjunction with achieving lower costs. A redesigned
    website and more airport technology will also lower distribution
    costs, enhance customer service and improve airport processing.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Enhanced low-cost product offering. US Airways customers will
    continue to benefit from a combination of product offerings that
    is unique among low-cost carriers, including two-class service,
    international flights to Europe, the Caribbean, Latin America
    and Canada, service to airports that business travelers prefer,
    access to a global network via the Star Alliance, a premium
    frequent flyer program and competitive onboard service.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">22

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Network enhancements. Leveraging its strong positions in major
    Northeast markets, US&nbsp;Airways intends to use its airport
    slot and facilities assets to offer nonstop service to more
    major business and leisure destinations. Pittsburgh is no longer
    a hub and service has been reduced in accordance with previously
    announced operational changes. Fort&nbsp;Lauderdale is being
    expanded to handle additional Latin America service. Operations
    at Charlotte are being expanded and new routes from Reagan
    National are being introduced. In addition, changes are being
    made to the scheduling practices at Philadelphia to improve
    reliability, adding new destinations in the Caribbean and Latin
    America and introducing service to Barcelona and Venice in May.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Lower unit operating costs. In conjunction with more
    point-to-point flying, US Airways intends to fly its fleet more
    hours per day as it decreases the time aircraft sit on the
    ground at hubs, waiting for connecting passengers. Productivity
    increases will be gained through this more efficient scheduling
    in conjunction with the contractual labor changes.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Prior Bankruptcy Information</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed above, the Company emerged from the Prior
Bankruptcy under the 2003 Plan. The 2003 Plan constituted a
separate plan of reorganization for each of the Company and its
domestic subsidiaries (the Filing Entities). In accordance with
the Bankruptcy Code, the 2003 Plan divided claims against, and
interests in, each of the Filing Entities into classes according
to their relative seniority and other criteria and provided the
same treatment for each claim or interest of a particular class
unless the holder of a particular claim or interest agreed to a
less favorable treatment of its claim or interest. Among other
things, the 2003 Plan generally provided for full payment of all
allowed administrative and priority claims, and the distribution
of shares (or warrants to purchase shares) of new equity in the
reorganized US Airways Group, Inc. (Reorganized US Airways
Group) to the ATSB, the Retirement Systems of Alabama Holdings
LLC (RSA), the Company&#146;s management and labor unions,
General Electric Capital Corporation and Bank of America, N.A.,
and to unsecured creditors of the Filing Entities, including the
PBGC, in satisfaction of their allowed claims. Persons holding
equity in US Airways Group prior to March&nbsp;31, 2003 were not
entitled to any distribution under the 2003 Plan and their
shares of common stock were cancelled. For a complete discussion
of the distributions provided for under the 2003 Plan, investors
should refer to the 2003 Plan confirmed by the Bankruptcy Court
on March&nbsp;18, 2003 and filed with US Airways Group&#146;s
Current Report on Form&nbsp;8-K dated March&nbsp;18, 2003 and
filed with the SEC on April&nbsp;2, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;31, 2003, RSA invested $240&nbsp;million in cash
in Reorganized US Airways Group pursuant to an investment
agreement (the RSA Investment Agreement) in exchange for
approximately 36.2%, on a fully diluted basis, of the equity in
Reorganized US Airways Group. As of March&nbsp;31, 2003, in
connection with its investment, RSA was granted a voting
interest of approximately 71.6% in Reorganized US Airways Group
and became entitled to designate and vote to elect eight of
15&nbsp;directors to Reorganized US Airways Group&#146;s Board
of Directors. See Notes&nbsp;10 and 12(a) in the Notes to the
Consolidated Financial Statements for a summary of the equity
structure following the Prior Bankruptcy and related party
transactions with RSA.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='229'></A>
</DIV>

<!-- link1 "Results of Operations" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Results of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed above, the Company emerged from the Prior
Bankruptcy and adopted fresh-start reporting on March&nbsp;31,
2003. As a result of the application of fresh-start reporting,
the Successor Company&#146;s financial statements are not
comparable with the Predecessor Company&#146;s financial
statements. However, for purposes of discussion of the results
of operations, 2004 has been compared to the full year 2003 as
included, in part, in the Company&#146;s Statements of
Operations (which are contained in Part&nbsp;II, Item&nbsp;8 of
this report) and in &#147;Selected Operating and Financial
Statistics&#148; below. Except where noted, operating statistics
referred to below are for scheduled service only.
</DIV>

<P align="center" style="font-size: 10pt;">23

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2004 Compared With 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Operating Revenues</U>&nbsp;&#151; Operating revenues
increased $271&nbsp;million, or 4.0%. <I>Passenger
transportation </I>revenues increased $212&nbsp;million or 3.5%.
Revenue passenger miles (RPMs) were up 8.7%, which increased
revenues by $536&nbsp;million, partially offset by a 4.9%
decrease in yield, which decreased revenues by
$324&nbsp;million. Passenger transportation revenues were
negatively impacted by the Company&#146;s bankruptcy
proceedings. Passenger transportation revenue in 2003 included a
favorable $34&nbsp;million adjustment to the traffic balances
payable account for unused and now expired tickets. <I>Cargo and
freight </I>revenue was flat. <I>Other </I>operating revenue
increased as a result of increased third party fuel sales due to
higher fuel prices and revenue associated with certain marketing
arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Operating Expenses</U>&nbsp;&#151; Operating expenses
increased by $398&nbsp;million, or 5.6%. Operating expenses
excluding <I>Government compensation </I>and S<I>pecial
items</I> increased 3.0% on a capacity increase (as measured by
available seat miles or ASMs) of 5.8%. <I>Personnel costs
</I>decreased 8.4% due to lower employee pension, medical and
dental, and postretirement medical benefit expense, an
$89&nbsp;million decrease in stock-based compensation expense
related to the issuance of US Airways Group Class&nbsp;A Common
Stock to employees covered by collective bargaining agreements
following emergence from the Prior Bankruptcy in 2003, reduced
headcount in 2004 and lower wage rates in the fourth quarter of
2004 as the result of interim or permanent relief from labor
contracts. These decreases were partially offset by an increase
in expense associated with long-term disability. <I>Aviation
fuel </I>increased 32.4% primarily due to higher average fuel
prices and, to a lesser extent, schedule-driven increases in
consumption. <I>US Airways Express capacity purchases
</I>increased 24.2% reflecting an increase in purchased ASMs
from third-party regional jet operators and other airline
subsidiaries of US Airways Group. <I>Aircraft rent </I>increased
4.2% as a result of new leases due to the conversion of
mortgaged aircraft to leased aircraft and the addition of new
regional jet leases. <I>Other rent and landing fees
</I>decreased slightly as a result of decreases in landing fees
partially offsetting increased airport rental expenses.
<I>Selling expenses </I>decreased 3.2% due to a decrease in
commissions partially offset by increases to advertising expense
and sales volume driven increases in credit card fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Depreciation and amortization</I> increased 2.5% due to
depreciation associated with new regional jets and the write-off
of certain ground equipment and an indefinite lived foreign
slot, partially offset by lower book values on the existing
fleet as a result of fresh-start reporting effective
March&nbsp;31, 2003 and by reduced amortization associated with
capitalized software. <I>Other</I> operating expenses increased
4.6% due to increases in the cost associated with the redemption
of Dividend Miles for travel on partner airlines and future
travel on US Airways as well as increases to costs associated
with passenger and baggage screening and navigation fees,
partially offset by decreases in insurance expenses and
schedule-related expenses including passenger food expenses.
2003 included $28&nbsp;million in reductions to an accrual upon
the resolution of previously outstanding contingencies. Refer to
&#147;Description of Unusual Items&#148; below for information
on S<I>pecial items </I>and <I>Government compensation.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Other Income (Expense)</U>&nbsp;&#151; Other Income
(Expense), net decreased $2.0&nbsp;billion primarily as a result
of the reorganization items directly associated with the
emergence from the Prior Bankruptcy. See &#147;Description of
Unusual Items&#148; below for additional information on the
components of <I>Reorganization items, net </I>in 2003. In 2004,
reorganization items consisted of $30&nbsp;million of
professional fees, $7&nbsp;million in aircraft order
cancellation penalties, and $2&nbsp;million in damage and
deficiency claims associated with the rejection of certain
aircraft in the Prior Bankruptcy, offset by $4&nbsp;million in
interest income on accumulated cash as a result of the current
Chapter&nbsp;11 proceedings. <I>Interest income</I> decreased as
the result of the reclassification of interest income on cash,
cash equivalents and short term investments to <I>Reorganization
items, net</I> subsequent to the Chapter&nbsp;11 filing on
September&nbsp;12, 2004. <I>Interest expense</I> was flat as a
result of the conversion of mortgaged aircraft to leased
aircraft and the abandonment of certain aircraft, offset by
interest related to the ATSB Loan and penalty interest incurred
as a result of the current Chapter&nbsp;11 proceedings<I>.
Other, net </I>income in 2004 includes $13&nbsp;million related
to a business interruption insurance recovery and a
$2&nbsp;million gain on the sale of four aircraft, while the
2003 results reflect a $30&nbsp;million gain recognized in
connection with the Company&#146;s sale of its investment in
Hotwire, Inc.
</DIV>

<P align="center" style="font-size: 10pt;">24

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Provision (Credit) for Income Taxes</U>&nbsp;&#151; The
Company recorded an income tax benefit of $10&nbsp;million for
the year ended December&nbsp;31, 2004, as compared to
$11&nbsp;million of income tax expense in 2003. The benefit
recognized in 2004 related to revisions to prior estimates upon
completion of the Company&#146;s consolidated 2003 tax return.
The Company continues to record a full valuation allowance
against its net deferred tax assets due to the uncertainty
regarding their ultimate realization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Selected Operating and Financial Statistics</U>&nbsp;&#151;
System capacity (as measured by ASMs) increased 5.8% and
passenger volume (as measured by RPMs) increased 8.7% in 2004.
These increases resulted in a 73.5% system passenger load
factor, representing a 2.0&nbsp;percentage point increase over
2003. However, system yield declined by 4.9% reflecting the
continued downward pressure on fares. Weather conditions related
primarily to hurricanes adversely impacted the Company&#146;s
operating and financial performance in 2004 and 2003.
US&nbsp;Airways&#146; full-time equivalent employees at
December&nbsp;31, 2004 declined 8.1% reflecting the headcount
reduction measures put in place in connection with the
Company&#146;s Transformation Plan.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2003 Compared With 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Operating Revenues</U>&nbsp;&#151; Operating revenues
decreased $131&nbsp;million, or 1.9%. <I>Passenger
transportation </I>revenue decreased $149&nbsp;million or 2.4%.
RPMs declined 4.4%, which decreased revenues by
$277&nbsp;million, partially offset by a 2.1% improvement in
yield, which increased revenues by $127&nbsp;million. Passenger
transportation revenue for 2003 included a favorable
$34&nbsp;million adjustment to the traffic balances payable
account for unused and now expired tickets. <I>Other</I>
operating revenue increased 4.9% due to increased third party
fuel sales and mileage credit sales partially offset by lower
ticket change and cancellation fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Operating Expenses</U>&nbsp;&#151; Operating expenses
declined by $1.20&nbsp;billion, or 14.4%. Operating expenses
excluding <I>Government compensation </I>and S<I>pecial items
</I>were lower by 8.7% on a capacity decrease (as measured by
ASMs) of 6.9%. <I>Personnel costs </I>decreased 18.2% due to
lower headcount levels, wage rates and employee pension and
benefit expenses partially offset by $125&nbsp;million of
stock-based compensation expenses resulting from the issuance of
Class&nbsp;A Common Stock to employees covered by collective
bargaining agreements following emergence from Chapter&nbsp;11.
<I>Aviation fuel </I>increased 6.1% due to higher average fuel
prices partially offset by schedule-driven decreases in
consumption. <I>US Airways Express capacity purchases
</I>increased 33.8% reflecting a 32% increase in purchased ASMs
from third-party regional jet operators. <I>Aircraft rent</I>
decreased 17.9% due to favorably restructured leases and lease
rejections made in connection with the Company&#146;s Prior
Bankruptcy, which was partially offset by new leases as a result
of the conversion of mortgaged aircraft to leased aircraft.
<I>Other rent and landing fees </I>were flat as a result of
schedule-driven decreases in landing fees offsetting increased
airport rental expenses associated with the new terminal in
Philadelphia. <I>Selling expenses </I>decreased 7.9% due to
sales volume driven decreases in credit card fees and sales- and
rate-driven decreases in computer reservation system fees.
Travel agent commission rates decreased due to the elimination
of the base domestic commissions in March 2002 and increases in
internet bookings which are less costly to the Company.
<I>Depreciation and amortization </I>decreased 21.7% due to
fewer owned aircraft in the operating fleet and lower book
values on the existing fleet as a result of fresh-start
reporting. <I>Other </I>operating expenses decreased 8.4% due to
decreases in insurance expenses and schedule-related expenses
including passenger food expenses and crew travel expenses and a
$17&nbsp;million and $12&nbsp;million reduction to an accrual
upon the resolution of previously outstanding contingencies
partially offset by increases in expenses associated with
third-party fuel sales. Refer to &#147;Description of Unusual
Items&#148; below for information on <I>Special items </I>and
<I>Government compensation.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Other Income (Expense)</U>&nbsp;&#151; Other Income
(Expense), net increased $2.3&nbsp;billion from an expense of
$598&nbsp;million in 2002 to income of $1.7&nbsp;billion in
2003. <I>Interest income </I>decreased due to lower return rates
partially offset by higher average investment balances.
<I>Interest expense </I>decreased as a result of the conversion
of mortgaged aircraft to leased aircraft and the abandonment of
certain aircraft partially offset by interest related to the
ATSB Loan<I>. Other, net</I> income increased as a result of a
$30&nbsp;million gain recognized in connection with the
Company&#146;s sale of its investment in Hotwire, Inc. and
mark-to-market adjustments on certain stock options held by the
Company. Refer to &#147;Description of Unusual Items&#148; below
for information on <I>Reorganization items, net.</I>
</DIV>

<P align="center" style="font-size: 10pt;">25

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Provision (Credit) for Income Taxes</U>&nbsp;&#151; The
Company&#146;s federal and state income tax expense was
$11&nbsp;million in 2003 representing an effective tax rate of
0.7%. This differed from statutory rates primarily due to
utilization of net operating loss carryforwards. During 2001,
the Company recognized a valuation allowance against its net
deferred tax asset. The Company continues to record a full
valuation allowance against its net deferred tax assets due to
the uncertainty regarding their ultimate realization. As a
result of the March 2002 enactment of the Job Creation and
Worker Assistance Act of 2002 (Job Act), the Company recognized
an income tax credit equal to the Company&#146;s carryback
potential. The Job Act provides, among other things, an
extension of the net operating loss carryback period to five
years from two years for net operating losses arising from tax
years that end in 2001 or 2002 and the elimination of the 90%
limitation for alternative minimum tax purposes on those loss
carrybacks. The tax credit recorded in 2002 includes
$74&nbsp;million related to 2001 losses realizable due to the
enactment of the Job Act and recorded in the period of
enactment. The Company continued to record a valuation allowance
against its net deferred tax asset which resulted in a 2002
effective tax rate of 13%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Cumulative Effect of Accounting Change</U>&nbsp;&#151;
Effective January&nbsp;1, 2002, PSA, a wholly owned subsidiary
of the Company, changed its method of accounting for engine
maintenance from accruing on the basis of hours flown to
expensing as incurred. In connection with the change, PSA
recognized a $17&nbsp;million credit representing the cumulative
effect of the accounting change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Selected Operating and Financial Statistics</U>&nbsp;&#151;
System capacity (as measured by ASMs) decreased 6.9% and
passenger volume (as measured by RPMs) decreased 4.4% in 2003.
These decreases resulted in a 71.5% system passenger load
factor, representing a 1.9&nbsp;percentage point increase over
2002. System yield improved 2.1% reflecting a modest improvement
in economic conditions. Both RPMs and ASMs were significantly
affected by the schedule reductions initiated following the
Company&#146;s Prior Bankruptcy filing. In addition, hurricanes
Isabel, Fabian and Henri adversely impacted the Company&#146;s
operating and financial performance in 2003. US Airways
full-time equivalent employees at December&nbsp;31, 2003
declined 12.4% reflecting the headcount reduction measures put
in place in connection with the Company&#146;s 2002
restructuring.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Description of Unusual Items</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Special Items</U>&nbsp;&#151; Special items included within
operating expenses on the Company&#146;s Consolidated Statements
of Operations include the following components (dollars in
millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months&nbsp;Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft order cancellation penalty</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD align="left" valign="bottom" nowrap>(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft impairments and related charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>392</TD>
    <TD align="left" valign="bottom" nowrap>(b)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension and postretirement benefit curtailments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(90</TD>
    <TD align="left" valign="bottom" nowrap>)(c)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employee severance including benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)(d)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)(d)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD align="left" valign="bottom" nowrap>(e)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>320</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    During the quarter ended June&nbsp;30, 2003, the Company
    recorded a $35&nbsp;million charge in connection with its
    intention not to take delivery of certain aircraft scheduled for
    future delivery.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    During the fourth quarter of 2002, US&nbsp;Airways conducted an
    impairment analysis in accordance with Statement of Financial
    Accounting Standards No.&nbsp;144, &#147;Accounting for the
    Impairment or Disposal of Long-Lived Assets&#148;
    (SFAS&nbsp;144) on its B737-300, B737-400, B757-200 and B767-200
    aircraft fleets as a result of changes to the aircraft&#146;s
    recoverability periods (the planned conversion of owned aircraft
    to leased aircraft) as well as indications of possible material
    changes to the market values of these aircraft. The analysis
    revealed that estimated undiscounted future cash flows generated
    by these aircraft were less than their carrying values for four
    B737-300s, 15 B737-400s, 21 B757-200s and three B767-200s. In
    accordance with SFAS&nbsp;144, the carrying values were reduced
    to fair market value. This analysis resulted in a pretax charge
    of $392&nbsp;million. Management estimated fair market value
    using third-party appraisals and recent leasing transactions.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    During the fourth quarter of 2002, US&nbsp;Airways recorded a
    curtailment credit of $120&nbsp;million related to certain
    postretirement benefit plans and a $30&nbsp;million curtailment
    charge related to certain defined benefit pension plans.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">26

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    In September 2001, US&nbsp;Airways announced that in connection
    with its reduced flight schedule it would terminate or furlough
    approximately 11,000 employees across all employee groups.
    Approximately 10,200 of the affected employees were terminated
    or furloughed on or prior to January&nbsp;1, 2002. Substantially
    all the remaining affected employees were terminated or
    furloughed by May 2002. US&nbsp;Airways&#146; headcount
    reduction was largely accomplished through involuntary
    terminations/furloughs. In connection with this headcount
    reduction, US&nbsp;Airways offered a voluntary leave program to
    certain employee groups. Voluntary leave program participants
    generally received extended benefits (e.g. medical, dental, life
    insurance) but did not receive any furlough pay benefit. In
    accordance with Emerging Issues Task Force Issue No.&nbsp;94-3,
    US&nbsp;Airways recorded a pretax charge of $75&nbsp;million
    representing the involuntary severance pay and the benefits for
    affected employees during the third quarter of 2001. In the
    fourth quarter of 2001, US&nbsp;Airways recognized a
    $10&nbsp;million charge representing the estimated costs of
    extended benefits for those employees who elected to take
    voluntary leave and a $2&nbsp;million reduction in accruals
    related to the involuntary severance as a result of employees
    electing to accept voluntary furlough. During the quarters ended
    June&nbsp;30, 2003 and 2002, the Company recognized
    $1&nbsp;million and $3&nbsp;million, respectively, in reductions
    to severance pay and benefit accruals related to the involuntary
    termination or furlough of certain employees.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    During the fourth quarter of 2002, US&nbsp;Airways recognized an
    impairment charge of $21&nbsp;million related to capitalized
    gates at certain airports in accordance with Statement of
    Financial Accounting Standards No.&nbsp;142, &#147;Goodwill and
    Other Intangible Assets.&#148; The carrying values of the
    affected gates were reduced to fair value based on a third party
    appraisal.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<U>Reorganization Items, Net</U>&nbsp;&#151; Reorganization
items, net represent amounts incurred as a direct result of the
Company&#146;s Chapter&nbsp;11 filings and are presented
separately in the Company&#146;s Consolidated Statements of
Operations. Such items consist of the following (dollars in
millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discharge of liabilities(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructured aircraft financings(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Termination of pension plans(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income on accumulated cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Damage and deficiency claims(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,167</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revaluation of assets and liabilities(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,107</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Professional fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft order cancellation penalties</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on aircraft abandonment(e)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(68</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Severance including benefits(f)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of ESOP deferred compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(43</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(294</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects the discharge or reclassification of liabilities
    subject to compromise in the Prior Bankruptcy. Most of these
    obligations were only entitled to receive such distributions of
    cash and common stock as provided under the 2003 Plan. A portion
    of the liabilities subject to compromise in the Prior Bankruptcy
    were restructured and continued, as restructured, to be
    liabilities of the Company.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    As of March&nbsp;31, 2003, the Company restructured aircraft
    debt and lease agreements related to 200&nbsp;aircraft in
    connection with its Prior Bankruptcy including the conversion of
    52 mortgages to operating leases. The restructured terms
    generally provide for shorter lease periods and lower lease
    rates.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Effective March&nbsp;31, 2003, US Airways terminated its
    qualified and nonqualified pilot defined benefit pension plans.
    The PBGC was appointed trustee of the qualified plan effective
    with the termination. The Company recognized a gain in
    connection with the termination which is partially offset by the
    PBGC claim.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    Damage and deficiency claims largely arose as a result of the
    Company electing to either restructure, abandon or reject
    aircraft debt and leases during the bankruptcy proceedings.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    Includes aircraft (seven A319s for 2003 and 34 F-100s, two
    B757-200s and one B737-400 for 2002) that were legally abandoned
    as part of the Prior Bankruptcy. Related aircraft liabilities
    were adjusted for each aircraft&#146;s expected allowed
    collateral value.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (f)</TD>
    <TD></TD>
    <TD valign="top">
    As a result of schedule reductions made in connection with the
    Prior Bankruptcy, US Airways terminated or furloughed
    approximately 6,600 employees across all employee groups.
    Substantially all affected employees were terminated or
    furloughed prior to March&nbsp;31, 2003. US Airways&#146;
    headcount reduction was largely accomplished through involuntary
    terminations/furloughs. In connection with this headcount
    reduction, US Airways offered a voluntary leave program to
    certain employee groups. Voluntary</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">27

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    leave program participants generally received extended benefits
    (e.g. medical, dental, life insurance) but did not receive any
    furlough pay benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<U>Government Compensation</U>&nbsp;&#151; In April 2003,
President George W. Bush signed into law the Emergency Wartime
Supplemental Appropriations Act (Emergency Wartime Act), which
included $2.4&nbsp;billion for reimbursement to the airlines for
certain aviation-related security expenses. Certain airlines
that received the aviation-related assistance were required to
agree to limit the total cash compensation for certain executive
officers during the 12-month period beginning April&nbsp;1, 2003
to an amount equal to the annual salary paid to that officer
during the air carrier&#146;s fiscal year 2002. Any violation of
this agreement would require the carrier to repay to the
government the amount reimbursed for airline security fees. The
Company complied with this limitation on executive compensation.
The Company&#146;s security fee reimbursement was
$214&nbsp;million, net of amounts due to certain affiliates, and
was recorded as a reduction to operating expenses during the
second quarter of 2003. In September 2003, the Company received
approximately $6&nbsp;million of compensation associated with
flight deck door expenditures which was recorded as an offset to
capital costs.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='230'></A>
</DIV>

<!-- link1 "Selected Operating and Financial Statistics(1)" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Selected Operating and Financial Statistics(1)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenue passengers miles (millions):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,374</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,038</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Available seat miles (millions):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,329</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger load factor(2):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Yield(3):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.07&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.79&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.48&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.43&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.05&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.05&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger revenue per available seat mile(5):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.34&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.57&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.08&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.33&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.56&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.27&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenue passengers (thousands):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,389</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,155</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline revenue per available seat mile(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.69&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.75&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.38&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline cost per available seat mile (Mainline CASM)(7)(8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.34&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.36&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.67&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline average stage length (miles)*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>685</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline cost of aviation fuel per gallon(9)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112.08&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88.29&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74.36&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline cost of aviation fuel per gallon (excluding fuel taxes)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106.35&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83.02&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68.90&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline gallons of aviation fuel consumed (millions)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>972</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline number of aircraft in operating fleet at period-end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>280</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline full-time equivalent employees at period end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,585</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;*</TD>
    <TD align="left">
    Denotes scheduled service only (excludes charter service).</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Operating statistics include free frequent flyer travelers and
    the related miles they flew. System statistics encompass all
    wholly owned airline subsidiaries of US Airways Group, including
    US Airways, Allegheny (through June 2004), Piedmont, PSA, as
    well as operating and financial results from capacity purchase
    agreements with Mesa, Chautauqua, Trans States and Midway
    (through October 2003). Where noted, revenues and expenses
    associated with US Airways&#146; capacity purchase arrangements
    with certain</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">28

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">affiliated airlines and US
    Airways&#146; regional jet division, MidAtlantic, have been
    excluded from US&nbsp;Airways&#146; financial results for
    purposes of mainline financial statistical calculation and to
    provide better comparability between periods (see details below).
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">Percentage of aircraft seating
    capacity that is actually utilized (RPMs/ ASMs).
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">Passenger transportation revenue
    divided by RPMs.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">Mainline passenger revenue excludes
    US Airways Express and MidAtlantic passenger revenue of
    $1,379&nbsp;million, $1,208&nbsp;million, and
    $1,058&nbsp;million for the years ended December&nbsp;31, 2004,
    2003 and 2002, respectively.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">Passenger transportation revenue
    divided by ASMs (a measure of unit revenue).
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">Mainline operating revenues divided
    by ASMs (a measure of unit revenue). Mainline operating revenues
    exclude US Airways Express and MidAtlantic operating revenues of
    $1,385&nbsp;million, $1,214&nbsp;million and $1,063&nbsp;million
    for the years ended December&nbsp;31, 2004, 2003 and 2002,
    respectively.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">Total Operating Expenses divided by
    ASMs (a measure of unit cost).
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">Mainline operating expenses exclude
    US Airways capacity purchases of $1,304&nbsp;million,
    $1,145&nbsp;million, and $1,094&nbsp;million for the years ended
    December&nbsp;31, 2004, 2003 and 2002, respectively, and
    MidAtlantic operating expenses of $79&nbsp;million for the year
    ended December&nbsp;31, 2004. Operating expenses for each period
    include unusual items as follows:
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="4%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    For the year ended December&nbsp;31, 2003, operating expenses
    include an aircraft order penalty of $35&nbsp;million
    (0.07&#162;) and government compensation of $212&nbsp;million
    (0.41&#162;).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    For the year ended December&nbsp;31, 2002, operating expenses
    include aircraft impairment and related charges of
    $392&nbsp;million (0.70&#162;), a benefit on the pension and
    postretirement curtailment of $90&nbsp;million (0.16&#162;), an
    impairment charge related to capitalized gates at certain
    airports of $21&nbsp;million (0.04&#162;) and a reduction to the
    involuntary severance accrual of $3&nbsp;million (0.01&#162;).</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    Includes fuel taxes and transportation charges and excludes
    service fees.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt;">
<A name='231'></A>
</DIV>

<!-- link1 "Liquidity and Capital Resources" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Liquidity and Capital Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, the Company&#146;s Cash, Cash
equivalents and Short-term investments totaled $738&nbsp;million
compared to $1.29&nbsp;billion as of December&nbsp;31, 2003. All
of the Company&#146;s unrestricted cash constitutes cash
collateral under the ATSB Loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company requires substantial liquidity in order to meet
scheduled debt and lease payments and to finance day-to-day
operations. As a result of the recurring losses, decline in
available cash, and risk of defaults or cross defaults under
certain key financing and operating agreements, the Company
filed a voluntary petition for reorganization under
Chapter&nbsp;11 of the Bankruptcy Code on September&nbsp;12,
2004. The Company has been operating with the use of the ATSB
cash collateral since its Chapter&nbsp;11 filing on
September&nbsp;12, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company currently estimates its cash balance will continue
to decline through the first quarter of 2005. The projected
decline in cash is a result of continued net losses during
winter months, front-loaded transition costs to achieve a
competitive cost structure and approximately $302&nbsp;million
in aircraft debt and lease payments due in the first quarter of
2005. Failure to make debt and lease payments would result in
the loss of those aircraft which are essential to the
Transformation Plan. The Company projects modest accumulation of
cash for several months beginning in the second quarter of 2005.
Failure to have continued use of the ATSB cash collateral could
necessitate asset sales and layoffs, and result in an inability
to continue operating.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;18, 2005, the Company announced that it reached
agreement with Eastshore Aviation, LLC, an investment entity
owned by Air Wisconsin Airlines Corporation and its shareholders
(Air Wisconsin), on a $125&nbsp;million financing commitment to
provide a substantial portion of the equity funding for a plan
of reorganization. The $125&nbsp;million facility will be in the
form of a debtor-in-possession term loan, to be drawn in the
amount of $75&nbsp;million, upon approval by Bankruptcy Court,
and as early as February&nbsp;28, 2005, and two subsequent
$25&nbsp;million increments. This loan would be second only to
the ATSB Loan with regard to the Company&#146;s assets that are
pledged as collateral. Upon emergence from Chapter&nbsp;11, the
$125&nbsp;million financing package would then convert to equity
in the reorganized US Airways Group. As part of this agreement,
US Airways and Air Wisconsin will enter into an air services
agreement under which Air Wisconsin may, but is not required to,
provide regional jet service under a US Airways Express code
share arrangement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>ATSB Loan and Cash Collateral Agreement</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of its reorganization under the Prior Bankruptcy,
US&nbsp;Airways received a $900&nbsp;million loan guarantee
(ATSB Guarantee) under the Air Transportation Safety and System
Stabilization Act from the ATSB in connection with a
$1&nbsp;billion term loan financing (ATSB Loan) that was funded
on March&nbsp;31, 2003. The Company required this loan and
related guarantee in order to provide the additional liquidity
necessary to carry out its 2003 Plan. US Airways is the primary
obligor under the ATSB Loan, which is guaranteed by
US&nbsp;Airways Group and each of its other domestic
subsidiaries. The ATSB Loan is secured by substantially all of
the present and future assets of the Debtors not otherwise
encumbered (including certain cash and investment accounts,
previously unencumbered aircraft, aircraft engines, spare parts,
flight simulators, real property, takeoff and landing slots,
ground equipment and accounts receivable), other than certain
specified assets, including assets which are subject to other
financing agreements. As of December&nbsp;31, 2004,
$718&nbsp;million was outstanding under the ATSB Loan. The ATSB
Loan is reflected as a current liability on the accompanying
balance sheet at a book value of $701&nbsp;million, which is net
of $17&nbsp;million of unamortized discount, and is not subject
to compromise. As of December&nbsp;31, 2004, the Company&#146;s
$738&nbsp;million in unrestricted cash and short-term
investments was available to support daily operations, subject
to certain conditions and limitations, under the Cash Collateral
Agreement described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the September&nbsp;12, 2004 Chapter&nbsp;11
filing, the ATSB and the lenders under the ATSB Loan agreed to
authorize the Company to continue to use cash collateral
securing the ATSB Loan on an interim basis. Therefore, in lieu
of debtor-in-possession financing, the Company has access to the
cash collateralizing the ATSB Loan as working capital, subject
to certain on-going conditions and limitations. This
</DIV>

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<DIV align="left" style="font-size: 10pt;">
interim agreement was approved by the Bankruptcy Court on
September&nbsp;13, 2004 as part of the first day motions, and
was scheduled to expire on October&nbsp;15, 2004. The Bankruptcy
Court approved two subsequent agreements extending the
Company&#146;s ability to use the cash collateral, including an
agreement approved on January&nbsp;13, 2005 extending the
Company&#146;s use of cash collateral through June&nbsp;30,
2005, subject to certain conditions and limitations (the Cash
Collateral Agreement). Under the current agreement, the Company
may continue to access such cash collateral to support daily
operations so long as it maintains an agreed upon minimum amount
of cash on hand each week. The amount declines from
approximately $500&nbsp;million at the end of January to
$341&nbsp;million on June&nbsp;30, 2005, with weekly cash levels
permitted as low as $325&nbsp;million in March 2005. The Company
must also maintain and achieve certain cumulative earnings
levels during the period, as defined in the agreement. Further,
the Company must comply with restrictions on its ability to make
capital expenditures. In light of rising fuel prices and
continued downward pressure on fares across the industry, there
can be no assurance that the Company can comply with the Cash
Collateral Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ATSB Loan also contains covenants that limit, among other
things, the Company&#146;s ability to pay dividends, make
additional corporate investments and acquisitions, enter into
mergers and consolidations and modify certain concessions
obtained as part of the Prior Bankruptcy. The ATSB Loan contains
certain mandatory prepayment events including, among other
things, (i)&nbsp;the occurrence of certain asset sales and the
issuance of certain debt or equity securities and (ii)&nbsp;the
decrease in value of the collateral pledged in respect of the
ATSB Loan below specified coverage levels. The amendments
discussed below and the Cash Collateral Agreement have not
eliminated any of these covenants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ATSB Loan bears interest as follows: (i)&nbsp;90% of the
ATSB Loan (Tranche&nbsp;A) was funded through a participating
lender&#146;s commercial paper conduit program and bears
interest at a rate equal to the conduit provider&#146;s weighted
average cost related to the issuance of certain commercial paper
notes and other short-term borrowings plus 0.30%, and
(ii)&nbsp;10% of the ATSB Loan (Tranche&nbsp;B) bears interest
at LIBOR plus 4.0%. In addition, US Airways is charged an annual
guarantee fee in respect of the ATSB Guarantee currently equal
to 4.1% of the ATSB&#146;s guaranteed amount (initially
$900&nbsp;million) under the ATSB Guarantee, with such guarantee
fee increasing by ten basis points annually. Due to the
Company&#146;s September 2004 bankruptcy filing and subsequent
loss of certain regional jet financing, the guarantee fee
increased by 2%&nbsp;per annum and the interest rate on
Tranche&nbsp;A and Tranche&nbsp;B each increased by an
additional 2% and 4%&nbsp;per annum, respectively, for an
effective increase in the interest rate on the loan balance of
4&nbsp;percentage points.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Prior Amendments to the ATSB Loan during 2004</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2004, US Airways and the ATSB amended the financial
covenants of the ATSB Loan to provide covenant relief for the
measurement periods beginning June&nbsp;30, 2004 through
December&nbsp;31, 2005. The ratios used in the financial
covenants were adjusted and reset to align with the
Company&#146;s forecast for 2004 and 2005 as of the date of the
amendment, which assumed a return to profitability by 2005. In
exchange for this covenant relief and other changes described
below, US Airways made a voluntary prepayment of
$250&nbsp;million on March&nbsp;12, 2004, which reduced, pro
rata, all future scheduled principal payments of the ATSB Loan
(rather than shortening the remaining life of the loan).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The March 2004 amendment permitted US Airways to retain, at its
election, up to 25% of the net cash proceeds from any asset sale
for which definitive documentation would be completed by
February&nbsp;28, 2005, up to a total of $125&nbsp;million for
all asset sales. In addition, the amendment permitted US Airways
to accept a third-party secured note as consideration for
certain asset sales (including the US Airways Shuttle and wholly
owned regional airline assets) as long as specified conditions
are met. These conditions include: the note&#146;s amortization
schedule will be no more favorable than the ATSB Loan; proceeds
from the note will be used to prepay the ATSB Loan; the credit
strength of the ATSB Loan will not be adversely affected as
measured by specified ratings tests; and the note will be
pledged as collateral for the ATSB Loan. Finally, in
consideration for the lenders agreeing to amend the provision
related to the going concern paragraph in the independent
auditor&#146;s report for the Company&#146;s audited financial
statements for the year ended December&nbsp;31, 2003,
US&nbsp;Airways agreed to revised covenants relating to minimum
required unrestricted cash balances.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective May&nbsp;21, 2004, US Airways again amended the ATSB
Loan to permit use of its regional jets financed by General
Electric (GE)&nbsp;as cross collateral for other obligations of
US Airways to GE. In consideration for this amendment, US
Airways agreed to revised covenants relating to minimum required
unrestricted cash balances. In addition, US Airways agreed to
give up the right to retain up to 25% of the net cash proceeds
from any asset sale, as had been permitted by the March 2004
amendment. US Airways made a prepayment of $5&nbsp;million in
connection with this amendment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ATSB Loan contains financial covenants that must be
satisfied by US Airways at the end of each fiscal quarter. US
Airways was uncertain as to its ability to satisfy these
covenants as of June&nbsp;30, 2004. Effective June&nbsp;30,
2004, US Airways and the ATSB amended the ATSB Loan to remove
the uncertainty relating to the Company&#146;s ability to
satisfy its financial covenant tests for the second quarter of
2004. In consideration for this amendment, the Company agreed to
change the loan amortization schedule, by increasing each of the
first six principal repayment installments commencing on
October&nbsp;1, 2006 by approximately $16&nbsp;million, and
reducing the last principal repayment installment on
October&nbsp;1, 2009 by $94&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All of the foregoing rights and obligations of the parties
relating to the ATSB Loan are subject to the terms of the cash
collateral orders entered by the Bankruptcy Court and the terms
of the Bankruptcy Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>General Electric</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
GE is the Company&#146;s largest creditor. Together with GEES
and other affiliates, GE directly financed or leased a
substantial portion of the Company&#146;s aircraft prior to the
current Chapter&nbsp;11 filing. In November 2001, US Airways
obtained a $404&nbsp;million credit facility from GE (2001
GE&nbsp;Credit Facility). The 2001 GE Credit Facility is secured
by collateral including 11&nbsp;A320-family aircraft and 28
spare engines. As discussed below, borrowings under the 2001 GE
Credit Facility bear interest rates of LIBOR plus 3.5% and the
term of the facility is 2012.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the 2001 GE Credit Facility, GE has provided
financing or guarantees on 145 of the Company&#146;s current
operating aircraft. It also maintains the engines on the
Company&#146;s B737-family aircraft, A320-family aircraft, B767
aircraft, EMB-170 aircraft and CRJ-200 aircraft. In connection
with its Prior Bankruptcy, the Company reached a settlement with
GE that resolved substantially all aircraft, aircraft engine and
loan-related issues and the Company obtained additional
financing from GE in the form of a liquidity facility of up to
$360&nbsp;million (2003 GE Liquidity Facility). Borrowings under
the liquidity facility bear interest at LIBOR plus 4.25%. Every
obligation of the Company to GE is generally cross-defaulted to
the 2001 GE Credit Facility, the 2003 GE Liquidity Facility, the
GE regional jet leases and the GE regional jet mortgage
financings. All of the Company&#146;s obligations to GE are
generally cross-collateralized and cross-defaulted with all
other obligations owned by any Debtor to GECC or any of its
affiliates (collectively, the GE Obligations).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the Company reached a comprehensive agreement
with GE and its affiliates as described in the Master Memorandum
of Understanding (Master MOU) that was approved by the
Bankruptcy Court on December&nbsp;16, 2004. The Master MOU and
the transactions contemplated by the term sheets will provide
the Company with short-term liquidity, reduced debt, lower
aircraft ownership costs, enhanced engine maintenance services
and operating leases for new regional jets, while preserving the
vast majority of US&nbsp;Airways&#146; mainline fleet owned by
GECAS. The key aspects of the Master MOU are as follows:
(i)&nbsp;agreements providing for continued use by the Company
of certain Airbus, Boeing and regional jet aircraft, and the
return to GECC of certain other leased Airbus and Boeing
aircraft (the Aircraft Lease Term Sheet); (ii)&nbsp;GECC will
provide a bridge facility of up to approximately
$56&nbsp;million for use by the Debtors during the pendency of
the Chapter&nbsp;11 proceedings (the Bridge Facility Term
Sheet); (iii)&nbsp;GECC will purchase and immediately leaseback
to US Airways (a)&nbsp;the assets securing the 2001 GE Credit
Facility and the 2003 GE Liquidity Facility (collectively, the
2001 Credit Facility Assets), and other GE obligations,
consisting of 11 Airbus aircraft and 28 spare engines and engine
stands, and (b)&nbsp;ten regional jet aircraft currently debt
financed by GECC; (iv)&nbsp;the balance of the 2001 GE Credit
Facility will be restructured to provide additional liquidity of
approximately $10&nbsp;million, subject to the pledge of certain
collateral to secure
</DIV>

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<DIV align="left" style="font-size: 10pt;">
the 2001 GE Credit Facility; (v)&nbsp;subject to the
Company&#146;s satisfaction of certain financial tests and other
conditions, GECC will provide lease financing for up to 31
additional regional jet aircraft (the Regional Jet Leasing Term
Sheet); (vi)&nbsp;certain of US Airways&#146; engine maintenance
agreements with GEES will be modified and assumed; and
(viii)&nbsp;upon emergence from bankruptcy, convertible notes of
the reorganized US&nbsp;Airways will be issued to GECC in the
aggregate principal amount of $125&nbsp;million (the Convertible
Note&nbsp;Term Sheet).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Bridge Facility Term Sheet provides for a loan facility of
up to $56&nbsp;million made available by GECC to the Debtors in
a series of drawdowns commencing on December&nbsp;20, 2004, and
ending on or before June&nbsp;30, 2005 (the Bridge Facility).
The Company and GECC entered into the Bridge Facility on
December&nbsp;20, 2004, at which time $20&nbsp;million was drawn
down under the facility. Interest on the Bridge Facility accrues
at the rate of LIBOR plus 4.25% and will be payable in cash or
in kind at the option of the Debtors. The Bridge Facility
matures on the date the Company emerges from Chapter&nbsp;11 and
will be satisfied by the issuance of Convertible Notes described
below. The Bridge Facility is cross-collateralized and
cross-defaulted with all other GE obligations owed by any Debtor
to GECC or any of its affiliates and will be granted status as
an administrative expense claim with priority over all other
administrative claims other than for aircraft financing
deferrals, which are pari passu, and subordinate only to
(i)&nbsp;the super-priority administrative expense claim of the
ATSB and the ATSB Lenders as defined and provided for in the
Cash Collateral Agreement (ii)&nbsp;postpetition wages and
benefits, and (iii)&nbsp;any other new money
debtor-in-possession financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2001 GE Credit Facility will be amended to, among other
things: (i)&nbsp;provide the Debtors with an additional
$10&nbsp;million of liquidity upon consummation of the
sale-leaseback of the 2001 GE Credit Facility Assets and CRJ
Mortgaged Assets (defined below), (ii)&nbsp;after the prepayment
of the loan balance outstanding under the 2001 GE Credit
Facility made in connection with the sale-leaseback of the 2001
GE Credit Facility Assets and CRJ Mortgaged Assets, as described
below, revise the amortization schedule so that the remaining
principal of the loan begins amortizing over a period of eight
quarters following the Debtors&#146; emergence from bankruptcy
(the Remaining Term), (iii)&nbsp;provide that the interest rate
will be LIBOR plus 4.25% for the Remaining Term, and
(iv)&nbsp;provide that the loan will be secured with a third
lien position on three CRJ-700 aircraft (subject to first and
second lien positions and conditioned upon consent of such
senior lien holders pursuant to an inter-creditor agreement
reasonably acceptable to GECC), a second lien position on one
CRJ-700 aircraft (subject to first lien position and conditioned
upon consent of such senior lien holders pursuant to an
inter-creditor agreement reasonably acceptable to GECC) and a
first lien position on one CF34 spare engine owned by US
Airways, with the aggregate of any senior liens on such
collateral not to exceed $62&nbsp;million. The amendments to the
2001 GE Credit Facility do not constitute an assumption thereof,
but it is anticipated that in connection with a plan of
reorganization, the 2001 GE Credit Facility, as amended, will be
reinstated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Aircraft Lease Term Sheet sets forth a comprehensive
agreement regarding the treatment of GECC-owned and mortgaged
aircraft pursuant to Section&nbsp;1110 of the Bankruptcy Code.
The Debtors and GECC have agreed to subject certain of such
aircraft to consensual Section&nbsp;1110(a) agreements providing
for continued use of such aircraft so long as the Company
complies with the terms of such agreements. In certain cases,
the Debtors and GECC have agreed to amend prepetition
agreements. Except as set forth in the Master MOU or the Term
Sheets attached to the Master MOU, the Section&nbsp;1110(a)
agreements and any related amendments will not constitute an
assumption of any related underlying agreements, and no such
agreement will constitute a postpetition contract for purposes
of, among other things, Sections&nbsp;365, 503 and 507 of the
Bankruptcy Code, but will be subject to the Debtors&#146;
obligations under Section&nbsp;1110 of the Bankruptcy Code.
After emergence from bankruptcy, US Airways will have an option
to restructure the monthly rental obligations of certain
additional B737-400 leases following the issuance of the
Convertible Notes described below, for cash or additional
convertible notes of equal market value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to the swap of three aircraft contemplated by the
Aircraft Lease Term Sheet, GECC will purchase the two A319
aircraft, the four A320 aircraft, the five A321 aircraft, the 14
CFM56-5B spare engines, the 14 CFM56-3B spare engines, and
certain engine stands that currently secure the 2001 GE Credit
Facility and the 2003 GE Liquidity Facility, together with the
nine CRJ-200s and one CRJ-700 aircraft
</DIV>

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<DIV align="left" style="font-size: 10pt;">
currently mortgage debt financed by GECC (collectively, the CRJ
Mortgaged Assets) for a total purchase price of approximately
$640&nbsp;million, subject to adjustment, at which time the 2001
Credit Facility Assets and the CRJ Mortgaged Assets will be
leased back to US&nbsp;Airways under operating leases having an
initial lease term expiring on the earlier of the Debtors&#146;
emergence from Chapter&nbsp;11 or June&nbsp;30, 2005. The sale
proceeds will be applied to repay (in order) the 2003 GE
Liquidity Facility in full, the GECC mortgage-debt financed CRJ
aircraft in full, and a portion of the 2001 GE Credit Facility,
leaving a balance thereon of approximately $15&nbsp;million,
subject to adjustment, before the $10&nbsp;million additional
drawdown on the 2001 GE Credit Facility contemplated above. The
operating leases may be extended upon the Debtors&#146;
emergence from bankruptcy, will be cross-defaulted with all
other GE Obligations (other than certain excepted obligations),
and will be subject to return conditions to be agreed upon by
the parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Debtors and the GE entities have reached an agreement with
respect to five engine repair and maintenance agreements, and
certain other matters. This agreement includes, among other
things, the agreement of US Airways to assume three of such
agreements of GEES and certain of its affiliates to:
(i)&nbsp;forgive and release US Airways from certain prepetition
obligations, (ii)&nbsp;defer certain payment obligations arising
under such agreements, (iii)&nbsp;extend one maintenance
agreement, (iv)&nbsp;continue certain existing deferrals, and
(v)&nbsp;determine the treatment of certain removal charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Convertible Note&nbsp;Term Sheet, the Debtors
have agreed that upon emergence from Chapter&nbsp;11, as partial
consideration for entering into the Master MOU, an affiliate of
GECC will receive convertible notes of the reorganized US
Airways in the aggregate principal amount of $125&nbsp;million
(Convertible Notes). The Convertible Notes will be convertible
at any time, at the holders&#146; election, into shares of
common stock of the reorganized Company (New Common Stock) at a
conversion price equal to the product of (x)&nbsp;140%-150% (at
US Airways&#146; option) and (y)&nbsp;the average closing price
of the New Common Stock for the sixty consecutive trading days
following US Airways&#146; emergence from bankruptcy and the
listing of the New Common Stock on NASDAQ or a national stock
exchange. The Convertible Notes will bear interest at a rate to
be determined no later than thirty days prior to the
Debtors&#146; scheduled date of emergence from bankruptcy and
interest will be payable semi-annually, in arrears, and will
mature in 2020. US Airways will be permitted to redeem some or
all of the Convertible Notes at any time on or after the fifth
anniversary of the issuance of such notes, at a redemption price
payable in cash or, subject to certain conditions, New Common
Stock. Holders of the Convertible Notes may require US Airways
to repurchase all or a portion of their Convertible Notes on the
fifth and tenth anniversary of the issuance of such notes at
100% of the principal amount of the Convertible Notes, plus
accrued and unpaid interest to the date of repurchase, payable,
at US Airways election, in cash or New Common Stock. The
Convertible Notes will be senior unsecured obligations and will
rank equally in right of payment with all existing and future
unsecured senior obligations of the reorganized US Airways. The
Convertible Notes will be guaranteed by the parent holding
company of the reorganized US Airways.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Regional Jet Financing</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2003 Plan sought to boost revenue and enhance
competitiveness through the increased use of regional jets.
Regional jets are faster, quieter and more comfortable than
turboprops and are generally preferred by customers over
turboprops. In May 2003, the Company entered into agreements to
purchase a total of 170 regional jets from Bombardier and
Embraer. The Company had previously secured financing
commitments from GE and from the respective airframe
manufacturers for approximately 85% to 90% of these jets. These
commitments were subject to certain credit or financial tests,
as well as customary conditions precedent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Despite the Company&#146;s failure to meet one of the applicable
credit standards as of May&nbsp;5, 2004, the Company reached
agreements with GE, Embraer and Bombardier for continued
financing of regional jet deliveries through September&nbsp;30,
2004. As part of the agreement reached with Bombardier, the
Company converted 23 CRJ-200 deliveries (50-seat regional jets)
to CRJ-700 deliveries (70-seat regional jets) and retained the
right to convert some or all of the CRJ-700 deliveries to
CRJ-900 deliveries (90-seat regional jets). US Airways agreed to
refinance with third parties four aircraft originally financed
by Bombardier. DVB Bank AG provided US Airways with
18&nbsp;month bridge financing for two aircraft, with the
objective of
</DIV>

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<DIV align="left" style="font-size: 10pt;">
arranging long-term market financing for these aircraft upon
successful implementation of the Company&#146;s Transformation
Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
GE&#146;s financing commitment with respect to regional jets
through September&nbsp;30, 2004 was also conditioned on US
Airways gaining permission under its ATSB Loan to use its
regional jets mortgage financed by GE as cross-collateral for
other obligations of US Airways to GE. On May&nbsp;21, 2004, the
Company amended the ATSB Loan to allow this
cross-collateralization. At the same time GE waived the
application of the credit rating condition precedent for
regional jet financing through September&nbsp;30, 2004, thus
securing the continued financing support from GE through
September 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the September&nbsp;12, 2004 Chapter&nbsp;11
filing, the Company failed to meet the conditions precedent for
continued financing of regional jets and temporarily ceased
taking delivery of new regional jet aircraft. As a result, the
Company incurred aircraft order cancellation penalties of
$7&nbsp;million in the fourth quarter of 2004. These penalties
were offset against purchase deposits held by the aircraft
manufacturers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Regional Jet Leasing Term Sheet, GECC or its
affiliates will provide leases for up to 31&nbsp;regional jet
aircraft. The aircraft to be leased will consist of 70- to
100-seat regional jet aircraft manufactured by Bombardier and/or
Embraer in a mix and subject to such other terms to be agreed
mutually by GECC and US Airways. During the first quarter of
2005, GECC will lease six CRJ-700s to US Airways with terms
expiring on the earlier of the Debtors&#146; emergence from
Chapter&nbsp;11 and June&nbsp;30, 2005. These leases may be
extended upon the Debtors&#146; emergence from Chapter&nbsp;11.
To effectuate the contemplated regional jet leasing, US Airways
and GECC agreed to reinstate that portion of the RJ Lease
Transaction and Debt Financing Agreement, dated as of
December&nbsp;18, 2003 (RJ Lease Agreement), pursuant to which
GECC has agreed to provide single investor lease transactions
(provided that the obligations under the reinstated RJ Lease
Agreement will not be afforded administrative expense status),
subject to additional terms and conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the Company reached aircraft leasing and
financing agreements with Embraer and Bombardier, which were
approved by the Bankruptcy Court in January 2005. Pursuant to
the agreement reached with Embraer, the Company purchased and
took delivery of three ERJ-170 aircraft in January 2005 and
committed to purchase and take delivery of three additional
ERJ-170 aircraft by March&nbsp;31, 2005. The purchase of the
three ERJ-170s delivered in January 2005 was financed by Embraer
through a mortgage loan facility and the application of
$17&nbsp;million of existing purchase deposits held by Embraer.
Additionally, $12&nbsp;million of purchase deposits held by
Embraer will be used to fund an Embraer loan reserve. Embraer
shall apply the reserve funds in the amounts and on the dates as
and when payments are due under the Embraer loans during the
period from October&nbsp;1, 2004 through July&nbsp;31, 2005 in
full satisfaction of the Company&#146;s payment obligations with
respect to such Embraer loans during such period. Upon delivery
of the first three ERJ-170s, which occurred in January 2005,
unless the Company assumes the Embraer aircraft purchase
agreement pursuant to Section&nbsp;365 of the Bankruptcy Code,
no further obligations arise on the part of the Company or
Embraer with respect to the purchase and delivery of any
aircraft, other than those obligations that arise from or are
related to the purchase and delivery of the final three ERJ-170s
in March 2005. Embraer and the Company have agreed to negotiate
a new delivery schedule upon the Company&#146;s assumption of
the Embraer aircraft purchase agreement or upon the occurrence
of certain other events.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that the Company fails to take delivery by
March&nbsp;31, 2005 of the remaining three ERJ-170 aircraft,
damages will accrue on account of the Company&#146;s failure to
take delivery of such aircraft from and after April&nbsp;1, 2005
at the rate of $162,795&nbsp;per month per aircraft until the
later of (i)&nbsp;30&nbsp;days after the Company emerges from
the current Chapter&nbsp;11 proceedings and
(ii)&nbsp;July&nbsp;31, 2005, at which time Embraer&#146;s
obligation to deliver such aircraft will terminate and its
damages with respect to such undelivered aircraft may be as much
as $10&nbsp;million (rather than at the rate of
$162,795&nbsp;per month), with Embraer having the right to apply
any remaining purchase deposits against Embraer&#146;s aggregate
damages.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the agreement reached with Bombardier, the Company
acquired three new CRJ-700 aircraft in January 2005. The
purchase was financed through the application of
$28&nbsp;million of existing purchase deposits held by
Bombardier, $2&nbsp;million in cash and a financed lease
facility with DVB Bank. Additionally, $4&nbsp;million of
existing purchase deposits held by Bombardier were used to
satisfy existing defaults and cure
</DIV>

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<DIV align="left" style="font-size: 10pt;">
payments. So long as the Company continues to operate under the
protection of Chapter&nbsp;11 in compliance with the Bankruptcy
Code, no obligations will arise on the part of the Company or
Bombardier with respect to the purchase and delivery of any
aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, the aircraft manufacturers held
purchase deposits of $138&nbsp;million related to the
acquisition of aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Other</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways relies heavily on credit card processing for its
sales, and utilizes credit card issuers and third-party service
providers to process credit card transactions under agreements
which require the Company to provide cash collateral and to
comply with certain other financial and nonfinancial
requirements. If US&nbsp;Airways fails to meet any such
conditions, these issuers and providers can require additional
cash collateral and, under certain circumstances, terminate such
credit card processing agreements. The termination of credit
card agreements would have a material adverse affect on US
Airways&#146; financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the second quarter of 2004, US Airways amended its
agreement with American Express Travel Related Services Company,
Inc. (American Express). The new agreement has been extended to
December&nbsp;31, 2006 and provides for additional cash
collateral to reduce the exposure borne by American Express
against potential customer liabilities relating to unflown
tickets purchased by customers using the American Express card.
The agreement required additional cash collateral in the event
that US Airways&#146; regional jet financing programs were
terminated or if the Company failed to demonstrate by
September&nbsp;30, 2004 its ability to successfully implement
its Transformation Plan. This amendment effectively aligned the
American Express agreement with the arrangements in place for
certain other credit card processors. As the result of the
Company&#146;s financial position and various triggers in the
American Express agreement, the Company deposited an additional
$64&nbsp;million in cash collateral during the third quarter of
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Statements of Cash Flow Discussion</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in &#147;Results of Operations&#148; above, the
Successor Company&#146;s financial statements are not comparable
with the Predecessor Company&#146;s financial statements.
However, for purposes of discussion of liquidity and capital
resources, 2004 has been compared to the full year 2003 as
included, in part, in the Company&#146;s Statements of Cash
Flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For 2004, the Company&#146;s operating activities before
reorganization items used net cash of $89&nbsp;million, compared
to 2003, which used net cash of $77&nbsp;million. Included in
2003 cash flows from operating activities is $218&nbsp;million
received from TSA in connection with the Emergency Wartime Act.
Cash flows from operating activities for 2004 were favorably
impacted by an increase in accounts payable and other accrued
expenses as a result of the Chapter&nbsp;11 filing in September
2004, as the Company received liquidity protection under the
automatic stay provisions of the Bankruptcy Code related to
prepetition liabilities. Cash flows from operating activities
were also favorably impacted for this reason during the Prior
Bankruptcy for the period from August 2002 to March 2003. Cash
flows for all periods have been adversely affected by the same
factors that adversely affected financial results, as discussed
in &#147;Results of Operations,&#148; including reductions in
unit revenue and significant increases in fuel prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For 2004, net cash provided by investing activities was
$83&nbsp;million. Investing activities include a
$358&nbsp;million decrease in short term investments, reflecting
a shift to cash and cash equivalents, and an increase in
restricted cash of $76&nbsp;million. The increase in restricted
cash in 2004 and 2003 reflects the additional cash collateral
deposits required by the Company&#146;s credit card processors,
letters of credit and trust accounts described below, partially
offset by the decline in cash collateral required for fuel
hedging. Capital expenditures and net equipment purchase deposit
activity in 2004 of $217&nbsp;million reflect the early return
of aircraft purchase deposits by an aircraft manufacturer of
$31&nbsp;million in the first quarter of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For 2003, net cash used for investing activities was
$511&nbsp;million. Investing activities included cash outflows
of $215&nbsp;million related to capital expenditures, including
$174&nbsp;million for purchase deposits on
</DIV>

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<DIV align="left" style="font-size: 10pt;">
future regional jet aircraft deliveries and payments made in
connection with the delivery of two regional jets with the
balance related to rotables, ground equipment&nbsp;and
miscellaneous assets. The increase in short-term investments in
2003 reflects activity intended to increase the returns on the
Company&#146;s higher cash balances. Other investing activity in
2003 also reflects $24&nbsp;million in proceeds received related
to the sale of the Company&#146;s investment in Hotwire, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For 2002, net cash provided by investing activities was
$22&nbsp;million. Investing activities included cash outflows of
$146&nbsp;million related to capital expenditures. Capital
expenditures included $106&nbsp;million for three A321 aircraft
(two other A321s were purchased in noncash transactions) with
the balance related to rotables, ground equipment and
miscellaneous assets. Proceeds from disposition of property
includes, among other things, proceeds related to surplus
aircraft and related parts. During the first quarter of 2002, US
Airways sold 97 surplus DC-9, B737-200 and MD-80 aircraft. The
increase in short-term investments reflects proceeds from the
sale of short-term investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company, in the ordinary course of business, withholds from
employees and collects from passengers funds that are required
to be paid to applicable governmental authorities, which funds
include withholding for payroll taxes, transportation excise
taxes, passenger facility charges, transportation security
charges and other related fees. During the second quarter of
2002, the Company established trusts to fund these obligations.
The initial funding (which totaled approximately
$201&nbsp;million) and the net cash flows of the trusts are
reflected in Decrease (increase) in restricted cash on the
Company&#146;s Consolidated Statements of Cash Flows. The funds
in the trust accounts, which totaled $138&nbsp;million and
$164&nbsp;million as of December&nbsp;31, 2004 and 2003,
respectively, are classified as Restricted cash on the
Company&#146;s Consolidated Balance Sheets, including
$99&nbsp;million and $124&nbsp;million in current Restricted
cash and $39&nbsp;million and $39&nbsp;million in noncurrent
Restricted cash, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company used $185&nbsp;million in cash for financing
activities in 2004. Principal payments on debt and capital lease
obligations of $425&nbsp;million include $255&nbsp;million of
prepayments made in connection with amendments to the ATSB Loan
in March and May 2004. The financing activities in 2003 were
significantly impacted by the Company&#146;s emergence from the
Prior Bankruptcy in March 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by financing activities during 2003 was
$1.02&nbsp;billion. US Airways received proceeds of
$1&nbsp;billion from the ATSB Loan. Additionally, prior to
emergence from Chapter&nbsp;11 the Company borrowed
$69&nbsp;million under a debtor-in-possession facility provided
by RSA (RSA DIP Facility) and $62&nbsp;million under a
debtor-in-possession liquidity facility provided by General
Electric (GE DIP Facility). The Company borrowed
$114&nbsp;million under an exit liquidity facility provided by
GE and $20&nbsp;million under a credit facility provided by GE.
The Company also received proceeds of $240&nbsp;million in
connection with the RSA Investment Agreement and
$34&nbsp;million related to a private placement offering (see
below). The Company used a portion of the proceeds it received
in connection with its emergence from Chapter&nbsp;11 to repay
$369&nbsp;million that was then outstanding under the RSA DIP
Facility (including the $69&nbsp;million discussed above) on
March&nbsp;31, 2003. The Company also used a portion of the
proceeds to repay the $62&nbsp;million then outstanding under
the GE DIP Facility. The Company also made principal payments of
debt of $85&nbsp;million, including a $24&nbsp;million required
prepayment on the ATSB Loan related to the sale of its
investment in Hotwire, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by financing activities during 2002 was
$334&nbsp;million. US Airways received proceeds of
$116&nbsp;million from the mortgage financing of three A321
aircraft (two other A321s were financed in noncash
transactions). Additionally, US Airways received proceeds of
$33&nbsp;million with the private placement of pass through
certificates that partially financed five previously delivered
A330 aircraft and $18&nbsp;million from an engine manufacturer
credit facility. The Company also borrowed $300&nbsp;million
under the RSA DIP Facility and $75&nbsp;million under a senior
secured debtor-in-possession financing facility provided by
Credit Suisse First Boston, Cayman Islands Branch, and Bank of
America, N.A., with participation from the Texas Pacific Group
(Original DIP facility). The Company used a portion of the RSA
DIP Facility funds to repay the full $75&nbsp;million that was
then outstanding under the Original DIP Facility. Prior to the
2002 bankruptcy filing, the Company made scheduled principal
repayments of debt in the amount of $77&nbsp;million. Subsequent
</DIV>

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<DIV align="left" style="font-size: 10pt;">
to the 2002 bankruptcy filing, the Company made principal
repayments of debt of $56&nbsp;million, including
$38&nbsp;million to the engine manufacturer credit facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company sold 4,679,000&nbsp;shares of its Class&nbsp;A
Common Stock at a price of $7.34&nbsp;per share before
transaction fees during August 2003 in a private placement
transaction with Aviation Acquisition L.L.C., Goldman, Sachs and
Co. and OCM Principal Opportunities Fund&nbsp;II, L.P. These
shares related to Class&nbsp;A Common Stock retained by US
Airways Group from those shares allocated to employees pursuant
to the 2003 Plan and vested at July&nbsp;31, 2003. The retained
shares represented the employee tax withholding obligation with
respect to the vested portion of the restricted stock grants.
The amount of withholding was determined on the basis of a price
of $7.34&nbsp;per Class&nbsp;A common share and applicable
federal, state, and local taxes. The net proceeds received by
the Company were $34&nbsp;million related to this transaction
and offset the Company&#146;s remittance to taxing authorities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Contractual Obligations</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides detail of the Company&#146;s future
cash contractual obligations as of December&nbsp;31, 2004,
including classification of the ATSB Loan as current and without
regard to liabilities subject to compromise (dollars in
millions).
</DIV>

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    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>Payments Due by Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2006</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2007</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2008</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2009</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Thereafter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt and capital lease obligations(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,325</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating lease commitments(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,711</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft purchase commitments(3)(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,939</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Regional jet capacity purchase agreements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,521</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,496</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Excludes related interest amounts.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Includes aircraft obligations financed under enhanced equipment
    trust certificates.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    As long as the Company operates under the protection of
    Chapter&nbsp;11 in compliance with the Bankruptcy Code and
    unless the Company assumes the aircraft purchase agreements
    pursuant to Section&nbsp;365 of the Bankruptcy Code, neither the
    Company nor the aircraft manufacturers have any obligation in
    respect to the purchase or delivery of regional jet aircraft
    beyond the commitments for deliveries in the first quarter of
    2005 discussed below.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    The minimum determinable payments associated with these
    acquisition agreements for all firm-order aircraft include
    progress payments, payments at delivery, spares, capitalized
    interest and nonrefundable deposits.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, US Airways Group had 19
A320-family aircraft on firm order scheduled for delivery in the
years 2007 through 2009. US Airways Group also had ten A330-200
aircraft on firm order scheduled for delivery in the years 2007
through 2009. On February&nbsp;3, 2005, the Bankruptcy Court
approved the Company&#146;s agreement with Airbus providing for,
among other things, delivery of the 19 A320-family aircraft in
years 2008 through 2010, and delivery of the ten A330-200
aircraft in years 2008 through 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company acquired three new Embraer ERJ-170 aircraft in
January 2005 and has firm orders for three additional ERJ-170
aircraft scheduled to be delivered by March&nbsp;31, 2005. The
Company also acquired three new CRJ-700 aircraft in January 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of regional jet aircraft acquisitions, the Company
believes it is probable that it will not take delivery of
certain previously ordered narrow-body aircraft and recorded an
accrual of $35&nbsp;million for related penalties during the
three months ended June&nbsp;30, 2003. In the event that the
Company fails to take delivery by March&nbsp;31, 2005 of the
remaining three ERJ-170 aircraft, damages will accrue on account
of the Company&#146;s failure to take delivery of such aircraft
from and after April&nbsp;1, 2005 at the rate of
$162,795&nbsp;per month per aircraft until the later of
(i)&nbsp;30&nbsp;days after the Company emerges from the current
Chapter&nbsp;11 proceedings and (ii)&nbsp;July&nbsp;31, 2005, at
which time Embraer&#146;s obligation to deliver such aircraft
will terminate and its damages with respect to such undelivered
aircraft may be as much as $10&nbsp;million rather than at the
</DIV>

<P align="center" style="font-size: 10pt;">38

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<DIV align="left" style="font-size: 10pt;">
rate of $162,795&nbsp;per month), with Embraer having the right
to apply any remaining purchase deposits against Embraer&#146;s
aggregate damages.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='232'></A>
</DIV>

<!-- link1 "Off-Balance Sheet Arrangements" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Off-Balance Sheet Arrangements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An off-balance sheet arrangement is any transaction, agreement
or other contractual arrangement involving an unconsolidated
entity under which a company has (1)&nbsp;made guarantees,
(2)&nbsp;a retained or a contingent interest in transferred
assets, (3)&nbsp;an obligation under derivative instruments
classified as equity or (4)&nbsp;any obligation arising out of a
material variable interest in an unconsolidated entity that
provides financing, liquidity, market risk or credit risk
support to the company, or that engages in leasing, hedging or
research and development arrangements with the company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has no off-balance sheet arrangements of the types
described in the first three categories that it believes may
have a material current or future effect on its financial
condition, liquidity or results of operations. Certain
guarantees that the Company does not expect to have a material
current or future effect on its financial condition, liquidity
or results of operations are disclosed in Note&nbsp;7(e) to the
Financial Statements included in Item&nbsp;8 of this report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company does have obligations arising out of variable
interests in unconsolidated entities. In 2003, the Company
adopted Financial Accounting Standards Board Interpretation
No.&nbsp;46, &#147;Consolidation of Variable Interest
Entities&#148; (FIN&nbsp;46) which addresses the accounting for
these variable interests. An entity is subject to FIN&nbsp;46
and is called a variable interest entity (VIE)&nbsp;if it has
(1)&nbsp;equity that is insufficient to permit the entity to
finance its activities without additional subordinated financial
support from other parties, or (2)&nbsp;equity investors that
cannot make significant decisions about the entity&#146;s
operations, or that do not absorb the expected losses or receive
the expected returns of the entity. A VIE is consolidated by its
primary beneficiary, which is the party involved with the VIE
that has a majority of the expected losses or a majority of the
expected residual returns or both, as a result of ownership,
contractual or other financial interests in the VIE. The
adoption of FIN&nbsp;46 did not materially affect the
Company&#146;s financial statements. In reaching this
conclusion, the Company identified certain lease arrangements
that were within the scope of FIN&nbsp;46. This included a
review of 62 aircraft operating leases for which the Company was
the lessee and a pass through trust established specifically to
purchase, finance and lease the aircraft to the Company served
as lessor. These trusts, which issue certificates (also known as
Enhanced Equipment Trust&nbsp;Certificates or EETC), allow the
Company to raise the financing for several aircraft at one time
and place such funds in escrow pending the purchase or delivery
of the relevant aircraft. The trusts are also structured to
provide for certain credit enhancements, such as liquidity
facilities to cover certain interest payments, that reduce the
risks to the purchasers of the trust certificates and, as a
result, reduce the cost of aircraft financing to the Company.
Each of these leases contains a fixed-price purchase option that
allows the Company to purchase the aircraft at predetermined
prices on specified dates during the latter part of the lease
term. However, the Company does not guarantee the residual value
of the aircraft, and the Company does not believe it is the
primary beneficiary under these lease arrangements based upon
its cash flow analysis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company also reviewed long-term operating leases at a number
of airports, including leases where the Company is also the
guarantor of the underlying debt. Such leases are typically with
municipalities or other governmental entities. FIN&nbsp;46, as
revised in December 2003, provided a scope exception that
generally precludes the consolidation of governmental
organizations or financing entities established by a
governmental organization. The Company believes that its
arrangements meet the scope exception.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='233'></A>
</DIV>

<!-- link1 "Critical Accounting Policies" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Critical Accounting Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s discussion and analysis of its financial
condition and results of operations are based upon the
Company&#146;s Financial Statements, which have been prepared in
conformity with accounting principles generally accepted in the
United States of America. The preparation of these financial
statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the
</DIV>

<P align="center" style="font-size: 10pt;">39

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<DIV align="left" style="font-size: 10pt;">
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Critical accounting policies are defined as those that are
reflective of significant judgments and uncertainties and
potentially result in materially different results under
different assumptions and conditions. The Company has identified
the following critical accounting policies that impact the
preparation of its financial statements. See also Note&nbsp;2,
Summary of Significant Accounting Policies, for additional
discussion of the application of these estimates and other
accounting policies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Impairment of Goodwill</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective January&nbsp;1, 2002 the Company adopted the
provisions of Statement of Financial Accounting Standards
No.&nbsp;142, &#147;Goodwill and Other Intangible Assets&#148;
(SFAS&nbsp;142). SFAS&nbsp;142 requires management to make
judgments about the fair value of the reporting unit to
determine whether goodwill is impaired. The reporting unit is US
Airways Group. The Company believes that this accounting
estimate is a &#147;critical accounting estimate&#148; because:
(1)&nbsp;goodwill is a significant asset and (2)&nbsp;the impact
that recognizing an impairment would have on the assets reported
on the Consolidated Balance Sheet, as well as the Consolidated
Statement of Operations, could be material. Goodwill is tested
annually for impairment or more frequently if events or changes
in circumstances indicate that it might be impaired. The Company
assesses the fair value of the reporting unit considering both
the income approach and market approach. Under the market
approach, the fair value of the reporting unit is based on
quoted market prices and the number of shares outstanding for US
Airways Group common stock. Under the income approach, the fair
value of the reporting unit is based on the present value of
estimated future cash flows. The income approach is dependent on
a number of factors including estimates of future market growth
trends, forecasted revenues and expenses, expected periods the
assets will be utilized, appropriate discount rates and other
variables. The Company bases its estimates on assumptions that
it believes to be reasonable, but which are unpredictable and
inherently uncertain. Actual future results may differ from
those estimates. The Company concluded that the fair value of
the reporting unit was in excess of the carrying value and
therefore not impaired during 2004. Cash flow projections for
the Company&#146;s 2004 test were prepared on a going-concern
basis. Additionally, in the third and fourth quarters of 2004,
the carrying value of the Company&#146;s net assets was less
than zero. See Note&nbsp;2(g) to the Financial Statements for
details regarding past goodwill impairment tests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Impairment of Long-Lived Assets and Intangible Assets</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company assesses the impairment of long-lived assets and
intangible assets whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Factors
which could trigger an impairment review include the following:
significant changes in the manner of use of the assets;
significant underperformance relative to historical or projected
future operating results; or significant negative industry or
economic trends. The Company determines that an impairment has
occurred when the future undiscounted cash flows estimated to be
generated by those assets are less than the carrying amount of
those items. Cash flow estimates are based on historical results
adjusted to reflect the Company&#146;s best estimate of future
market and operating conditions. The net carrying value of
assets not recoverable is reduced to fair value. Estimates of
fair value represent the Company&#146;s best estimate based on
appraisals, industry trends and reference to market rates and
transactions. Changes in industry capacity and demand for air
transportation can significantly impact the fair value of
aircraft and related assets. The Company recorded an aircraft
impairment charge of $392&nbsp;million in 2002. See
&#147;Description of Unusual Items&#148; above for details
regarding this impairment charge.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Passenger Revenue Recognition</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company recognizes passenger transportation revenue and
related commission expense when transportation is rendered.
Passenger ticket sales collected prior to the transportation
taking place are reflected in Traffic balances payable and
unused tickets on the Balance Sheet. Due to various factors
including refunds, exchanges, unused tickets and transactions
involving other carriers, certain amounts are recorded based on
estimates. These estimates are based upon historical experience
and have been consistently applied to record
</DIV>

<P align="center" style="font-size: 10pt;">40

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<DIV align="left" style="font-size: 10pt;">
revenue. The Company routinely performs evaluations of the
liability that may result in adjustments which are recognized as
a component of Passenger transportation revenue. Actual refund,
exchange and expiration activity may vary from estimated
amounts. The Company has experienced changes in customer travel
patterns resulting from various factors, including new airport
security measures, concerns about further terrorist attacks and
an uncertain economy, resulting in more forfeited tickets and
fewer refunds. Therefore, during the fourth quarter of 2003, a
$34&nbsp;million favorable adjustment was made to Passenger
transportation revenue to reflect an increase in expired tickets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Frequent Traveler Program</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways&#146; Dividend Miles frequent traveler program
awards miles to passengers who fly on US&nbsp;Airways,
US&nbsp;Airways Express, Star Alliance carriers and certain
other airlines that participate in the program. US&nbsp;Airways
also sells mileage credits to participating airline partners and
non-airline business partners. The Company has an obligation to
provide this future travel and has therefore recognized an
expense and recorded a liability for mileage awards to
passengers redeeming on US&nbsp;Airways or an airline partner.
Outstanding miles may be redeemed for travel on any airline that
participates in the program, in which case US&nbsp;Airways pays
a designated amount to the transporting carrier.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Members may not reach the threshold necessary for a free ticket
and outstanding miles may not be redeemed for free travel.
Therefore, the Company estimates how many miles will never be
used for an award and excludes those miles from the estimate of
the liability. A portion of the mileage credits of Dividend
Miles participants who have excessive balances are also excluded
from the liability. Estimates are also made for the number of
miles that will be used per award and the number of awards that
will be redeemed on partner airlines. These estimates are based
upon past customer behavior. Estimated future travel awards for
travel on US&nbsp;Airways are valued at the estimated average
incremental cost of carrying one additional passenger.
Incremental costs include unit costs for passenger food,
beverages and supplies, credit card fees, fuel, communications,
insurance and denied boarding compensation. No profit or
overhead margin is included in the accrual for incremental
costs. For travel awards on partner airlines, the liability is
based upon the gross payment to be paid to the other airline for
redemption on the other airline. A change to these costs
estimates, actual redemption activity or award redemption level
could have a significant impact on the liability in the year of
change as well as future years. Incremental changes in the
liability resulting from participants earning or redeeming
mileage credits or changes in assumptions used for the related
calculations are recorded as part of the regular review process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004 and 2003, Dividend Miles
participants had accumulated mileage credits for approximately
4.0&nbsp;million and 6.3&nbsp;million awards, respectively. The
reduction in estimated awards from 2003 to 2004 is a result of
changes in the program and related assumptions, including the
increase in redemptions on partner airlines. Because
US&nbsp;Airways expects that some potential awards will never be
redeemed, the calculation of the frequent traveler liability is
based on approximately 80% of potential awards. The liability
for the future travel awards was $73&nbsp;million and
$85&nbsp;million as of December&nbsp;31, 2004 and 2003,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The number of awards redeemed for free travel during the years
ending December&nbsp;31, 2004, 2003 and 2002 was approximately
1.5&nbsp;million, 1.2&nbsp;million and 1.3&nbsp;million,
respectively, representing approximately 8% of
US&nbsp;Airways&#146; RPMs in each of those years. These low
percentages as well as the use of certain inventory management
techniques minimize the displacement of revenue passengers by
passengers traveling on Dividend Miles award tickets. In
addition to the awards issued for travel on US&nbsp;Airways,
approximately 20% of the total awards redeemed in 2004 were for
travel on partner airlines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways defers a portion of the revenue from the sale of
mileage credits to participating airline and non-airline
partners. The deferred revenue is recognized over the period in
which the credits are expected to be redeemed for travel. A
change to either the period over which the credits are used or
the estimated fair value of credits sold could have a
significant impact on revenue in the year of change as well as
future years.
</DIV>

<P align="center" style="font-size: 10pt;">41

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Pensions and Other Postretirement Benefits</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company accounts for its defined benefit pension plans using
Statement of Financial Accounting Standards No.&nbsp;87,
&#147;Employer&#146;s Accounting for Pensions&#148;
(SFAS&nbsp;87) and its other postretirement benefit plans using
Statement of Financial Accounting Standards No.&nbsp;106,
&#147;Employer&#146;s Accounting for Postretirement Benefits
Other than Pensions&#148; (SFAS&nbsp;106). Under both
SFAS&nbsp;87 and SFAS&nbsp;106, expense is recognized on an
accrual basis over employees&#146; approximate service periods.
Expenses calculated under SFAS&nbsp;87 and SFAS&nbsp;106 are
generally independent of funding decisions or requirements.
Exclusive of fresh-start charges, curtailment and settlement
items, the Company recognized defined benefit pension plan
expense of $66&nbsp;million, $52&nbsp;million, $50&nbsp;million,
and $326&nbsp;million for the year ended December&nbsp;31, 2004,
the nine months ended December&nbsp;31, 2003, the three months
ended March&nbsp;31, 2003 and the year ended December&nbsp;31,
2002, respectively, and other postretirement benefit expense of
$105&nbsp;million, $96&nbsp;million, $36&nbsp;million, and
$145&nbsp;million for the year ended December&nbsp;31, 2004, the
nine months ended December&nbsp;31, 2003, the three months ended
March&nbsp;31, 2003 and the year ended December&nbsp;31, 2002,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;12, 2004, US&nbsp;Airways filed a motion
requesting a determination from the Bankruptcy Court that
US&nbsp;Airways satisfied the financial requirements for a
&#147;distress termination&#148; of the three mainline defined
benefit plans under section&nbsp;4041(c)(2)(B)(ii)(IV) of ERISA,
and approval of each such plan&#146;s termination. These plans
were projected to have benefit obligations and plan assets
aggregating $2.7&nbsp;billion and $1.7&nbsp;billion,
respectively, as of September&nbsp;30, 2004, the most recent
valuation date. On January&nbsp;6, 2005, the Bankruptcy Court
entered an order (i)&nbsp;finding that the financial
requirements under section&nbsp;4041(c)(2)(B)(ii)(IV) of ERISA
for a distress termination of the plans had been met and
(ii)&nbsp;approving termination of the plans. The AFA Plan and
the IAM Plan were terminated effective January&nbsp;10, 2005, by
agreement between the PBGC and US&nbsp;Airways. The CE Plan was
terminated effective January&nbsp;17, 2005, by agreement between
the PBGC and US&nbsp;Airways. Effective February&nbsp;1, 2005,
the PBGC was appointed trustee for each of the three plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During hearings in late 2004 and January 2005, the Bankruptcy
Court approved various settlement agreements between
US&nbsp;Airways and its unions, and between the Company and the
court-appointed Section&nbsp;1114 Committee (representing
retirees other than those represented by the IAM) to begin the
significant curtailments of the Company&#146;s other
postretirement benefits. The Company&#146;s unfunded obligations
for these benefits aggregated $1.4&nbsp;billion as of
September&nbsp;30, 2004, the most recent valuation date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Fresh-start Reporting</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with SOP&nbsp;90-7, the Company adopted
fresh-start reporting upon emergence from the Prior Bankruptcy.
Accordingly, the Company valued its assets, liabilities and
equity at fair value. The excess of the reorganization value
over tangible assets and identifiable intangible assets has been
reflected as Goodwill on the Balance Sheet. Estimates of fair
value represent the Company&#146;s best estimate based on
independent appraisals and valuations and, where the foregoing
are not available, industry trends and by reference to market
rates and transactions. The Company&#146;s fresh-start equity
value of $438&nbsp;million at March&nbsp;31, 2003 was determined
with the assistance of financial advisors. The estimates and
assumptions are inherently subject to significant uncertainties
and contingencies beyond the control of the Company.
Accordingly, there can be no assurance that the estimates,
assumptions, and values reflected in the valuations will be
realized, and actual results could vary materially. See
Note&nbsp;13 to the Financial Statements for further detail
related to the fresh-start fair value adjustments.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='234'></A>
</DIV>

<!-- link1 "Recent Accounting and Reporting Developments" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recent Accounting and Reporting Developments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September 2004, the Financial Accounting Standards Board
(FASB)&nbsp;issued FASB Staff Position (FSP)&nbsp;Emerging
Issues Task Force (EITF)&nbsp;Issue&nbsp;03-1-1, Effective Date
of Paragraphs&nbsp;10&#150;20 of EITF Issue No.&nbsp;03-1,
&#147;The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments,&#148; which delays the
effective date for the recognition and measurement guidance in
EITF Issue No.&nbsp;03-1. In addition, the FASB has issued a
proposed FSP to consider whether further application guidance is
necessary for securities analyzed for impairment under EITF
Issue No.&nbsp;03-1. The Company continues to assess the
potential impact that the adoption of the proposed FSP could
have on its financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">42

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the FASB issued Statement of Financial
Accounting Standards (SFAS)&nbsp;No.&nbsp;151, &#147;Inventory
Costs&#148; (SFAS&nbsp;151), which clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling
costs, and wasted material. SFAS&nbsp;151 will be effective for
inventory costs incurred beginning January&nbsp;1, 2006. The
Company does not believe the adoption of SFAS&nbsp;151 will have
a material impact on its financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;153,
&#147;Exchanges of Nonmonetary Assets&#148; (SFAS&nbsp;153),
which eliminates the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general
exception for exchanges of nonmonetary assets that do not have
commercial substance. SFAS&nbsp;153 will be effective for
nonmonetary asset exchanges occurring after July&nbsp;1, 2005.
The Company is currently evaluating the impact of SFAS&nbsp;153
on its financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;123(R),
&#147;Share-Based Payment&#148; (SFAS&nbsp;123(R)), which
establishes standards for transactions in which an entity
exchanges its equity instruments for goods or services. This
standard requires a public entity to measure the cost of
employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award.
This eliminates the exception to account for such awards using
the intrinsic method previously allowable under Accounting
Principle Board Opinion No.&nbsp;25. SFAS&nbsp;123(R) will be
effective for the Company&#146;s interim reporting period
beginning July&nbsp;1, 2005. The Company previously adopted the
fair value recognition provisions of SFAS&nbsp;123,
&#147;Accounting for Stock-Based Compensation,&#148; upon
emergence from the Prior Bankruptcy on March&nbsp;31, 2003.
Accordingly, the Company believes SFAS&nbsp;123(R) will not have
a material impact on its financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='235'></A>
</DIV>

<!-- link1 "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item&nbsp;7A.&nbsp;Quantitative and Qualitative Disclosures
About Market Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s primary market risk exposures include
commodity price risk (i.e., the price paid to obtain aviation
fuel), interest rate risk and equity price risk. The potential
impact of adverse increases in the aforementioned risks and
general strategies employed by the Company to manage such risks
are discussed below. The risks identified below are consistent
from year to year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following sensitivity analyses do not consider the effects
that an adverse change may have on the overall economy nor do
they consider additional actions the Company may take to
mitigate its exposure to such changes. Actual results of changes
in prices or rates may differ materially from the following
hypothetical results.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Commodity Price Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Aviation fuel is typically the Company&#146;s second largest
expense. Prices and availability of all petroleum products are
subject to political, economic and market factors that are
generally outside of the Company&#146;s control. Accordingly,
the price and availability of aviation fuel, as well as other
petroleum products, can be unpredictable. Prices may be affected
by many factors, including: the impact of political instability
on crude production, especially in Russia and OPEC countries;
unexpected changes to the availability of petroleum products due
to disruptions in distribution systems or refineries;
unpredicted increases to oil demand due to weather or the pace
of economic growth; inventory levels of crude, refined products
and natural gas; and other factors, such as the relative
fluctuation between the U.S.&nbsp;dollar and other major
currencies and influence of speculative positions on the futures
exchanges. Because the operations of the Company&#146;s airline
subsidiaries are dependent upon aviation fuel, increases in
aviation fuel costs could materially and adversely affect the
Company&#146;s liquidity, results of operations and financial
condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company utilizes financial derivatives, including fixed
price swap agreements, collar structures and other similar
instruments, to manage some of the risk associated with changes
in aviation fuel prices. As of December&nbsp;31, 2004, the
Company had no open fuel hedge positions in place, but will
recognize approximately $2&nbsp;million per month for previously
liquidated hedges representing approximately 4% of its 2005
anticipated jet fuel requirements. The Company had
$22&nbsp;million of unrealized gains related to fuel
</DIV>

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<DIV align="left" style="font-size: 10pt;">
hedge positions recorded in Accumulated other comprehensive
loss, net of income tax effect on its Consolidated Balance Sheet
as of December&nbsp;31, 2004.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Interest Rate Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Exposure to interest rate risk relates primarily to the
Company&#146;s cash equivalents and short-term investments
portfolios and debt obligations. As of December&nbsp;31, 2004
and 2003, the Company had $1.63&nbsp;billion and
$1.53&nbsp;billion of variable-rate debt outstanding,
respectively. Assuming a hypothetical 10% increase in average
interest rates during 2005 as compared to 2004, interest expense
would increase by $8&nbsp;million. Additional information
regarding the Company&#146;s debt obligations as of
December&nbsp;31, 2004 is as follows (dollars in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>Expected Maturity Date</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2006</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2007</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2008</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2009</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Thereafter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fixed-rate debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,698</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted avg. interest rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Variable-rate debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,627</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted avg. interest rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the Company&#146;s Chapter&nbsp;11 filing, the
fair value of the debt outstanding could not be reasonably
determined as of December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As noted in &#147;Contractual Obligations&#148; above, US
Airways Group has future aircraft purchase commitments of
$1.93&nbsp;billion. It expects to lease or mortgage a majority
of those commitments. Changes in interest rates will impact the
cost of such financings.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Equity Price Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways holds Sabre Holdings Corporation (Sabre) stock
options that have a fair value and carrying value of
$10&nbsp;million as of December&nbsp;31, 2004. Fair value is
computed using the Black-Scholes stock option pricing model. A
hypothetical ten percent decrease in the December&nbsp;31, 2004
value of the Sabre stock price would decrease the fair value of
the stock options by $2&nbsp;million. See Note&nbsp;3(b) to the
Company&#146;s Notes to Consolidated Financial Statements for
information related to the fair value of these options.
</DIV>

<P align="center" style="font-size: 10pt;">44

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<DIV align="left" style="font-size: 10pt;">
<A name='236'></A>
</DIV>

<!-- link1 "Item 8. Consolidated Financial Statements of US Airways Group" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item&nbsp;8.&nbsp;Consolidated Financial Statements of US
Airways Group</B>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>Management&#146;s Annual Report on Internal Control over
    Financial Reporting</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management of US Airways Group, Inc. (the Company) is
responsible for establishing and maintaining adequate internal
control over financial reporting as defined in
Rules&nbsp;13a-15(f) and 15d-15(f) under the Securities Exchange
Act of 1934, as amended. The Company&#146;s internal control
over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. The
Company&#146;s internal control over financial reporting
includes those policies and procedures that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="4%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of the assets of the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the Company are being made
    only in accordance with authorizations of management and
    directors of the Company;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    Company&#146;s assets that could have a material effect on the
    financial statements.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management assessed the effectiveness of the Company&#146;s
internal control over financial reporting as of
December&nbsp;31, 2004. In making this assessment, management
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO)&nbsp;in Internal
Control-Integrated Framework.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on our assessment and those criteria, management believes
that the Company maintained effective internal control over
financial reporting as of December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s independent registered public accounting firm
has issued an attestation report on management&#146;s assessment
of the Company&#146;s internal control over financial reporting.
That report has been included herein.
</DIV>

<P align="center" style="font-size: 10pt;">45

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Board of Directors and Stockholders <BR>
 US Airways Group, Inc.:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited management&#146;s assessment, included in the
accompanying Management&#146;s Annual Report on Internal Control
over Financial Reporting that US Airways Group, Inc. and
subsidiaries (the Company) maintained effective internal control
over financial reporting as of December&nbsp;31, 2004, based on
criteria established in <I>Internal Control&nbsp;&#151;
Integrated Framework </I>issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Company&#146;s management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting. Our responsibility is to express an opinion
on management&#146;s assessment and an opinion on the
effectiveness of the Company&#146;s internal control over
financial reporting based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
management&#146;s assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A company&#146;s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company&#146;s
internal control over financial reporting includes those
policies and procedures that (1)&nbsp;pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2)&nbsp;provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3)&nbsp;provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company&#146;s assets that could have a material effect on the
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, management&#146;s assessment that the Company
maintained effective internal control over financial reporting
as of December&nbsp;31, 2004, is fairly stated, in all material
respects, based on criteria established in <I>Internal
Control&nbsp;&#151; Integrated Framework </I>issued by COSO.
Also, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of December&nbsp;31, 2004, based on criteria established in
<I>Internal Control&nbsp;&#151; Integrated Framework </I>issued
by COSO.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of US Airways Group, Inc. and
subsidiaries as of December&nbsp;31, 2004 and 2003, and the
related consolidated statements of operations,
stockholders&#146; equity (deficit)&nbsp;and cash flows for the
year ended December&nbsp;31, 2004 and the nine months ended
December&nbsp;31, 2003 for the Successor Company and the three
months ended March&nbsp;31, 2003 and the year ended
December&nbsp;31, 2002 for the Predecessor Company and our
report dated February&nbsp;25, 2005 expressed an unqualified
opinion on those financial statements. Our report included an
explanatory paragraph that states that the Company&#146;s
significant recurring losses, accumulated deficit and voluntary
petition seeking to reorganize under Chapter&nbsp;11 of the
federal bankruptcy laws raise substantial doubt about its
ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>KPMG LLP</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
McLean, Virginia
</DIV>

<DIV align="left" style="font-size: 10pt;">
February&nbsp;25, 2005
</DIV>

<P align="center" style="font-size: 10pt;">46

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Board of Directors and Stockholders
</DIV>

<DIV align="left" style="font-size: 10pt;">
US Airways Group, Inc.:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying consolidated balance sheets of
US Airways Group, Inc. and subsidiaries as of December&nbsp;31,
2004 and 2003, and the related consolidated statements of
operations, stockholders&#146; equity (deficit)&nbsp;and cash
flows for the year ended December&nbsp;31, 2004 and the nine
months ended December&nbsp;31, 2003 for the Successor Company
and the three months ended March&nbsp;31, 2003 and the year
ended December&nbsp;31, 2002 for the Predecessor Company. These
consolidated financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of US Airways Group, Inc. and subsidiaries as of
December&nbsp;31, 2004 and 2003, and the results of their
operations and their cash flows for the year ended
December&nbsp;31, 2004 and nine months ended December&nbsp;31,
2003 for the Successor Company and the three months ended
March&nbsp;31, 2003 and the year ended December&nbsp;31, 2002
for the Predecessor Company, in conformity with
U.S.&nbsp;generally accepted accounting principles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. The Company has incurred significant recurring losses
from operations, has an accumulated deficit and as discussed in
Note&nbsp;1 to the consolidated financial statements, filed a
voluntary petition seeking to reorganize under Chapter&nbsp;11
of the federal bankruptcy laws which raise substantial doubt
about its ability to continue as a going concern. Although the
Company is currently operating as a debtor-in-possession under
the jurisdiction of the Bankruptcy Court, the continuation of
the business as a going concern is contingent upon, among other
things: (1)&nbsp;the ability to maintain compliance with all
terms of its ATSB Loan; (2)&nbsp;the ability of the Company to
successfully achieve required cost savings to complete its
restructuring; (3)&nbsp;the ability of the Company to generate
cash from operations and to maintain adequate cash on hand;
(4)&nbsp;the resolution of the uncertainty as to the amount of
claims that will be allowed and as to a number of disputed
claims which are materially in excess of amounts reflected in
the accompanying consolidated financial statements; (5)&nbsp;the
ability of the Company to confirm a plan of reorganization under
the Bankruptcy Code and obtain the required debt and equity
financing to emerge from bankruptcy protection; and (6)&nbsp;the
Company&#146;s ability to achieve profitability.
Management&#146;s plans in regard to these matters are also
described in Note&nbsp;1. The accompanying consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
</DIV>

<P align="center" style="font-size: 10pt;">47

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in Note&nbsp;2(b) to the consolidated financial
statements, on March&nbsp;18, 2003, the Bankruptcy Court
confirmed the Company&#146;s Plan of Reorganization (the 2003
Plan) related to its prior Chapter&nbsp;11 proceeding. The 2003
Plan became effective on March&nbsp;31, 2003 and the Company
emerged from the prior Chapter&nbsp;11 proceeding. In connection
with its emergence from the prior Chapter&nbsp;11 proceeding,
the Company adopted fresh-start reporting pursuant to Statement
of Position&nbsp;90-7, &#147;Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code&#148; as of
March&nbsp;31, 2003. As a result, the consolidated financial
statements of the Successor Company are presented on a different
basis than those of the Predecessor Company and, therefore, are
not comparable in all respects. As discussed in Notes&nbsp;2(m)
and 9 to the consolidated financial statements, effective
April&nbsp;1, 2003, the Company changed its method of accounting
for stock-based compensation as described by Statement of
Financial Accounting Standards No.&nbsp;148, &#147;Accounting
for Stock-Based Compensation&nbsp;&#151; Transition and
Disclosure.&#148; As discussed in Note&nbsp;2(n) to the
consolidated financial statements, effective January&nbsp;1,
2002 the Company changed its method of accounting for engine
maintenance at PSA Airlines, Inc. a wholly owned subsidiary of
the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Company&#146;s internal control over
financial reporting as of December&nbsp;31, 2004, based on
criteria established in &#147;Internal Control-Integrated
Framework&#148; issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report
dated February&nbsp;25, 2005 expressed an unqualified opinion on
management&#146;s assessment of, and the effective operation of,
internal control over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>KPMG LLP</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
McLean, Virginia
</DIV>

<DIV align="left" style="font-size: 10pt;">
February&nbsp;25, 2005
</DIV>

<P align="center" style="font-size: 10pt;">48

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Debtor-in-Possession)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Consolidated Statements of Operations</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(dollars in millions, except share and per share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger transportation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,282</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cargo and freight</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>141</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>554</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Operating Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,977</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Personnel costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,255</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aviation fuel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>617</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>782</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    US Airways Express capacity purchases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>482</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft rent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>525</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other rent and landing fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>429</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>442</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft maintenance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>405</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>309</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>320</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Government compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(214</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,342</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Operating Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,294</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(378</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(207</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,317</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other Income (Expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(242</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(170</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(73</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(315</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(294</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other Income (Expense), Net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(243</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(119</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(598</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (Loss) Before Income Taxes and Cumulative Effect of
    Accounting Change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(621</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(163</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,915</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income Taxes Provision (Benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(252</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (Loss) Before Cumulative Effect of Accounting Change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(611</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,663</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative Effect of Accounting Change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Income (Loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(611</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,646</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (Loss) per Common Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Before Cumulative Effect of Accounting Change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative Effect of Accounting Change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Earnings (Loss) per Common Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Before Cumulative Effect of Accounting Change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative Effect of Accounting Change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Earnings (Loss) per Common Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares Used for Computation (000)&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,040</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,040</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Consolidated Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">49

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Debtor-in-Possession)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Consolidated Balance Sheets</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December 31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(dollars in millions,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>except share and</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>per share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ASSETS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>929</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>358</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Receivables, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>251</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Materials and supplies, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>196</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>170</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Current Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,055</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and Equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Flight equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,573</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ground property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>369</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(316</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(127</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,815</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase deposits for flight equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>213</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Property and Equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,028</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,475</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other intangibles, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>572</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>399</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Other Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,472</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,555</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LIABILITIES AND STOCKHOLDERS&#146; EQUITY (DEFICIT)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current Liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current maturities of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>376</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Traffic balances payable and unused tickets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>835</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued aircraft rent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued salaries, wages and vacation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>197</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>707</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Current Liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,553</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncurrent Liabilities and Deferred Credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, net of current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,630</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred gains and credits, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>439</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Postretirement benefits other than pensions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,651</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employee benefit liabilities and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,110</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Noncurrent Liabilities and Deferred Credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,830</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liabilities Subject to Compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and Contingencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; Equity (Deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;A Common Stock, par value $1&nbsp;per share,
    50,616,000 and 48,979,000&nbsp;shares outstanding, respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;B Common Stock, par value $1&nbsp;per share,
    5,000,000&nbsp;shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>392</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(785</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock held in treasury, at cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(98</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(55</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Stockholders&#146; Equity (Deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(434</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,555</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Consolidated Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">50

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Debtor-in-Possession)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Consolidated Statements of Cash Flows</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(611</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,646</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net income (loss) to net cash provided
    by (used for) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on debt discharge</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,938</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fresh start adjustments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash impairments and other special items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>442</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other reorganization items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>309</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gains on dispositions of property</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of deferred gains and credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(63</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(48</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative effect of accounting change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock-based compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in certain assets and liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in receivables</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(67</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in materials and supplies, prepaid expenses
    and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>454</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in traffic balances payable and unused
    tickets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in accounts payable and accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(95</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in postretirement benefits other than pensions,
    noncurrent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used for) operating activities before
    reorganization items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(78</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(192</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(302</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(90</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(62</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used for) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(282</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(364</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures and purchase deposits for flight equipment,
    net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(217</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(207</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(146</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from dispositions of property</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(289</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>430</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in restricted cash and investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(76</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(370</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used for) investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(422</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of Debtor-in-Possession financings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>375</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of preferred stock, common stock and
    warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Principal payments on long-term debt and capital lease
    obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(425</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(133</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Principal payments on Debtor-in-Possession financings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(431</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(75</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales of treasury stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used for) financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(185</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>334</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(191</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(271</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and Cash equivalents at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>593</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and Cash equivalents at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>585</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncash investing and financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Flight equipment acquired through issuance of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>77</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental Information</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest paid during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>248</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes refunded (paid)&nbsp;during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Consolidated Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">51

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
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</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Debtor-in-Possession)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Consolidated Statements of Stockholders&#146; Equity
(Deficit)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Three Years Ended December&nbsp;31, 2004</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Accumulated other comprehensive income</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(loss), net of income tax effect</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unrealized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>gain (loss) on</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unrealized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Class&nbsp;A</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Class&nbsp;B</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>available-for-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>gain (loss) on</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>for minimum</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid-in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock held</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deferred</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>sale</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>cash flow</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>pension</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deficit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>in treasury</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>hedges</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>liability</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>income (loss)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="46" align="center" nowrap><B>(dollars in millions, except share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Predecessor Company:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance as of December&nbsp;31, 2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,937</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,749</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(62</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(138</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,615</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Grant of 753,000&nbsp;shares of non-vested stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reversion of 242,000&nbsp;shares of previously-granted
    non-vested stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reissuance of shares held in treasury for less than cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(38</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of deferred compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write off of ESOP deferred compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrealized loss on available-for-sale securities, net of
    reclassification adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrealized gain on fuel cash flow hedges, net of
    reclassification adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(742</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(742</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(742</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,646</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,646</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,646</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,363</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance as of December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,583</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,711</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(880</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,921</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrealized loss on fuel cash flow hedges, net of
    reclassification adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Termination of pilot pension plan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization adjustments:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cancellation of Predecessor common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(101</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,147</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(537</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to Stockholders&#146; Deficit in connection with
    reorganization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>796</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of Class&nbsp;A Common Stock to labor groups</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(169</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of Class&nbsp;A and Class&nbsp;B Common Stock to
    creditors and investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,505</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Successor Company:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance sheet as of March&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(169</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">52

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<!-- LANDSCAPE -->
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Debtor-in-Possession)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Consolidated Statements of Stockholders&#146; Equity
(Deficit)&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Three Years Ended December&nbsp;31, 2004</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Accumulated other comprehensive income</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(loss), net of income tax effect</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>gain (loss) on</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unrealized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Class&nbsp;A</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Class&nbsp;B</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>available-for-</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>gain (loss) on</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>for minimum</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Common</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid-in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock held</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deferred</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>sale</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>cash flow</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>pension</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deficit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>in treasury</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>hedges</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>liability</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>income (loss)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="46" align="center" nowrap><B>(dollars in millions, except share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Successor Company:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance as of March&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(169</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock surrendered for tax withholdings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Private placement of Class&nbsp;A common shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of deferred compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrealized gain on fuel cash flow hedges, net of
    reclassification adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(229</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance as of December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted stock vestings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Stock surrendered for tax withholdings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of deferred compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrealized loss on fuel cash flow hedges, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(34</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(34</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(34</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(611</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(611</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(611</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(654</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance as of December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(785</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(120</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(434</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Consolidated Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">53
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='311'></A>
</DIV>

<!-- link1 "US Airways Group, Inc. Notes to Consolidated Financial Statements" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Notes to Consolidated Financial Statements</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Chapter&nbsp;11 Reorganization</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Chapter&nbsp;11 Proceedings</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;12, 2004, US Airways Group, Inc. (US Airways
Group or the Company) and its domestic subsidiaries
(collectively, the Debtors), which account for substantially all
of the operations of the Company, including its principal
operating subsidiary, US Airways, Inc. (US Airways), filed
voluntary petitions for relief under Chapter&nbsp;11 of the
United States Bankruptcy Code (Bankruptcy Code) in the United
States Bankruptcy Court for the Eastern District of Virginia,
Alexandria Division (Bankruptcy Court) (Case
Nos.&nbsp;04-13819-SSM through 04-13823-SSM). Each of the
Debtors in these cases had previously filed a voluntary petition
for relief under Chapter&nbsp;11 on August&nbsp;11, 2002 (the
Prior Bankruptcy). The Debtors emerged from the Prior Bankruptcy
under the First Amended Joint Plan of Reorganization of US
Airways Group, Inc. and Affiliated Debtors and
Debtors-in-Possession, As Modified (the 2003 Plan), which was
confirmed pursuant to an order of the Bankruptcy Court on
March&nbsp;18, 2003 and became effective on March&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Before emerging from the Prior Bankruptcy in 2003, the Company
examined virtually every phase of its contracts and operations
and had significantly reduced costs. The Company reduced its
mainline capacity, realigned its network to maximize yield,
initiated a business plan to use more regional jets and procured
financing for these aircraft, and expanded its alliance with
other carriers. However, after emerging from the Prior
Bankruptcy, the Company continued to incur substantial losses
from operations. The primary factors contributing to these
losses include the reduction in domestic industry unit revenue
and significant increases in fuel prices. The downward pressure
on domestic industry revenue is a result of the rapid growth of
low-fare, low-cost airlines, the increasing transparency of
fares through Internet sources and other changes in fare
structures that have resulted in substantially lower fares for
many business and leisure travelers. The competitive environment
continued to intensify throughout 2004, particularly in key
markets such as Philadelphia, Washington,&nbsp;D.C., Boston and
New York.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Throughout the spring and summer of 2004, the Company
communicated with key stakeholders and the public its plan to
transform US Airways into a fully competitive and profitable
airline (the Transformation Plan). A key element of the
Transformation Plan is significant reductions in labor costs
through changes to the Company&#146;s collective bargaining
agreements. The Company aggressively sought the necessary
agreements to allow full implementation of the Transformation
Plan without the need for filing new Chapter&nbsp;11 cases but
was unable to do so in a timely manner. As a result of the
recurring losses, declining available cash, and risk of defaults
or cross defaults under certain key financing and operating
agreements, it was necessary for the Debtors to file voluntary
petitions for reorganization under Chapter&nbsp;11 of the
Bankruptcy Code on September&nbsp;12, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At hearings held on September&nbsp;13, 2004, the Bankruptcy
Court granted the Company&#146;s first day motions for relief
designed to stabilize its operations and business relationships
with customers, vendors, employees and others and entered orders
granting permission to the Debtors to, among other things:
(a)&nbsp;pay employee wages and continue benefits, such as
medical and dental insurance; (b)&nbsp;honor prepetition
obligations to customers and continue customer programs,
including US Airways&#146; Dividend Miles program; (c)&nbsp;pay
for fuel under existing supply contracts, and honor existing
fuel supply, distribution and storage agreements;
(d)&nbsp;assume certain contracts related to interline
agreements with other airlines; (e)&nbsp;pay prepetition
obligations to certain foreign vendors, foreign service
providers and foreign governments; and (f)&nbsp;continue
maintenance of existing bank accounts and existing cash
management systems. The Bankruptcy Court also approved the
interim agreement reached between the Company, the Air
Transportation Stabilization Board (ATSB)&nbsp;and the lenders
under the $1&nbsp;billion loan, obtained upon emergence from the
Prior Bankruptcy and substantially guaranteed by the ATSB, to
allow the Company continued use of the cash collateral securing
the loan (see Note&nbsp;4 for further discussion of the ATSB
Loan and subsequent amendments).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since filing for bankruptcy on September&nbsp;12, 2004, the
Company has achieved cost-savings agreements with all of its
collective bargaining groups. Through a motion filed under
Section&nbsp;1113(e) of the Bankruptcy
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Code on September&nbsp;24, 2004, the Company sought interim
relief from their collective bargaining agreements (CBAs) with
the Air Line Pilots Association (ALPA), Association of Flight
Attendants-Communications Workers of America (AFA), Transport
Workers Union (TWU), Communications Workers of America
(CWA)&nbsp;and International Association of Machinists and
Aerospace Workers (IAM). On October&nbsp;15, 2004, the
Bankruptcy Court approved base rates of pay reductions of 21%
through February&nbsp;15, 2005 or entry of an order approving a
new CBA or granting final relief under Section&nbsp;1113(c) of
the Bankruptcy Code. Reductions to pension contributions and
certain work rule changes were also approved. The interim relief
order did not apply to ALPA or TWU, whose members reached and
ratified agreements prior to the interim relief going into
effect. Agreements with the CWA and AFA were reached in December
2004 and were subsequently ratified. On January&nbsp;6, 2005,
the Bankruptcy Court approved the Company&#146;s request to
reject the IAM CBAs and approved the termination of the three
mainline defined benefit plans. The IAM subsequently ratified
Company cost-savings proposals on January&nbsp;21, 2005. As part
of these negotiations and subsequent ratifications, all
collective bargaining groups had their pension plans reduced or
eliminated. See Note&nbsp;5(a) for further detail on the
termination of US Airways&#146; three defined benefit plans. In
addition, the Bankruptcy Court has also approved various
settlement agreements between the Company and the
court-appointed Section&nbsp;1114 Committee representing
retirees other than those represented by the IAM to begin the
significant curtailment of postretirement benefits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the cost savings achieved with labor groups, the
Company also implemented pay and benefit reductions for its
current management and other non-union employees, including
reductions to base pay, workforce reductions and modifications
to vacation and sick time accruals. The Company also implemented
modifications to its defined contribution pension plans and will
implement modifications to retiree benefits in 2005. The pay
rate and defined contribution plan reductions went into effect
October&nbsp;11, 2004 and the reductions to retiree medical
benefits will become effective March&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has reached agreements with certain of its lessors
and lenders restructuring existing aircraft lease and debt
financings. On November&nbsp;19, 2004, the Bankruptcy Court
approved the Company&#146;s agreements for the continued use and
operation of substantially all of its mainline and Express
fleet. As discussed in detail below, the Company reached a
comprehensive agreement with GE Capital Aviation Services
(GECAS)&nbsp;and GE Engine Service (GEES)&nbsp;on aircraft
leasing and financing and engine services, which will provide
the Company with short-term liquidity, reduced debt, lower
aircraft ownership costs, enhanced engine maintenance services,
and operating leases for new regional jets. The Company also
reached agreements with EMBRAER-Empresa Brasileria de
Aeronautica SA (Embraer) and Bombardier, Inc. (Bombardier)
providing for continued use and operation of its aircraft, short
term liquidity and new financing for regional jets, which were
approved by the Bankruptcy Court in January 2005. These
agreements are discussed in more detail in Note&nbsp;4.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has notified all known or potential creditors of the
Chapter&nbsp;11 filing for the purposes of identifying and
quantifying all prepetition claims. The Chapter&nbsp;11 filing
triggered defaults on substantially all debt and lease
obligations. Subject to certain exceptions under the Bankruptcy
Code, the Chapter&nbsp;11 filing automatically stayed the
continuation of any judicial or administrative proceedings or
other actions against the Debtors or their property to recover
on, collect or secure a claim arising prior to
September&nbsp;12, 2004. The deadline for filing proofs of claim
with the Bankruptcy Court was February&nbsp;3, 2005, with a
limited exception for governmental entities, which have until
March&nbsp;11, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The potential adverse publicity associated with the
Chapter&nbsp;11 filings and the resulting uncertainty regarding
the Company&#146;s future prospects may hinder the
Company&#146;s ongoing business activities and its ability to
operate, fund and execute its business plan by impairing
relations with existing and potential customers; negatively
impacting the ability of the Company to attract and retain key
employees; limiting the Company&#146;s ability to obtain trade
credit; limiting the Company&#146;s ability to effectively hedge
rising aviation fuel costs; and impairing present and future
relationships with vendors and service providers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the Chapter&nbsp;11 filings, realization of
assets and liquidation of liabilities are subject to significant
uncertainty. While operating as a debtor-in-possession under the
protection of Chapter&nbsp;11, and subject to Bankruptcy Court
approval or otherwise as permitted in the normal course of
business, US Airways may sell or otherwise dispose of assets and
liquidate or settle liabilities for amounts other than those
reflected
</DIV>

<P align="center" style="font-size: 10pt;">55

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<DIV align="left" style="font-size: 10pt;">
in the financial statements. Further, a plan of reorganization
could materially change the amounts and classifications reported
in the historical financial statements, which do not give effect
to any adjustments to the carrying value of assets or amounts of
liabilities that might be necessary as a consequence of
confirmation of a plan of reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To exit Chapter&nbsp;11 successfully, the Company must obtain
confirmation by the Bankruptcy Court of a plan of
reorganization. The Company currently has the exclusive right to
file a plan of reorganization until March&nbsp;31, 2005 and
solicit acceptance of the plan through June&nbsp;30, 2005. Under
the terms of the agreement reached with General Electric, the
Company has until March&nbsp;15, 2005 to file a plan of
reorganization. These deadlines could potentially be extended. A
plan of reorganization would, among other things, resolve all
prepetition obligations, set forth a revised capital structure
and establish the corporate governance subsequent to exiting
from bankruptcy. The Company is currently working towards
emerging from Chapter&nbsp;11 mid-year 2005, but that timing is
dependent upon, among other things, the timely and successful
confirmation and implementation of a plan of reorganization. The
ultimate recovery to creditors and/or holders of the common
stock, if any, will not be determined until confirmation of a
plan of reorganization. No assurance can be given as to what
values, if any, will be ascribed in the Chapter&nbsp;11 cases to
these constituencies or what type or amount of distributions, if
any, they would receive. A plan of reorganization could result
in holders of the Company&#146;s common stock receiving no
distribution and cancellation of existing stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;18, 2005, the Company announced that it reached
agreement with Eastshore Aviation, LLC, an investment entity
owned by Air Wisconsin Airlines Corporation and its shareholders
(Air Wisconsin), on a $125&nbsp;million financing commitment to
provide a substantial portion of the equity funding for a plan
of reorganization. The $125&nbsp;million facility will be in the
form of a debtor-in-possession term loan, to be drawn in the
amount of $75&nbsp;million, upon approval by Bankruptcy Court,
and as early as February&nbsp;28, 2005, and two subsequent
$25&nbsp;million increments. This loan would be second only to
the ATSB Loan with regard to the Company&#146;s assets that are
pledged as collateral. Upon emergence from Chapter&nbsp;11, the
$125&nbsp;million financing package would then convert to equity
in the reorganized US Airways Group. As part of this agreement,
US Airways and Air Wisconsin will enter into an air services
agreement under which Air Wisconsin may, but is not required to,
provide regional jet service under a US Airways Express code
share arrangement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Financial Statement Presentation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying consolidated financial statements have been
prepared in accordance with AICPA Statement of
Position&nbsp;90-7, &#147;Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code&#148; (SOP&nbsp;90-7)
and on a going-concern basis. SOP&nbsp;90-7 requires that the
financial statements for periods following the Chapter&nbsp;11
filing through emergence distinguish transactions and events
that are directly associated with the reorganization from the
ongoing operations of the business. Accordingly, revenues,
expenses, realized gains and losses and provisions for losses
directly associated with the reorganization and restructuring of
the business are reported separately as Reorganization items,
net in the Statements of Operations.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Reorganization items, net as shown on the Consolidated Statement
of Operations related to the current Chapter&nbsp;11 proceedings
as well as the Prior Bankruptcy consist of the following (in
millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discharge of liabilities(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructured aircraft financings(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Termination of pension plans(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income on accumulated cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Damage and deficiency claims(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,167</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revaluation of assets and liabilities(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,107</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Professional fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft order cancellation penalties(e)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on aircraft abandonment(f)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(68</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Severance including benefits(g)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of ESOP deferred compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(43</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(294</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    Reflects the discharge or reclassification of liabilities
    subject to compromise in the Prior Bankruptcy. Most of these
    obligations were only entitled to receive such distributions of
    cash and common stock as provided under the 2003 Plan. A portion
    of the liabilities subject to compromise in the Prior Bankruptcy
    were restructured and continued, as restructured, to be
    liabilities of the Company.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    As of March&nbsp;31, 2003, the Company restructured aircraft
    debt and lease agreements related to 200 aircraft in connection
    with its Prior Bankruptcy including the conversion of 52
    mortgages to operating leases. The restructured terms generally
    provide for shorter lease periods and lower lease rates.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Effective March&nbsp;31, 2003, US Airways terminated its
    qualified and nonqualified pilot defined benefit pension plans.
    The Pension Benefit Guaranty Corporation (PBGC)&nbsp;was
    appointed trustee of the qualified plan effective with the
    termination. The Company recognized a gain in connection with
    the termination which is partially offset by the Company&#146;s
    estimate of the PBGC claim.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    Damage and deficiency claims largely arose as a result of the
    Company electing to either restructure, abandon or reject
    aircraft debt and leases during the bankruptcy proceedings.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    As the result of the Company&#146;s bankruptcy filing in
    September 2004, the Company failed to meet the conditions
    precedent for continued financing of regional jets and was not
    able to take delivery of scheduled aircraft and therefore
    incurred penalties of $7&nbsp;million in the fourth quarter of
    2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (f)</TD>
    <TD></TD>
    <TD valign="top">
    Includes aircraft (seven A319s for 2003 and 34&nbsp;F-100s, two
    B757-200s and one B737-400 for 2002) that were legally abandoned
    as part of the Prior Bankruptcy. Related aircraft liabilities
    were adjusted for each aircraft&#146;s expected allowed
    collateral value.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (g)</TD>
    <TD></TD>
    <TD valign="top">
    As a result of schedule reductions made in connection with the
    Prior Bankruptcy, US Airways terminated or furloughed
    approximately 6,600 employees across all employee groups.
    Substantially all affected employees were terminated or
    furloughed prior to March&nbsp;31, 2003. US Airways&#146;
    headcount reduction was largely accomplished through involuntary
    terminations/furloughs. In connection with this headcount
    reduction, US Airways offered a voluntary leave program to
    certain employee groups. Voluntary leave program participants
    generally received extended benefits (e.g. medical, dental, life
    insurance) but did not receive any furlough pay benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
SOP&nbsp;90-7 also requires that prepetition liabilities subject
to compromise should be distinguished from both prepetition
liabilities that are not subject to compromise and postpetition
liabilities. Liabilities subject to compromise are reported at
the amounts expected to be allowed by the Bankruptcy Court, even
if they may be settled for lesser amounts. The following table
summarizes the components of Liabilities Subject to Compromise
included in the Company&#146;s Consolidated Balance Sheets as of
December&nbsp;31, 2004 (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,454</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Postretirement and other employee related expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,858</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>570</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>183</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft-related accruals and deferrals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Liabilities Subject to Compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,179</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">57

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Summary of Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>Nature of operations</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways Group&#146;s primary business activity is the
operation of a major network air carrier through its ownership
of the common stock of US Airways, Piedmont Airlines, Inc.
(Piedmont), PSA Airlines, Inc. (PSA), Material Services Company,
Inc. (MSC)&nbsp;and Airways Assurance Limited, LLC (AAL). US
Airways is a certificated air carrier engaged primarily in the
business of transporting passengers, property and mail.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways is the Company&#146;s principal operating subsidiary.
US Airways enplaned approximately 42&nbsp;million passengers in
2004 and was the seventh largest U.S.&nbsp;air carrier, as
ranked by revenue passenger miles (RPMs). As of
December&nbsp;31, 2004, US Airways operated 281 jet aircraft and
22 regional jet aircraft and provided regularly scheduled
service at 89 airports in the continental United States, Canada,
Mexico, France, Germany, Italy, Spain, Ireland, the Netherlands,
the United Kingdom and the Caribbean.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Piedmont, PSA and Allegheny (through June 2004) are regional
carriers that, along with other non-owned regional airlines with
which the Company has marketing agreements, form &#147;US
Airways Express.&#148; During 2004, US Airways Express air
carriers enplaned approximately 15.2&nbsp;million passengers. Of
these 15.2&nbsp;million passengers, approximately
6.2&nbsp;million were enplaned by the Company&#146;s wholly
owned regional airlines, approximately 7.4&nbsp;million were
enplaned by third-party carriers operating under capacity
purchase agreements and approximately 1.6&nbsp;million were
enplaned by carriers operating under prorate agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most of the operations of the Company&#146;s airline
subsidiaries are in competitive markets. Competitors include
other air carriers along with other modes of transportation.
Although a competitive strength in some regards, the
concentration of significant operations in the eastern
U.S.&nbsp;results in US Airways being susceptible to changes in
certain regional conditions that may have an adverse effect on
the Company&#146;s financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Personnel costs represent the Company&#146;s largest expense
category. As of December&nbsp;31, 2004, the Company&#146;s
subsidiaries employed approximately 29,500&nbsp;full-time
equivalent employees. Approximately 81% of the Company&#146;s
active employees are covered by collective bargaining agreements
with various labor unions.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Basis of presentation and use of estimates</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying Consolidated Financial Statements include the
accounts of US Airways Group and its wholly owned subsidiaries.
Principal subsidiaries include US Airways, Allegheny Airlines,
Inc. (Allegheny), Piedmont and PSA. Effective July&nbsp;1, 2004,
Allegheny merged with Piedmont, with Piedmont as the surviving
entity. All significant intercompany accounts and transactions
have been eliminated. Certain prior year amounts have been
reclassified to conform with the 2004 presentation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. The principal areas of judgment
relate to impairment of goodwill, impairment of long-lived
assets and intangible assets, passenger revenue recognition,
frequent traveler program, pensions and other postretirement
benefits and fresh-start reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed above, SOP&nbsp;90-7 requires that the financial
statements for periods following the Chapter&nbsp;11 filing
through emergence distinguish transactions and events that are
directly associated with the reorganization from the ongoing
operations of the business. The Consolidated Balance Sheet as of
December&nbsp;31, 2004 also distinguishes prepetition
liabilities subject to compromise from both those prepetition
liabilities that are not subject to compromise and from
postpetition liabilities. Liabilities subject to compromise are
reported at the amounts expected to be allowed, even if they may
be settled for lesser amounts. In addition, cash used for
reorganization items is disclosed separately in the Consolidated
Statements of Cash Flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with SOP&nbsp;90-7 and in connection with the
Prior Bankruptcy, the Company adopted fresh-start reporting on
March&nbsp;31, 2003. References in the Consolidated Financial
Statements and the Notes to the
</DIV>

<P align="center" style="font-size: 10pt;">58

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<DIV align="left" style="font-size: 10pt;">
Consolidated Financial Statements to &#147;Predecessor
Company&#148; refer to the Company prior to March&nbsp;31, 2003.
References to &#147;Successor Company&#148; refer to the Company
on and after March&nbsp;31, 2003, after giving effect to the
application of fresh-start reporting. Fresh-start reporting
requires assets and liabilities be adjusted to fair value on the
emergence date. The term &#147;cost&#148; as used in the
Successor Company&#146;s Consolidated Notes to the Financial
Statements is after giving effect to such adjustments. See
Note&nbsp;13 for information related to fresh-start reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2003 Plan constituted a separate plan of reorganization for
each of the Company and its domestic subsidiaries (the Filing
Entities). In accordance with the Bankruptcy Code, the 2003 Plan
divided claims against, and interests in, each of the Filing
Entities into classes according to their relative seniority and
other criteria and provided the same treatment for each claim or
interest of a particular class unless the holder of a particular
claim or interest agreed to a less favorable treatment of its
claim or interest. Among other things, the 2003 Plan generally
provided for full payment of all allowed administrative and
priority claims, and the distribution of shares (or warrants to
purchase shares) of new equity in the reorganized US Airways
Group, Inc. (Reorganized US Airways Group) to the ATSB, the
Retirement Systems of Alabama Holdings LLC (RSA), the
Company&#146;s management and labor unions, General Electric
Capital Corporation and Bank of America, N.A., and to unsecured
creditors of the Filing Entities, including the PBGC, in
satisfaction of their allowed claims. Persons holding equity in
the Company prior to March&nbsp;31, 2003 were not entitled to
any distribution under the 2003 Plan and their shares of common
stock were cancelled. For a complete discussion of the
distributions provided for under the 2003 Plan, see the 2003
Plan confirmed by the Bankruptcy Court on March&nbsp;18, 2003
and filed with US Airways Group&#146;s Current Report on
Form&nbsp;8-K, dated March&nbsp;18, 2003 and filed with the SEC
on April&nbsp;2, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to a definitive agreement and in connection with
emergence from the Prior Bankruptcy, RSA invested
$240&nbsp;million in cash in Reorganized US Airways Group (the
RSA Investment Agreement) in exchange for approximately 36.2%,
on a fully-diluted basis, of the equity in Reorganized US
Airways Group. As of March&nbsp;31, 2003, in connection with its
investment, RSA was granted a voting interest of approximately
71.6% in Reorganized US Airways Group and entitled to designate
and vote to elect eight of 15&nbsp;directors to Reorganized US
Airways Group&#146;s Board of Directors. See also Note&nbsp;10
for further discussion.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</B></TD>
    <TD>
    <B>Cash equivalents and Short-term investments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash equivalents and Short-term investments consist primarily of
cash in money market securities of various banks, commercial
paper and asset-backed securities of various financial
institutions, other companies with high credit ratings and
securities backed by the U.S.&nbsp;Government. All highly liquid
investments purchased within three months of maturity are
classified as Cash equivalents. All other highly liquid
investments are classified as Short-term investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways classifies securities underlying its Cash equivalents
and Short-term investments as &#147;available-for-sale&#148; in
accordance with Statement of Financial Accounting Standards
No.&nbsp;115, &#147;Accounting for Certain Investments in Debt
and Equity Securities&#148; (SFAS&nbsp;115). Cash equivalents
are stated at cost, which approximates fair value due to the
highly liquid nature and short maturities of the underlying
securities. Short-term investments are stated at fair value with
the offsetting unrecognized gain or loss reflected as a separate
component of Stockholders&#146; Equity (Deficit) within
Accumulated other comprehensive income (loss).
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</B></TD>
    <TD>
    <B>Restricted cash</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Restricted cash includes deposits in trust accounts primarily to
fund certain taxes and fees and collateralize letters of credit
and workers&#146; compensation claims, credit card processing
collateral and fuel hedge collateral. Restricted cash is stated
at cost which approximates fair value. See Note&nbsp;3(b) for
further information.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</B></TD>
    <TD>
    <B>Materials and supplies, net</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Inventories of materials and supplies are valued at the lower of
cost or fair value. Costs are determined using average costing
methods and are charged to operations as consumed. An allowance
for obsolescence is provided for flight equipment expendable and
repairable parts.
</DIV>

<P align="center" style="font-size: 10pt;">59

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</B></TD>
    <TD>
    <B>Property and Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment is stated at cost or, if acquired under
capital lease, at the lower of the present value of minimum
lease payments or fair value of the asset at the inception of
the lease. Interest expenses related to the acquisition of
certain property and equipment are capitalized as an additional
cost of the asset or as a leasehold improvement if the asset is
leased. Costs of major improvements that enhance the usefulness
of the asset are capitalized and depreciated over the estimated
useful life of the asset or the modifications, whichever is less.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Depreciation and amortization expense for principal asset
classifications is calculated on a straight-line basis to an
estimated residual value. Depreciable lives are 11-30&nbsp;years
for operating flight equipment, 25-30&nbsp;years for facilities
and 3-10&nbsp;years for other ground property and equipment.
Rotable parts and assemblies are depreciated over the estimated
fleet life of the associated aircraft, on a group basis. The
cost of property acquired under capital lease and improvements
to leased assets are depreciated over the term of the lease on a
straight-line basis. When property and equipment is sold any
gain or loss is recognized in the Other, net category of Other
Income (Expense).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company monitors the recoverability of the carrying value of
its long-lived assets. Under the provisions of Statement of
Financial Accounting Standards No.&nbsp;144, &#147;Accounting
for the Impairment or Disposal of Long-Lived Assets&#148;
(SFAS&nbsp;144), the Company recognizes an &#147;impairment
charge&#148; when the expected net undiscounted future cash
flows from an asset&#146;s use (including any proceeds from
disposition) are less than the asset&#146;s carrying value and
the asset&#146;s carrying value exceeds its fair value.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</B></TD>
    <TD>
    <B>Goodwill and Other intangibles, net</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Goodwill is the cost in excess of fair value of the tangible and
identifiable intangible assets of businesses acquired. Excess
reorganization value resulting from the application of
SOP&nbsp;90-7 upon emergence from bankruptcy is also reported
and accounted for as goodwill. The provisions of Statement of
Financial Accounting Standards No.&nbsp;142, &#147;Goodwill and
Other Intangible Assets&#148; (SFAS&nbsp;142) require that a
two-step impairment test be performed on goodwill. In the first
step, the Company compares the fair value of the reporting unit
to its carrying value. If the fair value of the reporting unit
exceeds the carrying value of the net assets of the reporting
unit, goodwill is not impaired and the Company is not required
to perform further testing. If the carrying value of the net
assets of the reporting unit exceeds the fair value of the
reporting unit, then the Company must perform the second step in
order to determine the implied fair value of the goodwill and
compare it to the carrying value of the goodwill. If the
carrying value of goodwill exceeds its implied fair value, then
the Company must record an impairment loss equal to the
difference. The Company tested its goodwill for impairment
during the fourth quarter of 2004, the third quarter of 2004 (as
a result of its Chapter&nbsp;11 filing), the fourth quarter of
2003, the third quarter of 2002 (as a result of its prior
Chapter&nbsp;11 filing) and the second quarter of 2002 (in
connection with its transition to SFAS&nbsp;142). The Company
concluded in each test that fair value of the reporting unit was
in excess of the carrying value. In the third and fourth
quarters of 2004, the Company&#146;s cash flows were prepared on
a going-concern basis. Additionally, the carrying value of the
Company&#146;s net assets was less than zero. The Company
assessed the fair value of the reporting unit considering both
the income approach and market approach for 2003. Under the
market approach, the fair value of the reporting unit is based
on quoted market prices for US Airways Group common stock and
the number of shares outstanding of US Airways Group common
stock. Under the income approach, the fair value of the
reporting unit is based on the present value of estimated future
cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with fresh-start reporting upon emergence from the
Prior Bankruptcy, the Company recognized route authorities and
trademarks on its Consolidated Balance Sheets. As of
December&nbsp;31, 2004 and 2003, the Company had
$32&nbsp;million and $36&nbsp;million of route authorities on
the Consolidated Balance Sheets, respectively. The carrying
value of trademarks was $33&nbsp;million as of December&nbsp;31,
2004 and 2003. Route authorities and trademarks are classified
as indefinite lived assets under SFAS&nbsp;142. Indefinite-lived
assets are not amortized but instead are reviewed for impairment
annually and more frequently if events or circumstances indicate
that the asset may be impaired. In the second quarter of 2004,
the Company wrote off an indefinite lived foreign slot.
</DIV>

<P align="center" style="font-size: 10pt;">60

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SFAS&nbsp;142 requires that intangible assets with estimable
useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for
impairments in accordance with SFAS&nbsp;144. The following
table provides information relating to the Company&#146;s
intangible assets subject to amortization as of
December&nbsp;31, 2004 and 2003 (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cost</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>A/A</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cost</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>A/A</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Airport take-off and landing slots</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Airport gate leasehold rights</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capitalized software costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 8pt;">
A/ A=Accumulated Amortization
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The intangible assets subject to amortization generally are
amortized over 25&nbsp;years for airport take-off and landing
slots, over the term of the lease for airport gate leasehold
rights and over five years for capitalized software costs on a
straight-line basis and are included in Depreciation and
amortization on the Consolidated Statements of Operations. As a
result of the depressed revenue environment in the airline
industry, during the fourth quarter of 2002, the Company
conducted an impairment analysis of its airport take-off and
landing slots and airport gate leasehold rights and determined
that certain airport gate leasehold rights were impaired. The
Company estimated fair market value using third-party
appraisals. This culminated in an impairment charge of
$21&nbsp;million reflected in Special items on the Consolidated
Statement of Operations. For the year ended December&nbsp;31,
2004, the nine months ended December&nbsp;31, 2003, the three
months ended March&nbsp;31, 2003, and the year ended
December&nbsp;31, 2002, the Company recorded amortization
expense of $37&nbsp;million, $44&nbsp;million, $11&nbsp;million
and $51&nbsp;million (exclusive of the impairment charge
discussed above), respectively, related to its intangible
assets. The Company expects to record annual amortization
expense of $28&nbsp;million in 2005; $26&nbsp;million in 2006;
$24&nbsp;million in 2007; $22&nbsp;million in 2008 and
$21&nbsp;million in 2009 related to these intangible assets.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
    assets, net</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other assets, net consist primarily of deposits held by vendors,
unamortized debt issuance costs, and long-term investments.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Frequent
    traveler program</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways accrues the estimated incremental cost of travel
awards earned by participants in its Dividend Miles frequent
traveler program when the requisite mileage award levels are
achieved. For travel awards on partner airlines, the liability
is based on the average contractual amount to be paid to the
other airline per redemption. US Airways also sells mileage
credits to certain participating airlines and marketing
partners. US Airways defers the portion of revenue attributable
to future transportation and recognizes it as passenger
transportation revenue when the service is provided. The
remaining portion of sales proceeds is recognized immediately as
a component of Other operating revenues.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Derivative
    financial instruments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Statement of Financial Accounting Standards No.&nbsp;133,
&#147;Accounting for Derivative Instruments and Hedging
Activities&#148; (SFAS&nbsp;133) requires the Company to
recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the
nature of the hedge, changes in the fair value of derivatives
are either offset against the change in fair value of assets,
liabilities or firm commitments through earnings or recognized
in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a hedging
derivative&#146;s change in fair value is immediately recognized
in earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s results of operations can be significantly
impacted by changes in the price of aircraft fuel. To manage
this risk, the Company periodically enters into fixed price swap
agreements, collar structures and other similar instruments.
These agreements substantially fix the Company&#146;s cash flows
related to fuel expense. Because jet fuel derivatives are
significantly less liquid and relatively more expensive, the
Company
</DIV>

<P align="center" style="font-size: 10pt;">61

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<DIV align="left" style="font-size: 10pt;">
primarily uses heating oil and crude oil contracts to manage its
exposure to the movement of aircraft fuel prices. The changes in
the market value of the heating oil and crude oil contracts have
a high correlation to changes in aircraft fuel prices. The
agreements generally qualify as cash flow hedges under
SFAS&nbsp;133. The Company does not purchase or hold any
derivative financial instruments for trading purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company records the fair market value of its fuel hedge
contracts on its Consolidated Balance Sheets. On an ongoing
basis, the Company adjusts its balance sheet to reflect the
current fair market value of its fuel hedge contracts. The
related gains or losses on these contracts are deferred in
accumulated other comprehensive income until the hedged fuel is
recognized into earnings. However, to the extent that the
absolute change in the value of the fuel hedge contract exceeds
the absolute change in the value of the aircraft fuel purchase
being hedged, the difference is considered
&#147;ineffective&#148; and is immediately recognized in
earnings as either gain or loss. The amount recognized in
earnings may reverse in following periods if the relationship
reverses. The fuel hedge contracts&#146; gains and losses
including those classified as &#147;ineffective&#148; are
recognized to Aviation fuel on the Company&#146;s Consolidated
Statements of Operations, except for those related to hedging
purchases of aviation fuel under its capacity purchase
agreements, which are recorded to US Airways Express capacity
purchases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company holds stock options in Sabre Holding Corporation
(Sabre) and warrants in a number of e-commerce companies as a
result of service agreements with them. On an ongoing basis, the
Company adjusts its balance sheet to reflect changes in the
current fair market value of the stock options and warrants to
Other, net on its Consolidated Statements of Operations. See
Note&nbsp;3 for more information on the Company&#146;s
derivative financial instruments.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
    gains and credits, net</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with fresh-start reporting upon emergence from the
Prior Bankruptcy, aircraft operating leases were adjusted to
fair value. The present value of the difference between the
contractual lease rates and the fair market value rates was
recorded as a deferred credit in the accompanying Consolidated
Balance Sheet. The deferred credit is decreased on a
straight-line basis as a reduction in aircraft rent expense over
the applicable lease periods, generally three to 21&nbsp;years.
In periods prior to the adoption of fresh-start reporting, gains
on aircraft sale and leaseback transactions were deferred and
amortized over the terms of the leases as a reduction of the
related aircraft rent expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The gain related to the exercise of Sabre options is deferred
and amortized over the contract period as a reduction to Other
operating expenses. See Note&nbsp;3 for more information
concerning the Sabre options.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(l)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Passenger
    transportation revenues</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenue is recognized when the transportation service is
rendered. Passenger ticket sales are recorded as a liability
(Traffic balances payable and unused tickets) and subsequently
relieved either through carriage of the passenger, refund to the
passenger, expiration of the passenger ticket or billing from
another air carrier which provided the service. Due to various
factors including refunds, exchanges, unused tickets and
transactions involving other carriers, certain amounts are
recorded based on estimates. These estimates are based upon
historical experience and have been consistently applied to
record revenue. The Company routinely performs evaluations of
the liability, which may result in adjustments that are
recognized as a component of Passenger transportation revenue.
Actual refund, exchange and expiration activity may vary from
estimated amounts. Except when noted, such differences have
historically not been material. During the fourth quarter of
2003, a $34&nbsp;million favorable adjustment was made to
Passenger transportation revenue to reflect an increase in
expired tickets. This adjustment was attributable to the Company
experiencing changes in customer travel patterns resulting from
various factors, including new airport security measures,
concerns about further terrorist attacks and an uncertain
economy, which resulted in more forfeited tickets and fewer
refunds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways purchases capacity (available seat miles) generated
by Mesa Airlines, Inc. (Mesa), Chautauqua Airlines, Inc.
(Chautauqua) and Trans States Airlines, Inc. (Trans States) in
certain markets. US&nbsp;Airways also purchased the capacity of
Midway Airlines Corporation (Midway) prior to Midway&#146;s
liquidation during the fourth quarter of 2003. Mesa, Chautauqua
and Trans States operate regional jet aircraft
</DIV>

<P align="center" style="font-size: 10pt;">62

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<DIV align="left" style="font-size: 10pt;">
in these markets as part of US&nbsp;Airways Express. US Airways
recognizes revenues related to these arrangements as Passenger
transportation revenue when transportation service is rendered
by these affiliates or the related tickets otherwise expire.
Liabilities related to tickets sold for travel on these air
carriers are also included in US&nbsp;Airways&#146; Traffic
balances payable and unused tickets and are subsequently
relieved in the same manner as described above. See
Note&nbsp;2(i) above for information on the sale of Dividend
Miles that are recognized as a component of Passenger
transportation revenue.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(m)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based
    compensation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Predecessor Company applied the provisions of Accounting
Principles Board Opinion No.&nbsp;25, &#147;Accounting for Stock
Issued to Employees&#148; (APB&nbsp;25) and related
interpretations to account for awards of stock-based
compensation granted to employees. Upon emergence, the Successor
Company adopted the fair value method of recording stock-based
employee compensation contained in Statement of Financial
Accounting Standards No.&nbsp;123, &#147;Accounting for
Stock-Based Compensation&#148; (SFAS&nbsp;123) and accounted for
this change in accounting principle using the &#147;prospective
method&#148; as described by Statement of Financial Accounting
Standards No.&nbsp;148, &#147;Accounting for Stock-Based
Compensation&nbsp;&#151; Transition and Disclosure, an amendment
of FASB Statement No.&nbsp;123&#148; (SFAS&nbsp;148).
Accordingly, the fair value of all Successor Company stock
option and warrant grants, as determined on the date of grant,
will be amortized as compensation expense in the Consolidated
Statements of Operations over the vesting period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table illustrates the effect on net income (loss)
and net earnings (loss) per common share as if the fair value
based recognition provisions of SFAS&nbsp;123 had been applied
to all outstanding and unvested stock option awards in each
period presented for the Predecessor Company (in millions,
except per share data).
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss), as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,646</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Recorded stock-based compensation expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock-based compensation expense determined under the fair value
    based method</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss), pro forma</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,659</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss) per common share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic/ Diluted, as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic/ Diluted, pro forma</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(24.38</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to calculate the pro forma stock-based compensation
shown above, the Company used the Black-Scholes stock option
pricing model with the following weighted-average assumptions
for the year ended December&nbsp;31, 2002: stock volatility of
80.1%; risk-free interest rates of 4.2%; expected stock option
lives of four years; and no dividend yield. There were no stock
options awarded in the three months ended March&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
See Note&nbsp;9 for more information on stock-based compensation
and Note&nbsp;10 for more information on the Successor
Company&#146;s equity structure.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(n)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maintenance
    and repair costs</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Maintenance and repair costs for owned and leased flight
equipment are charged to operating expense as incurred. Prior to
2002, engine overhaul costs incurred by PSA were accrued on the
basis of hours flown. Effective January&nbsp;1, 2002, PSA
changed its method of accounting for engine overhaul costs from
accruing on the basis of hours flown to expensing as incurred.
While the former method was permitted under GAAP, the Company
believes the new method is preferable since an obligation does
not exist until the maintenance services have been performed.
The new method is the predominant method used in the airline
industry and is consistent with the method used by US Airways
and the Company&#146;s other subsidiaries. In connection with
the change, the Company recognized a $17&nbsp;million credit
representing the cumulative effect of the accounting change. The
effect of adopting the new method was immaterial to the
Company&#146;s net loss for 2002.
</DIV>

<P align="center" style="font-size: 10pt;">63

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(o)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling
    expenses</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Selling expenses include commissions, credit card fees,
computerized reservations systems fees and advertising and
promotional expenses. Advertising and promotional expenses are
expensed when incurred. Advertising and promotional expenses for
the year ended December&nbsp;31, 2004, the nine months ended
December&nbsp;31, 2003, the three months ended March&nbsp;31,
2003, and the year ended December&nbsp;31, 2002 were
$27&nbsp;million, $15&nbsp;million, $5&nbsp;million and
$30&nbsp;million, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(p)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Earnings
    (Loss) per Common Share</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Basic Earnings (Loss) per Common Share (EPS)&nbsp;is computed by
dividing net income (loss) by the weighted average number of
shares of common stock outstanding during the period. Diluted
EPS reflects the maximum dilution that would result after giving
effect to dilutive stock options, warrants, and non-vested
restricted stock. The number of additional shares is calculated
by assuming that outstanding, in-the-money stock options and
warrants were exercised and the proceeds from such exercises
were used to buy back shares of common stock at the average
market price for the reporting period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 2004, 21.3&nbsp;million
stock options, warrants, and non-vested restricted stock are not
included in the computation of diluted EPS because of the
anti-dilutive effect. For the nine months ended
December&nbsp;31, 2003, 3.4&nbsp;million incremental shares from
the assumed exercise of stock options and warrants and
non-vested restricted stock are not included in the computation
of diluted EPS because of the anti-dilutive effect on EPS. For
the three months ended March&nbsp;31, 2003, 19.0&nbsp;million
stock options are not included in the computation of diluted EPS
because the option price was greater than the average market
value of common stock for the period. For the year ended
December&nbsp;31, 2002, 16.3&nbsp;million stock options are not
included in the computation of diluted EPS because of the
anti-dilutive effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The earnings per share calculations for the Predecessor Company
are based on common shares outstanding prior to the
Company&#146;s emergence from the Prior Bankruptcy on
March&nbsp;31, 2003. Upon emergence, these shares were
cancelled. Earnings per share for the Successor Company is based
upon shares outstanding subsequent to emergence from the Prior
Bankruptcy. Accordingly, post-emergence earnings per share is
not comparable with pre-emergence amounts. See Note&nbsp;10 for
more information on the Successor Company&#146;s equity
structure.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(q)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recent
    Accounting Pronouncements</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September 2004, the Financial Accounting Standards Board
(FASB)&nbsp;issued FASB Staff Position (FSP)&nbsp;Emerging
Issues Task Force (EITF)&nbsp;Issue&nbsp;03-1-1, Effective Date
of Paragraphs&nbsp;10&#150;20 of EITF Issue No.&nbsp;03-1,
&#147;The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments,&#148; which delays the
effective date for the recognition and measurement guidance in
EITF Issue No.&nbsp;03-1. In addition, the FASB has issued a
proposed FSP to consider whether further application guidance is
necessary for securities analyzed for impairment under EITF
Issue No.&nbsp;03-1. The Company continues to assess the
potential impact that the adoption of the proposed FSP could
have on its financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the FASB issued Statement of Financial
Accounting Standards (SFAS)&nbsp;No.&nbsp;151, &#147;Inventory
Costs&#148; (SFAS&nbsp;151), which clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling
costs, and wasted material. SFAS&nbsp;151 will be effective for
inventory costs incurred beginning January&nbsp;1, 2006. The
Company does not believe the adoption of SFAS&nbsp;151 will have
a material impact on its financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;153,
&#147;Exchanges of Nonmonetary Assets&#148; (SFAS&nbsp;153),
which eliminates the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general
exception for exchanges of nonmonetary assets that do not have
commercial substance. SFAS&nbsp;153 will be effective for
nonmonetary asset exchanges occurring after July&nbsp;1, 2005.
The Company is currently evaluating the impact of SFAS&nbsp;153
on its financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued SFAS&nbsp;No.&nbsp;123(R),
&#147;Share-Based Payment&#148; (SFAS&nbsp;123(R)), which
establishes standards for transactions in which an entity
exchanges its equity instruments for goods or services. This
standard requires a public entity to measure the cost of
employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award.
This eliminates the
</DIV>

<P align="center" style="font-size: 10pt;">64

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<DIV align="left" style="font-size: 10pt;">
exception to account for such awards using the intrinsic method
previously allowable under Accounting Principle Board Opinion
No.&nbsp;25. SFAS&nbsp;123(R) will be effective for the
Company&#146;s interim reporting period beginning July&nbsp;1,
2005. The Company previously adopted the fair value recognition
provisions of SFAS&nbsp;123, &#147;Accounting for Stock-Based
Compensation,&#148; upon emergence from the Prior Bankruptcy on
March&nbsp;31, 2003. Accordingly, the Company believes
SFAS&nbsp;123(R) will not have a material impact on its
financial statements.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Financial Instruments</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;1, 1998, as part of a comprehensive information
technology services agreement with Sabre, US Airways was granted
two tranches of stock options (SHC Stock Options) to acquire up
to 6,000,000&nbsp;shares of Class&nbsp;A Common Stock,
$.01&nbsp;par value, of Sabre Holdings Corporation (SHC Common
Stock), Sabre&#146;s parent company. Each tranche included
3,000,000 stock options. In December 1999, US&nbsp;Airways
exercised the first tranche of stock options at an exercise
price of $27&nbsp;per option and received proceeds of
$81&nbsp;million in January 2000 in lieu of receiving SHC Common
Stock. Realized gains resulting from the exercise of Sabre
options are subject to a clawback provision. Under the clawback
provision, if US&nbsp;Airways elects to terminate its
information technology service agreement with Sabre it will be
required to pay Sabre an amount equal to the gain multiplied by
the ratio of the remaining months in the contract period over
180&nbsp;months. The deferred gain from the 1999 exercise is
amortized on a straight-line basis over a contractually
determined period ending December 2012. In February 2000, SHC
declared a cash dividend resulting in a dilution adjustment to
the terms of the second tranche. The adjusted terms of the
second tranche include stock options to acquire
3,406,914&nbsp;shares of SHC Common Stock at an exercise price
of $23.78 subject to an $111.83&nbsp;per share cap on the fair
market value of the underlying common stock. These options are
exercisable during a ten-year period beginning January&nbsp;2,
2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company utilizes fixed price swap agreements and other
similar instruments to manage its exposure related to jet fuel
price changes. For the year ended December&nbsp;31, 2004, the
nine months ended 2003, and the three months ended
March&nbsp;31, 2003, the Company recognized gains of
approximately $130&nbsp;million, $14&nbsp;million, and
$27&nbsp;million, respectively, related to its fuel hedging
activities. During the three months ended March&nbsp;31, 2003,
the gain included $4&nbsp;million related to hedge
ineffectiveness. During 2002, the Company recognized gains of
approximately $18&nbsp;million including a gain of
$1&nbsp;million related to hedge ineffectiveness. These
recognized gains were primarily included in Aviation fuel on the
Company&#146;s Consolidated Statements of Operations. As of
December&nbsp;31, 2004, the Company had no open fuel hedge
positions in place, but will recognize approximately
$2&nbsp;million per month for previously liquidated hedges
representing approximately 4% of its 2005 anticipated jet fuel
requirements. The Company had $22&nbsp;million of unrealized
gains related to fuel hedge positions recorded in Accumulated
other comprehensive loss, net of income tax effect on its
Consolidated Balance Sheet as of December&nbsp;31, 2004. These
gains will be realized in the 2005 results.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair
    value of financial instruments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with the provisions of SFAS&nbsp;115, the fair
values for US&nbsp;Airways&#146; short-term investments are
determined based upon quoted market prices. Cash equivalents and
restricted cash are carried at cost which approximates fair
value. US Airways estimated the fair values of its note
receivable and long-term debt by discounting expected future
cash flows using current rates offered to US Airways for notes
receivable and debt with similar maturities. The estimated fair
value of the remaining SHC Stock Options (including the clawback
provision) was calculated using the Black-Scholes stock option
pricing model. The fair values of the fuel contracts are
obtained from dealer quotes. These values represent the
estimated amount US Airways would receive or pay to terminate
such agreements as of the valuation date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways holds warrants in a number of e-commerce companies as
a result of entering into service agreements with them. The
carrying amount of the warrants is equal to the estimated fair
value, which is calculated using the Black-Scholes stock option
pricing model. The carrying amount of these warrants was not
material as of December&nbsp;31, 2004 and 2003.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The estimated fair values of US Airways&#146; financial
instruments, none of which are held for trading purposes, are
summarized as follows (in millions; brackets denote a liability):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31, 2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Carrying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Estimated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Carrying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Estimated</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>893</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term investments(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>358</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>553</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SHC Stock Options(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt (excludes capital lease obligations)(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,198</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(f</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,029</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,793</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fuel contracts(e)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    Classified as &#147;available for sale&#148; in accordance with
    SFAS&nbsp;115. See also Note&nbsp;2(c).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    Carrying amount included in Receivables, net on the
    Company&#146;s Consolidated Balance Sheets, except for the
    noncurrent portion ($3&nbsp;million at December&nbsp;31, 2003)
    which is included in Other assets, net.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Carrying amount included in Other assets, net on the
    Company&#146;s Consolidated Balance Sheets.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    Includes Long-term debt classified as subject to compromise as
    of December&nbsp;31, 2004. See also Notes&nbsp;1 and 4.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    Carrying amount included in Prepaid expenses and other on the
    Company&#146;s Consolidated Balance Sheets.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (f)</TD>
    <TD></TD>
    <TD valign="top">
    As a result of the Company&#146;s Chapter&nbsp;11 filing, the
    fair value of the debt outstanding could not be reasonably
    determined as of December&nbsp;31, 2004.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Debt, Including Capital Lease Obligations</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Details of the Company&#146;s debt are as follows (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior Debt:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment financing agreements, installments due 2005 to 2022(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,546</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ATSB Loan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>976</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GE Credit Facility, installments due 2005 to 2012(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>389</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GE Liquidity Facility, installments due 2010 to 2012(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>118</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GE Bridge Facility due 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,029</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;B mandatorily redeemable preferred stock(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,154</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Unamortized discount(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(150</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(164</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Obligations classified as subject to compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,454</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current maturities of debt and capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(721</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(360</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt and capital lease obligations, net of current
    maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,630</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    December&nbsp;31, 2004 obligations were classified as subject to
    compromise. See Note&nbsp;1 for further discussion.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    For the year ended December&nbsp;31, 2004 and the nine months
    ended December&nbsp;31, 2003, $20&nbsp;million and
    $15&nbsp;million of debt discount was amortized and included in
    interested expense on the Consolidated Statement of Operations.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Maturities of debt and debt under capital leases for the next
five years, including the classification of the ATSB Loan as
current and without regard to liabilities subject to compromise,
are as follows (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>863</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,868</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,325</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">66

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>ATSB Loan</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of its reorganization under the Prior Bankruptcy,
US&nbsp;Airways received a $900&nbsp;million loan guarantee
(ATSB Guarantee) under the Air Transportation Safety and System
Stabilization Act from the ATSB in connection with a
$1&nbsp;billion term loan financing (ATSB Loan) that was funded
on March&nbsp;31, 2003. The Company required this loan and
related guarantee in order to provide the additional liquidity
necessary to carry out its 2003 Plan. US&nbsp;Airways is the
primary obligor under the ATSB Loan, which is guaranteed by
US&nbsp;Airways Group and each of its other domestic
subsidiaries. The ATSB Loan is secured by substantially all of
the present and future assets of the Debtors not otherwise
encumbered (including certain cash and investment accounts,
previously unencumbered aircraft, aircraft engines, spare parts,
flight simulators, real property, takeoff and landing slots,
ground equipment and accounts receivable), other than certain
specified assets, including assets which are subject to other
financing agreements. As of December&nbsp;31, 2004,
$718&nbsp;million was outstanding under the ATSB Loan. The ATSB
Loan is reflected as a current liability on the accompanying
balance sheet at a book value of $701&nbsp;million, which is net
of $17&nbsp;million of unamortized discount, and is not subject
to compromise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The maturity date of the ATSB Loan is October&nbsp;1, 2009. The
ATSB Loan is subject to acceleration upon the occurrence of an
event of default, after expiration of applicable notice and/or
cure periods. The ATSB Loan contains certain mandatory
prepayment events including, among other things, (i)&nbsp;the
occurrence of certain asset sales and the issuance of certain
debt or equity securities and (ii)&nbsp;the value of the
collateral pledged in respect of the ATSB Loan decreasing below
specified coverage levels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s Chapter&nbsp;11 filing in September 2004, was
an event of default under the terms of the ATSB Loan. The
Company has entered into an agreement, which has been
subsequently extended, with the approval of the Bankruptcy
Court, for the continued use of the cash securing the ATSB Loan
(Cash Collateral Agreement). The initial agreement was extended
until January&nbsp;15, 2005 and the current agreement, subject
to certain conditions and limitations, will expire on
June&nbsp;30, 2005. Under the Cash Collateral Agreement, the
Company is required to maintain a certain amount of unrestricted
cash each week. The amount declines from approximately
$500&nbsp;million at the end of January to $341&nbsp;million on
June&nbsp;30, 2005, with weekly cash levels permitted as low as
$325&nbsp;million in March 2005. The Company must also maintain
and achieve certain cumulative earnings levels during the
period, as defined in the agreement. Further, the Company must
comply with restrictions on its ability to make capital
expenditures. As of December&nbsp;31, 2004, the Company was in
compliance with the Cash Collateral Agreement; therefore, the
Company&#146;s $738&nbsp;million in unrestricted cash and
short-term investments was available to support daily
operations, subject to certain conditions and limitations, under
the Cash Collateral Agreement. In light of rising fuel prices
and continued downward pressure on fares across the industry,
there can be no assurance that the Company will be able to
comply with the Cash Collateral Agreement. If the Company is
unable to meet the aforementioned financial covenants, as
amended, it would be in default under the ATSB Loan and the ATSB
would have the right to accelerate the ATSB Loan and exercise
other remedies against US&nbsp;Airways. Such acceleration would
have a material adverse effect on the Company&#146;s future
liquidity, results of operation and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ATSB Loan bears interest as follows:&nbsp;(i)&nbsp;90% of
the ATSB Loan (Tranche&nbsp;A) was funded through a
participating lender&#146;s commercial paper conduit program and
bears interest at a rate equal to the conduit provider&#146;s
weighted average cost related to the issuance of certain
commercial paper notes and other short-term borrowings plus
0.30%, and (ii)&nbsp;10% of the ATSB Loan (Tranche&nbsp;B) bears
interest at LIBOR plus 4.0%. In addition, US&nbsp;Airways is
charged an annual guarantee fee in respect of the ATSB Guarantee
currently equal to 4.1% of the ATSB&#146;s guaranteed amount
(initially $900&nbsp;million) under the ATSB Guarantee, with
such guarantee fee increasing by ten basis points annually. Due
to the Company&#146;s September 2004 bankruptcy filing and
subsequent loss of certain regional jet financing, the guarantee
fee increased by 2%&nbsp;per annum and the interest rate on
Tranche&nbsp;A and Tranche&nbsp;B each increased by an
additional 2% and 4%&nbsp;per annum, respectively, for an
effective increase in the interest rate on the loan balance of
4&nbsp;percentage points. The effective interest rate of the
ATSB Loan was 10.91% for the year ended December&nbsp;31, 2004
and 6.0% for the nine months ended December&nbsp;31, 2003.
</DIV>

<P align="center" style="font-size: 10pt;">67

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Prior Amendments to the ATSB Loan during 2004</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2004, US&nbsp;Airways and the ATSB amended the
financial covenants of the ATSB Loan to provide covenant relief
for the measurement periods beginning June&nbsp;30, 2004 through
December&nbsp;31, 2005. The ratios used in the financial
covenants were adjusted and reset to align with the
Company&#146;s forecast for 2004 and 2005 as of the date of the
amendment, which assumed a return to profitability by 2005. In
exchange for this covenant relief and other changes described
below, US&nbsp;Airways made a voluntary prepayment of
$250&nbsp;million on March&nbsp;12, 2004, which reduced, pro
rata, all future scheduled principal payments of the ATSB Loan
(rather than shortening the remaining life of the loan).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The March 2004 amendment permitted US&nbsp;Airways to retain, at
its election, up to 25% of the net cash proceeds from any asset
sale for which definitive documentation would be completed by
February&nbsp;28, 2005, up to a total of $125&nbsp;million for
all asset sales. In addition, the amendment permitted
US&nbsp;Airways to accept a third-party secured note as
consideration for certain asset sales (including the
US&nbsp;Airways Shuttle and wholly owned regional airline
assets) as long as specified conditions are met. These
conditions include: the note&#146;s amortization schedule will
be no more favorable than the ATSB Loan; proceeds from the note
will be used to prepay the ATSB Loan; the credit strength of the
ATSB Loan will not be adversely affected as measured by
specified ratings tests; and the note will be pledged as
collateral for the ATSB Loan. Finally, in consideration for the
lenders agreeing to amend the provision related to the going
concern paragraph in the independent auditor&#146;s report for
the Company&#146;s audited financial statements for the year
ended December&nbsp;31, 2003, US&nbsp;Airways agreed to revised
covenants relating to minimum required unrestricted cash
balances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective May&nbsp;21, 2004, US Airways again amended the ATSB
Loan to permit use of its regional jets financed by General
Electric&nbsp;(GE) as cross collateral for other obligations of
US&nbsp;Airways to GE. In consideration for this amendment,
US&nbsp;Airways agreed to revised covenants relating to minimum
required unrestricted cash balances. In addition,
US&nbsp;Airways agreed to give up the right to retain up to 25%
of the net cash proceeds from any asset sale, as had been
permitted by the March 2004 amendment. US&nbsp;Airways made a
prepayment of $5&nbsp;million in connection with this amendment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ATSB Loan contains financial covenants that must be
satisfied by US Airways at the end of each fiscal quarter.
US&nbsp;Airways was uncertain as to its ability to satisfy these
covenants as of June&nbsp;30, 2004. Effective June&nbsp;30,
2004, US&nbsp;Airways and the ATSB amended the ATSB Loan to
remove the uncertainty relating to the Company&#146;s ability to
satisfy its financial covenant tests for the second quarter of
2004. In consideration for this amendment, the Company agreed to
change the loan amortization schedule, by increasing each of the
first six principal repayment installments commencing on
October&nbsp;1, 2006 by approximately $16&nbsp;million, and
reducing the last principal repayment installment on
October&nbsp;1, 2009 by $94&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the ATSB Guarantee, the ATSB received
7,635,000&nbsp;warrants that enable it to purchase shares of
Reorganized US&nbsp;Airways Group&#146;s Class&nbsp;A Common
Stock at $7.42&nbsp;per share. The value attributed to the
warrants at issuance is being amortized over the term of the
warrants.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>General Electric</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
GE is the Company&#146;s largest creditor. Together with GEES
and other affiliates, GE directly financed or leased a
substantial portion of the Company&#146;s aircraft prior to the
current Chapter&nbsp;11 filing. In November 2001,
US&nbsp;Airways obtained a $404&nbsp;million credit facility
from GE (2001 GE Credit Facility). The 2001 GE Credit Facility
is secured by collateral including 11 A320-family aircraft and
28 spare engines. As discussed below, borrowings under the 2001
GE Credit Facility bear interest rates of LIBOR plus 3.5% and
the term of the facility is 2012.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the 2001 GE Credit Facility, GE has provided
financing or guarantees on 145 of the Company&#146;s current
operating aircraft. It also maintains the engines on the
Company&#146;s B737-family aircraft, A320-family aircraft, B767
aircraft, EMB-170 aircraft and CRJ-200 aircraft. In connection
with its Prior Bankruptcy, the Company reached a settlement with
GE that resolved substantially all aircraft, aircraft engine and
loan-related issues and the Company obtained additional
financing from GE in the form of a liquidity facility of up to
$360&nbsp;million (2003 GE Liquidity Facility). Borrowings under
the liquidity facility bear interest of LIBOR plus 4.25%. Every
obligation of the Company to GE is generally cross-defaulted to
the
</DIV>

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<DIV align="left" style="font-size: 10pt;">
2001 GE Credit Facility, the 2003 GE Liquidity Facility, the GE
regional jet leases and the GE regional jet mortgage financings.
All of the Company&#146;s obligations to GE are generally
cross-collateralized and cross-defaulted with all other
obligations owned by any Debtor to General Electric Credit
Corporation (GECC)&nbsp;or any of its affiliates (collectively,
the GE Obligations).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the Company reached a comprehensive agreement
with GE and its affiliates as described in the Master Memorandum
of Understanding (Master MOU) that was approved by the
Bankruptcy Court on December&nbsp;16, 2004. The Master MOU and
the transactions contemplated by the term sheets will provide
the Company with short-term liquidity, reduced debt, lower
aircraft ownership costs, enhanced engine maintenance services
and operating leases for new regional jets, while preserving the
vast majority of US&nbsp;Airways&#146; mainline fleet owned by
GECAS. The key aspects of the Master MOU are as follows:
(i)&nbsp;agreements providing for continued use by the Company
of certain Airbus, Boeing and regional jet aircraft, and the
return to GECC of certain other leased Airbus and Boeing
aircraft (the Aircraft Lease Term Sheet); (ii)&nbsp;GECC will
provide a bridge facility of up to approximately
$56&nbsp;million for use by the Debtors during the pendency of
the Chapter&nbsp;11 proceedings (the Bridge Facility Term
Sheet); (iii)&nbsp;GECC will purchase and immediately leaseback
to US Airways (a)&nbsp;the assets securing the 2001 GE Credit
Facility and the 2003 GE Liquidity Facility (collectively, the
2001 Credit Facility Assets), and other GE obligations,
consisting of 11 Airbus aircraft and 28 spare engines and engine
stands, and (b)&nbsp;ten regional jet aircraft currently debt
financed by GECC; (iv)&nbsp;the balance of the 2001 GE Credit
Facility will be restructured to provide additional liquidity of
approximately $10&nbsp;million, subject to the pledge of certain
collateral to secure the 2001 GE Credit Facility;
(v)&nbsp;subject to the Company&#146;s satisfaction of certain
financial tests and other conditions, GECC will provide lease
financing for up to 31 additional regional jet aircraft (the
Regional Jet Leasing Term Sheet); (vi)&nbsp;certain of
US&nbsp;Airways&#146; engine maintenance agreements with GEES
will be modified and assumed; and (viii)&nbsp;upon emergence
from bankruptcy, convertible notes of the reorganized
US&nbsp;Airways will be issued to GECC in the aggregate
principal amount of $125&nbsp;million (the Convertible
Note&nbsp;Term Sheet).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Bridge Facility Term Sheet provides for a loan facility of
up to $56&nbsp;million made available by GECC to the Debtors in
a series of drawdowns commencing on December&nbsp;20, 2004, and
ending on or before June&nbsp;30, 2005 (the Bridge Facility).
The Company and GECC entered into the Bridge Facility on
December&nbsp;20, 2004, at which time $20&nbsp;million was drawn
down under the facility. Interest on the Bridge Facility accrues
at the rate of LIBOR plus 4.25% and will be payable in cash or
in kind at the option of the Debtors. The Bridge Facility
matures on the date the Company emerges from Chapter&nbsp;11 and
will be satisfied by the issuance of Convertible Notes described
below. The Bridge Facility is cross-collateralized and
cross-defaulted with all other GE obligations owed by any Debtor
to GECC or any of its affiliates and will be granted status as
an administrative expense claim with priority over all other
administrative claims other than for aircraft financing
deferrals, which are pari passu, and subordinate only to
(i)&nbsp;the super-priority administrative expense claim of the
ATSB and the ATSB Lenders as defined and provided for in the
Cash Collateral Agreement (ii)&nbsp;postpetition wages and
benefits, and (iii)&nbsp;any other new money
debtor-in-possession financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2001 GE Credit Facility will be amended to, among other
things: (i)&nbsp;provide the Debtors with an additional
$10&nbsp;million of liquidity upon consummation of the
sale-leaseback of the 2001 GE Credit Facility Assets and CRJ
Mortgaged Assets (defined below), (ii)&nbsp;after the prepayment
of the loan balance outstanding under the 2001 GE Credit
Facility made in connection with the sale-leaseback of the 2001
GE Credit Facility Assets and CRJ Mortgaged Assets, as described
below, revise the amortization schedule so that the remaining
principal of the loan begins amortizing over a period of eight
quarters following the Debtors&#146; emergence from bankruptcy
(the Remaining Term), (iii)&nbsp;provide that the interest rate
will be LIBOR plus 4.25% for the Remaining Term, and
(iv)&nbsp;provide that the loan will be secured with a third
lien position on three CRJ-700 aircraft (subject to first and
second lien positions and conditioned upon consent of such
senior lien holders pursuant to an inter-creditor agreement
reasonably acceptable to GECC), a second lien position on one
CRJ-700 aircraft (subject to first lien position and conditioned
upon consent of such senior lien holders pursuant to an
inter-creditor agreement reasonably acceptable to GECC) and a
first lien position on one CF34 spare engine owned by
US&nbsp;Airways, with the aggregate of any senior liens on such
collateral not to exceed $62&nbsp;million. The amendments to the
2001 GE Credit Facility do not constitute an assumption thereof,
but it
</DIV>

<P align="center" style="font-size: 10pt;">69

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<DIV align="left" style="font-size: 10pt;">
is anticipated that in connection with a plan of reorganization,
the 2001 GE Credit Facility, as amended, will be reinstated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Aircraft Lease Term Sheet sets forth a comprehensive
agreement regarding the treatment of GECC-owned and mortgaged
aircraft pursuant to Section&nbsp;1110 of the Bankruptcy Code.
The Debtors and GECC have agreed to subject certain of such
aircraft to consensual Section&nbsp;1110(a) agreements providing
for continued use of such aircraft so long as the Company
complies with the terms of such agreements. In certain cases,
the Debtors and GECC have agreed to amend prepetition
agreements. Except as set forth in the Master MOU or the Term
Sheets attached to the Master MOU, the Section&nbsp;1110(a)
agreements and any related amendments will not constitute an
assumption of any related underlying agreements, and no such
agreement will constitute a postpetition contract for purposes
of, among other things, Sections&nbsp;365, 503 and 507 of the
Bankruptcy Code, but will be subject to the Debtors&#146;
obligations under Section&nbsp;1110 of the Bankruptcy Code.
After emergence from bankruptcy, US&nbsp;Airways will have an
option to restructure the monthly rental obligations of certain
additional B737-400 leases following the issuance of the
Convertible Notes described below, for cash or additional
convertible notes of equal market value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to the swap of three aircraft contemplated by the
Aircraft Lease Term Sheet, GECC will purchase the two A319
aircraft, the four A320 aircraft, the five A321 aircraft, the 14
CFM56-5B spare engines, the 14 CFM56-3B spare engines, and
certain engine stands that currently secure the 2001 GE Credit
Facility and the 2003 GE Liquidity Facility, together with the
nine CRJ-200s and one CRJ-700 aircraft currently mortgage-debt
financed by GECC (collectively, the CRJ Mortgaged Assets) for a
total purchase price of approximately $640&nbsp;million, subject
to adjustment, at which time the 2001 Credit Facility Assets and
the CRJ Mortgaged Assets will be leased back to US&nbsp;Airways
under operating leases having an initial lease term expiring on
the earlier of the Debtors&#146; emergence from Chapter&nbsp;11
or June&nbsp;30, 2005. The sale proceeds will be applied to
repay (in order) the 2003 GE Liquidity Facility in full, the
GECC mortgage-debt financed CRJ aircraft in full, and a portion
of the 2001 GE Credit Facility, leaving a balance thereon of
approximately $15&nbsp;million, subject to adjustment, before
the $10&nbsp;million additional drawdown on the 2001 GE Credit
Facility contemplated above. The operating leases may be
extended upon the Debtors&#146; emergence from bankruptcy, will
be cross-defaulted with all other GE Obligations (other than
certain excepted obligations), and will be subject to return
conditions to be agreed upon by the parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Debtors and the GE entities have reached an agreement with
respect to five engine repair and maintenance agreements, and
certain other matters. This agreement includes, among other
things, the agreement of US&nbsp;Airways to assume three of such
agreements of GEES and certain of its affiliates to:
(i)&nbsp;forgive and release US&nbsp;Airways from certain
prepetition obligations, (ii)&nbsp;defer certain payment
obligations arising under such agreements, (iii)&nbsp;extend one
maintenance agreement, (iv)&nbsp;continue certain existing
deferrals, and (v)&nbsp;determine the treatment of certain
removal charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Convertible Note&nbsp;Term Sheet, the Debtors
have agreed that upon emergence from Chapter&nbsp;11, as partial
consideration for entering into the Master MOU, an affiliate of
GECC will receive convertible notes of the reorganized
US&nbsp;Airways in the aggregate principal amount of
$125&nbsp;million (Convertible Notes). The Convertible Notes
will be convertible at any time, at the holders&#146; election,
into shares of common stock of the reorganized Company (New
Common Stock) at a conversion price equal to the product of
(x)&nbsp;140%-150% (at US&nbsp;Airways&#146; option) and
(y)&nbsp;the average closing price of the New Common Stock for
the sixty consecutive trading days following US Airways&#146;
emergence from bankruptcy and the listing of the New Common
Stock on the NASDAQ Stock Market or a national stock exchange.
The Convertible Notes will bear interest at a rate to be
determined no later than thirty days prior to the Debtors&#146;
scheduled date of emergence from bankruptcy and interest will be
payable semi-annually, in arrears, and will mature in 2020.
US&nbsp;Airways will be permitted to redeem some or all of the
Convertible Notes at any time on or after the fifth anniversary
of the issuance of such notes, at a redemption price payable in
cash or, subject to certain conditions, New Common Stock.
Holders of the Convertible Notes may require US&nbsp;Airways to
repurchase all or a portion of their Convertible Notes on the
fifth and tenth anniversary of the issuance of such notes at
100% of the principal amount of the Convertible Notes, plus
accrued and unpaid interest to the date of repurchase, payable,
at US&nbsp;Airways election, in cash or New Common Stock. The
Convertible Notes will be senior unsecured obligations and will
rank equally in right of payment with all existing and future
</DIV>

<P align="center" style="font-size: 10pt;">70

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<DIV align="left" style="font-size: 10pt;">
unsecured senior obligations of the reorganized US&nbsp;Airways.
The Convertible Notes will be guaranteed by the parent holding
company of the reorganized US&nbsp;Airways.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest rates on $1.63&nbsp;billion and $1.53&nbsp;billion
principal amount of debt as of December&nbsp;31, 2004 and 2003,
respectively, are subject to adjustment to reflect changes in
floating interest rates. As of December&nbsp;31, 2004, the
weighted average effective interest rate was 7.9% for the
Equipment financing agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Class&nbsp;B Preferred Stock issued to RSA is subject to
mandatory redemption on its maturity date of March&nbsp;31, 2011
and is therefore classified as debt. Upon its maturity, the
Company will be required to redeem each share for $1,000, or
$75&nbsp;million in aggregate, plus accrued and unpaid
dividends. The Class&nbsp;B Preferred Stock holders are entitled
to cumulative quarterly dividends at a rate of 8%&nbsp;per annum
paid in cash by the Company. After March&nbsp;31, 2006, the
Company may redeem for cash each Class&nbsp;B Preferred Share at
a redemption price initially equal to $1,025 declining ratably
to par value through March&nbsp;31, 2010, plus accrued and
unpaid dividends. The carrying value of the Class&nbsp;B
Preferred Stock as of December&nbsp;31, 2004 and 2003, was
$54&nbsp;million and $49&nbsp;million, net of unamortized
discount of $24&nbsp;million and $26&nbsp;million, respectively.
See Note&nbsp;12 for further discussion of dividend payments.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Employee Pension and Benefit Plans</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Substantially all of the Company&#146;s employees meeting
certain service and other requirements are eligible to
participate in various pension, medical, dental, life insurance,
disability and survivorship plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Defined
benefit and other postretirement benefit plans</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company sponsors several qualified defined benefit plans and
other postretirement benefit plans for certain employees.
Effective March&nbsp;31, 2003, US&nbsp;Airways terminated its
qualified and nonqualified pilot defined benefit pension plans.
The PBGC was appointed trustee of the qualified plan effective
with the termination. Liabilities related to pension plans
covering foreign employees are calculated in accordance with
generally accepted accounting principles and funded in
accordance with the laws of the individual country.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;12, 2004, US&nbsp;Airways filed a motion
requesting a determination from the Bankruptcy Court that
US&nbsp;Airways satisfied the financial requirements for a
&#147;distress termination&#148; of the Retirement Plan for
Flight Attendants in the Service of US&nbsp;Airways, Inc. (AFA
Plan), the Pension Plan for Employees of US&nbsp;Airways, Inc.
Who Are Represented by the International Association of
Machinists and Aerospace Workers (IAM Plan), and the Retirement
Plan for Certain Employees of US&nbsp;Airways, Inc.
(CE&nbsp;Plan) under section&nbsp;4041(c)(2)(B)(ii)(IV) of the
Employee Retirement Income Security Act of 1974, as amended
(ERISA), and approval of each such plan&#146;s termination.
These plans were projected to have benefit obligations and plan
assets aggregating $2.7&nbsp;billion and $1.7&nbsp;billion,
respectively, as of September&nbsp;30, 2004, the most recent
valuation date. On January&nbsp;6, 2005, the Bankruptcy Court
entered an order (i)&nbsp;finding that the financial
requirements under section&nbsp;4041(c)(2)(B)(ii)(IV) of ERISA
for a distress termination of the plans had been met and
(ii)&nbsp;approving termination of the plans. The AFA Plan and
the IAM Plan were terminated effective January&nbsp;10, 2005, by
agreement between the Pension Benefit Guaranty Corporation
(PBGC)&nbsp;and US&nbsp;Airways. The CE&nbsp;Plan was terminated
effective January&nbsp;17, 2005, by agreement between the PBGC
and US&nbsp;Airways. Effective February&nbsp;1, 2005, the PBGC
was appointed trustee for each of the three plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During hearings in late 2004 and January 2005, the Bankruptcy
Court approved various settlement agreements between
US&nbsp;Airways and its unions, and between US&nbsp;Airways and
the court-appointed Section&nbsp;1114 Committee (representing
retirees not represented by the unions) to begin the significant
curtailments of postretirement benefits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2003, the Medicare Prescription Drug, Improvement
and Modernization Act of 2003 (the Medicare Prescription Drug
Act) became law in the United States. The Medicare Prescription
Drug Act introduces a prescription drug benefit under Medicare
as well as a federal subsidy to sponsors of retiree health care
benefit plans that provide a benefit that is at least
actuarially equivalent to the Medicare benefit. The Company
elected to recognize the effects of the Medicare Prescription
Drug Act in the quarter ended June&nbsp;30, 2004, as permitted
by FASB Staff Position FAS&nbsp;106-2, &#147;Accounting and
Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003.&#148;
</DIV>

<P align="center" style="font-size: 10pt;">71

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The recognition of this subsidy resulted in a reduction in
expense of $20&nbsp;million for the year ended December&nbsp;31,
2004 and a $198&nbsp;million actuarial gain that will be
amortized over the remaining period to expected retirement.
Significant assumptions included in the re-measurement of the
accumulated postretirement benefit obligation are a 6.25%
discount rate and a reduction in retiree participation in the
Company-sponsored plan as certain defined drug benefit caps make
the plan more costly to retirees than Medicare.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth changes in the fair value of plan
assets, benefit obligations and the funded status of the plans
as of the measurement date of September&nbsp;30, 2004 and 2003,
in addition to the amounts recognized in the Company&#146;s
Consolidated Balance Sheets as of December&nbsp;31, 2004,
December&nbsp;31, 2003 and March&nbsp;31, 2003 (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Defined Benefit Pension Plans(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Other Postretirement Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Mar.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Mar.&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of plan assets at the beginning of the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actual return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employer contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Plan participants&#146; contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(125</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(136</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(67</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Settlement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,223</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of plan assets at the end of the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation at the beginning of the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,693</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Plan participants&#146; contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Plan amendments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(94</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(168</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actuarial (gain)&nbsp;loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(361</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Curtailment/settlement(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,270</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(125</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(136</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(67</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation at the end of the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,644</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Funded status of the plan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(999</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(922</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(814</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,369</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,654</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,644</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized actuarial (gain)/ loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(329</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized prior service cost (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(71</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(84</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contributions for October to December</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net liability recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(898</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(864</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(814</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,754</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,701</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,644</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Components of the amounts recognized in the Company&#146;s
Consolidated Balance Sheets (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Defined Benefit Pension Plans(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Other Postretirement Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Mar.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Mar.&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued benefit cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(898</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(864</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(814</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,754</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,701</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,644</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustment for minimum pension liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(120</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net amount recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(898</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(864</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(814</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,754</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,701</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,644</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">72

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    For plans with accumulated benefit obligations in excess of plan
    assets, the aggregate projected benefit obligations, accumulated
    benefit obligations and plan assets were $2.75&nbsp;billion,
    $2.72&nbsp;billion and $1.75&nbsp;billion, respectively, as of
    September&nbsp;30, 2004 and $2.59&nbsp;billion,
    $2.57&nbsp;billion and $1.67&nbsp;billion, respectively, as of
    September&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    In 2003, US&nbsp;Airways recognized curtailments and settlements
    related to the termination of certain defined benefit pension
    plans. These curtailments and settlements were recognized in
    accordance with Statement of Financial Accounting Standards
    No.&nbsp;88, &#147;Employers&#146; Accounting for Settlements
    and Curtailments of Defined Benefit Pension Plans and for
    Termination Benefits.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The accumulated benefit obligation for defined benefit pension
plans was $2.72&nbsp;billion and $2.57&nbsp;billion as of
September&nbsp;30, 2004 and 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents the weighted average assumptions
used to determine benefit obligations:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Defined Benefit Pension Plans</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Other Postretirement Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Mar.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Mar.&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rate of compensation increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.74</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company discounted both its future pension obligations and
its other postretirement benefit obligations using a rate of
6.00% at September&nbsp;30, 2004 and 2003. The assumed discount
rate is based on the current rates earned on long-term bonds
that receive one of the two highest ratings given by a
recognized rating agency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The assumed health care cost trend rates are 9% in 2005 and
2006, decreasing to 5% in 2010, and thereafter. This compares to
a health care cost trend rate of 9% in 2004 decreasing to 5% in
2009 and thereafter. The assumed health care cost trend rates
have a significant effect on amounts reported for retiree health
care plans. A one-percentage point change in the health care
cost trend rates would have the following effects on Other
Postretirement Benefits as of September&nbsp;30, 2004 (in
millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1% Increase</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1% Decrease</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect on total service and interest costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect on postretirement benefit obligation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(338</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Weighted average assumptions used to determine net periodic
benefit cost were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Defined Benefit Pension Plans</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Other Postretirement Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Months</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Mar.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Mar.&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.19</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.01</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.01</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rate of compensation increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.74</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.42</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.22</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">73

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Components of the net and total periodic cost for Pension
Benefits (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Mar.&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31, 2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>194</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(132</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(91</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(70</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transition asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actuarial (gain)/loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>326</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fresh start charge</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Curtailment/settlement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,391</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total periodic cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(337</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>368</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Components of the net and total periodic cost for Other
Postretirement Benefits (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended Dec.&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Mar.&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dec.&nbsp;31, 2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actuarial (gain)/loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fresh start charge</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Curtailment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(120</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total periodic cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The change in the additional minimum pension liability included
in Other comprehensive income (loss) was $(34)&nbsp;million,
$(86)&nbsp;million, and $880&nbsp;million for the year ended
December&nbsp;31, 2004, the nine months ended December&nbsp;31,
2003, and the three months ended March&nbsp;31, 2003,
respectively. See Note&nbsp;8 for a reconciliation of the
components of Other comprehensive income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because US Airways does not expect to make further contributions
to the three defined benefit pension plans, future contributions
to the remaining plans are expected to be immaterial. The
Company expects to contribute $63&nbsp;million to its other
postretirement plans in 2005. Prior to the termination of the
three US Airways defined benefit plans in January 2005, the
following benefits, which reflect expected future service, as
appropriate, were expected to be paid from the plans (in
millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Postretirement</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Defined Benefit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Benefits before</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pension Plans</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Medicare Subsidy</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Medicare Subsidy</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2010 to 2014</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company assumed that its pension plans&#146; assets would
generate a long-term rate of return of 7.36% at
September&nbsp;30, 2004. This rate is lower than the assumed
rate of 8.01% used at September&nbsp;30, 2003. The expected
long-term rate of return assumption is developed by evaluating
input from the plan&#146;s investment consultants, including
their review of asset class return expectations and long-term
inflation assumptions.
</DIV>

<P align="center" style="font-size: 10pt;">74

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The weighted average asset allocations as of September&nbsp;30,
2004 and 2003, by asset category are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Plan Assets</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Real estate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s targeted asset allocation is approximately
46% equity securities, 45% debt securities, and 9% real estate.
The Company believes that its long-term asset allocation on
average will approximate the targeted allocation. The Company
regularly reviews its actual asset allocation and periodically
rebalances its investments to its targeted allocation when
considered appropriate.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Defined contribution pension plans</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company sponsors several defined contribution pension plans
for certain employees. The Company makes cash contributions to
certain plans based on the employee&#146;s age, compensation and
elected contributions. The Company also participates in a
multi-employer plan for certain employees. Cash contributions
are a function of hours worked times a negotiated contribution
rate. Prior to the reductions implemented in connection with its
restructured labor agreements and non-union wage and benefits
reductions in late 2004, the Company&#146;s contributions ranged
up to 12% of the employee&#146;s compensation. Expenses related
to these plans, excluding expenses related to the
US&nbsp;Airways Employee Stock Ownership Plan (ESOP)&nbsp;and
the US&nbsp;Airways pilot defined contribution plans (see
below), were approximately $52&nbsp;million, $40&nbsp;million,
$12&nbsp;million, and $67&nbsp;million for year ended
December&nbsp;31, 2004, the nine months ended December&nbsp;31,
2003, the three months ended March&nbsp;31, 2003 and the year
ended December&nbsp;31, 2002, respectively. See Note&nbsp;5(d)
for information related to the Company&#146;s ESOP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with its previous reorganization under
Chapter&nbsp;11 of the Bankruptcy Code, the Company terminated
the Retirement Income Plan for Pilots of US&nbsp;Airways, Inc.
(Pilot Retirement Plan) and the related nonqualified pilot plan
effective March&nbsp;31, 2003. The Company implemented a
qualified and nonqualified defined contribution plan for pilots
effective April&nbsp;1, 2003. The defined contribution amount
was individually determined based on a target normal retirement
date balance of approximately $1&nbsp;million for a career
US&nbsp;Airways pilot. The target balance included the estimated
value of other retirement benefits including, but not limited
to, the estimated benefit pilots are expected to receive from
the PBGC, the trustee for the terminated pilot defined benefit
plan. Effective October&nbsp;15, 2004, each pilot&#146;s
contribution rate became the lessor of the original rate or 10%
of eligible compensation. Expenses for this plan were
$134&nbsp;million for each of the year ended December&nbsp;31,
2004 and the nine months ended December&nbsp;31, 2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</B></TD>
    <TD>
    <B>Postemployment benefits</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company provides certain postemployment benefits to its
employees. Such benefits include disability-related and
workers&#146; compensation benefits and severance payments for
certain employees (See Note&nbsp;16, Unusual Items). The Company
accrues for the cost of such benefit expenses once an
appropriate triggering event has occurred.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</B></TD>
    <TD>
    <B>Employee stock ownership plan (ESOP)</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 1989, US Airways established an ESOP. US&nbsp;Airways
Group sold 2,200,000&nbsp;shares of its common stock to an
Employee Stock Ownership Trust (the Trust) to hold on behalf of
US Airways&#146; employees, exclusive of officers, in accordance
with the terms of the Trust and the ESOP. The trustee placed
those shares in a suspense account pending their release and
allocation to employees. US Airways provided financing to the
Trust in the form of a
9<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%
loan for $111&nbsp;million for its purchase of shares and US
Airways contributed an additional $2&nbsp;million to the Trust.
US Airways made a yearly contribution to the Trust sufficient to
cover the Trust&#146;s debt service requirement. The
contributions were made in amounts equal to the
</DIV>

<P align="center" style="font-size: 10pt;">75

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
periodic loan payments as they came due, less dividends
available for loan payment. Since US Airways Group did not pay
dividends on any shares held by the Trust for the three months
ended March&nbsp;31, 2003 or the year ended December&nbsp;31,
2002, the Trust did not utilize dividends to service its debt
during those periods. The initial maturity of the loan was
30&nbsp;years. As the loan was repaid over time, the trustee
systematically released shares of the common stock from the
suspense account and allocated them to participating employees.
Each participant&#146;s allocation was based on the
participant&#146;s compensation, the total compensation of all
ESOP participants and the total number of shares being released.
For each year after 1989, a minimum of 71,933&nbsp;shares were
released from the suspense account and allocated to participant
accounts. Annual contributions made by US Airways, and therefore
loan repayments made by the Trust, were $9&nbsp;million in 2003
and 2002. The interest portion of these contributions was
$7&nbsp;million in 2003 and 2002. US Airways recognized
compensation expense related to the ESOP of $4&nbsp;million in
2002 based on shares allocated to employees (the &#147;shares
allocated&#148; method). In June 2002, US Airways Group engaged
Aon Fiduciary Counselors (Aon) as an independent fiduciary of
the ESOP, with the authority to make all decisions related to
sale of the stock held in the ESOP. In September 2002, Aon sold
all shares that were allocated to participant accounts. All
unallocated shares in the ESOP were cancelled in accordance with
the Company&#146;s 2003 Plan. As a result, the Company
recognized a charge of $50&nbsp;million in 2002 representing the
remaining unamortized deferred compensation to Reorganization
items, net on the Company&#146;s Consolidated Statement of
Operations. Effective March&nbsp;31, 2003, the ESOP was
terminated as provided in the 2003 Plan. The note payable to US
Airways was cancelled under the provisions of the 2003 Plan.
Participant accounts were distributed by December&nbsp;31, 2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</B></TD>
    <TD>
    <B>Profit sharing plans</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the Defined Contribution Retirement Program, US Airways
makes additional contributions to participant accounts for
certain employees when US Airways Group achieves certain
prescribed pre-tax margin levels. US Airways did not make any
profit sharing contributions relating to 2004, 2003 or 2002.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company accounts for income taxes according to the
provisions of Statement of Financial Accounting Standards
No.&nbsp;109, &#147;Accounting for Income Taxes.&#148; The
Company files a consolidated federal income tax return with its
wholly owned subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In assessing the realizability of the deferred tax assets,
management considers whether it is more likely than not that
some portion or all of the deferred tax assets will be realized.
The Company recorded a valuation allowance against its net
deferred tax asset. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income
(including reversals of deferred tax liabilities) during the
periods in which those temporary differences will become
deductible.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The components of the Company&#146;s provision (credit) for
income taxes are as follows (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Three Months</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>March&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current provision:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(252</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(252</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred provision:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total deferred</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision (credit)&nbsp;for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(252</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">76

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The significant components of the deferred income tax provision
(credit)&nbsp;for the year ended December&nbsp;31, 2004, the
nine months ended December&nbsp;31, 2003, the three months ended
March&nbsp;31, 2003 and the year ended December&nbsp;31, 2002
are as follows (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax provision (exclusive of the other components listed
    below)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(237</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(417</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in the valuation allowance for deferred tax
    assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(412</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(356</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>417</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A reconciliation of taxes computed at the statutory federal tax
rate on income (loss) before income taxes to the provision
(credit)&nbsp;for income taxes is provided below (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax provision (credit)&nbsp;computed at federal statutory rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(217</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(57</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(670</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Book expenses not deductible for tax purposes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(203</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State income tax provision, net of federal benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in the federal valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(307</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(370</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>371</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reduction in net operating losses from discharge of indebtedness</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expiration of investment and foreign tax credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision (credit)&nbsp;for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(252</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effective tax rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities
as of December&nbsp;31, 2004 and 2003 are as follows (in
millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employee benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,141</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net operating loss carryforwards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>184</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AMT credit carryforward</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Leasing transactions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal general business and foreign tax credit carryforwards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(825</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(592</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>806</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>654</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sale and leaseback transactions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other deferred tax liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total deferred tax liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>809</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred tax liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: current deferred tax liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncurrent deferred tax liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Included in the employee benefit deferred tax assets at
December&nbsp;31, 2004 and 2003, among other items, are
$662&nbsp;million and $632&nbsp;million, respectively, related
to obligations of postretirement medical benefits.
</DIV>

<P align="center" style="font-size: 10pt;">77

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, the Company had a
$780&nbsp;million federal net operating loss carryforward
expiring in 2024, $24&nbsp;million of alternative minimum tax
credits which do not expire, and $1.8&nbsp;billion of state net
operating loss carryforwards primarily expiring from 2006 to
2024. The Company filed for bankruptcy protection on
September&nbsp;12, 2004. As a result, the tax attributes are
expected to be substantially reduced or eliminated by
cancellation of debt income that will result from the bankruptcy
proceedings. Additionally, the Company may have a change in
ownership upon emergence from bankruptcy, in which case Internal
Revenue Code Section&nbsp;382 would substantially limit the
annual usage of any remaining tax attributes that were generated
prior to the change in ownership.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2003, the federal and state net operating
loss carryforwards were reduced by discharge of indebtedness
income of $1.2&nbsp;billion that resulted from the August 2002
bankruptcy proceedings. In addition, an Internal Revenue Code
Section&nbsp;382 change in ownership occurred upon emergence
from the Prior Bankruptcy and issuance of new common stock to
creditors. Section&nbsp;382 substantially limited the annual
usage of the tax attributes that were generated prior to the
change in ownership.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The federal income tax returns of the Company through 2002 have
been examined and settled with the Internal Revenue Service. The
Company is not currently under examination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table is a summary of pretax book income and
taxable income prior to net operating loss carryforwards for the
year ended December&nbsp;31, 2004, the nine months ended
December&nbsp;31, 2003, the three months ended March&nbsp;31,
2003 and the year ended December&nbsp;31, 2002 (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pretax book income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(621</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(163</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,915</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Taxable income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(561</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,102</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The reasons for significant differences between taxable income
and pretax book income primarily relate to discharge of
indebtedness income, bankruptcy-related charges, employee
pension and postretirement benefit costs, employee-related
accruals and leasing transactions.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Commitments and Contingencies</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>Commitments to purchase flight equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, US Airways Group had 19
A320-family aircraft on firm order scheduled for delivery in the
years 2007 through 2009. US Airways Group also had ten A330-200
aircraft on firm order scheduled for delivery in the years 2007
through 2009. On February&nbsp;3, 2005, the Bankruptcy Court
approved the Company&#146;s agreement with Airbus providing for,
among other things, delivery of the 19 A320-family aircraft in
years 2008 through 2010 and delivery of the ten A330-200
aircraft in years 2008 through 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the Company reached aircraft leasing and
financing agreements with Embraer and Bombardier, which were
approved by the Bankruptcy Court in January 2005. Pursuant to
the agreement reached with Embraer, the Company purchased and
took delivery of three ERJ-170 aircraft in January 2005 and
committed to purchase and take delivery of three additional
ERJ-170 aircraft by March&nbsp;31, 2005. The purchase of the
three ERJ-170s delivered in January 2005 was financed by Embraer
through a mortgage loan facility and the application of
$17&nbsp;million of existing purchase deposits held by Embraer.
Additionally, $12&nbsp;million of purchase deposits held by
Embraer will be used to fund an Embraer loan reserve. Embraer
will apply the reserve funds in the amounts and on the dates as
and when payments are due under the Embraer loans during the
period from October&nbsp;1, 2004 through July&nbsp;31, 2005 in
full satisfaction of the Company&#146;s payment obligation with
respect to such Embraer loans during such period. Upon delivery
of the first three ERJ-170s, which occurred in January 2005,
unless the Company assumes the Embraer aircraft purchase
agreement pursuant to Section&nbsp;365 of the Bankruptcy Code,
no further obligations arise on the part of the Company or
Embraer with respect to the purchase and delivery of any
aircraft, other than those obligations that arise from or are
related to the purchase and delivery of the final three ERJ-170s
in March
</DIV>

<P align="center" style="font-size: 10pt;">78

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
2005. Embraer and the Company have agreed to negotiate a new
delivery schedule upon the Company&#146;s assumption of the
Embraer aircraft purchase agreement or upon the occurrence of
certain other events.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that the Company fails to take delivery by
March&nbsp;31, 2005 of the remaining three ERJ-170 aircraft ,
damages will accrue on account of the Company&#146;s failure to
take delivery of such aircraft from and after April&nbsp;1, 2005
at the rate of $162,795&nbsp;per month per aircraft until the
later of (i)&nbsp;30&nbsp;days after the Company emerges from
Chapter&nbsp;11 and (ii)&nbsp;July&nbsp;31, 2005, whereupon
Embraer&#146;s obligation to deliver such aircraft will
terminate and its damages with respect to such undelivered
aircraft may be as much as $10&nbsp;million (rather than at the
rate of $162,795&nbsp;per month), with Embraer having the right
to apply any remaining purchase deposits against Embraer&#146;s
aggregate damages.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the agreement reached with Bombardier, the Company
acquired three new CRJ-700 aircraft in January 2005. The
purchase was financed through the application of
$28&nbsp;million of existing purchase deposits held by
Bombardier, $2&nbsp;million in cash and a financed lease
facility with DVB Bank. Additionally $4&nbsp;million of existing
purchase deposits held by Bombardier were used to satisfy
existing defaults and cure payments. So long as the Company
continues to operate under the protection of Chapter&nbsp;11 in
compliance with the Bankruptcy Code, no obligations shall arise
on the part of the Company or Bombardier with respect to the
purchase and delivery of any aircraft.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Leases</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s airline subsidiaries lease certain aircraft,
engines and ground equipment, in addition to the majority of
their ground facilities. Ground facilities include executive
offices, maintenance facilities and ticket and administrative
offices. Public airports are utilized for flight operations
under lease arrangements with the municipalities or agencies
owning or controlling such airports. Substantially all leases
provide that the lessee must pay taxes, maintenance, insurance
and certain other operating expenses applicable to the leased
property. Some leases also include renewal and purchase options.
The Company subleases certain leased aircraft and ground
facilities under noncancelable operating leases expiring in
various years through the year 2023.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following amounts related to capital leases are included in
Property and equipment as of December&nbsp;31, 2004 and 2003 (in
millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ground property</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Net Book Value of Capital Leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, obligations under capital and
noncancelable operating leases for future minimum lease payments
were as follows (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital Leases</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Operating Leases</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>878</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>774</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>707</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>629</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>554</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,169</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total minimum lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,711</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less sublease rental receipts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total minimum operating lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,707</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less amount representing interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(80</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Present value of future minimum capital lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less current obligations under capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term obligations under capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">79

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 2004, the nine months ended
December&nbsp;31, 2003, the three months ended March&nbsp;31,
2003 and the year ended December&nbsp;31, 2002, rental expense
under operating leases was $793&nbsp;million, $591&nbsp;million,
$194&nbsp;million, and $861&nbsp;million, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s airline subsidiaries also lease certain owned
flight equipment to third parties under noncancelable operating
leases that expire in 2006. The future minimum rental receipts
associated with these leases are $3&nbsp;million in 2005 and
$1&nbsp;million in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following amounts relate to aircraft leased under such
agreements as reflected in flight equipment as of
December&nbsp;31, 2004 and 2003 (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Flight equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</B></TD>
    <TD>
    <B>Regional jet capacity purchase agreements</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways has entered into capacity purchase agreements
with certain regional jet operators. The capacity purchase
agreements provide that all revenues (passenger, mail and
freight) go to US&nbsp;Airways. In return, US&nbsp;Airways
agrees to pay predetermined fees to the regional airlines for
operating an agreed number of aircraft, without regard to the
number of passengers onboard. In addition, these agreements
provide that certain variable costs, such as fuel and airport
landing fees, will be reimbursed 100% by US&nbsp;Airways.
US&nbsp;Airways controls marketing, scheduling, ticketing,
pricing and seat inventories. The regional jet capacity purchase
agreements have expirations from 2008 to 2013 and provide for
optional extensions at the Company&#146;s discretion. The future
minimum noncancelable commitments under the regional jet
capacity purchase agreements are $257&nbsp;million in 2005,
$262&nbsp;million in 2006, $268&nbsp;million in 2007 and
$266&nbsp;million in 2008, $202&nbsp;million in 2009 and
$266&nbsp;million thereafter.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</B></TD>
    <TD>
    <B>Legal Proceedings</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;12, 2004, US&nbsp;Airways Group and its
domestic subsidiaries, including its principal operating
subsidiary, US&nbsp;Airways, filed voluntary petitions for
relief under Chapter&nbsp;11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the Eastern
District of Virginia, Alexandria Division (Case Nos.
04-13819-SSM through 03-13823-SSM). Each of the Debtors
continues to operate its business and manage its property as a
debtor-in-possession pursuant to Sections&nbsp;1107 and 1108 of
the Bankruptcy Code. As a result of the current Chapter&nbsp;11
filing, attempts to collect, secure or enforce remedies with
respect to prepetition claims against the Debtors are subject to
the automatic stay provisions of Section&nbsp;362(a) of the
Bankruptcy Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;26, 2004, a company called I.A.P. Intermodal,
LLC filed suit against US&nbsp;Airways Group and its wholly
owned airline subsidiaries in the United States District Court
for the Eastern District of Texas alleging that the defendants
infringed upon three patents held by plaintiffs, all of which
patents are entitled, &#147;Method to Schedule a Vehicle in
Real-Time to Transport Freight and Passengers.&#148; Plaintiff
seeks various injunctive relief as well as costs, fees and
treble damages. US&nbsp;Airways Group and the subsidiaries were
formally served with the complaint on June&nbsp;21, 2004.
US&nbsp;Airways Group is unable to ascertain at this time the
likelihood or potential scale of liability. It should be noted
that on the same date, the same plaintiff filed what the Company
believes to be substantially similar cases against nine other
major airlines, including British Airways, Northwest Airlines
Corporation (Northwest), Korean Airlines Co., Ltd., Deutsche
Lufthansa AG, Air France, Air Canada, Singapore Airlines Ltd.,
Delta Airlines, Inc. (Delta), and Continental Airlines, Inc.,
and had filed a suit against the parent company of American
Airlines in December, 2003. This action was stayed as to
US&nbsp;Airways Group and its wholly owned subsidiaries as a
result of the bankruptcy filing on September&nbsp;12, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Port Authority of New York and New Jersey filed a proof of
claim against US&nbsp;Airways in the Prior Bankruptcy. The claim
was in the amount of $8.5&nbsp;million and it alleged
environmental contamination and building deficiencies at
LaGuardia Airport. US&nbsp;Airways&#146; liability and defenses
to such liability were
</DIV>

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<DIV align="left" style="font-size: 10pt;">
unaffected by the Prior Bankruptcy. US&nbsp;Airways has received
no notice, inquiry or other communication from the Port
Authority other than in connection with the proof of claim, and
therefore is unable to evaluate at this time the validity of the
underlying claim, the degree to which US&nbsp;Airways might
share responsibility with other parties, or the cost of cleanup
or correction of the alleged building deficiencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;7, 2003, the Internal Revenue Service (IRS)
issued a notice of proposed adjustment to US&nbsp;Airways Group
proposing to disallow $573&nbsp;million of capital losses that
US&nbsp;Airways Group sustained in the tax year 1999 on the sale
of stock of USLM Corporation (USLM). On February&nbsp;5, 2003,
the IRS filed a proof of claim with the Bankruptcy Court in
connection with the Prior Bankruptcy asserting the following
claims with respect to USLM: (1)&nbsp;secured claims for
U.S.&nbsp;federal income tax and interest of $0.7&nbsp;million;
(2)&nbsp;unsecured priority claims for U.S.&nbsp;federal income
tax of $68&nbsp;million and interest of $14&nbsp;million; and
(3)&nbsp;an unsecured general claim for penalties of
$25&nbsp;million. On May&nbsp;8, 2003, US&nbsp;Airways Group
reached a tentative agreement with the IRS on the amount of
U.S.&nbsp;federal income taxes, interest and penalties due
subject to final approval from the Joint Committee on Taxation.
By letter dated September&nbsp;11, 2003, US&nbsp;Airways Group
was notified that the Joint Committee on Taxation had accepted
the tentative agreement with the IRS, including a settlement of
all federal income taxes through the end of 2002. Due to the
bankruptcy filing on September&nbsp;11, 2004, which suspended
payment of prepetition liabilities, final payment terms under
the agreement have not been submitted to the Bankruptcy Court
for approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways is named as a defendant along with most of the
major domestic airlines, several national carriers and a number
of international carriers, in a class action lawsuit on behalf
of all United States-based travel agents filed in federal court
in North Carolina. The complaint alleges violation of the
federal antitrust laws with respect to commission rate
reductions and/or commission cap reductions implemented by
various airlines in 1997, 1998, 1999, 2001 and 2002. Plaintiffs
seek unspecified damages for lost commissions, as well as
injunctive relief. On October&nbsp;30, 2003, the federal court
granted a motion for summary judgment dismissing all claims
against airline defendants other than the carriers then in
bankruptcy, including US&nbsp;Airways, because proceedings had
been stayed against those bankrupt defendants. That grant of
summary judgment was affirmed by the Fourth Circuit Court of
Appeals. On January&nbsp;28, 2004, the federal court in North
Carolina dismissed all claims against US&nbsp;Airways. The
plaintiffs in this proceeding had also filed a claim in
Bankruptcy Court for prepetition and continuing postpetition
damages. The Bankruptcy Court determined that the entire claim
was prepetition and unsecured, and the plaintiffs appealed this
decision to the District Court. The parties agreed to stay this
appeal pending the outcome of the plaintiffs&#146; appeal of the
grant of summary judgment in the North Carolina action.
Following the Fourth Circuit&#146;s decision to affirm the
summary judgment ruling, the plaintiffs dismissed their appeal
of the Bankruptcy Court decision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Williard, Inc. (Williard), together with the joint venture of
Williard and Len Parker Associates (Williard/ Parker), was
awarded construction contracts with US&nbsp;Airways for work to
be performed at the Philadelphia International Airport. On
May&nbsp;29, 2002, US&nbsp;Airways terminated the largest
contract between the parties. Williard and Williard/ Parker sued
US&nbsp;Airways in Pennsylvania state court for over
$14&nbsp;million in damages representing termination costs and
lost profits, along with other alleged contractual damage
claims. Subsequently, Limbach Company, LLC (Limbach) alleged
that it purchased the claims of Williard. After a trial, the
Bankruptcy Court, on June&nbsp;7, 2004, determined the value of
the Limbach and Limbach/ Parker claims to be $2,542,843. Limbach
and Limbach/ Parker are challenging on appeal various rulings of
the Bankruptcy Court, including the amount of the claim and its
status as an unsecured claim. US&nbsp;Airways has also filed an
appeal. Limbach and Limbach/ Parker have filed an action in
state court against the City of Philadelphia (the City) and the
Philadelphia Authority for Industrial Development
(PAID)&nbsp;and received permission to include US&nbsp;Airways
as a co-defendant, provided that Limbach and Limbach/ Parker did
not make any claims against US&nbsp;Airways in that action. In
the lawsuit against the City and PAID, Limbach and Limbach/
Parker are seeking the same sums as in their earlier lawsuit and
proofs of claim against US&nbsp;Airways, but this time under the
equitable theories of third-party beneficiary, quantum meruit
and constructive trust. The court in the Philadelphia action
dismissed US&nbsp;Airways from the lawsuit and dismissed the
third-party beneficiary claims against the City and PAID. These
rulings are subject to appeal at a later date. On May&nbsp;21,
2004, the City and PAID filed a Motion for Summary Judgment
seeking dismissal of the lawsuit. Should Limbach and/or Limbach/
Parker recover in the Philadelphia action against the City and
PAID, that award would be paid at 100 cents on the dollar.
US&nbsp;Airways may have an obligation to indemnify the City and
</DIV>

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<DIV align="left" style="font-size: 10pt;">
PAID under its agreements related to the airport development,
which US&nbsp;Airways assumed as part of the Prior Bankruptcy.
Therefore, any recovery by Limbach and/or Limbach/ Parker
against the City and PAID could result in an indemnification
claim that US&nbsp;Airways may have to pay at full value.
Proceedings in the Bankruptcy Court were stayed by the
bankruptcy filing on September&nbsp;12, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;4, 2004, the System Board of Adjustment (the
System Board) issued a ruling in which the Company&#146;s
outsourcing of heavy maintenance visits was deemed to be in
violation of the collective bargaining agreement between
US&nbsp;Airways and the IAM as the representative of Mechanic
and Related Employees. The System Board ordered the Company to
cease and desist from outsourcing the work, and ordered that
affected employees be made whole. The System Board did not
specify any particular monetary remedy and none has since been
decided or agreed upon by the parties. However, the Bankruptcy
Court&#146;s order granting in part the Company&#146;s motion
for relief under Section&nbsp;1113(e) of the Bankruptcy Code
included relief from any restrictions on the Company&#146;s
right to outsource the work covered by this award through
February&nbsp;15, 2005. Neither the Company&#146;s
Section&nbsp;1113(e) motion nor the Bankruptcy Court&#146;s
order addressed the make-whole portion of this award. On
November&nbsp;12, 2004, the Company filed a motion asking the
Bankruptcy Court for permission to reject the IAM collective
bargaining agreement under which the grievance had been filed.
On January&nbsp;6, 2005, the Bankruptcy Court granted the
Company&#146;s motion. On January&nbsp;21, 2005, the IAM
ratified a new collective bargaining agreement to replace the
one that had been rejected, and as part of the new agreement,
the IAM agreed not to pursue any claims for damages associated
with the rejection of the previous agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company and US Airways have been named as defendants in two
lawsuits filed in federal district court for the Eastern
District of Michigan. Delta is also named as a defendant in both
actions, while Northwest and the Airlines Reporting Corporation
were sued separately in a third action. The complaints were
filed on behalf of a class of airline passengers who originated
or terminated their trips at the defendant carriers&#146;
respective hubs. These passengers allege that they paid
excessive fares due to the respective airlines&#146; enforcement
of ticketing rules that prohibit the use of a connecting segment
coupon that is part of a through-fare ticket where the passenger
does not fly or intend to fly the entire ticketed itinerary.
Plaintiffs allege monopolization and restraint of trade in
violation of federal antitrust laws. They seek recovery of
treble damages from all named defendants in the amount of
$390&nbsp;million and an injunction prohibiting future
enforcement of the rules at issue. On May&nbsp;16, 2002, the
court denied the defendant airlines&#146; Motion for Summary
Judgment and granted the plaintiffs&#146; Motion for
Class&nbsp;Certification in each of the cases. On May&nbsp;31,
2002, the Company and US Airways filed a petition with the
United States Court of Appeals for the Sixth Circuit seeking a
discretionary review of the certification order. On
November&nbsp;21, 2002, the petition for permission to appeal
the class certification decision was denied. On December&nbsp;4,
2002, Delta and Northwest filed a rehearing petition seeking en
banc review of the initial Sixth Circuit denial. On
February&nbsp;24, 2003, Northwest and Delta&#146;s petition for
rehearing en banc was denied. Notwithstanding the district
court&#146;s denial of summary judgment and the petition, the
Company and US Airways believe the claims are without merit and
intend to pursue a vigorous defense. The automatic stay under
Section&nbsp;362(a) of the Bankruptcy Code was lifted when the
Company emerged from bankruptcy on March&nbsp;31, 2003, but the
action was subsequently stayed once more as a result of the
Company&#146;s bankruptcy filing on September&nbsp;12, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 1995, the Company, US Airways and the Retirement Plan for
Pilots of US Airways, Inc. (Pilot Retirement Plan) were sued in
federal district court for the District of Columbia by 481
active and retired pilots, alleging that defendants had
incorrectly interpreted the plan provisions and erroneously
calculated benefits under the Pilot Retirement Plan. The
plaintiffs sought damages in excess of $70&nbsp;million. In May
1996, the court issued a decision granting US Airways&#146;
Motion to Dismiss the majority of the complaint for lack of
jurisdiction, deciding that the dispute must be resolved through
the arbitration process under the Railway Labor Act because the
Pilot Retirement Plan was collectively bargained. The plaintiffs
appealed the district court&#146;s dismissal and in February
1999, the U.S.&nbsp;Court of Appeals upheld the district
court&#146;s decision originally granted in May 1996, in the
defendants&#146; favor. In May 1999, the plaintiffs filed a
petition for certiorari with the U.S.&nbsp;Supreme Court. In
October 1999, the U.S.&nbsp;Supreme Court denied the
plaintiffs&#146; petition for certiorari. The U.S.&nbsp;District
Court retained jurisdiction over one count of the complaint,
alleging violation of a disclosure requirement under ERISA. In
August 2000, the U.S.&nbsp;District Court dismissed the
remaining count without prejudice, giving plaintiffs the right
to reinstate their claims after completion of the
</DIV>

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<DIV align="left" style="font-size: 10pt;">
arbitration. Certain of the plaintiffs filed a claim before the
US Airways Pilot Retirement Board, requesting arbitration of
their claim for benefits that they believe were erroneously
calculated, and the Retirement Board selected an arbitrator to
decide certain issues related to the plaintiffs&#146; claims for
benefits. However, the Pilot Retirement Plan was terminated on
March&nbsp;31, 2003, and on April&nbsp;1, 2003 the PBGC became
trustee of the plan. Also, claims related to this matter were
expunged in the Prior Bankruptcy. Accordingly, the Company does
not believe there is any continuing risk of material liability
associated with this matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;29, 2000, US&nbsp;Airways intervened in a
proceeding that was originally brought on January&nbsp;26, 1998,
by the Pennsylvania Department of Environment
Protection&nbsp;(DEP)&nbsp;against Allegheny County,
Pennsylvania and the Allegheny County Aviation Administration
(ACAA), alleging that a variety of airfield and aircraft
de-icing activities at Pittsburgh International Airport
(Airport) violated the requirements of (a)&nbsp;a 1994 Consent
Order and Adjudication issued to Allegheny County and air
carrier tenants at the Airport, (b)&nbsp;the Airport&#146;s
National Pollutant Discharge Elimination System Permit, and
(c)&nbsp;the Pennsylvania Clean Streams Law. The action was
brought before the Pennsylvania Environmental Hearing Board.
During March 2001, the Environmental Hearing Board approved
Allegheny County&#146;s Motion to Withdraw the Appeal without
Prejudice, thereby terminating the appeal. However, during the
course of settlement discussions leading to the termination of
the appeal, the DEP advised Allegheny County and US&nbsp;Airways
that DEP (i)&nbsp;will require additional measures to be taken
to control de-icing materials at the Airport, and (ii)&nbsp;will
assess a civil penalty against Allegheny County and
US&nbsp;Airways for the alleged violations described above. The
ACAA, US&nbsp;Airways and the DEP have continued to work
together with the goal of fashioning an ultimate resolution to
the de-icing issues. The Company does not believe that the
settlement of this matter will have a material adverse effect on
its financial condition, results of operations or liquidity.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</B></TD>
    <TD>
    <B>Guarantees</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways guarantees the payment of principal and interest
on certain special facility revenue bonds issued by
municipalities to build or improve certain airport and
maintenance facilities which are leased to US&nbsp;Airways.
Under such leases, US&nbsp;Airways is required to make rental
payments through 2023, sufficient to pay maturing principal and
interest payments on the related bonds. As of December&nbsp;31,
2004, the principal amount outstanding of these bonds was
$79&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company enters into real estate leases in substantially all
cities that it serves. It is common in such commercial lease
transactions for the Company as the lessee to agree to indemnify
the lessor and other related third parties for tort liabilities
that arise out of or relate to the Company&#146;s use or
occupancy of the leased premises. In some cases, this indemnity
extends to related liabilities arising from the negligence of
the indemnified parties, but usually excludes any liabilities
caused by their gross negligence or willful misconduct.
Additionally, the Company typically indemnifies such parties for
any environmental liability that arises out of or relates to its
use of the leased premises.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In aircraft financing agreements, the Company typically
indemnifies the financing parties, trustees acting on their
behalf and other related parties against liabilities that arise
from the manufacture, design, ownership, financing, use,
operation and maintenance of the aircraft and for tort
liability, whether or not these liabilities arise out of or
relate to the negligence of these indemnified parties, except
for their gross negligence or willful misconduct. In aircraft
financing transactions structured as leveraged leases, the
Company typically indemnifies the lessor with respect to adverse
changes in U.S.&nbsp;tax laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company expects that it would be covered by insurance
(subject to deductibles) for most tort liabilities and related
indemnities described above with respect to real estate leases
and aircraft it operates. The Company cannot estimate the
potential amount of future payments under the foregoing
indemnities and guarantees.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</B></TD>
    <TD>
    <B>Concentration of credit risk</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company invests available cash in money market securities of
various banks, commercial paper and asset-backed securities of
various financial institutions, other companies with high credit
ratings and securities backed by the U.S.&nbsp;Government.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, most of the Company&#146;s
receivables related to tickets sold to individual passengers
through the use of major credit cards or to tickets sold by
other airlines and used by passengers on the Company&#146;s
airline subsidiaries. These receivables are short-term, mostly
being settled within seven days after sale. Bad debt losses,
which have been minimal in the past, have been considered in
establishing allowances for doubtful accounts. The Company does
not believe it is subject to any significant concentration of
credit risk.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>Accumulated other comprehensive income (loss), net of income
    tax effect</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Comprehensive income encompasses net income and &#147;other
comprehensive income,&#148; which includes all other non-owner
transactions and events that change stockholders&#146; equity.
The Company&#146;s other comprehensive income includes
unrealized gains (losses) on available-for-sale securities,
certain changes in the fair value of certain derivative
instruments and an adjustment for minimum pension liability,
each shown net of income tax effects.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As presented in the accompanying Consolidated Statements of
Stockholders&#146; Equity (Deficit), the Company recognized
comprehensive loss of $654&nbsp;million, including a net loss of
$611&nbsp;million and other comprehensive loss of
$43&nbsp;million, for the year ended December&nbsp;31, 2004. For
the nine months ended December&nbsp;31, 2003 the Company
recognized a comprehensive loss of $229&nbsp;million, including
a net loss of $174&nbsp;million and other comprehensive loss of
$55&nbsp;million. The Company recognized comprehensive income of
$2.51&nbsp;billion, including net income of $1.64&nbsp;billion
and other comprehensive income of $870&nbsp;million, for the
three months ended March&nbsp;31, 2003. For the year ended
December&nbsp;31, 2002, the Company recognized a comprehensive
loss of $2.36&nbsp;billion, including a net loss of
$1.65&nbsp;billion and other comprehensive loss of
$717&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The activity within Other comprehensive income (loss) and the
related income tax effects are as follows (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrealized gain (loss) on available-for-sale securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fuel cash flow hedges:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclassification adjustment for gains included in net income
    (loss) during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(75</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in fair value of hedges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrealized gain (loss), net of reclassification adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(34</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(742</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments in connection with reorganization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(43</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(55</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(717</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There was no tax effect on any element of Other comprehensive
income (loss) during the year ended December&nbsp;31, 2004, the
nine months ended December&nbsp;31, 2003, the three months ended
March&nbsp;31, 2003, and the year ended December&nbsp;31, 2002.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>9.</B></TD>
    <TD>
    <B>Stock-Based Compensation</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>Successor Company</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon emergence from the Prior Bankruptcy , the Successor Company
adopted the fair value method of recording stock-based employee
compensation contained in SFAS&nbsp;123 and accounted for this
change in accounting principle using the &#147;prospective
method&#148; as described by SFAS&nbsp;148. Accordingly, the
fair value of all Successor Company stock option and warrant
grants, as determined on the date of grant, will be amortized as
compensation expense (an element of Personnel costs) in the
Consolidated Statement of Operations over the vesting period.
The Company has disclosed in Note&nbsp;2(m) the effect on net
income (loss) and net earnings (loss) per common share as if the
fair value based recognition provisions of SFAS&nbsp;123 had
</DIV>

<P align="center" style="font-size: 10pt;">84

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
been applied to all outstanding and unvested stock option awards
in each Predecessor Company period presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
23,028,687&nbsp;shares of Class&nbsp;A Common Stock allocated to
employees pursuant to collective bargaining agreements were
valued at $169&nbsp;million in the aggregate and were included
as deferred compensation as a reduction to Stockholders&#146;
Equity (Deficit) upon emergence from the Prior Bankruptcy. The
Company records the deferred compensation as compensation
expense as the related shares vest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, there were 4,750,000&nbsp;shares
of Class&nbsp;A Common Stock and 2,220,570 each of
Class&nbsp;A-1 Warrants and shares of Class&nbsp;A Preferred
Stock authorized to be granted to the Company&#146;s management
and 500,000 options to purchase Class&nbsp;A Common Stock
authorized to be granted to the Company&#146;s non-employee
directors. Through December&nbsp;31, 2004, 3,962,593&nbsp;shares
of Class&nbsp;A Common Stock, 2,118,490 each of Class&nbsp;A-1
warrants and Class&nbsp;A Preferred Stock, and 466,640 options
to purchase Class&nbsp;A Common Stock were granted to the
Company&#146;s management. Additionally, an aggregate of 91,397
options to purchase Class&nbsp;A Common Stock were granted to
the Company&#146;s non-employee directors. Grants of
Class&nbsp;A Common Stock, stock options and warrants generally
vest over four years. The Company records compensation expense
over the vesting period. The following table summarizes the
activity of the Company&#146;s stock options and warrants since
emergence from the Prior Bankruptcy:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Avg. Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Avg. Exercise</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock Options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Warrants</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,227,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Canceled</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,050</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at 12/31/03</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,216,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>513,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Canceled</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(114,250</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(154,059</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at 12/31/04</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>448,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,118,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes additional information regarding
the warrants and options outstanding as of December&nbsp;31,
2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted Avg. Remaining</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Range of Exercise Prices</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options&nbsp;&#38; Warrants</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Contractual Life (years)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>1.02 to $7.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>448,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>7.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,118,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,927,000</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company granted 835,160 and 3,627,923&nbsp;shares of
restricted Class&nbsp;A Common Stock during the year ended
December&nbsp;31, 2004 and the nine months ended
December&nbsp;31, 2003. There were 1,997,108 non-vested shares
of restricted stock outstanding as of December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The weighted average fair value per share of US Airways Group
Class&nbsp;A Common Stock grants was $2 and $7 in the year ended
December&nbsp;31, 2004 and the nine months ended
December&nbsp;31, 2003, respectively. In order to calculate the
stock-based compensation for stock options and warrants using
the fair value method provisions in SFAS&nbsp;123, US Airways
used the Black-Scholes stock option pricing model with the
following weighted-average assumptions:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock volatility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Risk free interest rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected life</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4&nbsp;years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3&nbsp;years</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividend yield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company recognized compensation expense related to
Class&nbsp;A Common Stock, stock option and stock warrant grants
to the Company&#146;s employees of $50&nbsp;million and
$135&nbsp;million for the year ended December&nbsp;31, 2004 and
the nine months ended December&nbsp;31, 2003, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company held approximately 753,000 and 81,000&nbsp;shares of
Class&nbsp;A Common Stock in treasury as of December&nbsp;31,
2004 and December&nbsp;31, 2003, respectively. During 2004 and
2003, employees surrendered
</DIV>

<P align="center" style="font-size: 10pt;">85
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
672,420 and 4,760,000&nbsp;shares of Class&nbsp;A Common Stock
to the Company in lieu of cash payments to satisfy tax
withholding requirements related to the vesting of certain
Class&nbsp;A Common Stock grants, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ultimate recovery, if any, to holders of the common stock
will not be determined until confirmation of a plan of
reorganization. The plan of reorganization could result in
holders of US Airways Group&#146;s common stock and related
equity securities receiving no distribution on account of their
interest and cancellation of the equity.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Predecessor Company</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2002, approximately 25.4&nbsp;million
shares of common stock were reserved for future grants of common
stock or the possible exercise of stock options issued under the
Company&#146;s six stock option, stock purchase and incentive
plans. The Predecessor Company accounted for stock-based
compensation using the intrinsic value method as prescribed
under APB&nbsp;25 and related interpretations. The Company
recognized compensation expense (an element of Personnel costs)
related to common stock grants of $1&nbsp;million and
$3&nbsp;million for the three months ended March&nbsp;31, 2003,
and the year ended December&nbsp;31, 2002, respectively.
Deferred compensation related to common stock grants was
$5&nbsp;million as of December&nbsp;31, 2002. Deferred
compensation was amortized as Personnel costs over the
applicable vesting period. The Company granted 0.8&nbsp;million
shares of common stock during 2002. The weighted average fair
value per share of common stock granted in 2002 was $6.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A five-year labor contract between US Airways and its pilots
became effective January&nbsp;1, 1998. A provision of the labor
contract established the 1998 Pilot Stock Option Plan of US
Airways Group, Inc. (1998 Plan). The 1998 Plan authorized the
Company to grant in six separate series&nbsp;11.5&nbsp;million
stock option awards to its pilots over the five-year life of the
labor contract (with exercise prices established based on the
fair market value of the Company&#146;s common stock over a time
period preceding each grant). Options granted under the first
series and second through fifth series were subject to a
two-year and one-year vesting period, respectively. Options
granted under the last series were not subject to any vesting
period. All awards under the 1998 Plan expired ten years after
grant. This plan was terminated and all outstanding awards were
cancelled upon emergence from bankruptcy on March&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 1997 Stock Incentive Plan of US Airways Group, Inc. (1997
Plan) authorized the Company to grant common stock and stock
option awards to non-officer key employees provided that no more
than 3.0&nbsp;million shares of common stock were issued as a
result of the awards. The 1996 Stock Incentive Plan of US
Airways Group, Inc. (1996 Plan), which encompassed the
Company&#146;s former 1988 Stock Incentive Plan of USAir Group,
Inc., authorized the Company to grant common stock and stock
option awards to key employees provided that no more than
18.4&nbsp;million shares of common stock were issued as a result
of the awards. All stock option awards under the 1997 Plan and
1996 Plan expired after a period of ten years and one month from
date of grant. These plans were terminated and all outstanding
awards were cancelled upon emergence from bankruptcy on
March&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The US Airways Group, Inc. Nonemployee Director Stock Incentive
Plan (Director Plan) authorized the Company to grant stock
option awards to each nonemployee director provided that no more
than 160,000&nbsp;shares of common stock were issued as a result
of the awards. All stock option awards under the Director Plan
expired after ten years from date of grant and were subject to a
one-year vesting period. This plan was terminated and all
outstanding awards were cancelled upon emergence from bankruptcy
on March&nbsp;31, 2003.
</DIV>

<P align="center" style="font-size: 10pt;">86

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes stock option transactions
pursuant to the Company&#146;s various stock option and
incentive plans for the three months ended March&nbsp;31, 2003,
and the year ended December&nbsp;31, 2002 (stock options in
thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31, 2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock Options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Forfeited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,291</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expired</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(549</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Terminated, March&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,214</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercisable at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Exercise price was equal to the fair market value of a share of
    common stock at measurement date for grant.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Exercise price was greater than the fair market value of a share
    of common stock at measurement date for grant.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The weighted average fair value per stock option for stock
options which had an exercise price equal to the fair market
value of a share of common stock at the date of grant was $3 for
2002. There were no such grants in the three months ended
March&nbsp;31, 2003. The weighted average fair value per stock
option for stock options which had an exercise price greater
than the fair market value of a share of common stock at the
date of grant was $3 for 2002. There were no such grants in the
three months ended March&nbsp;31, 2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>10.</B></TD>
    <TD>
    <B>Equity Structure of the Reorganized US Airways Group</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways Group&#146;s 2003 Plan became effective on
March&nbsp;31, 2003, at which time the then-outstanding equity
securities of the Predecessor Company were cancelled. In
accordance with the 2003 Plan, the Successor Company adopted the
equity structure in the table below upon emergence. The equity
values were determined with the assistance of financial
advisors. See Note&nbsp;13 for more information.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Long-term</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stockholders&#146;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Debt, net of</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Authorized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Allocated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Equity</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Discount</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Par Value</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>per Unit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Millions)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;A Common Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,650,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;B Common Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;A Preferred Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.0001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,729,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;B Preferred Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;C Preferred Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,749,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;A-1 Warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,729,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In exchange for its $240&nbsp;million investment, RSA received
20,652,593&nbsp;shares of Class&nbsp;A Common Stock,
5,000,000&nbsp;shares of Class&nbsp;B Common Stock,
75,000&nbsp;shares of Class&nbsp;B Preferred Stock (see below),
1,380,570 Class&nbsp;A-1 Warrants and 1,380,570&nbsp;shares of
Class&nbsp;A Preferred Stock. The fair values reflected in the
above table as of March&nbsp;31, 2003 related to RSA&#146;s
equity securities were as follows: $152&nbsp;million for the
Class&nbsp;A Common Stock, $37&nbsp;million for the Class&nbsp;B
Common Stock, $48&nbsp;million for the Class&nbsp;B Preferred
Stock and $4&nbsp;million for the Class&nbsp;A-1 Warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Class&nbsp;B Preferred Stock issued to RSA is subject to
mandatory redemption on its maturity date of March&nbsp;31,
2011. The Company&#146;s policy is to classify equity
instruments with characteristics of liabilities and equity,
including those with mandatory redemption features, as
liabilities and corresponding dividends and accretion of
discounts are recorded as interest expense. Upon its maturity,
the Company will be required to
</DIV>

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<DIV align="left" style="font-size: 10pt;">
redeem each share for $1,000, or $75&nbsp;million in aggregate,
plus accrued and unpaid dividends. Class&nbsp;B Preferred Stock
holders are entitled to cumulative quarterly dividends at a rate
of 8%&nbsp;per annum paid in cash by the Company. After
March&nbsp;31, 2006, the Company may redeem for cash each
Class&nbsp;B Preferred Share at a redemption price initially
equal to $1,025 declining ratably to par value through
March&nbsp;31, 2010, plus accrued and unpaid dividends. See
Note&nbsp;12 for further information regarding dividend payments
to RSA in 2003 and 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holders of Class&nbsp;A Common Stock, Class&nbsp;A Preferred
Stock and Class&nbsp;B Preferred Stock are entitled to cast one
vote per share on all matters voted on by stockholders. Holders
of Class&nbsp;B Common Stock are entitled to cast twenty votes
per share on all matters voted on by stockholders. The Air Line
Pilots Association, International; the International Association
of Machinists and Aerospace Workers; the Association of Flight
Attendants-Communication Workers of America; the Communication
Workers Association of America and the Transport Workers Union
of America hold the Class&nbsp;C Preferred Stock and are
entitled to designate and vote to elect four directors to the
Company&#146;s Board of Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holders of Class&nbsp;B Common Stock have the right to convert
shares of Class&nbsp;B Common Stock into the same number of
shares of Class&nbsp;A Common Stock at any time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each Class&nbsp;A-1 Warrant is exercisable for one share of
Class&nbsp;A Common Stock upon tender of the warrant, a share of
Class&nbsp;A Preferred Stock and payment of an exercise price of
$7.42&nbsp;per share of Class&nbsp;A Common Stock. The exercise
price may be paid in cash, or, in certain instances, (a)&nbsp;by
delivery of shares of Class&nbsp;B Preferred Stock, valued at
their redemption price, (b)&nbsp;by delivery of additional
Class&nbsp;A-1 Warrants and shares of Class&nbsp;A Preferred
Stock or (c)&nbsp;by a combination of any of the foregoing. The
terms of the Class&nbsp;A-1 Warrants provide for customary
anti-dilution protections, which adjust the exercise price and
number of exercise shares upon certain events that may have a
dilutive effect on the Class&nbsp;A-1 Warrants, such as stock
splits, securities issuances or mergers. The voting power of the
Class&nbsp;A Preferred Stock is also subject to adjustment upon
any such anti-dilution adjustment so that the aggregate voting
power of the Class&nbsp;A Preferred Stock is equal to the
aggregate number of shares of Class&nbsp;A Common Stock into
which such Class&nbsp;A-1 Warrants are exercisable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The other equity securities allocated to the Company&#146;s
creditors, debtors and employees in connection with the
Company&#146;s emergence from the Prior Bankruptcy were
27,997,407&nbsp;shares of Class&nbsp;A Common Stock and
15,348,860 each of Class&nbsp;A-1 Warrants and shares of
Class&nbsp;A Preferred Stock. The fair values reflected in the
above table as of March&nbsp;31, 2003 related to these equity
securities were $206&nbsp;million for the Class&nbsp;A Common
Stock and $40&nbsp;million for the Class&nbsp;A-1 Warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A total of 23,028,687&nbsp;shares of Class&nbsp;A Common Stock
allocated to employees pursuant to collective bargaining
agreements was valued at $169&nbsp;million in the aggregate and
was included as deferred compensation as a reduction to
Stockholders&#146; Equity (Deficit) upon emergence. The Company
records the deferred compensation as compensation expense as the
related shares vest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
See Note&nbsp;9 for further discussion related to stock-based
compensation. The Company allocated 8,483,330 Class&nbsp;A-1
Warrants and 8,483,330&nbsp;shares of Class&nbsp;A Preferred
Stock to participants in the ATSB Loan. These Class&nbsp;A-1
Warrants were valued at $22&nbsp;million and reflected as a
discount to the carrying value of the $1&nbsp;billion loan on
the Company&#146;s Consolidated Balance Sheet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There were 3,750,000&nbsp;shares of Class&nbsp;A Common Stock
and 2,220,570 each of Class&nbsp;A-1 Warrants and shares of
Class&nbsp;A Preferred Stock authorized to be granted to the
Company&#146;s management pursuant to the Company&#146;s 2003
Plan and 500,000 options to purchase Class&nbsp;A Common Stock
authorized to be granted to the Company&#146;s nonemployee
directors not listed in the above table. See Note&nbsp;9 for
further information related to stock-based compensation.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>11.</B></TD>
    <TD>
    <B>Operating Segments and Related Disclosures</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is managed as a single business unit that provides
air transportation for passengers and cargo. This allows it to
benefit from an integrated revenue pricing and route network
that includes US&nbsp;Airways, Piedmont, PSA and third-party
carriers that fly under capacity purchase agreements as part of
US&nbsp;Airways Express. The flight equipment of all these
carriers is combined to form one fleet which is
</DIV>

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<DIV align="left" style="font-size: 10pt;">
deployed through a single route scheduling system. When making
resource allocation decisions, the chief operating decision
maker evaluates flight profitability data, which considers
aircraft type and route economics, but gives no weight to the
financial impact of the resource allocation decision on an
individual carrier basis. The objective in making resource
allocation decisions is to maximize consolidated financial
results, not the individual results of US Airways, Piedmont and
PSA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Information concerning operating revenues in principal
geographic areas is as follows (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Predecessor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,065</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>912</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,977</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>12.</B></TD>
    <TD>
    <B>Related Party Transactions</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>RSA</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2003, RSA held approximately 36.2%, on a
fully-diluted basis, of the Company&#146;s equity, had a voting
interest of approximately 71.6% and was entitled to designate
and vote to elect eight of 15&nbsp;directors to Reorganized US
Airways Group&#146;s Board of Directors. Total amounts due to
RSA at December&nbsp;31, 2004 and 2003 included $78&nbsp;million
and $75&nbsp;million, respectively, of Class&nbsp;B mandatorily
redeemable preferred stock and $54&nbsp;million and
$73&nbsp;million, respectively, of the initial $100&nbsp;million
at-risk amount under the ATSB Loan. For the year ended
December&nbsp;31, 2004, interest expense related to the
Class&nbsp;B Preferred Stock totaled $8&nbsp;million, including
$6&nbsp;million related to dividend requirements. For the nine
months ended December&nbsp;31, 2003, interest expense related to
Class&nbsp;B Preferred Stock totaled $6&nbsp;million, including
$5&nbsp;million related to dividend requirements. Dividend
payments of $5&nbsp;million and $3&nbsp;million were made in
cash in the year ended December&nbsp;31, 2004 and the nine
months ended December&nbsp;31, 2003, respectively. Accrued and
unpaid dividends at December&nbsp;31, 2004 totaled
$3&nbsp;million, which is included in the carrying value of the
Class&nbsp;B Preferred Stock at December&nbsp;31, 2004. The
Company is restricted from making further dividend payments
under the terms of the ATSB Loan. Interest expense on RSA&#146;s
portion of the ATSB Loan was $5&nbsp;million with interest
payments of $5&nbsp;million for the year ended December&nbsp;31,
2004. See also Notes&nbsp;2(b), 4 and 10 for additional
information with regard to the terms of RSA&#146;s investment,
Class&nbsp;B Preferred Stock and ATSB Loan.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Employees</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the year ended December&nbsp;31, 2004, the nine months
ended December&nbsp;31, 2003 and the year ended
December&nbsp;31, 2002, employees surrendered
672,000&nbsp;shares, 4,760,000&nbsp;shares and
77,000&nbsp;shares of common stock, respectively, to the Company
in lieu of cash payments to satisfy tax withholding requirements
related to the vesting of certain common stock grants (see also
Notes&nbsp;9 and 10). There were no shares surrendered of common
stock during the three months ended March&nbsp;31, 2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>13.</B></TD>
    <TD>
    <B>Fresh-start Reporting</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with its emergence from the Prior Bankruptcy on
March&nbsp;31, 2003, US Airways Group adopted fresh-start
reporting in accordance with SOP&nbsp;90-7. Accordingly, the
Company valued its assets, liabilities and equity at fair value.
The excess of the reorganization value over tangible assets and
identifiable intangible assets has been reflected as Goodwill on
the Consolidated Balance Sheet. Estimates of fair value
represent the Company&#146;s best estimate based on independent
appraisals and valuations and, where the foregoing are not
available, industry trends and by reference to market rates and
transactions. The Company&#146;s equity value of
$438&nbsp;million at March&nbsp;31, 2003 was determined with the
assistance of financial advisors. In determining the equity
value, the financial advisors and the Company considered several
matters, including the following: (i)&nbsp;certain recent
financial information of the Company; (ii)&nbsp;certain
financial projections prepared by the Company in connection with
the ATSB Loan and RSA Investment Agreement including the
underlying assumptions; (iii)&nbsp;the equity transactions
encompassed by the RSA Investment Agreement; (iv)&nbsp;a
discounted cash flow analysis prepared on a going concern basis;
(v)&nbsp;current and historical market values of
</DIV>

<P align="center" style="font-size: 10pt;">89

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<DIV align="left" style="font-size: 10pt;">
publicly traded companies that are in businesses reasonably
comparable to the Company and (vi)&nbsp;certain additional
economic and industry conditions. The Company received third
party appraisals for certain assets and liabilities subsequent
to March&nbsp;31, 2003. Changes in the fair value of these
assets and liabilities from the previously estimated values had
an impact on the reported value of Goodwill. During the three
months ended March&nbsp;31, 2004, the Company increased goodwill
and other accrued expenses by $15&nbsp;million related to the
valuation of the Company&#146;s deferred tax liabilities.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>14.</B></TD>
    <TD>
    <B>Valuation and Qualifying Accounts and Reserves (in
    millions)</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Sales,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Write-Offs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Retirements</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Beginning</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Charged to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Net of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>at End</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expense</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Payments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Recoveries)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Transfers</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Period</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Year ended December&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for obsolescence of inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for uncollectible accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserves for workforce reduction(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Nine months ended December&nbsp;31, 2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for obsolescence of inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for uncollectible accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserves for workforce reduction(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Three months ended March&nbsp;31, 2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for obsolescence of inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(116</TD>
    <TD align="left" valign="bottom" nowrap>)(c)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for uncollectible accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserves for workforce reduction(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserves for future rent payments&nbsp;&#151; parked aircraft(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(68</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Year ended December&nbsp;31, 2002</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for obsolescence of inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(90</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for uncollectible accounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserves for maintenance activities(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserves for workforce reduction(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserves for future rent payments&nbsp;&#151; parked aircraft(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    See also Note&nbsp;2(n).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    See also Note&nbsp;16.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Allowance for obsolescence of inventories eliminated upon
    adoption of fresh-start reporting. See also Note&nbsp;13.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>15.</B></TD>
    <TD>
    <B>Selected Quarterly Financial Information (Unaudited)</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>First</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Second</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Third</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fourth</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Quarter</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(In millions, except per share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,660</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Income (Loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(143</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(177</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(142</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Income (Loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(177</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(232</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(236</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (Loss) per Common Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.28</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.22</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.28</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.22</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">90

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Successor Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>



<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(In millions, except per share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,764</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Income (Loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(207</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(37</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(74</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (Loss) Before Cumulative Effect of Accounting Change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(90</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(98</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Income (Loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(90</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(98</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (Loss) per Common Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.69</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.82</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.69</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.82</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The comparability of quarterly results in 2003 was impacted by
the emergence from the Prior Bankruptcy in March 2003 and
certain other unusual events. See also Note&nbsp;16. The sum of
the four quarters may not equal the totals for the year due to
rounding.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>16.</B></TD>
    <TD>
    <B>Unusual Items</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>Special Items</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Special items included within operating expenses on the
Company&#146;s Consolidated Statements of Operations includes
the following components (dollars in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Successor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Predecessor</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Company</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Company</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft order cancellation penalty</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD align="left" valign="bottom" nowrap>(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft impairments and related charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>392</TD>
    <TD align="left" valign="bottom" nowrap>(b)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension and postretirement benefit curtailments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(90</TD>
    <TD align="left" valign="bottom" nowrap>)(c)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employee severance including benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)(d)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)(d)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD align="left" valign="bottom" nowrap>(e)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>320</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    During the quarter ended June&nbsp;30, 2003, the Company
    recorded a $35&nbsp;million charge in connection with its
    intention not to take delivery of certain aircraft scheduled for
    future delivery.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    During the fourth quarter of 2002, US Airways conducted an
    impairment analysis in accordance with SFAS&nbsp;144 on its
    B737-300, B737-400, B757-200 and B767-200 aircraft fleets as a
    result of changes to the aircraft&#146;s recoverability periods
    (the planned conversion of owned aircraft to leased aircraft) as
    well as indications of possible material changes to the market
    values of these aircraft. The analysis revealed that estimated
    undiscounted future cash flows generated by these aircraft were
    less than their carrying values for four B737-300s,
    15&nbsp;B737-400s, 21&nbsp;B757-200s and three B767-200s. In
    accordance with SFAS&nbsp;144, the carrying values were reduced
    to fair market value. This analysis resulted in a pretax charge
    of $392&nbsp;million. Management estimated fair market value
    using third-party appraisals and recent leasing transactions.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    During the fourth quarter of 2002, US&nbsp;Airways recorded a
    curtailment credit of $120&nbsp;million related to certain
    postretirement benefit plans and a $30&nbsp;million curtailment
    charge related to certain defined benefit pension plans.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    In September 2001, US&nbsp;Airways announced that in connection
    with its reduced flight schedule it would terminate or furlough
    approximately 11,000 employees across all employee groups.
    Approximately 10,200 of the affected employees were terminated
    or furloughed on or prior to January&nbsp;1, 2002. Substantially
    all the remaining affected employees were terminated or
    furloughed by May 2002. US&nbsp;Airways&#146; headcount
    reduction was largely accomplished through involuntary
    terminations/furloughs. In connection with this headcount
    reduction, US&nbsp;Airways offered a voluntary leave program to
    certain employee groups. Voluntary leave program participants
    generally received extended benefits (e.g. medical, dental, life
    insurance) but did not receive any furlough pay benefit. In
    accordance with Emerging Issues Task Force Issue No.&nbsp;94-3,
    US&nbsp;Airways recorded a pretax charge of $75&nbsp;million
    representing the involuntary severance pay and the benefits for
    affected employees during the third quarter of 2001. In the
    fourth quarter of 2001, US&nbsp;Airways recognized a
    $10&nbsp;million charge representing the estimated costs of
    extended benefits for those employees who elected to take
    voluntary leave and a $2&nbsp;million reduction in accruals
    related to the involuntary severance as a result of employees
    electing to accept voluntary furlough. During the quarters ended
    June&nbsp;30, 2003 and 2002, the Company recognized
    $1&nbsp;million and $3&nbsp;million, respectively, in reductions
    to severance pay and benefit accruals related to the involuntary
    termination or furlough of certain employees.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    During the fourth quarter of 2002, US Airways recognized an
    impairment charge of $21&nbsp;million related to capitalized
    gates at certain airports in accordance with SFAS&nbsp;142. The
    carrying values of the affected gates were reduced to fair value
    based on a third party appraisal.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">91

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Government Compensation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2003, President George W. Bush signed into law the
Emergency Wartime Supplemental Appropriations Act (Emergency
Wartime Act), which included $2.4&nbsp;billion for reimbursement
to the airlines for certain aviation-related security expenses.
Certain airlines that received the aviation-related assistance
were required to agree to limit the total cash compensation for
certain executive officers during the 12-month period beginning
April&nbsp;1, 2003 to an amount equal to the annual salary paid
to that officer during the air carrier&#146;s fiscal year 2002.
Any violation of this agreement would require the carrier to
repay to the government the amount reimbursed for airline
security fees. The Company complied with this limitation on
executive compensation. The Company&#146;s security fee
reimbursement was $214&nbsp;million, net of amounts due to
certain affiliates, and was recorded as a reduction to operating
expenses during the second quarter of 2003. In September 2003,
the Company received approximately $6&nbsp;million of
compensation associated with flight deck door expenditures which
was recorded as an offset to capital costs.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</B></TD>
    <TD>
    <B>Gain on Sale of Hotwire, Inc.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the fourth quarter of 2003, US Airways recorded a
$30&nbsp;million gain on the sale of its investment in Hotwire,
Inc. The gain is reflected in Other, net on the Company&#146;s
Consolidated Statement of Operations.
</DIV>

<P align="center" style="font-size: 10pt;">92

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<DIV align="left" style="font-size: 10pt;">
<A name='237'></A>
</DIV>

<!-- link1 "Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;9.&nbsp;</B></TD>
    <TD>
    <B>Changes in and Disagreements With Accountants on Accounting
    and Financial Disclosure</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='238'></A>
</DIV>

<!-- link1 "Item 9A. Controls and Procedures" -->

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;9A.&nbsp;</B></TD>
    <TD>
    <B>Controls and Procedures</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;404 of the Sarbanes-Oxley Act of 2002 requires
management to include in this Annual Report on Form&nbsp;10-K a
report on management&#146;s assessment of the effectiveness of
the Company&#146;s internal control over financial reporting, as
well as an attestation report from the Company&#146;s
independent registered public accounting firm on
management&#146;s assessment of the effectiveness of the
Company&#146;s internal control over financial reporting.
Management&#146;s annual report on internal control over
financial reporting and the related attestation report from the
Company&#146;s independent registered public accounting firm are
located in Item&nbsp;8. Consolidated Financial Statements of US
Airways Group and are incorporated herein by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Disclosure
Controls and Procedures</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company maintains a set of disclosure controls and
procedures designed to ensure that information required to be
disclosed by the Company in reports it files or submits under
the Securities Exchange Act of 1934, as amended (Exchange Act)
is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange
Commission&#146;s rules and forms. An evaluation was performed
under the supervision and with the participation of the
Company&#146;s management, including the Chief Executive Officer
(CEO) and Chief Financial Officer (CFO), of the effectiveness of
the design and operation of the Company&#146;s disclosure
controls and procedures (as defined in Exchange Act
Rules&nbsp;13a-15(e) and 15d-15(e)) as of December&nbsp;31,
2004. Based on that evaluation, the Company&#146;s CEO and CFO
have concluded that the Company&#146;s disclosure controls and
procedures were effective as of such date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes
in Internal Control over Financial Reporting</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There have been no changes in the Company&#146;s internal
control over financial reporting during the quarter ended
December&nbsp;31, 2004 that have materially affected or are
reasonably likely to materially affect the Company&#146;s
internal control over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='239'></A>
</DIV>

<!-- link1 "Item 9B. Other Information" -->

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<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;9B.&nbsp;</B></TD>
    <TD>
    <B>Other Information</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None.
</DIV>

<P align="center" style="font-size: 10pt;">93

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<DIV align="left" style="font-size: 10pt;">
<A name='240'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;III</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='241'></A>
</DIV>

<!-- link1 "Item 10. Directors and Executive Officers of US Airways Group" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;10.&nbsp;</B></TD>
    <TD>
    <B>Directors and Executive Officers of US Airways Group</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Introduction</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;11, 2002, US&nbsp;Airways Group and seven of its
domestic subsidiaries, which accounted for substantially all of
US&nbsp;Airways Group&#146;s operations, including
US&nbsp;Airways Group&#146;s principal operating subsidiary,
US&nbsp;Airways, filed voluntary petitions for relief under
Chapter&nbsp;11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Eastern District of
Virginia, Alexandria Division. US&nbsp;Airways Group emerged
from bankruptcy protection under the First Amended Joint Plan of
Reorganization of US&nbsp;Airways Group, Inc. and Affiliated
Debtors and Debtors-in-Possession, as modified (the 2003 Plan)
on March&nbsp;31, 2003, which was confirmed pursuant to the
Bankruptcy Court&#146;s confirmation order on March&nbsp;18,
2003 and, after each of the conditions precedent to consummation
was satisfied or waived, became effective on March&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the consummation of the 2003 Plan on
March&nbsp;31, 2003, Retirement Systems of Alabama Holdings LLC
(RSA) made an equity investment in US&nbsp;Airways Group in the
amount of $240&nbsp;million. In exchange for its
$240&nbsp;million investment, RSA received
20,652,593&nbsp;shares of Class&nbsp;A Common Stock,
5,000,000&nbsp;shares of Class&nbsp;B Common Stock,
75,000&nbsp;shares of Class&nbsp;B Preferred Stock, 1,380,570
Class&nbsp;A-1 Warrants and 1,380,570&nbsp;shares of
Class&nbsp;A Preferred Stock, representing approximately 36.2%,
on a fully-diluted basis, of US&nbsp;Airways Group&#146;s equity
and approximately 71.6% of US&nbsp;Airways Group&#146;s
outstanding voting interests. RSA is the sole holder of
US&nbsp;Airways Group&#146;s Class&nbsp;B Common Stock and
Class&nbsp;B Preferred Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the time the 2003 Plan became effective, RSA was entitled,
pursuant to the terms of its investment agreement, to designate
eight of the 15 members of US&nbsp;Airways Group&#146;s Board of
Directors. RSA is also entitled, until September&nbsp;26, 2007
and as long as it retains at least 50% of the shares of
Class&nbsp;A Common Stock acquired pursuant to its investment,
to nominate eight directors for election to the Board. The
investment agreement further provides that the remaining
nominees for director must consist of US&nbsp;Airways
Group&#146;s chief executive officer and two individuals who are
not employees or affiliates of US&nbsp;Airways Group or RSA, as
well as the four directors elected by the Class&nbsp;C Preferred
Stock, as described below. Until September&nbsp;26, 2007, RSA
has agreed to vote all of its shares of voting capital stock
received in connection with the consummation of the 2003 Plan in
favor of all of the directors nominated in accordance with the
investment agreement at each annual meeting of US&nbsp;Airways
Group&#146;s stockholders or at any meeting of US&nbsp;Airways
Group&#146;s stockholders at which members of its Board of
Directors are to be elected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;12, 2004, US&nbsp;Airways Group and its
domestic subsidiaries, which account for substantially all of
the operations of US&nbsp;Airways Group, including its principal
operating subsidiary, US&nbsp;Airways, filed voluntary petitions
for relief under Chapter&nbsp;11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the Eastern
District of Virginia, Alexandria Division. US&nbsp;Airways Group
does not know what the capital and Board structures will be upon
consummation of a new plan of reorganization. As a result of the
Chapter&nbsp;11 filings, the current capital and Board
structures may change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Board of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Board of Directors currently consists of 14&nbsp;members.
All of the directors, except Thomas R. Harter, George M. Philip
and Ronald E. Stanley, were elected by the Company&#146;s
stockholders at its 2004 Annual Meeting of Stockholders.
Mr.&nbsp;Stanley was elected to the Board of Directors on
May&nbsp;19, 2004 to fill the seat previously held by Raymond W.
Smith, whose term expired at the 2004 Annual Meeting of
Stockholders. Mr.&nbsp;Stanley was subsequently appointed
Executive Vice President and Chief Financial Officer of
US&nbsp;Airways Group, Inc. and US&nbsp;Airways, Inc. in October
2004. Mr.&nbsp;Harter was elected to the Board of Directors on
August&nbsp;27, 2004 to fill the seat previously held by Perry
L. Hayes and to serve as a representative of the Association of
Flight Attendants&#150;Communications Workers of America
AFL-CIO, International and Transport Workers Union of America.
George M. Philip was elected to the Board of Directors on
October&nbsp;25, 2004 to fill one of the two remaining vacancies
on the Board at that time. Directors are elected to hold office
for one year or until the election and qualification of their
successors. Ten of the Company&#146;s directors are also
</DIV>

<P align="center" style="font-size: 10pt;">94

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<DIV align="left" style="font-size: 10pt;">
directors of its principal operating subsidiary,
US&nbsp;Airways. There are no family relationships among the
directors or the executive officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Of the 14&nbsp;directors, Dr.&nbsp;Bronner, Ms.&nbsp;Krongard,
and Messrs.&nbsp;McKenna, Mirka, Simon, Stanley and Stephens are
seven of the eight directors designated by RSA in accordance
with the terms of its investment agreement with the Company. As
set forth in the investment agreement, the other three directors
are Mr.&nbsp;Lakefield, the Company&#146;s chief executive
officer, and Messrs.&nbsp;Johnson and Philip, the two directors
who may not be employees or affiliates of the Company or RSA.
There is currently one vacant seat remaining on the Board of
Directors. RSA is entitled to designate and elect a new director
to fill that vacant seat pursuant to the terms of its investment
agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Company&#146;s Amended and Restated Certificate
of Incorporation, four of its current directors were designated
by the series of Class&nbsp;C Preferred Stock as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="18%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Series of Class&nbsp;C</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Director</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Preferred</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Holder of Series</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William D. Pollock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>Series 1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Air Line Pilots Association</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Joseph J. Mantineo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>Series 2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    International Association of Machinists and Aerospace Workers</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas R. Harter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>Series 3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Association of Flight Attendants&nbsp;&#151; Communications
    Workers of America AFL-CIO, International and Transport Workers
    Union of America</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Magdelena Jacobsen</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>Series 4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Communications Workers of America</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the series of Class&nbsp;C Preferred Stock has the
ability, under the provisions of the Company&#146;s Amended and
Restated Certificate of Incorporation, to remove the director
elected by that series and designate and elect a new director to
fill that seat on the Board of Directors.
</DIV>

<P align="center" style="font-size: 10pt;">95

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Information Regarding Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below is certain information as of February&nbsp;1,
2005, regarding the Company&#146;s directors, including their
ages and principal occupations (which have continued for at
least the past five years unless otherwise noted).
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Served as</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Director</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Since</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David G. Bronner, 60</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Dr.&nbsp;Bronner has been the Chief Executive Officer of
    Retirement Systems of Alabama since 1973. He serves as Executive
    Director of the Public Education Employees&#146; Health
    Insurance, and is a member of the State Employees&#146;
    Insurance Board. He is a member of the Editorial Board, Southern
    Business&nbsp;&#38; Economics Journal, Auburn University at
    Montgomery, a member of the Board of Visitors, University of
    Alabama School of Business, New Water Corporation and Children
    First. Dr.&nbsp;Bronner has been Chairman of US&nbsp;Airways
    Group&#146;s and US Airways&#146; Board of Directors since April
    2003 and is a member of the Strategy and Finance Committee of
    the Board of Directors.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas R. Harter, 62</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mr.&nbsp;Harter is a Senior Vice President and Consultant of The
    Segal Company&#146;s Washington,&nbsp;DC office. Mr.&nbsp;Harter
    has been with The Segal Company since 1979. He became a Vice
    President of The Segal Company&#146;s Mid-Atlantic Division in
    1985, and a Senior Vice President in 1991. Mr.&nbsp;Harter has
    worked with labor organizations negotiating contracts at the
    national level and has made presentations at numerous
    Presidential Emergency Boards in the transportation sector on
    behalf of national unions of the AFL-CIO. Mr.&nbsp;Harter also
    served seven years as a systems and information manager with
    AARP. Mr.&nbsp;Harter has served as an instructor for courses in
    the Certified Employee Benefits Specialist programs sponsored by
    George Washington University and the George Meany Labor
    Institute. Mr.&nbsp;Harter is a member of the Safety and Social
    Responsibility Committees of the Board of Directors.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2004</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Magdalena Jacobsen, 64</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ms.&nbsp;Jacobsen currently owns a private consulting firm,
    which she founded in September 2002. Ms.&nbsp;Jacobsen is the
    former Chairwoman and a board member of the National Mediation
    Board, in which positions she served from 1993 until 2002. She
    was also Commissioner of the Federal Mediation and Conciliation
    Service, Director of the Employee Relations division for the
    City and County of San&nbsp;Francisco, Manager of Labor
    Relations, Flight Department of Continental Airlines, and
    Secretary Treasurer and Local Officer of the Air Line Pilots
    Association, Flight Attendants Division. She is a member of the
    Corporate Governance and Nominating and Social Responsibility
    Committees of the Board of Directors.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert L. Johnson, 58</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mr.&nbsp;Johnson has served the Chief Executive Officer of BET
    Holdings, Inc., a subsidiary of Viacom Inc. (media-entertainment
    holding company) from 1980 to the present. Mr.&nbsp;Johnson also
    serves as a Director of the Hilton Hotels Corporation, the
    American Film Institute, Johns Hopkins University, Strayer
    Education, Jazz&nbsp;@ Lincoln Center, and Lowe&#146;s
    Companies. He is a member of the Audit and Strategy and Finance
    Committees of the Board of Directors. He is also a director of
    US&nbsp;Airways.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1998</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cheryl G. Krongard, 49</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ms.&nbsp;Krongard retired in 2004 as a Senior Partner of Apollo
    Management, L.P. Ms.&nbsp;Krongard was the Chief Executive
    Officer of Rothschild Asset Management from 1994 to
    April&nbsp;15, 2000. She served as Senior Managing Director for
    Rothschild North America from 1994 until 2000. She serves on the
    board of directors of the Iowa State University Foundation and
    is a lifetime governor elected in 1997. She is also chairperson
    of the Investment Committee for the Iowa State University
    Foundation. Ms.&nbsp;Krongard is also a member of the
    Dean&#146;s Advisory Council, Iowa State University College of
    Business, and a Trustee of the Mount Sinai Medical Center.
    Ms.&nbsp;Krongard also serves as a Director of the City Meals on
    Wheels and Educate, Inc., a publicly traded company engaged in
    tutoring and learning (formerly Sylvan Learning).
    Ms.&nbsp;Krongard is Chairman of the Corporate Governance and
    Nominating and Strategy and Finance Committees and a member of
    the Human Resources Committee of the Board of Directors. She is
    also a director of US&nbsp;Airways.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Served as</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Director</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Since</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bruce R. Lakefield, 61</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mr.&nbsp;Lakefield is President and Chief Executive Officer and
    a director of US&nbsp;Airways Group and US&nbsp;Airways.
    Mr.&nbsp;Lakefield served as Chairman and Chief Executive
    Officer of Lehman Brothers International from 1995 until 1999.
    He has served as a Senior Advisor to the Investment Policy
    Committee of HGK Asset Management since 2000. Mr.&nbsp;Lakefield
    serves as a Non-Executive Director of Constellation Corporation
    PLC and a member of the Board of Directors of Magic Media, Inc.
    He is a member of the Strategy and Finance Committee of the
    Board of Directors.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Joseph J. Mantineo, 73</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mr.&nbsp;Mantineo is a retired Aircraft&nbsp;&#38; Powerplant
    Mechanic with US&nbsp;Airways. In addition to being employed by
    US&nbsp;Airways from 1957 through 1996, he served on negotiating
    committees for the International Association of Machinists and
    Aerospace Workers, from 1957 until his retirement in 1996. He
    became full-time Assistant General Chairman for District
    Lodge&nbsp;141-M, in 1991, until his retirement in November
    1996. He served as Secretary-Treasurer for twelve years in
    Lodge&nbsp;1445, as well as worked on the mergers of
    Allegheny/Mohawk, USAir/PSA and USAir/Piedmont.
    Mr.&nbsp;Mantineo is a member of the Safety and Social
    Responsibility Committees of the Board of Directors.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2002</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John A. McKenna,&nbsp;Jr., 37</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mr.&nbsp;McKenna has served as Director and Managing Director of
    Houlihan Lokey Howard&nbsp;&#38; Zukin, Inc. since 1999. He
    served as Vice President of Wasserstein Perella&nbsp;&#38; Co.
    during 1998 and 1999. Prior to 1998, he served in various
    capacities at Houlihan Lokey Howard&nbsp;&#38; Zukin, Inc.
    Mr.&nbsp;McKenna has been a Panelist on restructuring and
    investment banking topics before the World Bank and the American
    Bankruptcy Institute. He is a member of the Audit and Strategy
    and Finance Committees of the Board of Directors. He is also a
    director of US&nbsp;Airways.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hans Mirka, 68</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mr.&nbsp;Mirka served as Senior Vice President, International
    Division for American Airlines, Inc. from 1992 until his
    retirement in 1998. He also served as Executive Vice President
    and General Manager for Pan American World Airways, Inc. from
    1984 until 1989 and Vice President, Field Sales and Services for
    Continental Airlines until 1984. He is Chairman of the Human
    Resources Committee and a member of the Safety and Strategy and
    Finance Committees of the Board of Directors. He is also a
    director of US&nbsp;Airways.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">97

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Served as</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Director</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Since</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George M. Philip, 57</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mr.&nbsp;Philip has served as the Executive Director of the New
    York State Teachers&#146; Retirement System since 1995. He has
    also served as Chief Investment Officer of the New York State
    Teachers&#146; Retirement System since 1992. Mr.&nbsp;Philip
    served as the Assistant Executive Director of the New York State
    Teachers&#146; Retirement System from 1992-1995 and as Chief
    Real Estate Investment Officer from 1988-1992. Mr.&nbsp;Philip
    has served in various positions with the New York State
    Teachers&#146; Retirement System from 1971. Mr.&nbsp;Philip is
    the past President of the Executive Committee of the National
    Council on Teacher Retirement. Mr.&nbsp;Philip also serves as
    Chair of the University of Albany Council, the St. Peter&#146;s
    Hospital Board of Directors, the Catholic Health East Investment
    Committee, and the St. Peter&#146;s Hospital Investment
    Committee. Mr.&nbsp;Philip is a member of the Board of Directors
    of the Saratoga Performing Arts Center, the NYSE Pension
    Managers Advisory Committee and the State Academy of Public
    Administration. Mr.&nbsp;Philip is Chairman of the Audit
    Committee and a member of the Human Resources Committee of the
    Board of Directors. He is also a director of US&nbsp;Airways.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2004</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William D. Pollock, 48</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Capt. Pollock is Chairman of the US&nbsp;Airways Air Line Pilots
    Association (ALPA) Master Executive Council. An 19-year veteran
    of US&nbsp;Airways, he holds a captain position on the A320. His
    previous ALPA experience includes serving as MEC Vice Chairman
    for three years and MEC Legislative Affairs Committee Chairman
    for more than 12&nbsp;years. As a veteran pilot for
    US&nbsp;Airways, Pollock has flown the F-100 and B-737. In the
    Navy, he served 21&nbsp;years of combined active and reserve
    service and flew the P-3 Orion. Capt. Pollock is Chairman of the
    Safety Committee of the Board of Directors. He is also a
    director of US&nbsp;Airways.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2002</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James M. Simon,&nbsp;Jr., 57</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mr.&nbsp;Simon has been Director of the Microsoft Institute for
    Advanced Technology in Governments since September 2004.
    Mr.&nbsp;Simon served as the President and Senior Founding
    Partner of Intelligence Enterprises, LLC from January 2003 to
    September 2004. He formerly served in the Office of the Deputy
    Director of Central Intelligence for Community Management from
    1999 until 2003. Mr.&nbsp;Simon serves as a member of the Board
    of Directors of United Devices, Inc. He is a member of the
    Corporate Governance and Nominating and Safety Committees of the
    Board of Directors.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ronald E. Stanley, 57</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mr.&nbsp;Stanley is the current Executive Vice President and
    Chief Financial Officer of US&nbsp;Airways Group and
    US&nbsp;Airways, in which position he has served since October
    2004. Mr.&nbsp;Stanley has served as a Director of Scholefield,
    Turnbull&nbsp;&#38; Partners, a business travel consulting firm
    based in London, England since 2000. Mr.&nbsp;Stanley also
    serves as a director of Decatur Foundry, Inc., a private
    company. Mr.&nbsp;Stanley served as Chief Operating Officer and
    a member of the Executive Committee and Board of Directors of
    HSBC Equator from 2000 until 2002. He served as Senior Vice
    President&nbsp;&#38; General Manager of Royal Bank of Canada
    (RBC) Group, Chairman and CEO of Royal Bank of Canada Europe
    Limited and a member of the Executive Committee of RBC Dominion
    Securities from 1995 to 1999. He is also a director of
    US&nbsp;Airways.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2004</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">98

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Served as</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Director</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Since</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William T. Stephens, 61</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mr.&nbsp;Stephens has served as General Counsel of the
    Retirement Systems of Alabama since 2000, and previously from
    1980 to 1998. From 1998 to 2000, Mr.&nbsp;Stephens served as
    Deputy Director resident in the Montgomery, Alabama headquarters
    of Retirement Systems of Alabama. Mr.&nbsp;Stephens is a
    Director of New Water Street Corporation, a director of the
    American Village Citizenship Trust, a member of the Alumni
    Advisory Council and Auburn University School of Engineering. He
    is Chairman of the Social Responsibility Committee and is a
    member of the Strategy and Finance Committee of the Board of
    Directors. He is also a director of US&nbsp;Airways.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2003</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Audit Committee and Audit Committee Financial Expert</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Audit Committee of the Board of Directors, in consultation
with the Company&#146;s financial officers and the
Company&#146;s independent auditors, assists in establishing the
scope of the annual audit. The Audit Committee (1)&nbsp;reviews
annual and quarterly financial statements and periodic reports
filed with the Securities and Exchange Commission (SEC),
(2)&nbsp;appoints, ensures the independence of, and oversees the
performance of the Company&#146;s independent auditors,
(3)&nbsp;reviews the annual programs of the internal audit staff
and (4)&nbsp;reviews programs designed to protect and maintain
the Company&#146;s assets, including insurance, internal
controls and internal security programs. The Audit Committee has
been established in accordance with Section&nbsp;3(a)(58)(A) of
the Securities Exchange Act of 1934, as amended. The Audit
Committee operates under a charter approved by the Board of
Directors. The charter is posted on the Company&#146;s website
at <I>www.usairways.com. </I>The Audit Committee is composed of
Messrs.&nbsp;Philip, Johnson and McKenna, and Mr.&nbsp;Philip is
the Chairman of the Committee. The Board has determined that
Mr.&nbsp;Philip is the audit committee financial expert
currently serving on the Audit Committee and that
Mr.&nbsp;Philip is independent as defined in NASDAQ listing
standards.
</DIV>

<P align="center" style="font-size: 10pt;">99

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Information Regarding Executive Officers</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following individuals are the executive officers of US
Airways Group and US&nbsp;Airways as of February&nbsp;1, 2005:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Position</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bruce R. Lakefield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President and Chief Executive Officer, US Airways Group and US
    Airways</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ronald E. Stanley</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President and Chief Financial Officer,
    US&nbsp;Airways Group and US&nbsp;Airways</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    N. Bruce Ashby</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President&nbsp;&#151; Marketing and Planning of
    US&nbsp;Airways and President&nbsp;&#151; US Airways Express</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Alan W. Crellin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President&nbsp;&#151; Operations, US Airways</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Elizabeth K. Lanier</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President&nbsp;&#151; Corporate Affairs, General
    Counsel and Secretary, US Airways Group and US&nbsp;Airways</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Anita P. Beier</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President&nbsp;&#151; Finance and Controller,
    US&nbsp;Airways Group and US Airways</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher L. Chiames</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President&nbsp;&#151; Corporate Affairs of
    US&nbsp;Airways</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jerrold A. Glass</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President&nbsp;&#151; Employee Relations of
    US&nbsp;Airways</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Andrew P. Nocella</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President&nbsp;&#151; Planning of US Airways</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John Prestifilippo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President&nbsp;&#151; Maintenance of US Airways</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Ashby joined US Airways as Vice President&nbsp;&#151;
Financial Planning and Analysis from April 1996 until his
election as Senior Vice President&nbsp;&#151; Planning of US
Airways in January 1998. In June 1999, Mr.&nbsp;Ashby was
elected Senior Vice President&nbsp;&#151; Corporate Development
of US Airways Group and US&nbsp;Airways. Mr.&nbsp;Ashby served
as Senior Vice President&nbsp;&#151; Alliances of US Airways
Group and US Airways and President&nbsp;&#151; US Airways
Express from March 2003 to January 2005. In January 2005,
Mr.&nbsp;Ashby was elected Executive Vice President&nbsp;&#151;
Marketing and Planning and will continue as
President&nbsp;&#151; US Airways Express. He previously served
as Vice President&nbsp;&#151; Marketing Development at Delta Air
Lines from June 1995 to April 1996, and in several management
positions at United from January 1989 to June 1995, including
Vice President&nbsp;&#151; Financial Planning and Analysis and
Vice President and Treasurer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Crellin joined US Airways in 1988 as a result of the
acquisition of Pacific Southwest Airlines. He was promoted to
serve as Vice President&nbsp;&#151; Ground Services of US
Airways in 1995. Mr.&nbsp;Crellin served as Senior Vice
President&nbsp;&#151; Customer Service of US Airways from 2000
until his election as Executive Vice President&nbsp;&#151;
Operations in January 2002. Prior to joining US Airways,
Mr.&nbsp;Crellin held a variety of management positions with
Pacific Southwest Airlines from 1971 to 1988, including Vice
President&nbsp;&#151; Customer Service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Ms.&nbsp;Lanier joined US Airways Group and US Airways in March
2003 as Executive Vice President&nbsp;&#151; Corporate Affairs
and General Counsel, and was appointed as Secretary of US
Airways Group and US&nbsp;Airways in January 2004. Previously,
Ms.&nbsp;Lanier was Senior Vice President&nbsp;&#151; General
Counsel for Trizec Properties, Inc. from April to December 2002,
and prior to that, Vice President&nbsp;&#151; General Counsel
for General Electric Power Systems from 1998 to 2002, and Vice
President and Chief of Staff for Cinergy Corporation from 1996
to 1998. Ms.&nbsp;Lanier has been a member of the board of
directors of Patina Oil&nbsp;&#38; Gas Corporation since 1998.
She serves as a member of the audit committee and chair of the
corporate governance and nominating committee of Patina.
Ms.&nbsp;Lanier was associated with Davis Polk&nbsp;&#38;
Wardwell and was an associate and partner of Frost&nbsp;&#38;
Jacobs, now Frost Brown Todd, LLC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Ms.&nbsp;Beier joined US Airways in June 1999 from CSX
Corporation as Vice President&nbsp;&#151; Finance and
Controller. In May 2004, Ms.&nbsp;Beier was promoted to Senior
Vice President&nbsp;&#151; Finance and Controller, and she is
responsible for the management of all accounting functions for
US Airways Group and its subsidiaries and for monitoring the
Company&#146;s restructuring. At CSX Corporation, Ms.&nbsp;Beier
held a number of positions
</DIV>

<P align="center" style="font-size: 10pt;">100

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<DIV align="left" style="font-size: 10pt;">
in financial management, including Vice President&nbsp;&#151;
Financial Planning. Prior to being named Vice
President&nbsp;&#151; Financial Planning at CSX Corporation in
September 1998, Ms.&nbsp;Beier was Chief Financial Officer of
American Commercial Lines in 1997-1998. Ms.&nbsp;Beier served in
a variety of financial positions in economic and financial
analysis, budgeting and accounting at CSX Corporation from 1981
to 1997.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Chiames joined US Airways in May 2002 as Senior Vice
President&nbsp;&#151; Corporate Affairs. Mr.&nbsp;Chiames is
responsible for US Airways&#146; government relations and
corporate communications functions. Mr.&nbsp;Chiames has almost
15&nbsp;years of airline industry experience, including
leadership of Burson-Marsteller&#146;s transportation and
tourism public affairs practice from 2001 to 2002 and Managing
Director of Public Relations at American Airlines, Inc. from
1996 to 2001.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Glass joined US Airways in April 2002 as Senior Vice
President&nbsp;&#151; Employee Relations and is a recognized
expert in airline and railroad labor and employee relations
issues. Mr.&nbsp;Glass joined US Airways from J. Glass and
Associates, of which he was the founder and where he served as
President from 1989 until April 2002. At US Airways, he is
responsible for labor relations, human resources policy and
development, compensation, corporate learning and development,
recruiting and benefits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Nocella joined US Airways in April 2002 as Vice
President&nbsp;&#151; Planning and Scheduling. He served as Vice
President&nbsp;&#151; Revenue Management and Pricing of US
Airways from December 2002 to June 2003. Mr.&nbsp;Nocella served
as Vice President&nbsp;&#151; Network and Revenue Management
from June 2003 until his election as Senior Vice
President&nbsp;&#151; Planning in January 2005. At US Airways,
he is responsible for route planning, scheduling, pricing and
yield management functions. Prior to joining US Airways,
Mr.&nbsp;Nocella served as Vice President, Planning and
Scheduling of America West Airlines from April 1997 to April
2002, and in several management positions at Continental
Airlines from December 1993 to March 1997.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Prestifilippo joined US Airways in August 2002 as
Senior Vice President&nbsp;&#151; Maintenance. With nearly
20&nbsp;years of airline maintenance management experience,
Mr.&nbsp;Prestifilippo previously held the position of Vice
President&nbsp;&#151; Technical Services and Operations for
Continental Express Airlines from 1986 to 2001 and other
senior-level management positions for Continental Express and
Continental Airlines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Section&nbsp;16(a) Beneficial Ownership Reporting
Compliance</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;16(a) of the Exchange Act and regulations of the
SEC thereunder require the Company&#146;s directors, officers
and persons who own more than 10% of the Company&#146;s
Class&nbsp;A Common Stock, as well as certain affiliates of such
persons, to file initial reports of their ownership of the
Company&#146;s Class&nbsp;A Common Stock and subsequent reports
of changes in such ownership with the SEC. Directors, officers
and persons owning more than 10% of the Company&#146;s
Class&nbsp;A Common Stock are required by SEC regulations to
furnish the Company with copies of all Section&nbsp;16(a)
reports they file. Based solely on the Company&#146;s review of
the copies of such reports received by the Company and
information provided to the Company by its directors and
officers, the Company believes that during the fiscal year ended
December&nbsp;31, 2004, the Company&#146;s directors, officers
and owners of more than 10% of the Company&#146;s Class&nbsp;A
Common Stock complied with all applicable filing requirements
except for: (1)&nbsp;the award of director deferred stock units
and director stock options by the Company to George M. Philip on
October&nbsp;26, 2004, reported late on Form&nbsp;4 on
October&nbsp;29, 2004; (2)&nbsp;the award of restricted shares
of Class&nbsp;A Common Stock and stock options by the Company to
David M. Davis on May&nbsp;18, 2004, reported late on
Form&nbsp;4 on May&nbsp;24, 2004; and (3)&nbsp;the award of
restricted shares of Class&nbsp;A Common Stock and stock options
by the Company to Anita P. Beier on May&nbsp;18, 2004, reported
late on Form&nbsp;4 on May&nbsp;24, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Code of Ethics</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has a code of ethics that applies to all employees,
officers, directors and agents of US&nbsp;Airways Group and its
wholly owned subsidiaries, including its principal executive
officer, principal financial officer and principal accounting
officer. A copy of this code, the &#147;Business Conduct and
Ethics Policy,&#148; is available on the Company&#146;s website
at <I>usairways.com </I>(under the &#147;About US
Airways&nbsp;&#151; Investor Relations&#148; caption). The
Company intends to disclose any changes in or waivers from its
code of ethics by posting such information on its website or by
filing a Report on Form&nbsp;8-K.
</DIV>

<P align="center" style="font-size: 10pt;">101

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<DIV align="left" style="font-size: 10pt;">
<A name='242'></A>
</DIV>

<!-- link1 "Item 11. Executive Compensation" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;11.&nbsp;</B></TD>
    <TD>
    <B>Executive Compensation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The annual retainer payable to non-employee directors in 2004
was $12,000, plus an additional annual amount of $10,000 for the
Audit Committee Chairman, $10,000 for the Human Resources
Committee Chairman, $5,000 for the Corporate Governance and
Nominating Committee Chairman, $5,000 for the Safety Committee
Chairman, $5,000 for the Social Responsibility Chairman, and
$5,000 for the Strategy and Finance Committee Chairman. Each
non-employee director also receives $5,000 for each regularly
scheduled Board meeting attended, $2,000 for each other Board
meeting attended, $2,000 for each Audit Committee meeting
attended and $1,000 for each meeting of any other Board
committee attended by such non-employee director. Pursuant to
the terms of the US Airways Group, Inc. 2003 Nonemployee
Director Deferred Stock Unit Plan (described below), the
directors may be permitted to elect to receive all or a portion
of their retainer and meeting fees in the form of deferred stock
units. During 2004, directors who were also employees received
their compensation in their capacities as employees of US
Airways Group and US&nbsp;Airways and received no additional
compensation as directors of US Airways Group and US Airways.
Mr.&nbsp;Stephens and Dr.&nbsp;Bronner waived all director
compensation for 2004. All directors are also reimbursed for
reasonable out-of-pocket expenses incurred in connection with
attending Board and committee meetings upon the submission of
receipts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each director, director&#146;s spouse and the director&#146;s
dependent children, as well as a limited number of non-eligible
family members and unrelated persons, are provided free
transportation on US Airways and reimbursement for federal and
state income taxes incurred thereon. Additionally, these
benefits are provided for retired directors. During 2004,
non-employee directors received the following benefits under
this program: Dr.&nbsp;Bronner&nbsp;&#150; $0.00;
Mr.&nbsp;Harter&nbsp;&#150; $3,490.17;
Ms.&nbsp;Jacobsen&nbsp;&#150; $7,037.72;
Mr.&nbsp;Johnson&nbsp;&#150; $2,214.27;
Ms.&nbsp;Krongard&nbsp;&#150; $4,255.25;
Mr.&nbsp;Mantineo&nbsp;&#150; $693.92;
Mr.&nbsp;McKenna&nbsp;&#150; $1,019.73;
Mr.&nbsp;Mirka&nbsp;&#150; $3,861.12;
Mr.&nbsp;Philip&nbsp;&#150; $967.20; Mr.&nbsp;Simon&nbsp;&#150;
$4,133.62; and Mr.&nbsp;Stephens&nbsp;&#150; $0.00. Former
directors received the following benefits under this program
during 2004: Mathias J. DeVito&nbsp;&#150; $2,030.64; Rono
Dutta&nbsp;&#150; $273.16; Peter M. George&nbsp;&#150;
$2,648.13; Robert L. LeBuhn&nbsp;&#150; $8,430.40; John G.
Medlin,&nbsp;Jr.&nbsp;&#150; $1,438.64; Thomas H.
O&#146;Brien&nbsp;&#150; $2,999.72; Hilda
Ochoa-Brillembourg&nbsp;&#150; $8,157.53; Richard B.
Priory&nbsp;&#150; $2,153.76; and Raymond W. Smith&nbsp;&#150;
$9,950.51. Directors emeriti received the following benefits
under this program during 2004: Gilbert T. Bowman&nbsp;&#150;
$134.94; Edwin I. Colodny&nbsp;&#150; $7,747.22; George J. W.
Goodman&nbsp;&#150; $4,566.18; John&nbsp;W. Harris&nbsp;&#150;
$6,423.81; Edward A. Horrigan,&nbsp;Jr.&nbsp;&#150; $4,111.76;
David C. Jones&nbsp;&#150; $1,401.36; and J.&nbsp;Warren
McClure&nbsp;&#150; $1,214.12.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The compensation for non-employee directors consists of cash and
flight benefits as described above, and stock-based
compensation. Each year active non-employee directors receive a
grant of 5,000 stock options pursuant to the US Airways Group,
Inc. 2003 Nonemployee Director Stock Incentive Plan, as amended,
and $10,000 worth of deferred stock units pursuant to the US
Airways Group, Inc. 2003 Nonemployee Director Deferred Stock
Unit Plan, as amended. Using stock-based compensation for
directors is intended to more closely align directors&#146;
financial interests with that of the Company&#146;s
stockholders. The ultimate recovery, if any, to holders of the
common stock will not be determined until confirmation of a plan
of reorganization. The plan of reorganization could result in
holders of US Airways Group&#146;s common stock and related
equity securities receiving no distribution on account of their
interest and cancellation of the equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The US Airways Group, Inc. 2003 Nonemployee Director Stock
Incentive Plan, as amended (the NDSIP) is administered by US
Airways Group&#146;s Human Resources Committee, which has the
power to interpret the NDSIP and to determine rules and
procedures under the NDSIP. As of December&nbsp;31, 2004, there
were a total of 500,000&nbsp;shares of Class&nbsp;A Common Stock
reserved for issuance under the NDSIP, of which
91,397&nbsp;shares were subject to outstanding options and
408,603&nbsp;shares were available for future option grants. As
of December&nbsp;31, 2004, there were 11&nbsp;directors eligible
to participate in the NDSIP. The directors eligible for grants
under the NDSIP are those who are not employees of US Airways
Group or its subsidiaries on the date that an option would be
granted. Eligible directors receive an option to
purchase&nbsp;5,000&nbsp;shares of stock on the first business
day following US Airways Group&#146;s annual stockholders
meeting. In addition, newly elected or appointed eligible
directors receive a portion of the 5,000&nbsp;share annual grant
upon commencement of service, prorated for the remaining period
until the next annual stockholders meeting. The exercise price of
</DIV>

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<DIV align="left" style="font-size: 10pt;">
options under the NDSIP is the fair market value (generally, the
closing price on the most recent date preceding the date of
grant for which a price was reported) of a share of Class&nbsp;A
Common Stock on the date of grant of the option, and is payable
in cash. Each option becomes exercisable on the earliest to
occur of: (i)&nbsp;the first anniversary of the date of grant,
(ii)&nbsp;the director&#146;s death, disability, or completion
of the last term of office to which the director was elected, or
(iii)&nbsp;a &#147;change of control&#148; of US Airways Group
(described below). Upon termination of the director&#146;s
service, options that have not become exercisable terminate, and
options that are exercisable remain exercisable for two years
after the date of termination of the director&#146;s service, or
such other period as the Human Resources Committee may
determine. Options expire ten years after the date of grant and
are not transferable except by the laws of descent and
distribution. No options may be granted under the NDSIP more
than ten years after its effective date. The Board may alter,
amend, suspend or terminate the NDSIP at any time, but any such
action may not affect a director&#146;s rights under the NDSIP
without his or her consent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The US Airways Group, Inc. 2003 Nonemployee Director Deferred
Stock Unit Plan, as amended (the DSUP) is administered by US
Airways Group&#146;s Human Resources Committee, which has the
power to interpret the DSUP and to determine rules and
procedures under the DSUP. As of December&nbsp;31, 2004, there
were a total of 77,804.7&nbsp;shares of Class&nbsp;A Common
Stock subject to outstanding deferred stock units. As of
December&nbsp;31, 2004, there were 11&nbsp;directors eligible to
participate in the DSUP. The directors eligible for grants under
the DSUP are those who are not employees of US Airways Group or
its subsidiaries on the date that a deferred stock unit is
granted. Deferred stock units under the DSUP are reflected in a
bookkeeping account until distributed to the director, and
reflect an unsecured promise for US Airways Group to pay
benefits under the DSUP. On the first business day following US
Airways Group&#146;s annual stockholders meeting, eligible
directors are credited with a number of deferred stock units
equal to the quotient obtained by dividing $10,000 by the fair
market value (generally, the closing price on the most recent
date preceding the date of grant for which a price was reported)
of a share of Class&nbsp;A Common Stock on the date of grant. In
addition, newly elected or appointed eligible directors receive
a portion of the $10,000 grant upon commencement of service,
prorated for the remaining period until the next annual
stockholders meeting. The Committee may also permit eligible
directors to defer receipt of their annual retainers and meeting
fees and in exchange receive deferred stock units on such terms
and conditions as the Human Resources Committee deems
appropriate. Each deferred stock unit (other than deferred stock
units issued upon the deferral of retainers and meeting fees,
which are always fully vested) becomes vested and nonforfeitable
on the director&#146;s termination of service as a member of the
Board. Upon payment of a dividend on Class&nbsp;A Common Stock,
each bookkeeping account under the DSUP will be credited with an
additional number of deferred stock units equal to the product
of the dividend per share multiplied by the number of deferred
stock units in the account on the dividend record date, divided
by the fair market value of a share of Class&nbsp;A Common Stock
on the dividend payment date. On the
February&nbsp;1st&nbsp;immediately following termination of the
director&#146;s service as a non-employee director, the director
will generally receive a lump-sum cash payment equal to the
number of deferred stock units credited to the director&#146;s
account multiplied by the average of the fair market value of a
share of Class&nbsp;A Common Stock for the five business days
immediately preceding such February&nbsp;1st; however, a
director may elect instead to receive payment in up to four
annual installments. If the termination of service is after a
change of control (described below): (i)&nbsp;payment will be
made as soon as practicable following termination of the
director&#146;s service, rather than on the next
February&nbsp;1st; (ii)&nbsp;installment payments will not be
available; (iii)&nbsp;the director&#146;s payment will be based
on the number of shares in his or her account immediately prior
to the change of control; and (iv)&nbsp;with respect to the fair
market value used to determine the value of stock units for
payment, no averaging will be used and fair market value will
generally be the closing price on the immediately preceding date
for which a price was reported, except that if consideration is
received by US Airways Group&#146;s stockholders in the change
of control transaction, the fair market value of a share of
stock will be the value of per-share consideration received by
stockholders pursuant to the change of control transaction. If
the director was a member of the Board for at least five years
prior to termination of service, or if the director terminated
service due to death or disability, at the time of payment of
benefits under the DSUP the director will recei ve an additional
tax-gross up payment such that the net amount of the gross-up
payment after deduction of federal, state and local income tax
on the gross-up payment equals the total federal, state and
local income tax owed by the director on the DSUP distribution
payment. Deferred
</DIV>

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<DIV align="left" style="font-size: 10pt;">
stock units are not transferable except by the laws of descent
and distribution. No deferred stock units may be granted under
the DSUP more than ten years after its effective date. The Board
may alter, amend, suspend or terminate the DSUP at any time, but
any such action may not affect a director&#146;s rights under
the DSUP without his or her consent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Change of control is defined under the NDSIP and the DSUP as any
of the following events: (i)&nbsp;an individual, entity or group
acquires 30% or more of either the then-outstanding shares of US
Airways Group&#146;s common stock (the Outstanding Common Stock)
or the combined voting power of US Airways Group&#146;s
then-outstanding voting securities entitled to vote generally in
the election of directors (the Outstanding Voting Securities),
excluding: (A)&nbsp;acquisitions from US Airways Group,
(B)&nbsp;certain acquisitions by groups related to US Airways
Group and its stockholders, (C)&nbsp;acquisitions following
which the holders of Outstanding Common Stock and Outstanding
Voting Securities prior to the acquisition own, in substantially
the same proportions as their ownership immediately prior to the
acquisition, more than 85% of the common stock and voting
securities, respectively, of the acquiring corporation, and
(D)&nbsp;acquisitions where the acquirer reports its beneficial
ownership of Outstanding Common Stock and Outstanding Voting
Securities on Schedule&nbsp;13G pursuant to Rule&nbsp;13d-1 of
the Exchange Act; (ii)&nbsp;incumbent board members and
individuals whose nomination or election is approved by a
majority of the incumbent board members (or their
incumbent-approved successors) cease to constitute a majority of
the Board; (iii)&nbsp;a reorganization, merger or consolidation
is consummated under which the beneficial owners of the
Outstanding Common Stock or Outstanding Voting Securities
immediately prior to such event beneficially own less than 85%
of the resulting shares of common stock or voting securities,
respectively, following the transaction, in substantially the
same proportions as their ownership prior to the transaction;
(iv)&nbsp;approval by US Airways Group&#146;s stockholders of a
complete liquidation or dissolution of US Airways Group; or
(v)&nbsp;consummation of the sale or other disposition of all or
substantially all of US Airways Group&#146;s assets, other than
to a corporation with respect to which beneficial owners of the
Outstanding Common Stock and Outstanding Voting Securities
before the transaction own more than 85% of the resulting shares
of common stock or voting securities, respectively, in
substantially the same proportions as their ownership prior to
the transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation of Executive Officers</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following Summary Compensation Table sets forth the total
compensation paid for the fiscal years ended December&nbsp;31,
2004, 2003 and 2002 to the individuals who served as Chief
Executive Officer of US&nbsp;Airways Group and US Airways during
the 2004 fiscal year, each of the four other most highly
compensated executive officers who were serving as executive
officers as of December&nbsp;31, 2004 of US&nbsp;Airways Group,
US&nbsp;Airways or any other subsidiary of US Airways Group and
one additional individual for whom disclosures would have been
provided but who was not serving as an executive officer as of
December&nbsp;31, 2004 of US&nbsp;Airways Group, US Airways or
any other subsidiary of US Airways Group (collectively referred
to as the &#147;named executive officers&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amounts shown in the table below for Restricted Stock Awards
reflect amounts granted since US&nbsp;Airways Group and its
subsidiaries emerged from the prior Chapter&nbsp;11
reorganization on March&nbsp;31, 2003. The ultimate recovery, if
any, to holders of the common stock will not be determined until
confirmation of a plan of reorganization. The plan of
reorganization could result in holders of US Airways
Group&#146;s common stock and related equity securities
receiving no distribution on account of their interest and
cancellation of the equity. The named executive officers also
had previous restricted stock awards granted by US Airways
Group&#146;s predecessor company, but these shares were
cancelled as a part of the 2003 Plan and the named executive
officers received no consideration for this cancellation. The
prior awards are described in the footnotes to the table.
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Compensation Table</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Annual Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Long-Term Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Restricted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Name and Principal</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other Annual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options/</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>All Other</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap>&nbsp;<B>Position(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Salary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Bonus(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Awards(3)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Warrants&nbsp;(#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation(19)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bruce R. Lakefield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>286,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>81,369</TD>
    <TD align="left" valign="bottom" nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>687,952</TD>
    <TD align="left" valign="bottom" nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>288,800</TD>
    <TD align="left" valign="bottom" nowrap>(18)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>46,882</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President and</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>77,399</TD>
    <TD align="left" valign="bottom" nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD align="left" valign="bottom" nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD align="left" valign="bottom" nowrap>(18)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Alan W. Crellin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>346,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>219,940</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>354,550</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>352,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>72,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>227,368</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,469,530</TD>
    <TD align="left" valign="bottom" nowrap>(12)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,600</TD>
    <TD align="left" valign="bottom" nowrap>(18)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>376,256</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President&nbsp;&#151; Operations</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>392,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>102,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,116</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>(12)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD align="left" valign="bottom" nowrap>(18)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75,375</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Elizabeth K. Lanier</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>345,966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>183,178</TD>
    <TD align="left" valign="bottom" nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>249,732</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>284,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>184,492</TD>
    <TD align="left" valign="bottom" nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,382,856</TD>
    <TD align="left" valign="bottom" nowrap>(13)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,600</TD>
    <TD align="left" valign="bottom" nowrap>(18)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>267,266</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President&nbsp;&#151;&nbsp;Corporat</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>e 2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Affairs, General Counsel and Secretary</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jerrold A. Glass</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>313,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>169,581</TD>
    <TD align="left" valign="bottom" nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>239,379</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>319,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>181,174</TD>
    <TD align="left" valign="bottom" nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,382,856</TD>
    <TD align="left" valign="bottom" nowrap>(14)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,600</TD>
    <TD align="left" valign="bottom" nowrap>(18)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>270,023</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employee Relations</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>248,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>192,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,887</TD>
    <TD align="left" valign="bottom" nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>(14)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,000</TD>
    <TD align="left" valign="bottom" nowrap>(18)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,673</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    B. Ben Baldanza</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>347,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>196,946</TD>
    <TD align="left" valign="bottom" nowrap>(8)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>270,027</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Former Senior Vice</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>352,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>201,880</TD>
    <TD align="left" valign="bottom" nowrap>(8)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,382,856</TD>
    <TD align="left" valign="bottom" nowrap>(15)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,600</TD>
    <TD align="left" valign="bottom" nowrap>(18)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>285,191</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President&nbsp;&#151; Marketing</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>397,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,041</TD>
    <TD align="left" valign="bottom" nowrap>(8)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>54,454</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    and Planning</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David N. Siegel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>198,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>538,835</TD>
    <TD align="left" valign="bottom" nowrap>(9)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,654,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Former President and</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,935</TD>
    <TD align="left" valign="bottom" nowrap>(9)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,297,136</TD>
    <TD align="left" valign="bottom" nowrap>(16)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>669,600</TD>
    <TD align="left" valign="bottom" nowrap>(18)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,955</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>533,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>750,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,637</TD>
    <TD align="left" valign="bottom" nowrap>(9)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>(16)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>750,000</TD>
    <TD align="left" valign="bottom" nowrap>(18)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>115,465</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Neal S. Cohen</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>128,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,161</TD>
    <TD align="left" valign="bottom" nowrap>(10)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,607,670</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Former Executive Vice</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>394,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>256,684</TD>
    <TD align="left" valign="bottom" nowrap>(10)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,765,712</TD>
    <TD align="left" valign="bottom" nowrap>(17)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>223,200</TD>
    <TD align="left" valign="bottom" nowrap>(18)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>364,081</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President&nbsp;&#151; Finance and</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>306,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>435,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,523</TD>
    <TD align="left" valign="bottom" nowrap>(10)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>(17)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300,000</TD>
    <TD align="left" valign="bottom" nowrap>(18)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>46,099</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Lakefield was appointed as President and Chief
    Executive Officer of US Airways Group and US Airways on
    April&nbsp;19, 2004 following the departure of Mr.&nbsp;Siegel
    on that date. Mr.&nbsp;Cohen terminated his employment effective
    April&nbsp;30, 2004. Mr.&nbsp;Baldanza served as Senior Vice
    President&nbsp;&#151; Marketing and Planning through
    December&nbsp;31, 2004, but terminated his employment effective
    January&nbsp;15, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Amounts reflected for Mr.&nbsp;Crellin were earned in 2001 and
    paid in 12&nbsp;monthly installments beginning in June 2002.
    Amounts reflected for Ms.&nbsp;Lanier and Messrs.&nbsp;Siegel
    and Cohen were paid in connection with their commencement of
    employment by US Airways and in lieu of foregone compensation
    from prior employers due to the change of employment. Awards for
    Mr.&nbsp;Glass were paid in connection with his commencement of
    employment by US Airways.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    The figures in this column for 2004 and 2003 reflect the value
    of shares of US Airways Group&#146;s Class&nbsp;A Common Stock
    subject to certain restrictions (Restricted Stock) on the date
    of grant using the per share value of the stock on the date of
    grant, as further described in footnotes&nbsp;11 through 17
    below. Additionally, in connection with US Airways Group&#146;s
    and its subsidiaries&#146; Prior Bankruptcy, under the 2003 Plan
    all outstanding shares of common stock of US Airways
    Group&#146;s predecessor corporation were cancelled on
    March&nbsp;31, 2003, the effective date of the 2003 Plan.
    Consequently, all shares of predecessor corporation restricted
    stock granted to the named executive officers in 2002 have been
    cancelled, as further described below. The aggregate number of
    shares of Restricted Stock held by each of Ms.&nbsp;Lanier and
    Messrs.&nbsp;Lakefield, Crellin, Glass, Baldanza, Siegel and
    Cohen on December&nbsp;31, 2004, and the respective fair market
    value of the stock on such date were, respectively:
    Mr.&nbsp;Lakefield&nbsp;&#150; 471,200&nbsp;shares, $537,168;
    Mr.&nbsp;Crellin&nbsp;&#150; 188,400&nbsp;shares, $214,776;
    Ms.&nbsp;Lanier&nbsp;&#150; 188,400&nbsp;shares, $214,776;
    Mr.&nbsp;Glass&nbsp;&#150; 188,400&nbsp;shares, $214,776;
    Mr.&nbsp;Baldanza&nbsp;&#150; 188,400&nbsp;shares, $214,776;
    Mr.&nbsp;Siegel&nbsp;&#150; 0&nbsp;shares, $0; and
    Mr.&nbsp;Cohen&nbsp;&#150; 1,594&nbsp;shares, $1,817. The
    Restricted Stock is entitled to the same dividends, if any,
    payable on outstanding shares of Class&nbsp;A Common Stock. The
    ultimate recovery, if any, to holders of the common stock will
    not be determined until confirmation of a plan of
    reorganization. The plan of reorganization could result in
    holders of US Airways Group&#146;s common stock and related
    equity securities receiving no distribution on account of their
    interest and cancellation of the equity.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Amount disclosed for 2004 includes $29,371 for tax liability
    related to temporary living expenses, $9,835 in income and tax
    liability payments related to personal travel provided by US
    Airways, $2,663 for tax liability payments related to premiums
    paid by US Airways on a life insurance policy (as described in
    footnote&nbsp;19)&nbsp;and $39,500 for director fees paid for
    service as a member of the Board of Directors through
    April&nbsp;19, 2004, which consists of fees paid for board and
    committee meeting attendance. Amount disclosed for 2003 includes
    $73,250 for director fees paid for service as a member of the
    Board of Directors, which amount includes an annual retainer,
    fees paid for board and committee meeting attendance, and
    service as Chairman of the Human Resources and Strategy and
    Finance Committees, and $4,149 in income and tax liability
    payments related to personal travel provided by US&nbsp;Airways.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">105

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Amount disclosed for 2004 includes $9,000 paid for automobile
    expenses, $7,668 in income and tax liability payments related to
    personal travel provided by US Airways, $4,386 for tax liability
    payments related to premiums paid by US Airways on a life
    insurance policy (as described in footnote&nbsp;19)&nbsp;and
    $198,886 for tax liability payments related to company
    contributions under the US Airways Funded Executive Defined
    Contribution Plan (as described in footnote&nbsp;19). Amount
    disclosed for 2003 includes $9,000 paid for automobile expenses,
    $1,081 in income and tax liability payments related to personal
    travel provided by US Airways, $2,730 for tax liability payments
    related to premiums paid by US&nbsp;Airways on a life insurance
    policy and $214,557 for tax liability payments related to
    company contributions under the US Airways Funded Executive
    Defined Contribution Plan. Amount disclosed for 2002 includes
    $10,229 in income and tax liabilities incurred in connection
    with certain compensation related expenses, $8,250 paid for
    automobile expenses and $637 for income and tax liability
    payment related to personal travel provided by US Airways.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Amount disclosed for 2004 includes $33,908 for tax liability
    related to temporary living expenses, $9,000 paid for automobile
    expenses, $16,904 in income and tax liability payments related
    to personal travel provided by US Airways, $2,346 for tax
    liability payments related to premiums paid by US&nbsp;Airways
    on a life insurance policy (as described in
    footnote&nbsp;19)&nbsp;and $121,020 for tax liability payments
    related to company contributions under the US Airways Funded
    Executive Defined Contribution Plan (as described in
    footnote&nbsp;19). Amount disclosed for 2003 includes $30,345
    for tax liability related to temporary living expenses, $6,750
    paid for automobile expenses, $20,650 in income and tax
    liability payments related to personal travel provided by US
    Airways, $2,275 for tax liability payments related to premiums
    paid by US Airways on a life insurance policy and $124,472 for
    tax liability payments related to company contributions under
    the US Airways Funded Executive Defined Contribution Plan.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Amount disclosed for 2004 includes $710 for tax and financial
    planning services, $9,000 paid for automobile expenses, $11,686
    in income and tax liability payments related to personal travel
    provided by US Airways, $2,116 for tax liability payments
    related to premiums paid by US Airways on a life insurance
    policy (as described in footnote&nbsp;19)&nbsp;and $146,069 for
    tax liability payments related to company contributions under
    the US Airways Funded Executive Defined Contribution Plan (as
    described in footnote&nbsp;19). Amount disclosed for 2003
    includes $1,055 for tax and financial planning services, $5,250
    paid for automobile expenses, $13,272 in income and tax
    liability payments related to personal travel provided by US
    Airways, $1,606 for tax liability payments related to premiums
    paid by US&nbsp;Airways on a life insurance policy and $159,991
    for tax liability payments related to company contributions
    under the US Airways Funded Executive Defined Contribution Plan.
    Amount disclosed for 2002 includes $4,887 for income and tax
    liability payments related to personal travel provided by
    US&nbsp;Airways.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    Amount disclosed for 2004 includes $10,000 for tax and financial
    planning services, $9,000 paid for automobile expenses, $7,788
    in income and tax liability payments related to personal travel
    provided by US Airways, $1,020 for tax liability payments
    related to premiums paid by US Airways on a life insurance
    policy (as described in footnote&nbsp;19)&nbsp;and $169,138 for
    tax liability payments related to company contributions under
    the US Airways Funded Executive Defined Contribution Plan (as
    described in footnote&nbsp;19). Amount disclosed for 2003
    includes $10,000 for tax and financial planning services, $5,250
    paid for automobile expenses, $3,229 in income and tax liability
    payments related to personal travel provided by US Airways,
    $1,187 for tax liability payments related to premiums paid by
    US&nbsp;Airways on a life insurance policy and $182,214 for tax
    liability payments related to company contributions under the US
    Airways Funded Executive Defined Contribution Plan. Amount
    disclosed for 2002 includes $13,884 in income and tax
    liabilities incurred in connection with certain compensation
    related expenses and $3,157 for income and tax liability payment
    related to personal travel provided by US&nbsp;Airways.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    Amount disclosed for 2004 includes $12,000 for tax and financial
    planning services, $6,000 paid for automobile expenses, $26,815
    in income and tax liability payments related to personal travel
    provided by US Airways, $579 for tax liability payments related
    to premiums paid by US Airways on a life insurance policy (as
    described in footnote&nbsp;19)&nbsp;and $493,441 for tax
    liability payments related to company contributions under the US
    Airways Funded Executive Defined Contribution Plan (as described
    in footnote&nbsp;19). Amount disclosed for 2003 includes $8,570
    for tax and financial planning services, $18,000 paid for
    automobile expenses, $1,996 for tax liability payments related
    to premiums paid by US&nbsp;Airways on a life insurance policy
    and $21,369 in income and tax liability payments related to
    personal travel provided by US Airways. Amount disclosed for
    2002 includes $31,663 for tax liability related to relocation
    and moving expenses, $13,500 paid for automobile expenses and
    $2,474 in income and tax liability payments related to personal
    travel provided by US Airways.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    Amount disclosed for 2004 includes $2,517 for tax liability
    related to temporary living expenses, $3,000 paid for automobile
    expenses, $8,710 in income and tax liability payments related to
    personal travel provided by US Airways, $350 for tax liability
    payments related to premiums paid by US Airways on a life
    insurance policy (as described in footnote&nbsp;19)&nbsp;and
    $44,584 for tax liability payments related to company
    contributions under the US Airways Funded Executive Defined
    Contribution Plan (as described in footnote&nbsp;19). Amount
    disclosed for 2003 includes $1,500 for tax and financial
    planning services, $31,465 for tax liability related to
    temporary living expenses, $9,000 paid for automobile expenses,
    $13,701 in income and tax liability payments related to personal
    travel provided by US Airways, $1,211 for tax liability payments
    related to premiums paid by US Airways on a life insurance
    policy and $199,807 for tax liability payments related to
    company contributions under the US Airways Funded Executive
    Defined Contribution Plan. Amount disclosed for 2002 includes
    $31,392 for tax liability related to temporary living expenses,
    $6,000 paid for automobile expenses and $3,131 for income and
    tax liability payments related to personal travel provided by US
    Airways.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)&nbsp;</TD>
    <TD align="left">
    Amount disclosed for 2004 reflects an award of
    471,200&nbsp;shares of Restricted Stock to Mr.&nbsp;Lakefield
    effective May&nbsp;19, 2004 based on a per share value of $1.46
    on the grant date, vesting 25% on each of April&nbsp;19, 2005,
    2006, 2007 and 2008. Amount disclosed for 2003 reflects an award
    of 1,362.4 deferred stock units granted to Mr.&nbsp;Lakefield
    effective July&nbsp;31, 2003, under the 2003 Nonemployee
    Director Deferred Stock Unit Plan, based on a per share value of
    $7.34 on the grant date. The deferred stock units are payable
    solely in cash upon termination of service as a member of the
    Board. The deferred stock units are entitled to dividend
    equivalents if any dividends are paid on the Class&nbsp;A Common
    Stock.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">106

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(12)&nbsp;</TD>
    <TD align="left">
    The amount disclosed for 2003 reflects an award of
    (a)&nbsp;102,584&nbsp;shares of Restricted Stock effective
    July&nbsp;31, 2003, vesting 50% on June&nbsp;30, 2005 and 50% on
    January&nbsp;1, 2006, based on a per share value of $7.34 on the
    grant date, and (b)&nbsp;85,816&nbsp;shares of Restricted Stock
    effective October&nbsp;16, 2003, vesting 100% on January&nbsp;1,
    2006, based on a per share value of $8.35 on the grant date.
    Because US Airways Group&#146;s Class&nbsp;A Common Stock was
    not listed on the grant dates, the $7.34&nbsp;per share value is
    based on the per share value determined pursuant to the 2003
    Plan and also subsequently paid in a private placement of US
    Airways Group&#146;s Class&nbsp;A Common Stock in August 2003,
    and the $8.35&nbsp;per share value is based on the weighted
    average trading price on the over-the-counter bulletin board for
    the five preceding days, due to the low trading volume on
    October&nbsp;16, 2003. Mr.&nbsp;Crellin had shares of restricted
    stock of US Airways Group&#146;s predecessor corporation which
    were canceled on March&nbsp;31, 2003, the effective date of the
    2003 Plan, and Mr.&nbsp;Crellin received no payment with respect
    to such cancellation. These cancelled shares were received
    pursuant to (a)&nbsp;an award effective January&nbsp;16, 2002 of
    10,000&nbsp;shares of restricted common stock of US Airways
    Group&#146;s predecessor corporation, vesting 25% on each of
    January&nbsp;16, 2003 and the three succeeding anniversaries
    thereafter, with a value of $56,100 based on the closing price
    ($5.61) on the grant date; and (b)&nbsp;an award effective
    October&nbsp;16, 2001 of 15,000&nbsp;shares of restricted common
    stock of US Airways Group&#146;s predecessor corporation,
    vesting 25% on November&nbsp;15, 2001, 25% on December&nbsp;1,
    2002 and 25% on each of October&nbsp;16, 2003 and
    October&nbsp;16, 2004, with a value of $80,400 based on the
    closing price ($5.36) on the grant date.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(13)&nbsp;</TD>
    <TD align="left">
    Amount disclosed for 2003 reflects an award of
    188,400&nbsp;shares of Restricted Stock effective July&nbsp;31,
    2003, vesting 50% on June&nbsp;30, 2005 and 50% on
    January&nbsp;1, 2006, based on a per share value of $7.34 on the
    grant date. Because US Airways Group&#146;s Class&nbsp;A Common
    Stock was not listed on the grant date, the $7.34&nbsp;per share
    value is based on the per share value determined pursuant to the
    2003 Plan and also subsequently paid in a private placement of
    US Airways Group&#146;s Class&nbsp;A Common Stock in August 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(14)&nbsp;</TD>
    <TD align="left">
    The amount disclosed for 2003 reflects an award of
    188,400&nbsp;shares of Restricted Stock effective July&nbsp;31,
    2003, vesting 50% on June&nbsp;30, 2005 and 50% on
    January&nbsp;1, 2006, based on a per share value of $7.34 on the
    grant date. Because US Airways Group&#146;s Class&nbsp;A Common
    Stock was not listed on the grant date, the $7.34&nbsp;per share
    value is based on the per share value determined pursuant to the
    2003 Plan and also subsequently paid in a private placement of
    US Airways Group&#146;s Class&nbsp;A Common Stock in August
    2003. Mr.&nbsp;Glass also had shares of restricted stock of US
    Airways Group&#146;s predecessor corporation which were canceled
    on March&nbsp;31, 2003, the effective date of the 2003 Plan, and
    Mr.&nbsp;Glass received no payment with respect to such
    cancellation. These cancelled shares were received pursuant to
    an award effective April&nbsp;8, 2002 of 25,000&nbsp;shares of
    restricted common stock of US Airways Group&#146;s predecessor
    corporation, vesting 34% on April&nbsp;8, 2003 and 33% on each
    of April&nbsp;8, 2004 and April&nbsp;8, 2005, with a value of
    $151,000 based on the closing price ($6.04) on the grant date.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(15)&nbsp;</TD>
    <TD align="left">
    The amount disclosed for 2003 reflects an award of
    188,400&nbsp;shares of Restricted Stock effective July&nbsp;31,
    2003, vesting 50% on June&nbsp;30, 2005 and 50% on
    January&nbsp;1, 2006, based on a per share value of $7.34 on the
    grant date. Because US Airways Group&#146;s Class&nbsp;A Common
    Stock was not listed on the grant date, the $7.34&nbsp;per share
    value is based on the per share value determined pursuant to the
    2003 Plan and also subsequently paid in a private placement of
    US Airways Group&#146;s Class&nbsp;A Common Stock in August
    2003. All of Mr.&nbsp;Baldanza&#146;s shares of Restricted Stock
    were forfeited upon his termination of employment on
    January&nbsp;15, 2005. Mr.&nbsp;Baldanza had shares of
    restricted stock of US Airways Group&#146;s predecessor
    corporation which were canceled on March&nbsp;31, 2003, the
    effective date of the 2003 Plan, and Mr.&nbsp;Baldanza received
    no payment with respect to such cancellation. These cancelled
    shares were received pursuant to an award effective
    October&nbsp;16, 2001 of 15,000&nbsp;shares of restricted common
    stock of US Airways Group&#146;s predecessor corporation,
    vesting 25% on November&nbsp;15, 2001, 25% on December&nbsp;1,
    2002 and 25% on each of October&nbsp;16, 2003 and
    October&nbsp;16, 2004, with a value of $80,400 based on the
    closing price ($5.36) on the grant date.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(16)&nbsp;</TD>
    <TD align="left">
    The amount disclosed for 2003 reflects an award of
    1,130,400&nbsp;shares of Restricted Stock to Mr.&nbsp;Siegel,
    based on a per share value of $7.34 on the grant date, vesting
    no later than January&nbsp;1, 2006. Upon his termination of
    employment on April&nbsp;19, 2004, the shares became fully
    vested. Because US Airways Group&#146;s Class&nbsp;A Common
    Stock was not listed on the grant date, the $7.34&nbsp;per share
    value is based on the per share value determined pursuant to the
    2003 Plan and also subsequently paid in a private placement of
    US Airways Group&#146;s Class&nbsp;A Common Stock in August
    2003. Mr.&nbsp;Siegel also had shares of restricted stock of US
    Airways Group&#146;s predecessor corporation which were
    cancelled on March&nbsp;31, 2003, the effective date of US
    Airways Group&#146;s 2003 Plan, and Mr.&nbsp;Siegel received no
    payment with respect to such cancellation. These cancelled
    shares were received pursuant to an award effective
    March&nbsp;11, 2002 of 350,000&nbsp;shares of restricted common
    stock of US Airways Group&#146;s predecessor corporation,
    vesting 100% on March&nbsp;11, 2005, with a value of $2,359,000
    based on the closing price ($6.74) on the grant date.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(17)&nbsp;</TD>
    <TD align="left">
    The amount disclosed for 2003 reflects an award of
    376,800&nbsp;shares of Restricted Stock effective July&nbsp;31,
    2003, vesting 50% on January&nbsp;1, 2005 and 50% on
    January&nbsp;1, 2006, based on a per share value of $7.34 on the
    grant date. Upon his termination of employment on April&nbsp;30,
    2004, the shares became fully vested. Because US Airways
    Group&#146;s Class&nbsp;A Common Stock was not listed on the
    grant date, the $7.34&nbsp;per share value is based on the per
    share value determined pursuant to the 2003 Plan and also
    subsequently paid in a private placement of US Airways
    Group&#146;s Class&nbsp;A Common Stock in August 2003.
    Mr.&nbsp;Cohen had shares of restricted stock of US Airways
    Group&#146;s predecessor corporation which were canceled on
    March&nbsp;31, 2003, the effective date of the 2003 Plan, and
    Mr.&nbsp;Cohen received no payment with respect to such
    cancellation. These cancelled shares were received pursuant to
    an award effective April&nbsp;8, 2002 of 100,000&nbsp;shares of
    restricted common stock of US Airways Group&#146;s predecessor
    corporation, vesting 34% on April&nbsp;8, 2003, and 33% on each
    of April&nbsp;8, 2004 and April&nbsp;8, 2005, with a value of
    $604,000 based on the closing price ($6.04) on the grant date.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(18)&nbsp;</TD>
    <TD align="left">
    Amounts shown for 2004 reflect options granted in 2004, as
    described under &#147;Option Grants&#148; below. Amounts shown
    for 2003 for all named executive officers other than
    Mr.&nbsp;Lakefield reflect Class&nbsp;A-1 Warrants (Warrants)
    granted in 2003 with an exercise price of $7.42&nbsp;per share.
    Amounts shown for 2003 for Mr.&nbsp;Lakefield include options
    exercisable for 5,000&nbsp;shares of Class&nbsp;A Common Stock
    granted pursuant to the 2003 Nonemployee Director Stock
    Incentive Plan. Amounts shown for 2002 reflect options</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">107

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">exercisable for shares of common
    stock of US Airways Group&#146;s predecessor corporation, all of
    which were cancelled on March&nbsp;31, 2003, the effective date
    of the 2003 Plan. The respective officer did not receive any
    payment in connection with the cancellation of the options.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt">(19)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">As further described herein,
    amounts disclosed include the value of life insurance benefits
    for the named executive officers and contributions to various
    defined contribution pension plans. Under the US&nbsp;Airways
    life insurance plan, individual life insurance coverage is
    available to executive officers, with US&nbsp;Airways paying the
    premium associated with this coverage. The following amounts
    reflect the dollar value of premiums paid by US Airways on life
    insurance policies in 2004 for its named executives:
    Mr.&nbsp;Lakefield&nbsp;&#150; $3,805;
    Mr.&nbsp;Crellin&nbsp;&#150; $6,321; Ms.&nbsp;Lanier&nbsp;&#150;
    $3,381; Mr.&nbsp;Glass&nbsp;&#150; $3,050;
    Mr.&nbsp;Baldanza&nbsp;&#150; $1,470;
    Mr.&nbsp;Siegel&nbsp;&#150; $780; and Mr.&nbsp;Cohen&nbsp;&#150;
    $500. Amounts disclosed for 2004 include US Airways
    contributions to the US Airways Funded Executive Defined
    Contribution Plan and accruals under the US Airways Unfunded
    Executive Defined Contribution Plan, which were adopted during
    2003 to replace supplemental retirement arrangements in effect
    before US Airways Group and US Airways&#146; prior bankruptcy
    reorganization, and which provide supplemental retirement
    benefits to the executives. The US Airways Funded Executive
    Defined Contribution Plan also provides for full funding of the
    benefits in a secular trust. The following amounts reflect the
    value of the benefits accrued under the US Airways Unfunded
    Executive Defined Contribution Plan during 2004 to the named
    executives: Mr.&nbsp;Lakefield&nbsp;&#150; $0;
    Mr.&nbsp;Crellin&nbsp;&#150; $73,580;
    Ms.&nbsp;Lanier&nbsp;&#150; $32,786; Mr.&nbsp;Glass&nbsp;&#150;
    $34,614; Mr.&nbsp;Baldanza&nbsp;&#150; $34,991;
    Mr.&nbsp;Siegel&nbsp;&#150; $91,714; and
    Mr.&nbsp;Cohen&nbsp;&#150; $8,988. The following amounts reflect
    the value of the benefits contributed to the US Airways Funded
    Executive Defined Contribution Plan during 2004 to the named
    executives: Mr.&nbsp;Lakefield &#150; $0;
    Mr.&nbsp;Crellin&nbsp;&#150; $274,649;
    Ms.&nbsp;Lanier&nbsp;&#150; $167,122; Mr.&nbsp;Glass&nbsp;&#150;
    $201,715; Mr.&nbsp;Baldanza&nbsp;&#150; $233,566;
    Mr.&nbsp;Siegel&nbsp;&#150; $681,419; and
    Mr.&nbsp;Cohen&nbsp;&#150; $61,568. During 2004, US Airways also
    made contributions to Mr.&nbsp;Siegel&#146;s accounts in US
    Airways&#146; tax-qualified defined contribution plans, in the
    amount of $14,677. The other named executives did not receive
    company contributions under US Airways&#146; tax-qualified
    defined contribution plans during 2004. The amount reflected for
    2004 also includes $43,077 in temporary living expenses for
    Mr.&nbsp;Lakefield, $46,443 in temporary living expenses for
    Ms.&nbsp;Lanier and $3,581 in temporary living expenses for
    Mr.&nbsp;Cohen. As a result of his termination of employment
    with US Airways Group and US Airways, Mr.&nbsp;Siegel was paid a
    cash severance payment in the amount of $4,725,410 and $75,000
    for accrued but unused vacation time, each of which is included
    in the 2004 amount. In addition, Mr.&nbsp;Siegel was paid
    $681,419 in settlement of his benefits under the US Airways
    Funded Executive Defined Contribution Plan. This amount has been
    previously included, as described above, and is not separately
    shown in the total in the column. Also included in the 2004
    amount is $65,000 paid to Mr.&nbsp;Siegel as reimbursement for
    legal fees incurred in connection with his separation
    agreements. As a result of his termination of employment with US
    Airways Group and US Airways, Mr.&nbsp;Cohen was paid a cash
    severance payment in the amount of $1,520,000 and $3,033 for
    accrued but unused vacation time, each of which is included in
    the 2004 amount. In addition, Mr.&nbsp;Cohen was paid $338,458
    in settlement of his benefits under the US Airways Funded
    Executive Defined Contribution Plan. This amount has been
    previously included in the Summary Compensation Table and is not
    separately shown in the total included in the column. Also
    included in the 2004 amount is $10,000 paid to Mr.&nbsp;Cohen as
    reimbursement for legal fees incurred in connection with his
    separation agreement.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Option Grants</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth information regarding the number
and terms of options granted to the named executive officers
pursuant to US Airways Group&#146;s 2003 Stock Incentive Plan,
as amended and restated, during the fiscal year ended
December&nbsp;31, 2004.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Option Grants in Last Fiscal Year</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="26%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Potential Realizable</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Value at Assumed</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Annual Rates of Stock</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Price Appreciation for</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Option Term(3)</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options Granted to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise or</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expiration</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options Granted(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Employees in 2004(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Base Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Date</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5% ($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>10% ($)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bruce R. Lakefield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>288,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>06/19/14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>288,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>731,834</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Alan W. Crellin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Elizabeth K. Lanier</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jerrold A. Glass</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    B. Ben Baldanza</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David N. Siegel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Neal S. Cohen</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The options vest 25% on each anniversary of April&nbsp;19, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    The total number of stock options granted to employees in 2004
    was 472,340.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Amounts represent hypothetical gains assuming exercise at the
    end of the option term and assuming rates of stock price
    appreciation of 5% and 10% compounded annually from the date the
    options were granted to their expiration date. The 5% and 10%
    assumed rates of appreciation are mandated by the rules of the
    SEC. These assumptions are not intended to forecast future
    appreciation of US&nbsp;Airways Group&#146;s stock price. The
    potential realizable value computation does not take into
    account federal or state income tax consequences of option
    exercises or sales of appreciated stock. The actual gains, if
    any, on the option exercises will depend on the</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">108

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">future performance of US Airways
    Group&#146;s Class&nbsp;A Common Stock, the option holder&#146;s
    continued employment through applicable vesting periods and the
    date on which the options are exercised and the underlying
    shares are sold. The closing price of US&nbsp;Airways
    Group&#146;s Class&nbsp;A Common Stock on February&nbsp;18, 2005
    was $1.16&nbsp;per share. The ultimate recovery, if any, to
    holders of the common stock will not be determined until
    confirmation of a plan of reorganization. The plan of
    reorganization could result in holders of US&nbsp;Airways
    Group&#146;s common stock and related equity securities
    receiving no distribution on account of their interest and
    cancellation of the equity.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Option and Warrant Exercises</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There were no option or Warrant exercises by the named executive
officers during the fiscal year ended December&nbsp;31, 2004.
The following table sets forth (i)&nbsp;the number of shares
covered by options and Warrants (both exercisable and
unexercisable) as of December&nbsp;31, 2004 and (ii)&nbsp;the
respective value for &#147;in-the-money&#148; options and
Warrants, which represents the positive spread between the
exercise price of existing options and Warrants and the fair
market value of US Airways Group&#146;s Class&nbsp;A Common
Stock at December&nbsp;31, 2004.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Aggregate Option/ Warrant Exercises in Last Fiscal Year
and</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Fiscal Year-End Option/ Warrant Values</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Number of Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Value of Unexercised</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Underlying Unexercised</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>In-The-Money</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Options/Warrants at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Options/Warrants at</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year-End (#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Year-End (#)</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Acquired</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Value</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>on Exercise (#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Realized ($)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unexercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Unexercisable</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bruce R. Lakefield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>288,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Alan W. Crellin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Elizabeth K. Lanier</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jerrold A. Glass</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    B. Ben Baldanza</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David N. Siegel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>669,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Neal S. Cohen</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>223,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Retirement Benefits</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Qualified Retirement Plan.</I> US Airways previously
maintained a defined benefit retirement plan (the Retirement
Plan) for its salaried employees which provided noncontributory
benefits based upon years of service and the employee&#146;s
highest three-year average annual compensation during the last
ten calendar years of service. The Retirement Plan was frozen in
1991, but benefits accrued as of the date the plan was frozen
remain outstanding until they are paid to participants. Under
the Retirement Plan, benefits were generally payable commencing
at age&nbsp;65. However, the Retirement Plan provided reduced
early retirement benefits commencing as early as age&nbsp;55.
Benefits under the Retirement Plan were integrated with the
Social Security program. Compensation under the Retirement Plan
included the employee&#146;s total compensation as reported on
Form&nbsp;W-2, plus exclusions from income due to employee
elections under Sections&nbsp;401(k), 125 and 132(f)(4) of the
Internal Revenue Code of 1986, as amended (the Internal Revenue
Code), minus any imputed income due to the exercise of stock
options, income resulting from group term insurance, income
imputed due to air pass privileges, expense reimbursements and
deferred compensation received in the form of a lump sum
distribution. This definition of compensation excludes the
following items reported as compensation under the Summary
Compensation Table: (i)&nbsp;imputed income from stock options,
(ii)&nbsp;income resulting from group term insurance,
(iii)&nbsp;income imputed due to air pass privileges, and
(iv)&nbsp;certain expense reimbursements. On November&nbsp;12,
2004, US Airways filed a motion requesting a determination from
the Bankruptcy Court that US Airways satisfied the financial
requirements for a &#147;distress termination&#148; of the
Retirement Plan, which the Bankruptcy Court approved on
January&nbsp;6, 2005. The Retirement Plan was terminated
effective January&nbsp;17, 2005, by agreement between the PBGC
and US Airways. Effective February&nbsp;1, 2005, the PBGC was
appointed trustee for the plan. Other than Mr.&nbsp;Crellin,
none of the named executive officers participated in the
Retirement Plan. Mr.&nbsp;Crellin has two years of Credited
Service under the Retirement Plan. Assuming retirement effective
January&nbsp;1, 2005 and payment in the form of a single life
annuity under the Retirement Plan, Mr.&nbsp;Crellin would
receive payments of $1,896.85&nbsp;per month through
January&nbsp;31, 2009, reduced to $1,799.48&nbsp;per month from
February&nbsp;1, 2009 through November&nbsp;30, 2013, and
further reduced to
</DIV>

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<DIV align="left" style="font-size: 10pt;">
$1,755.22&nbsp;per month on and after December 1, 2013. If the
payment were made in the form of a joint and 50% survivor
annuity with Mr.&nbsp;Crellin&#146;s spouse as beneficiary under
the Retirement Plan, Mr.&nbsp;Crellin would receive payments of
$1,701.47&nbsp;per month through January&nbsp;31, 2009, reduced
to $1,614.13&nbsp;per month from February&nbsp;1, 2009 through
November&nbsp;30, 2013, and further reduced to
$1,574.43&nbsp;per month on and after December&nbsp;1, 2013, and
upon Mr.&nbsp;Crellin&#146;s death his surviving spouse would
receive 50% of the monthly payment amounts for her life. As a
result of the termination of the Retirement Plan,
Mr.&nbsp;Crellin&#146;s benefits may be reduced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Executive Defined Contribution Plans.</I>
Messrs.&nbsp;Crellin, Glass and Baldanza and Ms.&nbsp;Lanier
receive a defined contribution benefit under the US&nbsp;Airways
Funded Executive Defined Contribution Plan and the
US&nbsp;Airways Unfunded Executive Defined Contribution Plan
(the Executive Plans), and Mr.&nbsp;Siegel and Mr.&nbsp;Cohen
received benefits under the Executive Plans in connection with
the termination of their employment during 2004. Under the
Executive Plans, a contribution is credited to each participant
each year, the amount of which is individually determined based
upon age, service and projected earnings (including target
annual bonus) such that the annual contribution to the Executive
Plans and an assumed 8% investment return will achieve a target
annual benefit of 50% of final average earnings (based on total
cash compensation) at normal retirement age (age&nbsp;62) when
combined with the executive&#146;s benefits under the
tax-qualified retirement plans maintained by US Airways. The
annual contribution to the Funded Executive Defined Contribution
Plan may not exceed 64% of the executive&#146;s earnings for the
year, and the annual allocation to the Unfunded Executive
Defined Contribution Plan may not exceed 16% of the
executive&#146;s earnings for the year. Under the Executive
Plans, contributions for disabled executives will continue
during the period of disability benefits, and contributions
continue for the first twelve months following an executive
starting an absence from work due to the birth, adoption or
caring for a child after birth or adoption, or due to pregnancy.
Furthermore, upon termination of an executive on or after the
occurrence of a change in control (as defined in the Executive
Plans), US Airways will make an additional contribution or
allocation to the Executive Plans for the year in which the
termination of employment occurs, in the amount equal to the
allocations that US Airways would have had to make during the
years for which US Airways would be required to continue to
provide such benefits under the executive&#146;s employment
agreement or severance agreement. Participants in the Executive
Plans do not receive employer contributions under the
tax-qualified retirement plans sponsored by US Airways
(including the 401(k) and money purchase pension plans) or under
any other nonqualified defined contribution plans associated
with the tax-qualified retirement plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Messrs.&nbsp;Crellin, Glass and Baldanza and Ms.&nbsp;Lanier
receive a benefit based upon three years of credited service for
each of the first five years of service (beginning on date of
hire), and thereafter two years of credited service for each
actual year of service up to a maximum of 30&nbsp;years of
credited service. Contributions and allocations are fully
vested. In connection with his termination of employment on
January&nbsp;15, 2005, Mr.&nbsp;Baldanza received his benefits
under the Executive Plans in accordance with the terms of the
respective plans, as described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Eighty percent (80%) of the target benefit amount is calculated
under the Funded Executive Defined Contribution Plan and reduced
to present value based on actuarial assumption under that plan,
which amount, less the maximum amount of 401(k) contributions
permitted for the year, is contributed to a secular trust on a
monthly basis, subject to certain limitations on the total
amount that can be contributed on an annual basis. Participants
also receive a payment to cover any income tax liabilities
incurred in connection with the contributions to the secular
trust. The remainder of the target benefit amount is unfunded
and is credited to an account with an assumed annual 8% rate of
return. Under letter agreements entered into with
Ms.&nbsp;Lanier, Mr.&nbsp;Baldanza, Mr.&nbsp;Crellin and
Mr.&nbsp;Glass on October&nbsp;20, 2004, contributions under the
Executive Plans after October&nbsp;11, 2004 are subject to a 25%
reduction. Distributions from the Funded Executive Defined
Contribution Plan will be made to participants upon termination
of employment in a single lump sum payment in cash.
Distributions from the Unfunded Executive Defined Contribution
Plan will be made to participants in a single lump sum payment
in cash after the later of termination of employment or
attainment of age&nbsp;62.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employment and Severance Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways has entered into employment agreements with Bruce R.
Lakefield and Elizabeth K. Lanier. In addition, US Airways is a
party to severance agreements, which in substance are employment
agreements as well, with Alan W. Crellin, Jerrold A. Glass and
B. Ben Baldanza. The Company has entered into a Separation
Agreement and Supplemental Separation Agreement with David N.
Siegel and a Separation and Consulting Agreement with Neal S.
Cohen. All employment-related agreements with
Mr.&nbsp;Lakefield, Mr.&nbsp;Crellin, Ms.&nbsp;Lanier and
Mr.&nbsp;Glass have not yet been assumed and are subject to
modification prior to the Company&#146;s emergence from
bankruptcy.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Employment Agreement with Bruce R. Lakefield</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways Group and US Airways entered into an Employment
Agreement with Mr.&nbsp;Lakefield April&nbsp;19, 2004, which is
filed as Exhibit&nbsp;10.6 to US Airways&#146; Quarterly Report
on Form&nbsp;10-Q for the quarter ended September&nbsp;30, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Term of Employment.</I> The agreement provides for
Mr.&nbsp;Lakefield to serve as US Airways&#146; Chief Executive
Officer and President on an at-will basis. Upon a change of
control, the agreement will become effective for a two-year term
and terminate at the end of the two-year period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Salary and Benefits.</I> Under the agreement,
Mr.&nbsp;Lakefield is entitled to an annual base salary of not
less than $425,000, subject to annual increases consistent with
those provided to other key employees. Under the agreement,
Mr.&nbsp;Lakefield received 471,200&nbsp;shares of restricted
stock and a nonqualified option to
purchase&nbsp;288,800&nbsp;shares of Class&nbsp;A Common Stock
at a price of $1.59&nbsp;per share, each under the 2003 Stock
Incentive Plan, which awards vest in 25% increments on each
April&nbsp;19, beginning in 2005. In addition to base salary,
the agreement provides that Mr.&nbsp;Lakefield will be awarded
an annual bonus in accordance with US Airways Group&#146;s
Incentive Compensation Plan (ICP) (or successor plan) and will
be eligible to participate in the Long-Term Incentive Plan
(LTIP), each as determined by the Board or the Human Resources
Committee. Mr.&nbsp;Lakefield waived his participation in the
ICP and the LTIP until US Airways returns to profitability.
Mr.&nbsp;Lakefield also waived participation in the Executive
Plans and in all tax-qualified retirement plans and nonqualified
retirement or deferred compensation plans sponsored by US
Airways Group or US&nbsp;Airways. Mr.&nbsp;Lakefield is entitled
to participate in all welfare benefit and fringe benefit plans
provided to other officers. At the time the agreement was
executed, those benefits included on-line first class, positive
space travel privileges for business and pleasure for
Mr.&nbsp;Lakefield and his eligible family members, as well as a
limited number of non-eligible family members and unrelated
persons, a gross-up payment (up to a maximum of $10,000) to
cover his tax liability resulting from such travel, free access
to US Airways Club facilities for him and his eligible family
members and certain temporary living expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Termination of Employment.</I> Mr.&nbsp;Lakefield&#146;s
employment may be terminated at any time by mutual agreement,
and terminates automatically upon his death. US Airways or US
Airways Group may also terminate the agreement upon ten
days&#146; written notice upon Mr.&nbsp;Lakefield&#146;s
disability, or immediately at any time for &#147;cause&#148; (as
defined in the agreement). Mr.&nbsp;Lakefield may voluntarily
terminate his employment, which may constitute termination for
&#147;good reason&#148; upon certain events defined in the
agreement. In the event of any termination by US Airways or US
Airways Group for cause or by Mr.&nbsp;Lakefield for good
reason, the terminating party must give written notice that
indicates the specific termination provision in the agreement
that is relied upon and sets forth in reasonable detail the
facts and circumstances that are the basis for the termination,
as well as the termination date, which may not be more than
15&nbsp;days after the notice date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Obligations Upon Termination.</I> After two years of service
with US Airways Group, including as a member of the Board,
Mr.&nbsp;Lakefield will become vested in lifetime on-line, first
class, positive space travel privileges for business and
pleasure for him and his eligible family members. If
Mr.&nbsp;Lakefield&#146;s employment is terminated for cause,
due to death or disability, or is voluntarily terminated by
Mr.&nbsp;Lakefield without &#147;good reason,&#148;
Mr.&nbsp;Lakefield is entitled to receive all salary and
vacation accrued through the date of termination, within
30&nbsp;days of the date of termination. If
Mr.&nbsp;Lakefield&#146;s employment is terminated due to death
or disability, US Airways must also pay a prorated annual bonus
if annual bonuses are paid to executives for the year in which
termination occurs. If, prior to a change of control, US Airways
or
</DIV>

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<DIV align="left" style="font-size: 10pt;">
US&nbsp;Airways Group terminates Mr.&nbsp;Lakefield&#146;s
employment other than for cause or if Mr.&nbsp;Lakefield
terminates his employment for good reason,
(i)&nbsp;Mr.&nbsp;Lakefield is entitled to receive all salary
and vacation accrued through the date of termination, within
30&nbsp;days of the date of termination, and US Airways must pay
a prorated annual bonus if annual bonuses are paid to executives
for the year in which termination occurs, and (ii)&nbsp;Mr.
Lakefield may negotiate a separate severance agreement providing
severance pay and/or additional benefits, subject to his
execution of a general release and covenant not to sue the
company. If, within two years after a change of control, US
Airways or US Airways Group terminates Mr.&nbsp;Lakefield&#146;s
employment other than for cause or if Mr.&nbsp;Lakefield
terminates his employment for good reason, Mr.&nbsp;Lakefield is
entitled to: (i)&nbsp;accrued but unpaid base salary and
vacation; (ii)&nbsp;three times base salary (unreduced for any
reductions then in effect) plus target annual bonus for the year
in which termination occurs; (iii)&nbsp;three times the greater
of 125% of unreduced base salary or the target LTIP award that
would have been paid for the period ending in the year of
termination; (iv)&nbsp;continuation of medical, dental, vision
and prescription drug coverages for Mr.&nbsp;Lakefield and his
dependents for 24&nbsp;months on the same premium and coverage
basis as active officers (or an equivalent payment);
(v)&nbsp;continuation of life insurance coverage for
24&nbsp;months (or an equivalent payment); and (vi)&nbsp;on-line
travel privileges to Mr.&nbsp;Lakefield and his eligible family
members for life.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other Obligations.</I> In the event that any of
Mr.&nbsp;Lakefield&#146;s compensation (whether required under
the agreement or otherwise) would be subject to an excise tax
under Internal Revenue Code Section&nbsp;4999, US&nbsp;Airways
is required to pay Mr.&nbsp;Lakefield an additional gross-up
payment, such that after payment of all taxes, including
interest or penalties, on the gross-up payment,
Mr.&nbsp;Lakefield will retain an amount of the gross-up payment
equal to the excise tax (and any penalties and interest on the
excise tax). Mr.&nbsp;Lakefield agreed to hold US Airways
Group&#146;s and US Airways&#146; secret or confidential
information, knowledge or data as confidential, including after
termination of employment, and agreed to nonsolicitation of
customers and employees for one year after termination.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Employment Agreement with Elizabeth K. Lanier</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways&#146; Employment Agreement with Ms.&nbsp;Lanier is
dated as of March&nbsp;1, 2003 and is filed as Exhibit&nbsp;10.5
to US Airways&#146; Annual Report on Form&nbsp;10-K for the year
ended December&nbsp;31, 2003. The Employment Agreement was
amended by a letter agreement dated October&nbsp;20, 2004, which
is filed as Exhibit&nbsp;10.38 to US Airways Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Term of Employment.</I> The agreement provides for
Ms.&nbsp;Lanier to serve as US Airways&#146; Executive Vice
President&nbsp;&#151; Corporate Affairs and General Counsel.
Ms.&nbsp;Lanier will serve for an initial term of three years,
to be extended each year by one additional year unless either US
Airways or Ms.&nbsp;Lanier provides notice that the term will
not be extended, or, if a shorter period, until the first day of
the month following Ms.&nbsp;Lanier&#146;s 65th birthday (which
is defined in the agreement as Ms.&nbsp;Lanier&#146;s
&#147;normal retirement date&#148;). Upon a &#147;change of
control&#148; (as defined in the agreement), the term of the
agreement is automatically extended through the third
anniversary of the date of the change of control or through
Ms.&nbsp;Lanier&#146;s normal retirement date, whichever is
earlier.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Salary and Benefits.</I> Under the agreement, Ms.&nbsp;Lanier
is entitled to an annual base salary of not less than $425,000
for the initial 12&nbsp;months of the term, subject to a 17%
salary reduction. Ms.&nbsp;Lanier is entitled to salary
increases in accordance with increases awarded to other key
employees and her salary generally may not be decreased, except
that pursuant to a letter agreement that amended the employment
agreement, Ms.&nbsp;Lanier is currently subject to an additional
10% salary reduction. In addition to base salary, the agreement
provides that Ms.&nbsp;Lanier will be awarded an annual bonus
determined by the Board or the Human Resources Committee in
accordance with US Airways Group&#146;s ICP (or successor plan).
Ms.&nbsp;Lanier&#146;s target percentage under the annual ICP
each year will be no less than 60% of her base salary, and her
maximum bonus opportunity each year will be no less than 120% of
base salary. Ms.&nbsp;Lanier is eligible to participate in the
LTIP with a target percentage no less than 80% of her base
salary, and a maximum percentage no less than 160% of base
salary. The agreement provides that Ms.&nbsp;Lanier will receive
supplemental executive retirement benefits (which she now
receives through participation in the Company&#146;s Executive
Plans, subject to a 25% reduction provided in the letter
agreement that amended the employment agreement), and is
entitled to equity awards consistent with those provided to
other Executive Vice Presidents. Ms.&nbsp;Lanier is also entitled
</DIV>

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<DIV align="left" style="font-size: 10pt;">
to participate in all incentive, savings, retirement and welfare
benefit plans provided to other key employees. Under the
agreement, Ms.&nbsp;Lanier is entitled to fringe benefits,
office and support staff, and paid vacation, all in accordance
with the most favorable practices with respect to other key
employees. During 2004, those benefits included on-line first
class, positive space travel privileges for business and
pleasure for Ms.&nbsp;Lanier and her eligible family members, as
well as a limited number of non-eligible family members and
unrelated persons, a gross-up payment (up to a maximum of
$10,000) to cover her tax liability resulting from such travel,
free access to US Airways Club facilities for her and her
eligible family members, an annual car allowance, and certain
relocation benefits including up to 24&nbsp;months of reasonable
temporary living expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Termination of Employment.</I> Ms.&nbsp;Lanier&#146;s
employment may be terminated at any time by mutual agreement,
and terminates automatically upon her death. US Airways may also
terminate the agreement upon written notice after six months of
Ms.&nbsp;Lanier&#146;s continuous total and permanent
disability, if Ms.&nbsp;Lanier does not return to work within
90&nbsp;days after the written notice. US Airways may also
terminate the agreement at any time for &#147;cause&#148; (as
defined in the agreement). Ms.&nbsp;Lanier may voluntarily
terminate her employment, which may constitute termination for
&#147;good reason&#148; upon certain events defined in the
agreement. In the event of any termination by US Airways for
cause or by Ms.&nbsp;Lanier for good reason, the terminating
party must give written notice that indicates the specific
termination provision in the agreement that is relied upon and
sets forth in reasonable detail the facts and circumstances that
are the basis for the termination, as well as the termination
date, which may not be more than 15&nbsp;days after the notice
date. In the event of a dispute regarding termination, the
agreement and compensation continue in effect until the earlier
of the resolution of the dispute or the end of the term of the
agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Obligations Upon Termination.</I> If Ms.&nbsp;Lanier&#146;s
employment is terminated for cause, due to death or disability,
or is voluntarily terminated by Ms.&nbsp;Lanier without
&#147;good reason,&#148; US Airways must pay all salary
(disregarding any impermissible salary decrease), deferred
compensation and vacation accrued through the date of
termination within 30&nbsp;days of the date of termination. If
Ms.&nbsp;Lanier&#146;s employment is terminated due to death or
disability, or is voluntarily terminated by Ms.&nbsp;Lanier
without &#147;good reason,&#148; US Airways must also pay a
prorated annual bonus based on the amount of
Ms.&nbsp;Lanier&#146;s annual bonus for the previous fiscal
year. If, prior to a change of control and not in connection
with a change of control, US Airways terminates
Ms.&nbsp;Lanier&#146;s employment other than for cause,
disability or death or if Ms.&nbsp;Lanier terminates her
employment for good reason: (i)&nbsp;US Airways will pay to
Ms.&nbsp;Lanier a lump sum in cash within five days after the
date of termination equal to the aggregate of
Ms.&nbsp;Lanier&#146;s accrued but unpaid base salary
(disregarding any impermissible reductions), a prorated annual
bonus (based on the higher of the target bonus applicable under
the agreement, the bonus paid during, or the bonus paid with
respect to, the most recent fiscal year), two times the sum of
such annual base salary and Ms.&nbsp;Lanier&#146;s target annual
bonus for the year in which the termination occurs, any
previously deferred compensation, and any accrued vacation pay;
and (ii)&nbsp;for two years after the date of termination, US
Airways will continue benefits to Ms.&nbsp;Lanier and/or her
family as if the agreement had continued. If, after a change of
control or prior to a change in control and in connection with a
change of control, US Airways terminates Ms.&nbsp;Lanier&#146;s
employment other than for cause, disability or death or if
Ms.&nbsp;Lanier terminates her employment for good reason:
(i)&nbsp;US Airways will pay to Ms.&nbsp;Lanier a lump sum in
cash within five days after the date of termination equal to the
aggregate of Ms.&nbsp;Lanier&#146;s accrued but unpaid base
salary (disregarding any impermissible reductions), a prorated
annual bonus (based on the higher of the target bonus applicable
under the agreement, the bonus paid during, or the bonus paid
with respect to, the most recent fiscal year), three times the
sum of such annual base salary and such annual bonus, any
previously deferred compensation, any accrued vacation pay, and
an amount equal to the amount of additional benefits
Ms.&nbsp;Lanier would receive under all US Airways retirement
plans if Ms.&nbsp;Lanier continued employment through the term
of the agreement; (ii)&nbsp;for purposes of eligibility for
retiree benefits, Ms.&nbsp;Lanier shall be considered to have
remained employed and retired on the last day of the term of the
agreement; (iii)&nbsp;for three years after the date of
termination, US Airways will continue benefits to
Ms.&nbsp;Lanier and/or her family as if the agreement had
continued; and (iv)&nbsp;at the end of the three-year period, US
Airways will continue health insurance and on-line travel
privileges to Ms.&nbsp;Lanier for life. In addition, as a
participant in the LTIP, upon a change of control, she would be
eligible for a payment for each three-year performance period
under the LTIP that has not yet been completed in an amount that
would have been payable to her if target performance had been
met for each performance period. Further, upon termination of
Ms.&nbsp;Lanier&#146;s
</DIV>

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<DIV align="left" style="font-size: 10pt;">
employment for any reason following the completion of at least
5&nbsp;years of service, US Airways will continue to provide
Ms.&nbsp;Lanier with on-line travel privileges for life.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other Obligations.</I> US Airways agreed to pay
Ms.&nbsp;Lanier&#146;s reasonable legal fees and expenses
incurred as a result of any contest by US Airways or others of
the validity or enforceability of, or liability under the
agreement, plus interest. In addition, in the event that any of
Ms.&nbsp;Lanier&#146;s compensation (whether required under the
agreement or otherwise) would be subject to an excise tax under
Internal Revenue Code Section&nbsp;4999, US Airways is required
to pay Ms.&nbsp;Lanier an additional gross-up payment, such that
after payment of all taxes, including interest or penalties, on
the gross-up payment, Ms.&nbsp;Lanier will retain an amount of
the gross-up payment equal to the excise tax (and any penalties
and interest on the excise tax). Ms.&nbsp;Lanier agreed to hold
US Airways Group&#146;s and US Airways&#146; secret or
confidential information, knowledge or data as confidential,
including after termination of employment.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Severance Agreement with Alan W. Crellin</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US Airways&#146; Severance Agreement with Mr.&nbsp;Crellin is
dated as of June&nbsp;26, 2002 and is filed as Exhibit&nbsp;10.9
to US Airways&#146; Annual Report on Form&nbsp;10-K for the year
ended December&nbsp;31, 2002. The Severance Agreement was
amended by letter agreements dated July&nbsp;25, 2002 and
October&nbsp;20, 2004, which are filed as Exhibits&nbsp;10.17 to
US Airways&#146; Annual Report on Form&nbsp;10-K for the year
ended December&nbsp;31, 2002 and Exhibit&nbsp;10.37 to US
Airways Annual Report on Form&nbsp;10-K for the year ended
December&nbsp;31, 2004, respectively
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Term of Employment.</I> The agreement provides for
Mr.&nbsp;Crellin to serve as Executive Vice President of US
Airways for an initial term of three years, to be extended each
year by one additional year unless either US Airways or
Mr.&nbsp;Crellin provides notice that the term will not be
extended, or, if a shorter period, until the first day of the
month following Mr.&nbsp;Crellin&#146;s 65th birthday (which is
defined in the agreement as Mr.&nbsp;Crellin&#146;s &#147;normal
retirement date&#148;). Upon a &#147;change of control&#148; (as
defined in the agreement), the term of the agreement is
automatically extended to the third anniversary of the date of
the change of control or through Mr.&nbsp;Crellin&#146;s normal
retirement date, whichever is earlier.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Salary and Benefits.</I> The agreement does not specify
Mr.&nbsp;Crellin&#146;s salary and benefits prior to the date of
a change of control. However, pursuant to the letter agreements
that amended the severance agreement, Mr.&nbsp;Crellin became
subject to a 17% and an additional 10% salary reduction and a
25% reduction in retirement plan contributions effective
October&nbsp;11, 2004. Beginning on the date of a change of
control and continuing for a period of three years thereafter,
or until Mr.&nbsp;Crellin&#146;s normal retirement date, if
earlier, the agreement provides for minimum salary and benefits
that must be provided to Mr.&nbsp;Crellin. US Airways will pay
Mr.&nbsp;Crellin a base salary for the first 12&nbsp;months of
such period at a rate not less than his base salary in effect on
the date of the change of control. Mr.&nbsp;Crellin&#146;s
salary may not be decreased thereafter and must be increased in
accordance with pay increases provided to other executive vice
president level employees. In addition, Mr.&nbsp;Crellin will be
awarded an annual bonus determined by the Board or the Human
Resources Committee in accordance with US Airways Group&#146;s
ICP or successor plan. In addition to base salary and annual
bonus, Mr.&nbsp;Crellin will be entitled to participate in all
incentive, savings, retirement and welfare benefit plans
applicable to executive vice president level employees, under
terms at least as favorable as the most favorable plans provided
during the 90-day period prior to the change of control.
Mr.&nbsp;Crellin will also be entitled to fringe benefits,
including but not limited to space positive and space available
travel privileges in all classes of service and cabins on all
air carriers owned by US Airways and any of its affiliates,
including all carriers owned by any individual, entity or group
that has entered into an agreement that constitutes a change of
control, and to paid vacation under terms at least as favorable
as the most favorable travel privileges and vacation program
provided during the 90-day period prior to the change of
control. Mr.&nbsp;Crellin will continue to be entitled to all of
the foregoing compensation and benefits, if applicable, during
the first six months of Mr.&nbsp;Crellin&#146;s total and
permanent disability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Termination of Employment.</I> Mr.&nbsp;Crellin&#146;s
employment may be terminated at any time by mutual agreement,
and terminates automatically upon his death. US Airways may also
terminate the agreement upon written notice after six months of
Mr.&nbsp;Crellin&#146;s continuous total and permanent
disability, if Mr.&nbsp;Crellin does not return to work within
90&nbsp;days after the written notice. US Airways may also
terminate the agreement at
</DIV>

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<DIV align="left" style="font-size: 10pt;">
any time for &#147;cause&#148; (as defined in the agreement).
Mr.&nbsp;Crellin may voluntarily terminate his employment, which
may constitute termination for &#147;good reason&#148; upon
certain events defined in the agreement. In the event of any
termination by US Airways for cause or by Mr.&nbsp;Crellin for
good reason within three years after a change of control and
before Mr.&nbsp;Crellin&#146;s normal retirement date, the
terminating party must give written notice that indicates the
specific termination provision in the agreement that is relied
upon and sets forth in reasonable detail the facts and
circumstances that are the basis for the termination, as well as
the termination date, which may not be more than 15&nbsp;days
after the notice date. For post-change of control terminations,
in the event of a dispute regarding termination, the agreement
and compensation continue in effect until the earlier of the
resolution of the dispute, Mr.&nbsp;Crellin&#146;s normal
retirement date, or the third anniversary of the date of the
change of control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Obligations Upon Termination.</I> If Mr.&nbsp;Crellin&#146;s
employment is terminated for cause, due to death or disability,
or is voluntarily terminated by Mr.&nbsp;Crellin without
&#147;good reason,&#148; US Airways must pay all salary,
deferred compensation and vacation accrued through the date of
termination within 30&nbsp;days of the date of termination. If
termination is due to death or disability and occurs within
three years after a change of control and before
Mr.&nbsp;Crellin&#146;s normal retirement date, US Airways must
also pay a prorated annual bonus based on the amount of
Mr.&nbsp;Crellin&#146;s annual bonus for the previous fiscal
year. If, prior to a change of control and not in connection
with a change of control, US Airways terminates
Mr.&nbsp;Crellin&#146;s employment other than for cause,
disability or death or if Mr.&nbsp;Crellin terminates his
employment for good reason, US&nbsp;Airways will pay to
Mr.&nbsp;Crellin in a lump sum in cash within 30&nbsp;days after
the date of termination the aggregate of Mr.&nbsp;Crellin&#146;s
accrued but unpaid base salary, deferred compensation and
benefits, plus an amount equal to two times the sum of his
annual rate of base salary and his target annual bonus. If,
after a change of control, or prior to a change of control but
in connection with a change of control, US Airways terminates
Mr.&nbsp;Crellin&#146;s employment other than for cause,
disability or death or if Mr.&nbsp;Crellin terminates his
employment for good reason: (i)&nbsp;US Airways will pay to
Mr.&nbsp;Crellin a lump sum in cash within 30&nbsp;days after
the date of termination equal to the aggregate of
Mr.&nbsp;Crellin&#146;s accrued but unpaid base salary
(disregarding any impermissible reductions in
Mr.&nbsp;Crellin&#146;s salary), a prorated annual bonus (based
on the higher of the target bonus immediately in effect prior to
the change of control, the bonus paid during, or the bonus paid
with respect to, the most recent fiscal year ending after the
change of control), three times the sum of such annual base
salary and such annual bonus, any previously deferred
compensation, and any accrued vacation pay; (ii)&nbsp;for three
years after the date of termination, US&nbsp;Airways will
continue benefits to Mr.&nbsp;Crellin and/or his family as if
the agreement had continued; (iii)&nbsp;for purposes of
eligibility for retirement, Mr.&nbsp;Crellin shall be considered
to have remained employed until the third anniversary of the
date of termination; and (iv)&nbsp;US&nbsp;Airways will provide
continuation of travel privileges for life. In addition, as a
participant in the LTIP, upon a change of control, he would be
eligible for a payment for each three-year performance period
under the LTIP that has not yet been completed in an amount that
would have been payable to him if target performance had been
met for each performance period. Upon termination of
Mr.&nbsp;Crellin&#146;s employment for any reason following the
fifth anniversary of his date of employment, he will be entitled
to lifetime travel privileges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other Obligations.</I> US&nbsp;Airways agreed to pay
Mr.&nbsp;Crellin&#146;s reasonable legal fees and expenses
incurred as a result of any contest by US&nbsp;Airways or others
of the validity or enforceability of, or liability under the
agreement, plus interest. In the case of a contest regarding
(i)&nbsp;payments upon termination of Mr.&nbsp;Crellin&#146;s
employment prior to a change of control and not in connection
with a change of control other than for cause, disability or
death or termination by Mr.&nbsp;Crellin for good reason, or
(ii)&nbsp;lifetime travel privileges following
Mr.&nbsp;Crellin&#146;s fifth anniversary of employment,
US&nbsp;Airways is only required to make such payments if
Mr.&nbsp;Crellin prevails on at least one material issue in such
contest. In addition, in the event that any of
Mr.&nbsp;Crellin&#146;s compensation (whether required under the
agreement or otherwise) would be subject to an excise tax under
Section&nbsp;4999 of the Internal Revenue Code, US&nbsp;Airways
is required to pay Mr.&nbsp;Crellin an additional gross-up
payment, such that after payment of all taxes, including
interest or penalties, on the gross-up payment, Mr.&nbsp;Crellin
will retain an amount of the gross-up payment equal to the
excise tax (and any penalties and interest on the excise tax).
Mr.&nbsp;Crellin agreed to hold US Airways Group&#146;s and
US&nbsp;Airways&#146; confidential and proprietary information
as confidential, including after termination of employment. If
Mr.&nbsp;Crellin violates this confidentiality agreement, any
payments due under the agreement are forfeited.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>First Amendment to Severance Agreement.</I> US&nbsp;Airways
entered into a First Amendment to Mr.&nbsp;Crellin&#146;s
Severance Agreement on March&nbsp;31, 2003 that is filed as
Exhibit&nbsp;10.3 to US&nbsp;Airways&#146; Quarterly Report on
Form&nbsp;10-Q for the quarterly period ended March&nbsp;31,
2003. The Amendment provides that (1)&nbsp;no change of control
will be deemed to have occurred in connection with transactions
under the RSA&nbsp;investment agreement or in connection with
US&nbsp;Airways&#146; emergence from the Prior Bankruptcy and
(2)&nbsp;any relocation of US&nbsp;Airways&#146; headquarters
outside of the Washington,&nbsp;D.C. metropolitan area will
constitute good reason for Mr.&nbsp;Crellin to terminate his
employment.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Severance Agreement with Jerrold A. Glass</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways&#146; Severance Agreement with Mr.&nbsp;Glass is
dated as of April&nbsp;8, 2002 and is filed as
Exhibit&nbsp;10.10 to US Airways&#146; Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2002. The
Severance Agreement was amended by letter agreements dated
July&nbsp;25, 2002 and October&nbsp;20, 2004, which are filed as
which are filed as Exhibit&nbsp;10.18 to US&nbsp;Airways&#146;
Annual Report on Form&nbsp;10-K for the year ended
December&nbsp;31, 2002 and Exhibit&nbsp;10.40 to
US&nbsp;Airways&#146; Annual Report on Form&nbsp;10-K for the
year ended December&nbsp;31, 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Term of Employment.</I> The agreement provides for
Mr.&nbsp;Glass to serve as Senior Vice President of
US&nbsp;Airways for an initial term of three years, to be
extended each year by one additional year unless either
US&nbsp;Airways or Mr.&nbsp;Glass provides notice that the term
will not be extended, or, if a shorter period, until the first
day of the month following Mr.&nbsp;Glass&#146;s
65th&nbsp;birthday (which is defined in the agreement as
Mr.&nbsp;Glass&#146;s &#147;normal retirement date&#148;). Upon
a &#147;change of control&#148; (as defined in the agreement),
the term of the agreement is automatically extended to the third
anniversary of the date of the change of control or through
Mr.&nbsp;Glass&#146;s normal retirement date, whichever is
earlier.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Salary and Benefits.</I> The agreement does not specify
Mr.&nbsp;Glass&#146;s salary and benefits prior to the date of a
change of control. However, pursuant to the letter agreements
that amended the severance agreement, Mr.&nbsp;Glass became
subject to a 17% and an additional 10%&nbsp;salary reduction and
a 25%&nbsp;reduction in retirement plan contributions effective
October&nbsp;11, 2004. Beginning on the date of a change of
control and continuing for a period of three years thereafter,
or until Mr.&nbsp;Glass&#146;s normal retirement date, if
earlier, the agreement provides for minimum salary and benefits
that must be provided to Mr.&nbsp;Glass. US&nbsp;Airways will
pay Mr.&nbsp;Glass a base salary for the first 12&nbsp;months of
such period at a rate not less than his base salary in effect on
the date of the change of control. Mr.&nbsp;Glass&#146;s salary
may not be decreased thereafter and must be increased in
accordance with pay increases provided to other senior vice
president level employees. In addition, Mr.&nbsp;Glass will be
awarded an annual bonus determined by the Board or the Human
Resources Committee in accordance with US&nbsp;Airways
Group&#146;s ICP or successor plan. In addition to base salary
and annual bonus, Mr.&nbsp;Glass will be entitled to participate
in all incentive, savings, retirement and welfare benefit plans
applicable to senior vice president level employees, under terms
at least as favorable as the most favorable plans provided
during the 90-day period prior to the change of control.
Mr.&nbsp;Glass will also be entitled to fringe benefits,
including but not limited to space positive and space available
travel privileges in all classes of service and cabins on all
air carriers owned by US&nbsp;Airways and any of its affiliates,
including all carriers owned by any individual, entity or group
that has entered into an agreement that constitutes a change of
control, and to paid vacation under terms at least as favorable
as the most favorable travel privileges and vacation program
provided during the 90-day period prior to the change of
control. Mr.&nbsp;Glass will continue to be entitled to all of
the foregoing compensation and benefits, if applicable, during
the first six months of Mr.&nbsp;Glass&#146;s total and
permanent disability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Termination of Employment.</I> Mr.&nbsp;Glass&#146;s
employment may be terminated at any time by mutual agreement,
and terminates automatically upon his death. US&nbsp;Airways may
also terminate the agreement upon written notice after six
months of Mr.&nbsp;Glass&#146;s continuous total and permanent
disability, if Mr.&nbsp;Glass does not return to work within
90&nbsp;days after the written notice. US&nbsp;Airways may also
terminate the agreement at any time for &#147;cause&#148; (as
defined in the agreement). Mr.&nbsp;Glass may voluntarily
terminate his employment, which may constitute termination for
&#147;good reason&#148; upon certain events defined in the
agreement. In the event of any termination by US&nbsp;Airways
for cause or by Mr.&nbsp;Glass for good reason within three
years after a change of control and before Mr.&nbsp;Glass&#146;s
normal retirement date, the terminating party must give written
notice that indicates the specific termination provision in the
agreement that is relied upon and sets forth in
</DIV>

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<DIV align="left" style="font-size: 10pt;">
reasonable detail the facts and circumstances that are the basis
for the termination, as well as the termination date, which may
not be more than 15&nbsp;days after the notice date. For
post-change of control terminations, in the event of a dispute
regarding termination, the agreement and compensation continue
in effect until the earlier of the resolution of the dispute,
Mr.&nbsp;Glass&#146;s normal retirement date, or the third
anniversary of the date of the change of control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Obligations Upon Termination.</I> If Mr.&nbsp;Glass&#146;s
employment is terminated for cause, due to death or disability,
or is voluntarily terminated by Mr.&nbsp;Glass without
&#147;good reason,&#148; US&nbsp;Airways must pay all salary,
deferred compensation and vacation accrued through the date of
termination within 30&nbsp;days of the date of termination. If
termination is due to death or disability and occurs within
three years after a change of control and before
Mr.&nbsp;Glass&#146;s normal retirement date, US&nbsp;Airways
must also pay a prorated annual bonus based on the amount of
Mr.&nbsp;Glass&#146;s annual bonus for the previous fiscal year.
If, prior to a change of control and not in connection with a
change of control, US&nbsp;Airways terminates
Mr.&nbsp;Glass&#146;s employment other than for cause,
disability or death or if Mr.&nbsp;Glass terminates his
employment for good reason, US&nbsp;Airways will pay to
Mr.&nbsp;Glass in a lump sum in cash within 30&nbsp;days after
the date of termination the aggregate of Mr.&nbsp;Glass&#146;s
accrued but unpaid base salary, deferred compensation and
benefits, plus an amount equal to two times the sum of his
annual rate of base salary and his target annual bonus. If,
after a change of control, or prior to a change of control but
in connection with a change of control, US&nbsp;Airways
terminates Mr.&nbsp;Glass&#146;s employment other than for
cause, disability or death or if Mr.&nbsp;Glass terminates his
employment for good reason: (i)&nbsp;US&nbsp;Airways will pay to
Mr.&nbsp;Glass a lump sum in cash within 30&nbsp;days after the
date of termination equal to the aggregate of
Mr.&nbsp;Glass&#146;s accrued but unpaid base salary
(disregarding any impermissible reductions in
Mr.&nbsp;Glass&#146;s salary), a prorated annual bonus (based on
the higher of the target bonus immediately in effect prior to
the change of control, the bonus paid during, or the bonus paid
with respect to, the most recent fiscal year ending after the
change of control), three times the sum of such annual base
salary and such annual bonus, any previously deferred
compensation, and any accrued vacation pay; (ii)&nbsp;for three
years after the date of termination, US&nbsp;Airways will
continue benefits to Mr.&nbsp;Glass and/or his family as if the
agreement had continued; (iii)&nbsp;for purposes of eligibility
for retirement, Mr.&nbsp;Glass shall be considered to have
remained employed until the third anniversary of the date of
termination; and (iv)&nbsp;US&nbsp;Airways will provide
continuation of travel privileges for life. In addition, as a
participant in the LTIP, upon a change of control, he would be
eligible for a payment for each three-year performance period
under the LTIP that has not yet been completed in an amount that
would have been payable to him if target performance had been
met for each performance period. Upon termination of
Mr.&nbsp;Glass&#146;s employment for any reason following the
fifth anniversary of his date of employment, he will be entitled
to lifetime travel privileges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other Obligations.</I> US&nbsp;Airways agreed to pay
Mr.&nbsp;Glass&#146;s reasonable legal fees and expenses
incurred as a result of any contest by US&nbsp;Airways or others
of the validity or enforceability of, or liability under the
agreement, plus interest. In the case of a contest regarding
(i)&nbsp;payments upon termination of Mr.&nbsp;Glass&#146;s
employment prior to a change of control and not in connection
with a change of control other than for cause, disability or
death or termination by Mr.&nbsp;Glass for good reason, or
(ii)&nbsp;lifetime travel privileges following
Mr.&nbsp;Glass&#146;s fifth anniversary of employment,
US&nbsp;Airways is only required to make such payments if
Mr.&nbsp;Glass prevails on at least one material issue in such
contest. In addition, in the event that any of
Mr.&nbsp;Glass&#146;s compensation (whether required under the
agreement or otherwise) would be subject to an excise tax under
Section&nbsp;4999 of the Internal Revenue Code, US&nbsp;Airways
is required to pay Mr.&nbsp;Glass an additional gross-up
payment, such that after payment of all taxes, including
interest or penalties, on the gross-up payment, Mr.&nbsp;Glass
will retain an amount of the gross-up payment equal to the
excise tax (and any penalties and interest on the excise tax).
Mr.&nbsp;Glass agreed to hold US&nbsp;Airways Group&#146;s and
US&nbsp;Airways&#146; confidential and proprietary information
as confidential, including after termination of employment. If
Mr.&nbsp;Glass violates this confidentiality agreement, any
payments due under the agreement are forfeited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>First Amendment to Severance Agreement.</I> US&nbsp;Airways
entered into a First Amendment to Mr.&nbsp;Glass&#146;s
Severance Agreement on March&nbsp;31, 2003 that is filed as
Exhibit&nbsp;10.33 to US&nbsp;Airways&#146; Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2004. The
Amendment provides that (1)&nbsp;no change of control will be
deemed to have occurred in connection with transactions under
the RSA&nbsp;investment agreement or in connection with
US&nbsp;Airways&#146; emergence from the Prior Bankruptcy and
(2)&nbsp;any relocation of US&nbsp;Airways&#146;
</DIV>

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<DIV align="left" style="font-size: 10pt;">
headquarters outside of the Washington,&nbsp;D.C. metropolitan
area will constitute good reason for Mr.&nbsp;Glass to terminate
his employment.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Severance Agreement with B.&nbsp;Ben Baldanza</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways&#146; Severance Agreement with Mr.&nbsp;Baldanza
is dated as of June&nbsp;26, 2002 and is filed as
Exhibit&nbsp;10.14 to US&nbsp;Airways&#146; Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2003. The
Severance Agreement was amended by letter agreements dated
July&nbsp;25, 2002 and October&nbsp;20, 2004, which are filed as
Exhibits&nbsp;10.18 to Amendment No.&nbsp;1 to
US&nbsp;Airways&#146; Annual report on Form&nbsp;10-K for the
year ended December&nbsp;31, 2002) and Exhibit&nbsp;10.35 to
US&nbsp;Airways Annual Report on Form&nbsp;10-K for the year
ended December&nbsp;31, 2004, respectively. The Severance
Agreement was also amended by a First Amendment on
March&nbsp;31, 2003, which is filed as Exhibit&nbsp;10.15 to
US&nbsp;Airways&#146; Annual Report on Form&nbsp;10-K for the
year ended December&nbsp;31, 2003. The Amendment provided that
(1)&nbsp;no change of control was deemed to have occurred in
connection with transactions under the RSA&nbsp;investment
agreement or in connection with US&nbsp;Airways&#146; emergence
from the Prior Bankruptcy and (2)&nbsp;any relocation of
US&nbsp;Airways&#146; headquarters outside of the
Washington,&nbsp;D.C. metropolitan area will constitute good
reason for Mr.&nbsp;Baldanza to terminate his employment.
Mr.&nbsp;Baldanza terminated his employment with the Company
effective January&nbsp;15, 2005, and the Company does not intend
to assume the Severance Agreement, as amended, in connection
with the Chapter&nbsp;11 proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Term of Employment, Salary and Benefits.</I> The agreement
provided for Mr.&nbsp;Baldanza to serve as Senior Vice President
of US&nbsp;Airways for an initial term of three years, to be
extended each year by one additional year unless either
US&nbsp;Airways or Mr.&nbsp;Baldanza provided notice that the
term will not be extended. The agreement also provided that
Mr.&nbsp;Baldanza&#146;s employment could be terminated at any
time by mutual agreement, and terminated automatically upon his
death. US&nbsp;Airways had the right terminate the agreement in
the event of Mr.&nbsp;Baldanza&#146;s continuous total and
permanent disability or for &#147;cause&#148; (as defined in the
agreement), and Mr.&nbsp;Baldanza had the right to terminate his
employment for &#147;good reason&#148; upon certain events
defined in the agreement. Mr.&nbsp;Baldanza&#146;s voluntary
termination of his agreement effective January&nbsp;15, 2005 was
not for &#147;good reason.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The agreement did not specify Mr.&nbsp;Baldanza&#146;s salary
and benefits prior to the date of a change of control. However,
pursuant to the letter agreements that amended the severance
agreement, Mr.&nbsp;Baldanza had been subject to a 17% and
became subject to an additional 10%&nbsp;salary reduction and a
25%&nbsp;reduction in retirement plan contributions effective
October&nbsp;11, 2004. Beginning on the date of a change of
control and continuing for a period of three years thereafter,
or until Mr.&nbsp;Baldanza&#146;s normal retirement date, if
earlier, the agreement provided for minimum salary and benefits
that must be provided to Mr.&nbsp;Baldanza.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Obligations Upon Termination.</I> The agreement provided for
various payments to Mr.&nbsp;Baldanza upon termination for
cause, for good reason, upon death or disability or due to a
change of control, which are described in detail in
US&nbsp;Airways Group&#146;s proxy statement for its 2004 annual
meeting of shareholders. Due to his voluntary termination
without good reason, these provisions no longer apply. As
provided in the agreement, upon voluntary termination of the
agreement by Mr.&nbsp;Baldanza without good reason,
US&nbsp;Airways paid all salary, deferred compensation and
vacation accrued by Mr.&nbsp;Baldanza through the date of
termination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other Obligations.</I> Upon termination of
Mr.&nbsp;Baldanza&#146;s employment for any reason following the
fifth anniversary of his date of employment, he was entitled to
lifetime travel privileges. US&nbsp;Airways also agreed to pay
Mr.&nbsp;Baldanza&#146;s reasonable legal fees and expenses
incurred as a result of any contest by US&nbsp;Airways or others
of the validity or enforceability of, or liability under the
agreement, plus interest. In the case of a contest regarding
(i)&nbsp;payments upon termination of Mr.&nbsp;Baldanza&#146;s
employment prior to a change of control and not in connection
with a change of control other than for cause, disability or
death or termination by Mr.&nbsp;Baldanza for good reason, or
(ii)&nbsp;lifetime travel privileges following
Mr.&nbsp;Baldanza&#146;s fifth anniversary of employment,
US&nbsp;Airways is only required to make such payments if
Mr.&nbsp;Baldanza prevails on at least one material issue in
such contest. In addition, in the event that any of
Mr.&nbsp;Baldanza&#146;s compensation (whether required under
the agreement or otherwise) would be subject to an excise tax
under Section&nbsp;4999 of the Internal Revenue Code,
US&nbsp;Airways is required to pay Mr.&nbsp;Baldanza an
additional gross-up payment, such that after payment of all
taxes, including interest or penalties, on the gross-up payment,
Mr.&nbsp;Baldanza will
</DIV>

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<DIV align="left" style="font-size: 10pt;">
retain an amount of the gross-up payment equal to the excise tax
(and any penalties and interest on the excise tax).
Mr.&nbsp;Baldanza agreed to hold US&nbsp;Airways Group&#146;s
and US&nbsp;Airways&#146; confidential and proprietary
information as confidential, including after termination of
employment. If Mr.&nbsp;Baldanza violates this confidentiality
agreement, any payments due under the agreement are forfeited.
The obligations set forth in this paragraph will no longer apply
if the Company does not assume the Severance Agreement, as
amended, in connection with the Chapter&nbsp;11 proceedings.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Separation Agreement with David N. Siegel</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group and US&nbsp;Airways entered into a
Separation Agreement with Mr.&nbsp;Siegel dated April&nbsp;23,
2004, which is filed as Exhibit&nbsp;10.10 to
US&nbsp;Airways&#146; Quarterly Report on Form&nbsp;10-Q for the
quarter ended June&nbsp;30, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The agreement provided that Mr.&nbsp;Siegel&#146;s service as
President and Chief Executive Officer of Airways was terminated
by Mr.&nbsp;Siegel for &#147;good reason&#148; on April&nbsp;19,
2004. The agreement provided for a cash severance payment of
$4,725,410, which was paid in a single lump sum. In addition,
669,600 outstanding Warrants held by Mr.&nbsp;Siegel became
fully vested and remain exercisable until April&nbsp;1, 2010.
1,130,400&nbsp;shares of restricted stock held by
Mr.&nbsp;Siegel became fully vested under the agreement.
Mr.&nbsp;Siegel is also entitled to continue participating in
certain employee benefits for three years. The agreement
required US&nbsp;Airways to reimburse Mr.&nbsp;Siegel up to
$15,000 for his legal fees incurred in connection with the
separation agreement. The agreement requires Mr.&nbsp;Siegel to
protect US&nbsp;Airways&#146; and US&nbsp;Airways Group&#146;s
confidential information for three years and not to solicit
customers, clients or employees for six months. The agreement
provided for mutual general releases of claims.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Supplemental Separation Agreement with David N. Siegel</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group and US&nbsp;Airways entered into a
Supplemental Separation Agreement with Mr.&nbsp;Siegel dated
May&nbsp;19, 2004, which is filed as Exhibit&nbsp;10.11 to
US&nbsp;Airways&#146; Quarterly Report on Form&nbsp;10-Q for the
quarter ended June&nbsp;30, 2004. The Supplemental Separation
Agreement supplemented the initial Separation Agreement
described above, and in particular, provided the supplemental
executive retirement benefits for Mr.&nbsp;Siegel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the agreement, Mr.&nbsp;Siegel became entitled to benefits
under the Executive Plans. The total contribution under the
Funded Executive Defined Contribution Plan for Mr.&nbsp;Siegel
was $681,419, which was paid to Mr.&nbsp;Siegel as provided in
the plan. In addition, Mr.&nbsp;Siegel received a tax gross-up
payment of $493,441. The allocation under the Unfunded Executive
Defined Contribution Plan for Mr.&nbsp;Siegel was $91,714, which
is distributable to Mr.&nbsp;Siegel in accordance with the terms
of that plan. The agreement required Mr.&nbsp;Siegel to
cooperate with US&nbsp;Airways and US&nbsp;Airways Group for six
months after the date of his termination of employment and to
reasonably assist on all matters related to his employment and
the conduct of business, including any litigation.
US&nbsp;Airways agreed to reimburse Mr.&nbsp;Siegel up to an
additional $50,000 for his legal fees incurred in connection
with the separation agreement and supplemental separation
agreement. The agreement also entitled Mr.&nbsp;Siegel to
receive $75,000 for accrued but unused vacation time.
Mr.&nbsp;Siegel also agreed not to solicit customers, clients or
employees for six months, and the agreement provided for mutual
general releases of claims.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Employment Agreement with David N. Siegel</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways&#146; Employment Agreement with Mr.&nbsp;Siegel
was dated as of March&nbsp;11, 2002 and was filed as
Exhibit&nbsp;10.41 to US&nbsp;Airways&#146; Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2001. In
addition, a letter agreement between US&nbsp;Airways and
Mr.&nbsp;Siegel dated as of March&nbsp;11, 2002, which
supplemented the employment agreement, was filed as
Exhibit&nbsp;10.49 to US&nbsp;Airways&#146; Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2001.
Mr.&nbsp;Siegel&#146;s employment agreement and the
supplementary letter agreement were terminated and superseded by
the separation agreement and supplemental separation agreement
described above, except that the following provisions of the
employment agreement survived: (i)&nbsp;US&nbsp;Airways agreed
to pay Mr.&nbsp;Siegel&#146;s reasonable legal fees and expenses
incurred as a result of any contest by US&nbsp;Airways or others
of the validity or enforceability of, or liability under, the
separation agreement and supplemental separation agreement, plus
interest, and (ii)&nbsp;in the event that any of
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Mr.&nbsp;Siegel&#146;s compensation would be subject to an
excise tax under Internal Revenue Code Section&nbsp;4999,
US&nbsp;Airways is required to pay Mr.&nbsp;Siegel an additional
gross-up payment, such that after payment of all taxes,
including interest or penalties, on the gross-up payment,
Mr.&nbsp;Siegel will retain an amount of the gross-up payment
equal to the excise tax (and any penalties and interest on the
excise tax).
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Separation and Consulting Agreement with Neal S. Cohen</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group and US&nbsp;Airways entered into a
Separation and Consulting Agreement with Mr.&nbsp;Cohen dated
April&nbsp;30, 2004, which is filed as Exhibit&nbsp;10.12 to
US&nbsp;Airways&#146; Quarterly Report on Form&nbsp;10-Q for the
quarter ended June&nbsp;30, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The agreement provided that Mr.&nbsp;Cohen&#146;s service as
Executive Vice President and Chief Financial Officer of Airways
was terminated by Mr.&nbsp;Cohen for &#147;good reason&#148; on
April&nbsp;30, 2004. The agreement provided for a cash severance
payment of $1,523,033, which was paid in a single lump sum. In
addition, 223,200&nbsp;outstanding Warrants held by
Mr.&nbsp;Cohen were fully vested and remain exercisable until
April&nbsp;1, 2010. 376,800&nbsp;shares of restricted stock held
by Mr.&nbsp;Cohen became fully vested under the agreement. The
agreement provided that Mr.&nbsp;Cohen would provide consulting
services for three months, which could be extended by mutual
written agreement. For the consulting services, Mr.&nbsp;Cohen
received $50,000&nbsp;per month, plus $20,000&nbsp;per month in
future first class travel on Airways at a value of $200&nbsp;per
domestic flight round trip, $400&nbsp;per Caribbean flight round
trip and $600&nbsp;per European flight round trip, prorated for
partial months. The agreement required US&nbsp;Airways to
reimburse Mr.&nbsp;Cohen up to $10,000 for his legal fees
incurred in connection with the separation agreement. The
agreement requires Mr.&nbsp;Cohen to protect
US&nbsp;Airways&#146; and US&nbsp;Airways Group&#146;s
confidential information for one year, and not to solicit
customers, clients or employees for nine months. The agreement
provided for mutual general releases of claims.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Severance Agreement with Neal S. Cohen</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways&#146; Severance Agreement with Mr.&nbsp;Cohen
was dated as of April&nbsp;8, 2002 and was filed as
Exhibit&nbsp;10.8 to US&nbsp;Airways&#146; Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2002.
Mr.&nbsp;Cohen&#146;s severance agreement was terminated and
superseded by the separation agreement described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Committee Interlocks and Insider
Participation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None of the Company&#146;s executive officers or directors
serves as a member of the board of directors or compensation
committee of any entity that has one or more of its executive
officers serving as a member of the Company&#146;s Board of
Directors or Human Resources Committee.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='243'></A>
</DIV>

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    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;12.&nbsp;</B></TD>
    <TD>
    <B>Security Ownership of Certain Beneficial Owners and
    Management</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Equity Compensation Plan Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table gives information about the Company&#146;s
Class&nbsp;A Common Stock, Options, Restricted Stock and
Warrants that may be issued under all of its existing equity
compensation plans as of December&nbsp;31, 2004, which include:
</DIV>

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    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    2004 Omnibus Stock Incentive Plan of US&nbsp;Airways Group, Inc.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    2003 Stock Incentive Plan, as amended and restated, of
    US&nbsp;Airways Group, Inc.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    2003 Nonemployee Director Stock Incentive Plan, as amended</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Shares of restricted Class&nbsp;A Common Stock issued to
    employees in accordance with the terms of the 2003 Plan and the
    Company&#146;s collective bargaining agreements with certain
    labor groups.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2003 Stock Incentive Plan, as amended and restated, was
approved by the Company&#146;s stockholders at the Annual
Meeting of Stockholders held May&nbsp;19, 2004. The other plans
above have not previously been specifically approved by the
Company&#146;s stockholders. The allocation of shares for the
grants to employees were approved by the bankruptcy court as
part of the Company&#146;s 2003 Plan, which under
Section&nbsp;303 of the Delaware General Corporation Law has
like effect to stockholder approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the current Chapter&nbsp;11 proceedings, the
plans listed above will either be terminated or modified in
connection with the confirmation of a plan of reorganization.
The ultimate recovery, if any, to holders of the equity
securities granted under these plans will not be determined
until such confirmation. The plan of reorganization could result
in holders of US&nbsp;Airways Group&#146;s common stock and
related equity securities receiving no distribution on account
of their interest and cancellation of the equity.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(c)&nbsp;Number of Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(a)&nbsp;Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Remaining Available</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Securities to be Issued</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(b)&nbsp;Weighted-Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>for Future Issuance Under</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Upon Exercise of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise Price of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Equity Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(d)&nbsp;Total of Securities</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Outstanding Options,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Outstanding Options,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Plans (Excluding Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Reflected in</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2" align="left" nowrap><B>Plan Category</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Warrants and Rights</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Warrants and Rights(4)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Reflected in Column&nbsp;(a))</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Columns&nbsp;(a)&nbsp;and (c)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity Compensation Plans Approved by Stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,644,347</TD>
    <TD align="left" valign="bottom" nowrap>(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>532,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,176,444</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity Compensation Plans Not Approved by Stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,397</TD>
    <TD align="left" valign="bottom" nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,208,063</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    TOTAL</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,730,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,740,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,676,444</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Includes all shares of restricted Class&nbsp;A Common Stock
    allocated to the various labor groups under the Company&#146;s
    2003 Plan, as described below, that had not vested as of
    December&nbsp;31, 2004. As noted above, the allocation of
    securities for the grants to employees were approved by the 2003
    Plan, which has the same effect as stockholder approval.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Includes the following securities granted under the
    Company&#146;s 2003 Stock Incentive Plan, as amended and
    restated: 1,997,108&nbsp;shares of restricted Class&nbsp;A
    Common Stock that had not vested as of December&nbsp;31, 2004;
    2,118,490&nbsp;Warrants exercisable for shares of Class&nbsp;A
    Common Stock; and 357,390&nbsp;options exercisable for shares of
    Class&nbsp;A Common Stock. All Warrants are issued with a
    corresponding number of shares of Class&nbsp;A Preferred Stock
    equal to the number of shares of Class&nbsp;A Common Stock for
    which the Warrants are exercisable.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Includes 86,397&nbsp;stock options exercisable for shares of
    Class&nbsp;A Common Stock granted under the 2003 Nonemployee
    Director Stock Incentive Plan, as amended.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Does not include the shares of restricted Class&nbsp;A Common
    Stock included in column&nbsp;(a), due to the fact that the
    restricted stock does not have an exercise price.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Includes 408,603&nbsp;shares of Class&nbsp;A Common Stock under
    the Company&#146;s 2003 Nonemployee Director Stock Incentive
    Plan, as amended and 1,800,000&nbsp;shares of Class&nbsp;A
    Common Stock under the Company&#146;s 2004 Omnibus Stock
    Incentive Plan.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2004 Omnibus Stock Incentive Plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Board of Directors of US&nbsp;Airways Group, Inc. adopted
the US&nbsp;Airways Group, Inc. 2004 Omnibus Stock Incentive
Plan (the &#147;Omnibus Plan&#148;) on August&nbsp;4, 2004, to
replace the 2003 Stock Incentive Plan. As noted above, due to
the current Chapter&nbsp;11 proceedings, the Omnibus Plan will
either be terminated or
</DIV>

<P align="center" style="font-size: 10pt;">121
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<DIV align="left" style="font-size: 10pt;">
modified in connection with the confirmation of a plan of
reorganization. The Board of Directors has reserved a total of
1,800,000&nbsp;shares of Class&nbsp;A Common Stock for issuance
under the Omnibus Plan. Pursuant to the Omnibus Plan, no further
awards may be granted under the 2003 Stock Incentive Plan. Under
the Omnibus Plan, employees of US&nbsp;Airways Group and its
affiliates are eligible to receive grants of qualified and
nonqualified stock options, reload options, stock appreciation
rights, restricted stock, restricted stock units,
performance-based shares and units, Class&nbsp;A-1 Warrants
coupled with shares of Class&nbsp;A Preferred Stock and/or cash
awards. A committee appointed by US&nbsp;Airways Group&#146;s
Board of Directors will select award recipients, determine the
terms of each award, and interpret the plan. Awards become
vested as determined by the committee, but all awards generally
become immediately vested upon the participant&#146;s death,
disability or retirement after age&nbsp;62, and upon a change in
control of US&nbsp;Airways Group, although vesting is
accelerated for performance-based awards on a pro rata basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2003 Nonemployee Director Stock Incentive Plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The US&nbsp;Airways Group, Inc. 2003 Nonemployee Director Stock
Incentive Plan has not been approved by the Company&#146;s
stockholders. See Item&nbsp;11. Executive
Compensation&nbsp;&#151; Compensation of Directors above for a
description of the material terms of the plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Restricted Class&nbsp;A Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms of the 2003 Plan and collective bargaining
agreements, US&nbsp;Airways Group was required to issue a total
of 23,028,687&nbsp;shares of restricted stock to individuals
designated by various labor groups. The restricted stock is
subject to restrictions on sale, assignment, transfer and other
encumbrance prior to vesting, but holders of the restricted
shares otherwise have all of the rights of a stockholder. The
restricted stock generally became vested and nonforfeitable with
respect to 50% of each grant on July&nbsp;31, 2003, and an
additional 25% was scheduled to vest on each of January&nbsp;1,
2005 and January&nbsp;1, 2006. These vesting provisions are
subject to the provisions of the Notices of Restricted Stock
Grant as described below for each union. Except as provided in
the Notices of Restricted Stock Grant for each union, a holder
of restricted stock must be employed by US&nbsp;Airways on each
vesting date in order for the shares of restricted stock to
vest. The IAM, CWA, AFA and the TWU&nbsp;dispatchers agreed to
postpone the January&nbsp;1, 2005 vesting to June&nbsp;30, 2005.
Shares held by members of the ALPA and the TWU&nbsp;flight crew
training instructors and flight simulator engineers vested, and
income tax withholding payments were either deducted from the
paychecks of active employees or invoiced to in-active
employees, with the shares subject to forfeit if the withholding
tax is not paid. Any shares forfeited are re-allocated as
directed by the applicable union.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Notices of Restricted Stock Grant for shares issued pursuant
to the collective bargaining agreement between US Airways and
the IAM provide that an employee who retires or dies prior to
full vesting will receive the next 25% of vesting as of the
vesting date immediately after retirement or death, but will not
vest in any additional shares thereafter. Employees who retired
before June&nbsp;1, 2003 received 25% vesting. Employees who
retired before July&nbsp;31, 2003 received 50% vesting. An
employee who resigns or is terminated for cause will forfeit any
unvested shares, except that an employee who resigned or was
terminated for cause between June&nbsp;1, 2003 and July&nbsp;31,
2003 received the first 25% of vesting. Employees who take a
leave of absence or are furloughed continue to vest on the same
schedule as active employees, and are taxed on all remaining
shares granted but not yet vested on the first vesting date
after the furlough begins. Except as described in the preceding
sentences, upon termination of employment, all unvested shares
are forfeited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Notices of Restricted Stock Grant for shares issued pursuant
to the collective bargaining agreement between US Airways and
the CWA provide that in order for the employees&#146; shares of
restricted stock to vest on any vesting date, the individual
must have been on the CWA Passenger Service Employees seniority
list as of September&nbsp;17, 2002. In addition, in order to
receive the first 50% vesting on July&nbsp;31, 2003, the
employee (i)&nbsp;must have worked as a Passenger Service
Employee on at least one date between September&nbsp;17, 2002
and July&nbsp;31, 2003, and (ii)&nbsp;must continue to be on the
Passenger Service Employees seniority list as of July&nbsp;31,
2003. Individuals who met those eligibility criteria as of
May&nbsp;31, 2003, but were not on the seniority list as of
July&nbsp;31, 2003, vested in 25% of their restricted stock and
the remainder was forfeited. In order to receive the next 25%
vesting on January&nbsp;1, 2005, the eligible employee
(i)&nbsp;must have worked as a Passenger Service Employee on at
least one date between August&nbsp;1, 2003 and December&nbsp;31,
2004, and (ii)&nbsp;must continue to be
</DIV>

<P align="center" style="font-size: 10pt;">122

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<DIV align="left" style="font-size: 10pt;">
on the Passenger Service Employees seniority list as of
January&nbsp;1, 2005. In order to receive the final 25% vesting
on January&nbsp;1, 2006, the eligible employee (i)&nbsp;must
have worked as a Passenger Service Employee on at least one date
between January&nbsp;1, 2005 and December&nbsp;31, 2005, and
(ii)&nbsp;must continue to be on the Passenger Service Employees
seniority list as of January&nbsp;1, 2006. Upon termination of
employment, all unvested shares are forfeited, and upon each
vesting date, all shares which do not vest are forfeited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Notices of Restricted Stock Grant for shares issued pursuant
to the collective bargaining agreement between US Airways and
the AFA provide that all eligible employees on each vesting date
will receive an equal number of whole shares from the
union&#146;s vested pool on that vesting date. Shares remaining
from the July&nbsp;31, 2003 and January&nbsp;1, 2005 vesting
dates will go into a pool for distribution among eligible
employees upon the final vesting date. After the final vesting
date, once all employees have received an equal number of whole
shares, any remaining shares will be distributed to employees in
order of seniority. An employee who resigns, retires, is
terminated or dies will forfeit any unvested shares. Employees
whose status reflects Involuntary Furlough, Long-Term
Disability, Long Term Disability&nbsp;&#151; Social Security
Award, Supervisor, Training Instructor, Company Business or AFA
Union Business National on the January&nbsp;1, 2005 or
January&nbsp;1, 2006 vesting dates will not participate in the
vesting pool on those dates. The union will provide US Airways
Group with a list of employees eligible to receive an allocation
from the pool and the number of shares to be allocated to each
employee no later than November&nbsp;1, 2005. Except as
described in the preceding sentences, upon termination of
employment, all unvested shares are forfeited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Notices of Restricted Stock Grant for shares issued pursuant
to the collective bargaining agreement between US Airways and
ALPA provide that a pilot who retired before July&nbsp;31, 2003
became fully vested on that date and an employee whose
&#147;normal retirement date&#148; falls prior to full vesting
will become fully vested as of the vesting date immediately
preceding the normal retirement date. Pilots who took early
retirement between July&nbsp;31, 2003 and January&nbsp;1, 2005
became vested in an additional 25% on January&nbsp;1, 2005, and
forfeited the remaining 25% of the restricted stock grant.
Pilots who take early retirement after January&nbsp;1, 2005 will
become fully vested on January&nbsp;1, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A pilot who died before July&nbsp;31, 2003 became fully vested
on that date, and a pilot who dies after July&nbsp;31, 2003 but
before January&nbsp;1, 2006, will become fully vested on the
date of death. A pilot who resigns or is terminated for cause
(as determined by the US Airways System Board of Adjustment)
forfeits any unvested shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
One group of Notices of Restricted Stock Grant for shares issued
pursuant to the collective bargaining agreement between US
Airways and the Transportation Workers Union provides that an
instructor who retired before July&nbsp;31, 2003 became 50%
vested on that date, but will not vest in any additional shares
thereafter. An employee who retires before fully vesting will
receive the next 25% of vesting on the next vesting date, but
will not vest further. Employees on furlough continue to vest on
the same schedule as active employees, and are taxed on all
remaining shares granted but not yet vested on the first vesting
date after the furlough begins. Except as described in the
preceding sentences, upon termination of employment, all
unvested shares are forfeited. A second group of Notices of
Restricted Stock Grant for shares issued pursuant to the
collective bargaining agreement between US Airways and the
Transportation Workers Union provide that a dispatcher who was
active (as defined in the agreement) between the 32nd&nbsp;day
preceding June&nbsp;1, 2003 and the 32nd&nbsp;day preceding
July&nbsp;31, 2003 but retired, was furloughed or died before
July&nbsp;31, 2003, became vested in 50% of the restricted stock
grant on July&nbsp;31, 2003. Thereafter, an employee who is
active on the date 32&nbsp;days before the vesting date but
retires, is furloughed or dies before that vesting date will
receive the applicable vesting on that date. Except as described
in the preceding sentences, upon termination of employment, all
unvested shares are forfeited. A third group of Notices of
Restricted Stock Grant for shares issued pursuant to the
collective bargaining agreement between US Airways and the
Transportation Workers Union provides that a flight simulator
engineer employee who retired before July&nbsp;31, 2003 became
25% vested on that date, but will not vest in any additional
shares thereafter. An employee who retires before fully vesting
will receive the next 25% of vesting on the next vesting date,
but will not vest further. Employees who die prior to becoming
fully vested will become fully vested on the next vesting date.
Employees on furlough continue to vest on the same schedule as
active employees, and are taxed on all remaining shares granted
but not yet vested on the first
</DIV>

<P align="center" style="font-size: 10pt;">123

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<DIV align="left" style="font-size: 10pt;">
vesting date after the furlough begins. Except as described in
the preceding sentences, upon termination of employment, all
unvested shares are forfeited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Security Ownership of Certain Beneficial Owners and
Management</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth information regarding the
beneficial ownership of the Company&#146;s Class&nbsp;A Common
Stock and Class&nbsp;A Preferred Stock as of February&nbsp;1,
2005, by (i)&nbsp;each of the Company&#146;s directors,
(ii)&nbsp;each of the Company&#146;s executive officers named in
the Summary Compensation Table herein and (iii)&nbsp;all of the
Company&#146;s directors and executive officers as a group,
based in each case on information furnished to the Company by
such persons. Each share of Class&nbsp;A Preferred Stock is
issued with a corresponding Warrant that is exercisable for
Class&nbsp;A Common Stock. The Warrants do not have voting
rights but the corresponding Class&nbsp;A Preferred Stock issued
with each Warrant entitles the holder to one vote per share of
Class&nbsp;A Preferred Stock (subject to adjustment in certain
circumstances). Each Warrant is only exercisable, redeemable or
transferable when delivered together with the corresponding
shares of Class&nbsp;A Preferred Stock. In no event will a
holder be entitled to vote both the shares of Class&nbsp;A
Preferred Stock corresponding to the Warrant and the shares of
Class&nbsp;A Common Stock that may be issued to the holder upon
exercise of the Warrant. Therefore, the information in the table
below regarding beneficial ownership of Class&nbsp;A Common
Stock excludes the shares of Class&nbsp;A Common Stock that are
deemed to be beneficially owned by holders of Warrants due to
the fact that the Warrants are exercisable within 60&nbsp;days
of February&nbsp;1, 2005, since the holders of Warrants must
surrender their Class&nbsp;A Preferred Stock prior to receiving
the shares of Class&nbsp;A Common Stock. This excluded
beneficial ownership information is disclosed in the footnotes.
We believe that each of the named individuals and each director
and executive officer included in the group has sole voting and
investment power with regard to the shares shown, except as
otherwise noted. The ultimate recovery, if any, to holders of
the common stock will not be determined until confirmation of a
plan of reorganization. The plan of reorganization could result
in holders of US Airways Group&#146;s common stock and related
equity securities receiving no distribution on account of their
interest and cancellation of the equity.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Class&nbsp;A Common Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Class&nbsp;A Preferred Stock</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Beneficially Owned(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Beneficially Owned(1)(2)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Name and Title</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Class</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Class</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bruce R. Lakefield</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>476,200</TD>
    <TD align="left" valign="bottom" nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>President, Chief Executive Officer and Director,</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>US Airways Group and US Airways</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ronald E. Stanley</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD align="left" valign="bottom" nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Executive Vice President, Chief Financial Officer</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>and Director, US Airways Group and US Airways</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Alan W. Crellin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188,400</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,600</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Executive Vice President&nbsp;&#151; Operations, US
    Airways</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Elizabeth K. Lanier</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188,400</TD>
    <TD align="left" valign="bottom" nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,600</TD>
    <TD align="left" valign="bottom" nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Executive Vice President&nbsp;&#151; Corporate Affairs,</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>General Counsel and Secretary, US Airways</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Group and US Airways</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jerrold Glass</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188,400</TD>
    <TD align="left" valign="bottom" nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,600</TD>
    <TD align="left" valign="bottom" nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Senior Vice President&nbsp;&#151; Employee Relations,</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>US Airways</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David N. Siegel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD align="left" valign="bottom" nowrap>(8)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>669,600</TD>
    <TD align="left" valign="bottom" nowrap>(8)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Former President, Chief Executive Officer and</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director, US Airways Group and US Airways</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Neal S. Cohen</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,594</TD>
    <TD align="left" valign="bottom" nowrap>(9)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>223,200</TD>
    <TD align="left" valign="bottom" nowrap>(9)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Former Executive Vice President&nbsp;&#151; Finance and</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Chief Financial Officer, US Airways Group and</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>US Airways</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    B. Ben Baldanza</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD align="left" valign="bottom" nowrap>(10)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,600</TD>
    <TD align="left" valign="bottom" nowrap>(10)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Former Senior Vice President&nbsp;&#151; Marketing and</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Planning, US Airways</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">124

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
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    <TD width="5%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Class&nbsp;A Common Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Class&nbsp;A Preferred Stock</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Beneficially Owned(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Beneficially Owned(1)(2)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Name and Title</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Class</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Class</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William D. Pollock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David G. Bronner</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Chairman of the Board</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas R. Harter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Magdalena Jacobsen</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD align="left" valign="bottom" nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert L. Johnson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD align="left" valign="bottom" nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cheryl G. Krongard</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD align="left" valign="bottom" nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Joseph J. Mantineo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD align="left" valign="bottom" nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John A. McKenna,&nbsp;Jr.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD align="left" valign="bottom" nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hans Mirka</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD align="left" valign="bottom" nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George M. Philip</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="18">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James M. Simon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD align="left" valign="bottom" nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William T. Stephens</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Director</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Directors and executive officers of US Airways Group as a group
    (25&nbsp;persons)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,479,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,578,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;*</TD>
    <TD align="left">
    Represents less than 1% of the class.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The number shown reflects the number of Class&nbsp;A Common
    Stock and Class&nbsp;A Preferred Stock owned beneficially as of
    February&nbsp;1, 2005, based on information furnished by the
    persons named, public filings and the Company&#146;s records. A
    person is deemed to be a beneficial owner if such person, either
    alone or with others, has the power to vote or to dispose of
    such common shares. Except as otherwise indicated below and
    subject to applicable community property laws, the Company
    believes each owner has sole voting and sole investment
    authority with respect to the shares listed. Except as indicated
    in the notes below, shares of Class&nbsp;A Common Stock
    beneficially owned by a person include shares of which the
    person has the right to acquire beneficial ownership within
    60&nbsp;days after February&nbsp;1, 2005. There were
    51,643,527&nbsp;shares of Class&nbsp;A Common Stock and
    18,847,894&nbsp;shares of Class&nbsp;A Preferred Stock
    outstanding as of February&nbsp;1, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Each share of Class&nbsp;A Preferred Stock is issued with a
    corresponding Warrant that is exercisable for Class&nbsp;A
    Common Stock. The Warrants do not have any voting rights. Each
    Warrant is only exercisable, redeemable or transferable when
    delivered together with the corresponding shares of Class&nbsp;A
    Preferred Stock. Therefore, a holder of Class&nbsp;A Preferred
    Stock will be entitled either to (i)&nbsp;vote the shares of
    Class&nbsp;A Preferred Stock, or (ii)&nbsp;upon exercise of the
    Warrants and the required surrender of the corresponding number
    of shares of Class&nbsp;A Preferred Stock, vote the number of
    shares of Class&nbsp;A Common Stock received upon exercise. In
    no event will a holder be entitled to vote both the shares of
    Class&nbsp;A Preferred Stock corresponding to the Warrant and
    the shares of Class&nbsp;A Common Stock that may be issued to
    the holder upon exercise of the Warrant.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    The Class&nbsp;A Common Stock Beneficially Owned excludes 1362.4
    deferred stock units and includes 5,000 vested stock options
    exercisable for shares of Class&nbsp;A Common Stock, each of
    which was received by Mr.&nbsp;Lakefield under the
    Company&#146;s director compensation programs for service as a
    non-employee director until April&nbsp;19, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    The Class&nbsp;A Common Stock Beneficially Owned excludes
    6,849.3 deferred stock units received by Mr.&nbsp;Stanley under
    the Company&#146;s director compensation programs for service as
    a non-employee director until October&nbsp;25, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    The Class&nbsp;A Common Stock Beneficially Owned excludes
    Warrants to purchase&nbsp;111,600&nbsp;shares of our
    Class&nbsp;A Common Stock that are immediately exercisable.
    Please see Note&nbsp;2 above regarding the surrender of
    Class&nbsp;A Preferred Stock upon the exercise of the Warrants,
    which is required to receive the underlying Class&nbsp;A Common
    Stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    The Class&nbsp;A Common Stock Beneficially Owned excludes
    Warrants to purchase&nbsp;111,600&nbsp;shares of our
    Class&nbsp;A Common Stock that are immediately exercisable.
    Please see Note&nbsp;2 above regarding the surrender of
    Class&nbsp;A Preferred Stock upon the exercise of the Warrants,
    which is required to receive the underlying Class&nbsp;A Common
    Stock.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">125

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    The Class&nbsp;A Common Stock Beneficially Owned excludes
    Warrants to purchase&nbsp;111,600&nbsp;shares of our
    Class&nbsp;A Common Stock that are immediately exercisable.
    Please see Note&nbsp;2 above regarding the surrender of
    Class&nbsp;A Preferred Stock upon the exercise of the Warrants,
    which is required to receive the underlying Class&nbsp;A Common
    Stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    The Class&nbsp;A Common Stock Beneficially Owned excludes
    Warrants to purchase&nbsp;669,600&nbsp;shares of our
    Class&nbsp;A Common Stock that are immediately exercisable.
    Please see Note&nbsp;2 above regarding the surrender of
    Class&nbsp;A Preferred Stock upon the exercise of the Warrants,
    which is required to receive the underlying Class&nbsp;A Common
    Stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    The Class&nbsp;A Common Stock Beneficially Owned excludes
    Warrants to purchase&nbsp;223,200&nbsp;shares of our
    Class&nbsp;A Common Stock that are immediately exercisable.
    Please see Note&nbsp;2 above regarding the surrender of
    Class&nbsp;A Preferred Stock upon the exercise of the Warrants,
    which is required to receive the underlying Class&nbsp;A Common
    Stock.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    The Class&nbsp;A Common Stock Beneficially Owned excludes
    Warrants to purchase&nbsp;111,600&nbsp;shares of our
    Class&nbsp;A Common Stock that are immediately exercisable.
    Please see Note&nbsp;2 above regarding the surrender of
    Class&nbsp;A Preferred Stock upon the exercise of the Warrants,
    which is required to receive the underlying Class&nbsp;A Common
    Stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)&nbsp;</TD>
    <TD align="left">
    Consists of 5,000 vested stock options exercisable for shares of
    Class&nbsp;A Common Stock received under the Company&#146;s 2003
    Nonemployee Director Stock Incentive Plan.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below are the number of deferred stock units held by
each non-employee director who participates in the
Company&#146;s director compensation programs. See Item&nbsp;11.
Executive Compensation-Compensation of Directors above. Although
each deferred stock unit represents the economic equivalent of a
share of Class&nbsp;A Common Stock, no voting rights or other
rights of a stockholder of US Airways Group attach to the
deferred stock units. Although David G. Bronner and William T.
Stephens, as non-employee members of the Board, are entitled to
receive deferred stock units, each waived all director
compensation.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deferred Stock Units</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Directors</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas R. Harter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,880.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Magdalena Jacobsen</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,211.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert L. Johnson</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,211.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cheryl G. Krongard</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,211.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Joseph J. Mantineo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,211.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John A. McKenna,&nbsp;Jr.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,211.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hans Mirka</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,211.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    George M. Philip</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,506.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James M. Simon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,211.7</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth information regarding the
beneficial ownership of the Company&#146;s Class&nbsp;A Common
Stock, Class&nbsp;B Common Stock, Class&nbsp;A Preferred Stock
and Class&nbsp;B Preferred Stock as of the date indicated for
each person, other than the Company&#146;s officers and
directors, known to it to be the beneficial owner of more than
5% of its outstanding Class&nbsp;A Common Stock, Class&nbsp;B
Common Stock, Class&nbsp;A Preferred Stock and Class&nbsp;B
Preferred Stock.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount and Nature of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Name and Address of Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Title of Class</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Beneficial Ownership</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Class</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Retirement Systems of Alabama Holdings LLC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Class&nbsp;A Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>22,669,412</TD>
    <TD align="left" valign="top" nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>42.25%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    135 South Union Street</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Class&nbsp;B Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5,000,000</TD>
    <TD align="left" valign="top" nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>100.00%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Montgomery, Alabama 36104(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Class&nbsp;A Preferred Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2,016,819</TD>
    <TD align="left" valign="top" nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.70%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Class&nbsp;B Preferred Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>100.00%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ATSB Securities Trust u/a/d March&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Class&nbsp;A Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7,635,000</TD>
    <TD align="left" valign="top" nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>12.88%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    1120 Vermont Avenue, Suite&nbsp;970</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Class&nbsp;A Preferred Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7,635,000</TD>
    <TD align="left" valign="top" nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>40.51%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Washington, DC 20005(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The amount shown and the following information was provided in a
    Schedule&nbsp;13D filed by RSA on August&nbsp;25, 2003 reporting
    beneficial ownership on May&nbsp;13, 2003. RSA reported
    beneficial ownership with sole voting power and sole dispositive
    power of 22,669,412&nbsp;shares of Class&nbsp;A Common Stock
    (which includes 2,016,819&nbsp;shares of Class&nbsp;A Preferred
    Stock that must be surrendered upon exercise of the Warrants)
    and 5,000,000&nbsp;shares of Class&nbsp;B Common Stock. The
    Schedule&nbsp;13D was filed by RSA, on behalf of
    (i)&nbsp;itself, (ii)&nbsp;The Teachers&#146; Retirement System
    of Alabama (TRSA)&nbsp;and (iii)&nbsp;The Employees&#146;
    Retirement System of Alabama (ERSA), for the purpose of
    disclosing the acquired beneficial ownership pursuant to
    (a)&nbsp;an investment agreement by and between US Airways Group
    and RSA, dated as of September&nbsp;26, 2002, as amended by that
    certain Amendment No.&nbsp;1 by and among US Airways Group, TRSA
    and RSA, dated as of January&nbsp;17, 2003, and as further
    amended by that certain Amendment No.&nbsp;2 by and among US
    Airways Group, TRSA and RSA, dated as of March&nbsp;30, 2003 and
    (b)&nbsp;the 2003 Plan. TRSA is one of two members of RSA, and
    has</TD>
</TR>

</TABLE>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">a
    66<FONT style="font-size: 70%"><SUP>2</SUP></FONT>/<FONT style="font-size: 60%">3</FONT>%
    interest in RSA. ERSA is the other member of RSA, and has a
    33<FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">3</FONT>%
    interest in RSA. By reason of these relationships, TRSA and ERSA
    may be deemed to beneficially own and have shared voting and
    dispositive power over the Class&nbsp;A Common Stock and
    Class&nbsp;B Common Stock owned by RSA. TRSA and ERSA disclaim
    beneficial ownership of the shares of Class&nbsp;A Common Stock
    and Class&nbsp;B Common Stock beneficially owned by RSA or by
    ERSA and TRSA, respectively. By reason of TRSA&#146;s and
    ERSA&#146;s ownership of RSA, TRSA, ERSA and RSA may be deemed
    to constitute a group within the meaning of
    Section&nbsp;13d-5(b) of the Securities Exchange Act of 1934, as
    amended (the &#147;Exchange Act&#148;). However, RSA, TRSA and
    ERSA each disclaims the existence of a group.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Amount and Nature of Beneficial Ownership for the
Class&nbsp;A Common Stock includes Warrants to
purchase&nbsp;2,016,819&nbsp;shares of our Class&nbsp;A Common
Stock that are exercisable within sixty days of February&nbsp;1,
2005.
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    The ATSB Securities Trust beneficially owns
    7,635,000&nbsp;shares of Class&nbsp;A Common Stock through its
    ownership of 7,635,000 Warrants. As disclosed above, the
    Warrants are issued with a corresponding number of shares of
    Class&nbsp;A Preferred Stock, which has voting rights. The ATSB
    Securities Trust holds 7,635,000&nbsp;shares of Class&nbsp;A
    Preferred Stock, which must be surrendered upon exercise of the
    Warrants. The Warrants have an exercise price of $7.42&nbsp;per
    share and are immediately exercisable. In addition, the ATSB
    Securities Trust, under certain interpretations of
    Rule&nbsp;13d-5 of the Exchange Act, may be deemed to possess
    shared investment power with respect to 14,456,815&nbsp;shares
    of Class&nbsp;A Common Stock owned by RSA pursuant to the terms
    of an Undertaking Agreement entered into by RSA for the benefit
    of the ATSB Securities Trust. The ATSB Securities Trust
    expressly disclaims that it is the beneficial owner of any
    securities except to the extent of its pecuniary interest in
    shares of Class&nbsp;A Common Stock.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='244'></A>
</DIV>

<!-- link1 "Item 13. Certain Relationships and Related Transactions" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.&nbsp;</B></TD>
    <TD>
    <B>Certain Relationships and Related Transactions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>ATSB Securities Trust u/a/d March&nbsp;31, 2003.</I> As part
of its reorganization under the Prior Bankruptcy, US Airways
received the $900&nbsp;million ATSB Guarantee under the Air
Transportation Safety and System Stabilization Act from the ATSB
in connection with the $1&nbsp;billion ATSB Loan that was funded
on March&nbsp;31, 2003. The Company required this loan and
related guarantee in order to provide the additional liquidity
necessary to carry out its 2003 Plan. US&nbsp;Airways is the
primary obligor under the ATSB Loan, which is guaranteed by
US&nbsp;Airways Group and each of its other domestic
subsidiaries. The ATSB Loan is secured by substantially all of
the present and future assets of the US&nbsp;Airways Group and
its subsidiaries not otherwise encumbered, other than certain
specified assets, including assets which are subject to other
financing agreements. As of December&nbsp;31, 2004,
$718&nbsp;million was outstanding under the ATSB Loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ATSB Loan bears interest as follows: (i)&nbsp;90% of the
ATSB Loan (Tranche&nbsp;A) was funded through a participating
lender&#146;s commercial paper conduit program and bears
interest at a rate equal to the conduit provider&#146;s weighted
average cost related to the issuance of certain commercial paper
notes and other short-term borrowings plus 0.30%, and
(ii)&nbsp;10% of the ATSB Loan (Tranche&nbsp;B) bears interest
at LIBOR plus 4.0%. In addition, US&nbsp;Airways is charged an
annual guarantee fee in respect of the ATSB Guarantee currently
equal to 4.1% of the ATSB&#146;s guaranteed amount (initially
$900&nbsp;million) under the ATSB Guarantee, with such guarantee
fee increasing by ten basis points annually. Due to the
Company&#146;s September 2004 bankruptcy filing and subsequent
loss of regional jet financing, the guarantee fee increased by
2%&nbsp;per annum and the interest rate on Tranche&nbsp;A and
Tranche&nbsp;B each increased by an additional 2% and
4%&nbsp;per annum, respectively, for an effective increase in
the interest rate on the loan balance of 4%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the ATSB Loan, US Airways Group issued to
ATSB Securities Trust u/a/d March&nbsp;31, 2003, 7,635,000
Warrants to purchase its Class&nbsp;A Common Stock, together
with 7,635,000&nbsp;shares of Class&nbsp;A Preferred Stock,
which makes ATSB Securities Trust u/a/d March&nbsp;31, 2003 a
beneficial owner of more than five percent of the Class&nbsp;A
Common Stock and the Class&nbsp;A Preferred Stock. The ATSB
Securities Trust was established to hold these securities for
the benefit of the United States Department of Treasury and to
take action with respect to these securities at the direction of
the ATSB.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2003, the Company made a required prepayment of
$24&nbsp;million on the ATSB Loan in connection with the sale of
its investment in Hotwire, Inc. Effective March&nbsp;12, 2004,
the Company entered into an amendment to the ATSB Loan that
provided for a partial prepayment of the loan and modifications
of financial covenants for the measurement periods beginning
June&nbsp;30, 2004 through December&nbsp;31, 2005. In connection
with this amendment, US&nbsp;Airways made an immediate voluntary
prepayment of $250&nbsp;million, which reduced, pro rata, all
future scheduled principal payments of the ATSB Loan (rather
than shortening the remaining life of the loan).
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective May&nbsp;21, 2004, US Airways again amended the ATSB
Loan to permit use of its regional jets financed by GE utilizing
mortgage debt as cross collateral for other obligations of US
Airways to GE. In consideration for this amendment, US Airways
agreed to certain revised covenants and conditions and made a
prepayment of $5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective June&nbsp;30, 2004, US&nbsp;Airways and the ATSB
amended the ATSB Loan to remove the uncertainty relating to the
Company&#146;s ability to satisfy its financial covenant tests
for the second quarter of 2004. In consideration for this
amendment, the Company agreed to change the loan amortization
schedule, by increasing each of the first six principal
repayment installments commencing on October&nbsp;1, 2006 by
approximately $16&nbsp;million, and reducing the last principal
repayment installment on October&nbsp;1, 2009 by
$94&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into a Cash Collateral Agreement, which
has been subsequently extended, with the approval of the
Bankruptcy Court, for the continued use of the cash securing the
ATSB Loan. The initial agreement was extended until
January&nbsp;15, 2005 and the current agreement, subject to
certain conditions and limitations will expire on June&nbsp;30,
2005. Under the Cash Collateral Agreement, the Company is
required to maintain a certain amount of unrestricted cash each
week. For more information about the Cash Collateral Agreement,
see Part&nbsp;I, Item&nbsp;7. &#147;Management&#146;s Discussion
and Analysis of Financial Condition and Results of
Operation&nbsp;&#151; Liquidity and Capital Resources.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Retirement Systems of Alabama Holdings LLC.</I> In connection
with the consummation of the 2003 Plan, RSA made an equity
investment in US&nbsp;Airways Group equal to $240&nbsp;million.
In exchange for the $240&nbsp;million investment, RSA received
20,652,593&nbsp;shares of Class&nbsp;A Common Stock,
5,000,000&nbsp;shares of Class&nbsp;B Common Stock,
75,000&nbsp;shares of Class&nbsp;B Preferred Stock, 1,380,570
Warrants and 1,380,570&nbsp;shares of Class&nbsp;A Preferred
Stock, representing approximately 36.2%, on a fully-diluted
basis, of US Airways Group&#146;s equity. As of February&nbsp;1,
2005, in connection with its investment, RSA held a voting
interest of approximately 71.7% in US&nbsp;Airways Group and is
entitled to designate and vote to elect eight of the
15&nbsp;directors on US&nbsp;Airways Group&#146;s board of
directors. Additionally, Dr.&nbsp;David G. Bronner and
Mr.&nbsp;William T. Stephens, two of the Company&#146;s
directors, are the Manager and Secretary of RSA, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until September&nbsp;26, 2007, RSA has agreed to vote all of the
shares of voting capital stock received in connection with the
consummation of the 2003 Plan and then owned by it in favor of
all of the directors nominated in accordance with the investment
agreement between US&nbsp;Airways Group and RSA, which directors
include the Company&#146;s chief executive officer, four
directors nominated by the various unions and their affiliates,
and two directors identified by the Company&#146;s chief
executive officer, neither of whom is an employee or affiliate
of the Company, at each annual meeting of US Airways
Group&#146;s stockholders or at any meeting of the stockholders
at which members of the Board of Directors are to be elected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RSA funded $75&nbsp;million of the non-guaranteed portion of the
ATSB Loan. In connection with RSA&#146;s partial funding, it
received 636,249 additional Warrants and 636,249 additional
shares of Class&nbsp;A Preferred Stock. With respect to the
prepayments of the ATSB Loan, RSA, as one of the lenders under
the ATSB Loan, has received prepayments totaling
$21&nbsp;million through December&nbsp;31, 2004, which
represented its pro rata portion of the prepayment amount based
on the percentage of the original aggregate amount of the ATSB
Loan that RSA funded. As of December&nbsp;31, 2004,
$54&nbsp;million was outstanding under RSA&#146;s portion of the
ATSB Loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additionally, in connection with the execution and delivery of
the ATSB Loan, RSA executed an undertaking for the benefit of
the ATSB. RSA agreed that until April&nbsp;1, 2005, it shall not
transfer any of its shares of Class&nbsp;A Common Stock, other
than pursuant to or in connection with certain approved
transactions specified in the undertaking. Notwithstanding
restrictions against transfer set forth above, RSA may make one
or more transfers of securities, provided that the aggregate
number of securities subject to such transfers may in no event
exceed 6,195,778&nbsp;shares of Class&nbsp;A Common Stock; this
number of shares represents 30% of its Class&nbsp;A Common Stock
and will be adjusted for stock splits, reverse stock splits and
other similar actions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RSA also agreed that for so long as it holds any shares of
Class&nbsp;B Common Stock, it will not, directly or indirectly,
in any manner effect or seek, offer or propose to effect, or
cause or participate in or in any way assist any other person to
effect or seek, offer or propose to effect or participate in
(i)&nbsp;any acquisition of all
</DIV>

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<DIV align="left" style="font-size: 10pt;">
or substantially all of the Company&#146;s assets, (ii)&nbsp;any
tender or exchange offer, merger or other business combination
involving the Company, or (iii)&nbsp;any recapitalization,
restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the Company, in any of the foregoing
cases where the transaction provides or would provide for
disparate consideration or economic rights between the holders
of the Class&nbsp;A Common Stock and the Class&nbsp;B Common
Stock. This provision terminates in certain circumstances, as
more fully described in the undertaking.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='245'></A>
</DIV>

<!-- link1 "Item 14. Principal Accountant Fees and Services" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.&nbsp;</B></TD>
    <TD>
    <B>Principal Accountant Fees and Services</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Audit and Non-Audit Fees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Aggregate fees for professional services rendered for the
Company by KPMG&nbsp;LLP as of or for the fiscal years ended
December&nbsp;31, 2004 and 2003 are set forth below. The
aggregate fees included in the Audit category are fees <I>for
</I>the fiscal years for the audit of the Company&#146;s annual
financial statements and review of quarterly financial
statements and statutory and regulatory filings or engagements.
The aggregate fees included in each of the other categories are
fees billed <I>in </I>the fiscal years.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fiscal Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fiscal Year</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Audit Fees</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,332,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,015,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Audit-Related Fees</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>562,801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>714,300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Tax Fees</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>597,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>745,578</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>All Other Fees</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,493,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,474,878</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Audit Fees </I>for the fiscal years ended December&nbsp;31,
2004 and 2003 were for professional services rendered for the
audits of the annual financial statements, the audit of internal
control over financial reporting (2004)&nbsp;and quarterly
review of the financial statements included in the Quarterly
Reports on Form&nbsp;10-Q, including bankruptcy related
transactions and the adoption of fresh start reporting (2003).
Audit fees also include statutory audits and consents to the use
of audit reports in SEC filings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Audit-Related Fees </I>as of the fiscal years ended
December&nbsp;31, 2004 and 2003 were for audits of employee
benefit plans and other audit related services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Tax Fees </I>as of the fiscal years ended December&nbsp;31,
2004 and 2003 were for tax compliance advice related primarily
to bankruptcy matters, change of ownership and review of tax
returns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There were no fees which fall into the classification of <I>All
Other Fees </I>as of the fiscal years ended December&nbsp;31,
2004 and 2003.
</DIV>

<P align="center" style="font-size: 10pt;">129

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Policy on Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Commencing in May 2003, with the effectiveness of new rules
adopted under the Sarbanes-Oxley Act of 2002, the Audit
Committee established a practice of pre-approving all services
(audit and non-audit) provided by the Company&#146;s independent
auditors and is responsible for determining whether these
services are consistent with the auditor&#146;s independence.
The Audit Committee adopted a pre-approval policy in May 2003
that provides guidelines for the audit, audit-related, tax and
other non-audit services that may be provided to the Company by
its independent auditors. The policy requires the pre-approval
of all services at a meeting of the Audit Committee or through
the following detailed process:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    submission by the independent auditors of a detailed description
    of the audit or non-audit service being requested by management,
    including an engagement fee or range of fees for the service;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the Company&#146;s analysis and certification that the services
    are not prohibited services under the Sarbanes-Oxley Act of 2002
    and related rules or regulations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the Company&#146;s certification that the services are
    compatible with the auditors&#146; independence requirements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the review and approval of one authorized member of management
    (either the General Counsel or the Executive Vice
    President&nbsp;&#151; Finance and Chief Financial Officer)
    before submitting the proposal to the Chairman of the Audit
    Committee;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the analysis and verification by the independent auditor that
    the services are not prohibited services under the
    Sarbanes-Oxley Act of 2002 and related rules or regulations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the verification by the independent auditor that the services
    are compatible with the auditors&#146; independence requirements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the review and approval by the lead engagement partner before
    submitting the proposal to the Chairman of the Audit Committee;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the approval by the Chairman of the Audit Committee;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    informing the full Audit Committee of such approval in a timely
    manner.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">130

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='246'></A>
</DIV>

<!-- link1 "PART IV" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;IV</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='247'></A>
</DIV>

<!-- link1 "Item 15. Exhibits and Financial Statement Schedules" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.&nbsp;</B></TD>
    <TD>
    <B>Exhibits and Financial Statement Schedules</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following documents are filed as part of this report:
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='248'></A>
</DIV>

<!-- link1 "Consolidated Financial Statements" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Consolidated Financial Statements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following consolidated financial statements of
US&nbsp;Airways Group, Inc. are included in Part&nbsp;II,
Item&nbsp;8 of this report:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Consolidated Statements of Operations for the year ended
    December&nbsp;31, 2004, the nine months ended December&nbsp;31,
    2003 (Successor Company), the three months ended March&nbsp;31,
    2003 and the year ended December&nbsp;31, 2002 (Predecessor
    Company)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Consolidated Balance Sheets as of December&nbsp;31, 2004 and
    December&nbsp;31, 2003 (Successor Company)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Consolidated Statements of Cash Flows for the year ended
    December&nbsp;31, 2004, the nine months ended December&nbsp;31,
    2003 (Successor Company), the three months ended March&nbsp;31,
    2003 and the year ended December&nbsp;31, 2002 (Predecessor
    Company)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Consolidated Statements of Stockholders&#146; Equity (Deficit)
    for the year ended December&nbsp;31, 2004, the nine months ended
    December&nbsp;31, 2003 (Successor Company), the three months
    ended March&nbsp;31, 2003 and the year ended December&nbsp;31,
    2002 (Predecessor Company)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Notes to Consolidated Financial Statements</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='249'></A>
</DIV>

<!-- link1 "Consolidated Financial Statement Schedules" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Consolidated Financial Statement Schedules</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All financial statement schedules have been omitted because they
are not applicable or not required, or because the required
information is either incorporated herein by reference or
included in the financial statements or notes thereto included
in this report.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='250'></A>
</DIV>

<!-- link1 "Exhibits" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Exhibits</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Exhibits required to be filed by Item&nbsp;601 of
Regulation&nbsp;S-K. Where the amount of securities authorized
to be issued under any of the Company&#146;s long-term debt
agreements does not exceed 10&nbsp;percent of the Company&#146;s
assets, pursuant to paragraph&nbsp;(b)(4)(iii)&nbsp;of
Item&nbsp;601 of Regulation&nbsp;S-K, in lieu of filing such as
an exhibit, the Company hereby agrees to furnish to the
Commission upon request a copy of any agreement with respect to
such long-term debt.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amended Joint Plan of Reorganization of US Airways Group
    and Its Affiliated Debtors and Debtors-in-Possession, As
    Modified (incorporated by reference to Exhibit&nbsp;2.1 to
    US&nbsp;Airways Group&#146;s Current Report on Form&nbsp;8-K
    dated March&nbsp;18, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Findings of Fact, Conclusions of Law, and Order
    Under&nbsp;11&nbsp;U.S.C. Secs.&nbsp;1129&nbsp;(a) and&nbsp;(b)
    and Fed.&nbsp;R. Bankr. P.&nbsp;3020 Confirming the First
    Amended Joint Plan of Reorganization of US&nbsp;Airways Group,
    Inc. and Its Affiliated Debtors and Debtors-in-Possession, As
    Modified (incorporated by reference to Exhibit&nbsp;2.2 to US
    Airways Group&#146;s Current Report on Form&nbsp;8-K dated
    March&nbsp;18, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Certificate of Incorporation of
    US&nbsp;Airways Group, Inc., effective as of March&nbsp;31, 2003
    (incorporated by reference to Exhibit&nbsp;3.1 to US Airways
    Group&#146;s Registration Statement on Form&nbsp;8-A filed on
    May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Bylaws of US&nbsp;Airways Group, Inc.,
    effective as of March&nbsp;31, 2003 (incorporated by reference
    to Exhibit&nbsp;3.2 to US&nbsp;Airways Group&#146;s Registration
    Statement on Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase shares
    of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003, issued
    to General Electric Capital Corporation (incorporated by
    reference to Exhibit&nbsp;4.1 to US Airways Group&#146;s
    Registration Statement on Form&nbsp;8-A filed on May&nbsp;14,
    2003)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">131

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase
    shares of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003,
    issued to Bank of America, N.A. (incorporated by reference to
    Exhibit&nbsp;4.2 to US&nbsp;Airways Group&#146;s Registration
    Statement on Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase
    shares of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003,
    issued to Retirement Systems of Alabama Holdings LLC
    (incorporated by reference to Exhibit&nbsp;4.3 to US Airways
    Group&#146;s Registration Statement on Form&nbsp;8-A filed on
    May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase shares
    of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003, issued
    to Retirement Systems of Alabama Holdings LLC (incorporated by
    reference to Exhibit&nbsp;4.4 to US&nbsp;Airways Group&#146;s
    Registration Statement on Form&nbsp;8-A filed on May&nbsp;14,
    2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase shares
    of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003, issued
    to ATSB Securities Trust u/a/d March&nbsp;31, 2003 (incorporated
    by reference to Exhibit&nbsp;4.5 to US&nbsp;Airways Group&#146;s
    Registration Statement on Form&nbsp;8-A filed on May&nbsp;14,
    2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Class&nbsp;A-1 Warrants (incorporated by reference to
    Exhibit&nbsp;4.3 to US Airways Group&#146;s Registration
    Statement on Form&nbsp;S-8 filed on July&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement dated March&nbsp;31, 2003 among US&nbsp;Airways,
    Inc. and Phoenix American Financial Services, Inc., Bank of
    America, N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit&nbsp;10.5 to US
    Airways&#146; Quarterly Report on Form&nbsp;10-Q for the quarter
    ended March&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated December&nbsp;18, 2003 to Loan
    Agreement dated March&nbsp;31, 2003 among US&nbsp;Airways, Inc.
    and Phoenix American Financial Services, Inc., Bank of America,
    N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit&nbsp;10.1 to US
    Airways&#146; Quarterly Report on Form&nbsp;10-Q for the quarter
    ended March&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2 dated March&nbsp;12, 2004 to Loan Agreement
    dated March&nbsp;31, 2003 among US&nbsp;Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board. (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways&#146;
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    March&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3 dated May&nbsp;21, 2004 to Loan Agreement
    dated March&nbsp;31, 2004 among US&nbsp;Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways&#146;
    Quarterly Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4 dated July&nbsp;13, 2004 to Loan Agreement
    dated March&nbsp;31, 2004 among US&nbsp;Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways&#146;
    Quarterly Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Final Order&nbsp;(I)&nbsp;Authorizing Debtors&#146; Use of Cash
    Collateral and (II)&nbsp;Providing Adequate Protection Pursuant
    to Bankruptcy Rules&nbsp;4001&nbsp;(b) and 4001&nbsp;(d)
    (incorporated by reference to Exhibit&nbsp;99.1 to
    US&nbsp;Airways Group&#146;s Current Report on Form&nbsp;8-K
    dated October&nbsp;14, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Motion to Authorize and Approve&nbsp;(1)&nbsp;The Primary
    Tranche&nbsp;A Lender Assignment, (2)&nbsp;The Alternate
    Tranche&nbsp;A Lender Assignment, and (3)&nbsp;Amendment
    No.&nbsp;5 to the Loan Agreement pursuant to 11&nbsp;U.S.C.
    Sections&nbsp;105, 363, 1108, and Bankruptcy Rules&nbsp;4001 and
    6004) (incorporated by reference to Exhibit&nbsp;99.1 to
    US&nbsp;Airways Group&#146;s Current Report on Form&nbsp;8-K
    dated December&nbsp;28, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Order Approving (1)&nbsp;The Primary Tranche&nbsp;A Lender
    Assignment, (2)&nbsp;The Alternate Tranche&nbsp;A Lender
    Assignment, and (3)&nbsp;Amendment No.&nbsp;5 to Loan Agreement
    pursuant to 11&nbsp;U.S.C. Sections&nbsp;105, 363, 1108, and
    Bankruptcy Rules&nbsp;4001 and 6004 (incorporated by reference
    to Exhibit&nbsp;99.2 to US&nbsp;Airways Group&#146;s Current
    Report on Form&nbsp;8-K dated December&nbsp;28, 2004)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">132

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Master Memorandum of Understanding among US Airways Group, Inc.,
    US&nbsp;Airways, Inc., and General Electric Capital Corporation
    acting through its agent GE Capital Aviation Services, Inc. and
    General Electric Company, GE Transportation Component (portions
    of this exhibit have been omitted pursuant to a request for
    confidential treatment and filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    A319/ A320/ A321 Purchase Agreement dated as of October&nbsp;31,
    1997 between US Airways Group and AVSA, S.A.R.L. (AVSA), an
    affiliate of aircraft manufacturer Airbus Industrie G.I.E.
    (incorporated by reference to Exhibit&nbsp;10.1 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the three months ended September&nbsp;30, 1997) (portions of
    this exhibit were omitted pursuant to a request for confidential
    treatment and filed separately with the United States Securities
    and Exchange Commission (SEC))</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of June&nbsp;10, 1998 to A319/
    A320/ A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.2 to US Airways Group&#146;s Annual
    Report on Form&nbsp;10-K for the year ended December&nbsp;31,
    1998) (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2 dated as of January&nbsp;19, 1999 to A319/
    A320/ A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.3 to US Airways Group&#146;s Annual
    Report on Form&nbsp;10-K for the year ended December&nbsp;31,
    1998) (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3 dated as of March&nbsp;31, 1999 to A319/
    A320/ A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.1 to US Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the three months ended
    September&nbsp;30, 1999) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4 dated as of August&nbsp;31, 1999 to A319/
    A320/ A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.2 to US Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the three months ended
    September&nbsp;30, 1999) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;5 dated as of October&nbsp;29, 1999 to A319/
    A320/ A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.6 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 1999) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;6 dated as of April&nbsp;19, 2000 to A319/
    A320/ A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.1 to US Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the three months ended
    March&nbsp;31, 2000) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;7 dated as of June&nbsp;29, 2000 to A319/
    A320/ A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the three months ended
    June&nbsp;30, 2000) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;8 dated as of November&nbsp;27, 2000 to A319/
    A320/ A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.9 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2000) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">133

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;9 dated as of December&nbsp;29, 2000 to A319/
    A320/ A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.10 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2000) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;10 dated as of April&nbsp;9, 2001 to A319/
    A320/ A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the three months ended
    March&nbsp;31, 2001) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;11 dated as of July&nbsp;17, 2002 to A319/
    A320/ A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit&nbsp;10.1 to US&nbsp;Airways
    Group&#146;s Quarterly Report on Form&nbsp;10-Q for the three
    months ended June&nbsp;30, 2002) (portions of this exhibit have
    been omitted pursuant to a request for confidential treatment
    and filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;12 dated as of March&nbsp;29, 2003 to A319/
    A320/ A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit&nbsp;10.1 to US&nbsp;Airways
    Group&#146;s Quarterly Report on Form&nbsp;10-Q for the three
    months ended March&nbsp;31, 2003) (portions of this exhibit have
    been omitted pursuant to a request for confidential treatment
    and filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;13 dated August&nbsp;30, 2004 to the Airbus
    A319/ A320/ A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group, Inc. and AVSA, S.A.R.L (portions
    of this document have been omitted pursuant to a request for
    confidential treatment and filed separately with the SEC)
    (incorporated by reference to Exhibit&nbsp;10.2 to
    US&nbsp;Airways&#146; Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.24</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    A330/ A340 Purchase Agreement dated as of November&nbsp;24, 1998
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.4 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 1998) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.25</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of March&nbsp;23, 2000 to A330/
    A340 Purchase Agreement dated November&nbsp;24, 1998 between
    US&nbsp;Airways Group and AVSA (incorporated by reference to
    Exhibit&nbsp;10.2 to US&nbsp;Airways Group&#146;s Quarterly
    Report on Form&nbsp;10-Q for the three months ended
    March&nbsp;31, 2000) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.26</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2 dated as of June&nbsp;29, 2000 to A330/
    A340 Purchase Agreement dated November&nbsp;24, 1998 between
    US&nbsp;Airways Group and AVSA (incorporated by reference to
    Exhibit&nbsp;10.2 to US&nbsp;Airways Group&#146;s Quarterly
    Report on Form&nbsp;10-Q for the three months ended
    June&nbsp;30, 2000) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.27</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3 dated as of November&nbsp;27, 2000 to A330/
    A340 Purchase Agreement dated November&nbsp;24, 1998 between
    US&nbsp;Airways Group and AVSA (incorporated by reference to
    Exhibit&nbsp;10.14 to US&nbsp;Airways Group&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2000)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.28</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4 dated as of September&nbsp;20, 2001 to
    A330/ A340 Purchase Agreement dated November&nbsp;24, 1998
    between US Airways Group and AVSA (incorporated by reference to
    Exhibit&nbsp;10.16 to US&nbsp;Airways Group&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2001)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">134

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.29</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;5 dated as of July&nbsp;17, 2002 to A330/
    A340 Purchase Agreement dated November&nbsp;24, 1998 between
    US&nbsp;Airways Group and AVSA, S.A.R.L. (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the three months ended
    June&nbsp;30, 2002) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.30</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;6 dated as of March&nbsp;29, 2003 to A330/
    A340 Purchase Agreement dated November&nbsp;24, 1998 between
    US&nbsp;Airways Group and AVSA, S.A.R.L. (incorporated by
    reference to Exhibit&nbsp;10.2 to US Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    March&nbsp;31, 2003) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.31</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;7 dated August&nbsp;30, 2004 to the Airbus
    A330/ A340 Purchase Agreement dated November&nbsp;24, 1998
    between US&nbsp;Airways Group, Inc. and AVSA, S.A.R.L
    (incorporated by reference to Exhibit&nbsp;10.3 to
    US&nbsp;Airways&#146; Quarterly Report for the quarter ended
    September&nbsp;30, 2004) (portions of this document have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.32</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Agreement dated December&nbsp;17, 2004 between
    US&nbsp;Airways Group, Inc. and US Airways, Inc. and Airbus
    North America Sales Inc (incorporated by reference to
    Exhibit&nbsp;99.2 to US&nbsp;Airways Group&#146;s Current Report
    on Form&nbsp;8-K dated February&nbsp;3, 2005)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.33</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.1
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the three months ended June&nbsp;30, 2003)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.34</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of November&nbsp;4, 2003 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to
    Exhibit&nbsp;10.22 to US Airways Group&#146;s Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 2003)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.35</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2 dated as of November&nbsp;21, 2003 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to
    Exhibit&nbsp;10.23 to US Airways Group&#146;s Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 2003)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.36</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated January&nbsp;6, 2004 to the Letter
    Agreement DCT-022/03 dated May&nbsp;9, 2003 between
    US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.5
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2004)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.37</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3 dated as of February&nbsp;9, 2004 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.4
    to US Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended March&nbsp;31, 2004) (portions of this
    exhibit have been omitted pursuant to a request for confidential
    treatment and filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.38</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4 dated as of August&nbsp;4, 2004 to Embraer
    Aircraft Purchase Agreement dated as of May&nbsp;9, 2003 between
    US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.4
    to US Airways&#146; Quarterly Report for the quarter ended
    September&nbsp;30, 2004) (portions of this document have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">135

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.39</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;5 dated as of September&nbsp;3, 2004 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (portions of this document have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC) (incorporated by reference to
    Exhibit&nbsp;10.5 to US&nbsp;Airways&#146; Quarterly Report for
    the quarter ended September&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.40</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May&nbsp;9, 2003 between US&nbsp;Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit&nbsp;10.2
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended June&nbsp;30, 2003)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.41</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Contract Change Order&nbsp;1 dated January&nbsp;27, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May&nbsp;9, 2003 between US&nbsp;Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit&nbsp;10.6
    to US&nbsp;Airways Group&#146;s Quarterly Report for the quarter
    ended March&nbsp;31, 2004) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.42</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Contract Change Order&nbsp;2 dated February&nbsp;9, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May&nbsp;9, 2003 between US&nbsp;Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit&nbsp;10.7
    to US&nbsp;Airways Group&#146;s Quarterly Report for the quarter
    ended March&nbsp;31, 2004) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.43</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Contract Change Order&nbsp;3 dated February&nbsp;26, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May&nbsp;9, 2003 between US&nbsp;Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit&nbsp;10.8
    to US&nbsp;Airways Group&#146;s Quarterly Report for the quarter
    ended March&nbsp;31, 2004) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.44</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated as of September&nbsp;26, 2002, by
    and between the Retirement Systems of Alabama and
    US&nbsp;Airways Group, Inc. (incorporated by reference to
    Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s Quarterly
    Report on Form&nbsp;10-Q for the three months ended
    September&nbsp;30, 2002)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.45</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of January&nbsp;17, 2003 to the
    Investment Agreement, entered into as of September&nbsp;26, 2002
    and amended and restated as of January&nbsp;17, 2003 by and
    between the Retirement Systems of Alabama and US&nbsp;Airways
    Group, Inc. (incorporated by reference to Exhibit&nbsp;10.37 to
    US&nbsp;Airways Group&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.46</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2, dated as of March&nbsp;30, 2003, to the
    Investment Agreement, dated as of September&nbsp;26, 2002, by
    and among The Retirement Systems of Alabama, Retirement Systems
    of Alabama Holdings, LLC and US&nbsp;Airways Group, Inc.
    (incorporated by reference to Exhibit&nbsp;10.1 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the three months ended September&nbsp;30, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.47</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and Retirement Systems of Alabama Holdings LLC (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s
    Registration Statement on Form&nbsp;8-A filed on May&nbsp;14,
    2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.48</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US Airways Group, Inc. and
    ATSB&nbsp;Securities Trust u/a/d March&nbsp;31, 2003
    (incorporated by reference to Exhibit&nbsp;10.2 to
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.49</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment dated as of June&nbsp;25, 2003 to the
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and ATSB Securities Trust u/a/d March&nbsp;31, 2003
    (incorporated by reference to Exhibit&nbsp;10.6 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the three months ended June&nbsp;30, 2003)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">136

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.50</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and General Electric Capital Corporation (incorporated by
    reference to Exhibit&nbsp;10.3 to US&nbsp;Airways Group&#146;s
    Registration Statement on Form&nbsp;8-A filed on May&nbsp;14,
    2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.51</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and Bank of America, N.A. (incorporated by reference to
    Exhibit&nbsp;10.4 to US&nbsp;Airways Group&#146;s Registration
    Statement on Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.52</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2003 Stock Incentive Plan of US&nbsp;Airways Group, as amended
    and restated (incorporated by reference to Exhibit&nbsp;4.4 of
    US Airways Group&#146;s Registration Statement on Form&nbsp;S-8
    filed on June&nbsp;3, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.53</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US Airways Group, Inc. 2003 Nonemployee Director Stock Incentive
    Plan (incorporated by reference to Exhibit&nbsp;10.4 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended June&nbsp;30, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.54</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to the US&nbsp;Airways Group, Inc. 2003
    Nonemployee Director Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.55</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US Airways Group, Inc. 2003 Nonemployee Director Deferred Stock
    Unit Plan (incorporated by reference to Exhibit&nbsp;10.5 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended June&nbsp;30, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.56</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to the US&nbsp;Airways Group, Inc. 2003
    Nonemployee Director Deferred Stock Unit Plan (incorporated by
    reference to Exhibit&nbsp;10.10 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.57</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to the US&nbsp;Airways Group, Inc. 2003
    Nonemployee Director Deferred Stock Unit Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.58</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US Airways Funded Executive Defined Contribution Plan
    (incorporated by reference to Exhibit&nbsp;10.1 to
    US&nbsp;Airways&#146; Annual Report on Form&nbsp;10-K for the
    year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.59</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to the US&nbsp;Airways Funded Executive Defined
    Contribution Plan dated January&nbsp;26, 2004 (incorporated by
    reference to Exhibit&nbsp;10.4 to US&nbsp;Airways&#146;
    Quarterly Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.60</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to the US&nbsp;Airways Funded Executive Defined
    Contribution Plan (incorporated by reference to
    Exhibit&nbsp;10.5 to US&nbsp;Airways&#146; Quarterly Report for
    the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.61</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to the US&nbsp;Airways Funded Executive Defined
    Contribution Plan (incorporated by reference to
    Exhibit&nbsp;10.6 to US&nbsp;Airways&#146; Quarterly Report for
    the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.62</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US Airways Unfunded Executive Defined Contribution Plan
    (incorporated by reference to Exhibit&nbsp;10.2 to
    US&nbsp;Airways&#146; Annual Report on Form&nbsp;10-K for the
    year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.63</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to the US&nbsp;Airways Unfunded Executive
    Defined Contribution Plan dated January&nbsp;26, 2004
    (incorporated by reference to Exhibit&nbsp;10.7 to
    US&nbsp;Airways&#146; Quarterly Report for the quarter ended
    June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.64</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to the US&nbsp;Airways Unfunded Executive
    Defined Contribution Plan (incorporated by reference to
    Exhibit&nbsp;10.8 to US&nbsp;Airways&#146; Quarterly Report for
    the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.65</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to the US&nbsp;Airways Unfunded Executive
    Defined Contribution Plan (incorporated by reference to
    Exhibit&nbsp;10.9 to US&nbsp;Airways&#146; Quarterly Report for
    the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.66</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement between US&nbsp;Airways Group, Inc. and
    US&nbsp;Airways, Inc. and its President and Chief Executive
    Officer effective May&nbsp;19, 2004 (incorporated by reference
    to Exhibit&nbsp;10.6 to US&nbsp;Airways&#146; Quarterly Report
    for the quarter ended September&nbsp;30, 2004)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">137

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.67</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement between US&nbsp;Airways and David&nbsp;N.
    Siegel effective March&nbsp;11, 2002 (incorporated by reference
    to Exhibit&nbsp;10.41 to US&nbsp;Airways&#146; Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 2001)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.68</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment effective March&nbsp;31, 2003 to the Employment
    Agreement dated March&nbsp;11, 2002 between US&nbsp;Airways and
    David&nbsp;N. Siegel (incorporated by reference to
    Exhibit&nbsp;10.1 to US&nbsp;Airways&#146; Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.69</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Separation Agreement between U.S.&nbsp;Airways Group, Inc.,
    U.S.&nbsp;Airways, Inc. and David&nbsp;N. Siegel dated
    April&nbsp;23, 2004 (incorporated by reference to
    Exhibit&nbsp;10.10 to US&nbsp;Airways&#146; Quarterly Report for
    the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.70</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Supplemental Separation Agreement between US&nbsp;Airways Group,
    Inc., US&nbsp;Airways, Inc. and David&nbsp;N. Siegel dated
    May&nbsp;19, 2004 (incorporated by reference to
    Exhibit&nbsp;10.11 to US&nbsp;Airways&#146; Quarterly Report for
    the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.71</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement between US&nbsp;Airways and its Executive
    Vice President&nbsp;&#151; Corporate Affairs and General Counsel
    effective March&nbsp;1, 2003 (incorporated by reference to
    Exhibit&nbsp;10.5 to US&nbsp;Airways&#146; Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.72</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Severance Agreement between US Airways and Neal S. Cohen
    effective April&nbsp;8, 2002 (incorporated by reference to
    Exhibit&nbsp;10.8 to US&nbsp;Airways&#146; Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.73</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment effective March&nbsp;31, 2003 to the Severance
    Agreement dated April&nbsp;8, 2002 between US&nbsp;Airways and
    Neal&nbsp;S. Cohen (incorporated by reference to
    Exhibit&nbsp;10.2 to US&nbsp;Airways&#146; Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.74</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Separation and Consulting Agreement between US&nbsp;Airways
    Group, Inc., US&nbsp;Airways, Inc. and Neal S. Cohen effective
    April&nbsp;30, 2004 (incorporated by reference to
    Exhibit&nbsp;10.12 to US&nbsp;Airways&#146; Quarterly Report for
    the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.75</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Severance Agreement between US&nbsp;Airways and its Executive
    Vice President&nbsp;&#151; Operations effective July&nbsp;26,
    2002 (incorporated by reference to Exhibit&nbsp;10.9 to
    US&nbsp;Airways&#146; Annual Report on Form&nbsp;10-K for the
    year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.76</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment effective March&nbsp;31, 2003 to the Severance
    Agreement dated June&nbsp;26, 2002 between US&nbsp;Airways and
    the Executive Vice President-Operations (incorporated by
    reference to Exhibit&nbsp;10.3 to US&nbsp;Airways&#146;
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    March&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.77</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Severance Agreement between US&nbsp;Airways and the Senior Vice
    President&nbsp;&#151; Marketing effective June&nbsp;26, 2002
    (incorporated by reference to Exhibit&nbsp;10.14 to
    US&nbsp;Airways&#146; Annual Report on Form&nbsp;10-K for the
    year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.78</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment effective March&nbsp;31, 2003 to the Severance
    Agreement dated June&nbsp;26, 2002 between US&nbsp;Airways and
    the Senior Vice President-Marketing (incorporated by reference
    to Exhibit&nbsp;10.15 to US&nbsp;Airways&#146; Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.79</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways and David&nbsp;N. Siegel with
    respect to certain employment arrangements effective
    March&nbsp;11, 2002 (incorporated by reference to
    Exhibit&nbsp;10.49 to US&nbsp;Airways&#146; Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 2001)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.80</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Severance Agreement between US&nbsp;Airways and its Senior Vice
    President&nbsp;&#151; Employee Relations effective April&nbsp;8,
    2002 (incorporated by reference to Exhibit&nbsp;10.10 to
    US&nbsp;Airways&#146; Annual Report on Form&nbsp;10-K for the
    year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.81</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment dated March&nbsp;31, 2003 to the Severance
    Agreement dated as April&nbsp;8, 2002 between US&nbsp;Airways
    and its Senior Vice President&nbsp;&#151; Labor Relations
    (incorporated by reference to Exhibit&nbsp;10.33 to
    US&nbsp;Airways&#146; Annual Report on Form&nbsp;10-K for the
    year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.82</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways and its Senior Vice
    President&nbsp;&#151; Labor Relations with respect to certain
    employment arrangements effective July&nbsp;25, 2002
    (incorporated by reference to Exhibit&nbsp;10.18 to
    US&nbsp;Airways&#146; Annual Report on Form&nbsp;10-K for the
    year ended December&nbsp;31, 2002)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">138

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.83</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways and its Senior Vice
    President&nbsp;&#151; Marketing with respect to certain
    employment arrangements effective July&nbsp;25, 2002
    (incorporated by reference to Exhibit&nbsp;10.18 to Amendment
    No.&nbsp;1 to US&nbsp;Airways&#146; Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.84</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways and its Senior Vice
    President&nbsp;&#151; Marketing with respect to certain
    employment arrangements effective October&nbsp;20, 2004
    (incorporated by reference to Exhibit&nbsp;10.35 to
    US&nbsp;Airways&#146; Annual Report on Form&nbsp;10-K for the
    year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.85</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways and its Executive Vice
    President&nbsp;&#151; Operations with respect to certain
    employment arrangements effective July&nbsp;25, 2002
    (incorporated by reference to Exhibit&nbsp;10.17 to
    US&nbsp;Airways&#146; Annual Report on Form&nbsp;10-K for the
    year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.86</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways and its Executive Vice
    President&nbsp;&#151; Operations with respect to certain
    employment arrangements effective October&nbsp;20, 2004
    (incorporated by reference to Exhibit&nbsp;10.37 to
    US&nbsp;Airways&#146; Annual Report on Form&nbsp;10-K for the
    year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.87</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways and its Executive Vice
    President&nbsp;&#151; Corporate Affairs, General Counsel and
    Secretary with respect to certain employment arrangements
    effective October&nbsp;20, 2004 (incorporated by reference to
    Exhibit&nbsp;10.38 to US&nbsp;Airways&#146; Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.88</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways and its Senior Vice
    President&nbsp;&#151; Labor Relations with respect to certain
    employment arrangements effective October&nbsp;20, 2004
    (incorporated by reference to Exhibit&nbsp;10.40 to
    US&nbsp;Airways&#146; Annual Report on Form&nbsp;10-K for the
    year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>18</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter from KPMG&nbsp;LLP re change in accounting principle
    (incorporated by reference to Exhibit&nbsp;18 to US&nbsp;Airways
    Group&#146;s Quarterly Report on Form&nbsp;10-Q for the three
    months ended March&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subsidiaries of US&nbsp;Airways Group</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Independent Registered Public Accounting Firm of
    US&nbsp;Airways Group to the incorporation of their report
    concerning certain financial statements contained in this report
    in certain registration statements</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Powers of Attorney signed by the directors of US&nbsp;Airways
    Group, authorizing their signatures on this report</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of the Principal Executive Officer pursuant to
    Rule&nbsp;13a-14(a) or Rule&nbsp;15d-14(a) (Section&nbsp;302 of
    the Sarbanes-Oxley Act of 2002)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of the Principal Financial Officer pursuant to
    Rule&nbsp;13a-14(a) or Rule&nbsp;15d-14(a) (Section&nbsp;302 of
    the Sarbanes-Oxley Act of 2002)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certifications pursuant to 18&nbsp;U.S.C. Section&nbsp;1350, as
    adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act
    of 2002</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Disclosure Statement with Respect to First Amended Joint Plan of
    Reorganization of US&nbsp;Airways Group, Inc. and Its Affiliated
    Debtors and Debtors-in-Possession (incorporated by reference to
    Exhibit&nbsp;99.2 to US&nbsp;Airways Group&#146;s Current Report
    on Form&nbsp;8-K dated on January&nbsp;31, 2003)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">139

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<DIV align="left" style="font-size: 10pt;">
<A name='251'></A>
</DIV>

<!-- link1 "SIGNATURES" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of Section&nbsp;13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on February&nbsp;28, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US Airways Group, Inc. (registrant)</B>
</DIV>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>By:&nbsp;</TD>
    <TD align="center">
    /s/ Bruce R. Lakefield</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 73%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;">
Bruce R. Lakefield,
</DIV>

<DIV align="left" style="font-size: 10pt;">
Director, President and Chief Executive Officer
</DIV>

<DIV align="left" style="font-size: 10pt;">
(Principal Executive Officer)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of US Airways Group in the capacities indicated, on
February&nbsp;28, 2005.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 21pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>SIGNATURE</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    /s/ Bruce R. Lakefield<BR>
    -----------------------------------------------------------<BR>
    Bruce R. Lakefield<BR>
    Director, President and Chief Executive Officer<BR>
    (Principal Executive Officer)</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    /s/ Ronald E. Stanley<BR>
    -----------------------------------------------------------<BR>
    Ronald E. Stanley<BR>
    Executive Vice President and Chief Financial Officer<BR>
    (Principal Financial Officer)</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    /s/ Anita P. Beier<BR>
    -----------------------------------------------------------<BR>
    Anita P. Beier<BR>
    Senior Vice President&nbsp;&#151; Finance and Controller<BR>
    (Chief Accounting Officer)</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<FONT style="font-variant:SMALL-CAPS">*<BR>
    </FONT>-----------------------------------------------------------<BR>
    Dr.&nbsp;David G. Bronner<BR>
    Director and Chairman</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    </FONT>-----------------------------------------------------------<BR>
    Thomas R. Harter<BR>
    Director</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    </FONT>-----------------------------------------------------------<BR>
    Magdalena Jacobsen<BR>
    Director</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    </FONT>-----------------------------------------------------------<BR>
    Robert L. Johnson<BR>
    Director</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    </FONT>-----------------------------------------------------------<BR>
    Cheryl G. Krongard<BR>
    Director</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">140

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>SIGNATURE</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    </FONT>-----------------------------------------------------------<BR>
    Joseph J. Mantineo<BR>
    Director</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<FONT style="font-variant:SMALL-CAPS">*<BR>
    </FONT>-----------------------------------------------------------<BR>
    John A. McKenna,&nbsp;Jr.<BR>
    Director</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    </FONT>-----------------------------------------------------------<BR>
    Hans Mirka<BR>
    Director</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    </FONT>-----------------------------------------------------------<BR>
    George M. Philip<BR>
    Director</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    </FONT>-----------------------------------------------------------<BR>
    William D. Pollock<BR>
    Director</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    </FONT>-----------------------------------------------------------<BR>
    James M. Simon<BR>
    Director</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT style="font-variant:SMALL-CAPS">*<BR>
    </FONT>-----------------------------------------------------------<BR>
    William T. Stephens<BR>
    Director</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    /s/ Ronald E. Stanley<BR>
    -----------------------------------------------------------<BR>
    Ronald E. Stanley<BR>
    Attorney-In-Fact</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    Signed pursuant to power of attorney filed herewith.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">141
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<DIV align="left" style="font-size: 10pt;">
<A name='193'></A>
</DIV>

<!-- link1 "ANNEX A-2" -->

<DIV align="right" style="font-size: 10pt;">
<B>ANNEX A-2</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US&nbsp;Airways Group, Inc.&#146;s Quarterly Report on
Form&nbsp;10-Q for the three months ended March&nbsp;31, 2005</B>
</DIV>

<P align="center" style="font-size: 10pt;">A-2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 2pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Form&nbsp;10-Q</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 12pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
</TR>

<TR style="font-size: 10pt;">
    <TD align="center" nowrap>(Mark One)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="wingdings">&#254;
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>QUARTERLY REPORT PURSUANT TO SECTION&nbsp;13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>For the quarterly period ended March&nbsp;31, 2005</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <B>or</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="wingdings">&#111;</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>TRANSITION REPORT PURSUANT TO SECTION&nbsp;13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>For the transition period
    from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="p70803q7080300.gif" alt="(US AIRWAYS GROUP LOGO)">
</DIV>

<DIV align="center" style="font-size: 24pt;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>(Debtor-in-Possession)</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact name of registrant as specified in its charter)</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>State of Incorporation: Delaware</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2345 Crystal Drive, Arlington, Virginia 22227</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Address of principal executive offices, including zip
code)</I>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(703)&nbsp;872-7000</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Registrant&#146;s telephone number, including area code)</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>(Commission file number: 1-8444)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(I.R.S. Employer Identification No.: 54-1194634)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark whether the registrant (1)&nbsp;has filed
all reports required to be filed by Section&nbsp;13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12&nbsp;months (or for such shorter period that the registrant
was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past
90&nbsp;days.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;<FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule&nbsp;12b-2 of the Exchange
Act).&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;<FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections&nbsp;12,
13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a
court.
Yes&nbsp;<FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of April&nbsp;22, 2005, there were outstanding approximately
51,621,000&nbsp;shares of US Airways Group, Inc. Class&nbsp;A
common stock and 5,000,000&nbsp;shares of US Airways Group, Inc.
Class&nbsp;B common stock.
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Debtor-in-Possession)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Form&nbsp;10-Q</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Quarterly Period Ended March&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TABLE OF CONTENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="7" align="left" valign="top">
    <B>Part&nbsp;I.&nbsp;&nbsp;Financial Information</B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Item&nbsp;1.</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financial Statements&nbsp;&#151; US Airways Group, Inc.</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>Condensed Consolidated Statements of
    Operations&nbsp;&#151; Three Months Ended March&nbsp;31, 2005
    and 2004</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Condensed Consolidated Balance
    Sheets&nbsp;&#151; March&nbsp;31, 2005 and December&nbsp;31,
    2004</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>Condensed Consolidated Statements of Cash
    Flows&nbsp;&#151; Three Months Ended March&nbsp;31, 2005 and
    2004</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#106'>Notes to Condensed Consolidated Financial
    Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Item&nbsp;2.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Item&nbsp;3.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Quantitative and Qualitative Disclosures
    about Market Risk</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>Item&nbsp;4.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>Controls and Procedures</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7" align="left" valign="top">
    <B>&nbsp;<A HREF='#110'>Part&nbsp;II.&nbsp;&nbsp;Other
    Information</A></B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Item&nbsp;1.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Legal Proceedings</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>II-1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Item&nbsp;3.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Defaults Upon Senior Securities</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>II-1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Item&nbsp;6.</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Exhibits</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>II-1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <B>&nbsp;<A HREF='#114'>Signature</A></B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>II-1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>II-3</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Debtor-in-Possession)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='103'></A>
</DIV>

<!-- link1 "Condensed Consolidated Statements of Operations Three Months Ended March 31, 2005 and 2004 (unaudited) (in millions, except share and per share amounts)" -->

<DIV align="center" style="font-size: 10pt;">
<B>Condensed Consolidated Statements of Operations</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Three Months Ended March&nbsp;31, 2005 and 2004
(unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in millions, except share and per share amounts)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger transportation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,513</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cargo and freight</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Operating Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,701</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Personnel costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>641</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aviation fuel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>233</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    US Airways Express capacity purchases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other rent and landing fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>127</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft rent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>109</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft maintenance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>297</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Operating Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,844</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(201</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(143</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other Income (Expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(78</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(58</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other Income (Expense), Net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(81</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(34</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss Before Income Taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(282</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(177</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income Tax Provision</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(282</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(177</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss per Common Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.28</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.28</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted Average Shares Used for Computation (000)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,972</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,972</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Condensed Consolidated Financial
Statements.
</DIV>

<P align="center" style="font-size: 10pt;">1
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Debtor-in-Possession)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='104'></A>
</DIV>

<!-- link1 "Condensed Consolidated Balance Sheets March 31, 2005 (unaudited) and December 31, 2004 (in millions)" -->

<DIV align="center" style="font-size: 10pt;">
<B>Condensed Consolidated Balance Sheets</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>March&nbsp;31, 2005 (unaudited)&nbsp;and December&nbsp;31,
2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in millions)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ASSETS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>738</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Receivables, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Materials and supplies, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Current Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,413</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and Equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Flight equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,176</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ground property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>372</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(356</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(316</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,232</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase deposits for flight equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Property and Equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,370</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Goodwill</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,490</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other intangibles, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>532</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>527</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Other Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,639</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,422</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LIABILITIES&nbsp;&#38; STOCKHOLDERS&#146; DEFICIT</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current Liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current maturities of debt, capital leases and debtor in
    possession financing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>721</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>353</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Traffic balances payable and unused tickets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>820</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued aircraft rent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued salaries, wages and vacation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>162</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>276</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Current Liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,383</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Noncurrent Liabilities and Deferred Credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt and capital lease obligations, net of current
    maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred gains and credits, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Postretirement benefits other than pensions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employee benefit liabilities and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Noncurrent Liabilities and Deferred Credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>294</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liabilities Subject to Compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,179</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and Contingencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; Deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;A Common Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;B Common Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>410</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,067</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(785</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock held in treasury, at cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(98</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Stockholders&#146; Deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(598</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(434</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,422</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Condensed Consolidated Financial
Statements.
</DIV>

<P align="center" style="font-size: 10pt;">2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Debtor-in-Possession)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='105'></A>
</DIV>

<!-- link1 "Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 2005 and 2004 (unaudited) (in millions)" -->

<DIV align="center" style="font-size: 10pt;">
<B>Condensed Consolidated Statements of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Three Months Ended March&nbsp;31, 2005 and 2004
(unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in millions)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used for) operating activities before
    reorganization items</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(98</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used for) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(109</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures and purchase deposits for flight equipment,
    net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from dispositions of property</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease in short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>358</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in restricted cash and investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(139</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(113</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used for) investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(174</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>246</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from debtor in possession financings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Principal payments on debt and capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(72</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(295</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used for) financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(272</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(225</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>929</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>978</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash investing and financing activity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Flight and ground equipment acquired through issuance of debt
    and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>79</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental Information</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest paid during the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>79</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Condensed Consolidated Financial
Statements.
</DIV>

<P align="center" style="font-size: 10pt;">3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US Airways Group, Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='106'></A>
</DIV>

<!-- link1 "Notes to Condensed Consolidated Financial Statements (Unaudited)" -->

<DIV align="center" style="font-size: 10pt;">
<B>Notes to Condensed Consolidated Financial Statements</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Unaudited)</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Chapter&nbsp;11 Proceedings</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;12, 2004, US Airways Group, Inc. (US Airways
Group and collectively with its consolidated subsidiaries, the
Company) and its domestic subsidiaries, including its principal
operating subsidiary, US Airways, Inc. (US Airways)
(collectively, the Debtors), filed voluntary petitions for
relief under Chapter&nbsp;11 of the Bankruptcy Code in the
United States Bankruptcy Court for the Eastern District of
Virginia, Alexandria Division (Bankruptcy Court) (Case Nos.
04-13819-SSM through 04-13823-SSM). Each of the Debtors in these
cases had previously filed a voluntary petition for relief under
Chapter&nbsp;11 on August&nbsp;11, 2002 (the Prior Bankruptcy).
The Debtors emerged from the Prior Bankruptcy under the First
Amended Joint Plan of Reorganization of US Airways Group, Inc.
and Affiliated Debtors and Debtors-in-Possession, As Modified
(the 2003 Plan), which was confirmed pursuant to an order of the
Bankruptcy Court on March&nbsp;18, 2003 and became effective on
March&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the Debtors continues to operate its business and manage
its property as a debtor in possession pursuant to
Sections&nbsp;1107 and 1108 of the Bankruptcy Code. At hearings
held on September&nbsp;13, 2004, the Bankruptcy Court granted
the Company&#146;s first day motions for relief designed to
stabilize its operations and business relationships with
customers, vendors, employees and others and entered orders
granting permission to the Debtors to, among other things:
(a)&nbsp;pay employee wages and continue benefits, such as
medical and dental insurance; (b)&nbsp;honor prepetition
obligations to customers and continue customer programs,
including US Airways&#146; Dividend Miles program; (c)&nbsp;pay
for fuel under existing supply contracts, and honor existing
fuel supply, distribution and storage agreements;
(d)&nbsp;assume certain contracts related to interline
agreements with other airlines; (e)&nbsp;pay prepetition
obligations to certain foreign vendors, foreign service
providers and foreign governments; and (f)&nbsp;continue
maintenance of existing bank accounts and existing cash
management systems.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the Chapter&nbsp;11 filings, realization of
assets and liquidation of liabilities are subject to significant
uncertainty. While operating as a debtor in possession under the
protection of Chapter&nbsp;11, and subject to Bankruptcy Court
approval or otherwise as permitted in the normal course of
business, the Company may sell or otherwise dispose of assets
and liquidate or settle liabilities for amounts other than those
reflected in the financial statements. Further, a plan of
reorganization could materially change the amounts and
classifications reported in the historical financial statements,
which do not give effect to any adjustments to the carrying
value of assets or amounts of liabilities that might be
necessary as a consequence of confirmation of a plan of
reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To exit Chapter&nbsp;11 successfully, the Company must obtain
confirmation by the Bankruptcy Court of a plan of
reorganization. The Company currently has the exclusive right to
file a plan of reorganization until May&nbsp;31, 2005 and
solicit acceptance of the plan through August&nbsp;31, 2005.
Under the terms of an agreement reached with General Electric
Capital Aviation Services (GECAS), the Company previously agreed
to a deadline of April&nbsp;29, 2005 to file a plan of
reorganization. The deadline has been extended and the Company
remains in discussion with GE to determine a revised deadline. A
plan of reorganization would, among other things, resolve all
prepetition obligations, set forth a revised capital structure
and establish the corporate governance subsequent to exiting
from bankruptcy. The Company is currently working towards
emerging from Chapter&nbsp;11 mid-year 2005, but that timing is
dependent upon, among other things, the timely and successful
confirmation and implementation of a plan of reorganization. The
ultimate recovery to creditors and/or holders of the common
stock, if any, will not be determined until after a plan of
reorganization is confirmed. No assurance can be given as to
what values, if any, will be ascribed in the Chapter&nbsp;11
cases to these constituencies or what type or amount of
distributions, if any, they would receive. A plan of
reorganization could result in holders of the Company&#146;s
common stock receiving no distribution and cancellation of
existing stock.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;22, 2005, the Company confirmed that it is in
discussions with America West Holdings Corp., regarding a
potential strategic transaction. The Company emphasized that
there is no assurance that the discussions will lead to a
definitive agreement. The Company does not intend to make any
further announcements until a definitive agreement is reached or
discussions are terminated. It is the Company&#146;s intention
that if a transaction is consummated, that the transaction would
become an integral component of the plan of reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company notified all known or potential creditors of the
Chapter&nbsp;11 filing for the purposes of identifying and
quantifying all prepetition claims. The Chapter&nbsp;11 filing
triggered defaults on substantially all debt and lease
obligations. Subject to certain exceptions under the Bankruptcy
Code, the Chapter&nbsp;11 filing automatically stayed the
continuation of any judicial or administrative proceedings or
other actions against the Debtors or their property to recover
on, collect or secure a claim arising prior to
September&nbsp;12, 2004. The deadline for filing proofs of claim
with the Bankruptcy Court was February&nbsp;3, 2005 (General Bar
Date), with a limited exception for governmental entities, which
had until March&nbsp;11, 2005. The Debtors&#146; claims agent
received approximately 4,800 timely-filed proofs of claims as of
the General Bar Date totaling approximately $26.0&nbsp;billion
in the aggregate, and approximately 350 proofs of claims
timely-filed by governmental entities totaling approximately
$13.4&nbsp;billion in the aggregate. As is typical in
reorganization cases, differences between amounts scheduled by
the Debtors and claims by creditors are being investigated and
resolved in connection with the claims resolution process. The
aggregate amount of claims filed with the Bankruptcy Court far
exceeds the Debtors&#146; estimate of such liability. The
Debtors believe that many of these claims are duplicative,
including those filed alleging joint and several liability
against each of the Debtors, based upon contingencies that have
not occurred, or otherwise are overstated, and are therefore
invalid. In light of the number of creditors of the Debtors, the
claims resolution process may take considerable time to
complete. Accordingly, the ultimate number and amount of allowed
claims is not presently known.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Financing during the Chapter&nbsp;11 Proceedings</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of its reorganization under the Prior Bankruptcy, US
Airways received a $900&nbsp;million loan guarantee under the
Air Transportation Safety and System Stabilization Act from the
Air Transportation Stabilization Board (ATSB)&nbsp;in connection
with a $1&nbsp;billion term loan financing (ATSB Loan). US
Airways is the primary obligor under the ATSB Loan, which is
guaranteed by US Airways Group and each of its other domestic
subsidiaries. In connection with the September&nbsp;12, 2004
Chapter&nbsp;11 filing, the ATSB and the lenders under the
ATSB&nbsp;Loan agreed to authorize the Company to continue to
use cash collateral securing the ATSB Loan on an interim basis.
Therefore, the Company has access to the cash collateralizing
the ATSB Loan as working capital, subject to certain on-going
conditions and limitations. This interim agreement was approved
by the Bankruptcy Court on September&nbsp;13, 2004 as part of
the first day motions, and was scheduled to expire on
October&nbsp;15, 2004. The Bankruptcy Court approved two
subsequent agreements extending the Company&#146;s ability to
use the cash collateral, including an agreement approved on
January&nbsp;13, 2005 extending the Company&#146;s use of cash
collateral through June&nbsp;30, 2005, subject to certain
conditions and limitations. Under the current agreement (the
Cash Collateral Agreement), the Company may continue to access
such cash collateral to support daily operations so long as it
maintains an agreed minimum amount of cash on hand each week.
This minimum amount declines from approximately
$500&nbsp;million at the end of January to $341&nbsp;million on
June&nbsp;30, 2005, with weekly cash levels permitted as low as
$325&nbsp;million in March 2005. The Company must also maintain
and achieve certain cumulative earnings levels during the
period, as defined in the agreement. Further, the Company must
comply with restrictions on its ability to make capital
expenditures. In light of continued high fuel prices and
downward pressure on its fares, there can be no assurance that
the Company can continue to comply with the Cash Collateral
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ATSB Loan also contains covenants that limit, among other
things, the Company&#146;s ability to pay dividends, make
additional corporate investments and acquisitions, enter into
mergers and consolidations and modify certain concessions
obtained as part of the Prior Bankruptcy. The ATSB Loan contains
certain mandatory prepayment events including, among other
things, (i)&nbsp;the occurrence of certain asset sales and the
issuance of certain debt or equity securities and (ii)&nbsp;the
decrease in value of the collateral pledged in respect of the
ATSB Loan below specified coverage levels. During the three
months ended March&nbsp;31, 2005, the
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Company made approximately $6&nbsp;million in prepayments on the
ATSB Loan with proceeds received from asset sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, $712&nbsp;million was outstanding
under the ATSB Loan. The ATSB Loan is reflected as a current
liability on the accompanying balance sheet at a book value of
$697&nbsp;million, which is net of $15&nbsp;million of
unamortized discount, and is not subject to compromise. As of
March&nbsp;31, 2005, the Company&#146;s $513&nbsp;million in
unrestricted cash and cash equivalents was available to support
daily operations, subject to certain conditions and limitations
under the Cash Collateral Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;18, 2005, the Company announced that it reached
an agreement with Eastshore Aviation, LLC, an investment entity
owned by Air Wisconsin Airlines Corporation and its shareholders
(Air Wisconsin), on a $125&nbsp;million financing commitment to
provide equity funding for a plan of reorganization. The
$125&nbsp;million facility is in the form of a debtor in
possession term loan. After receiving approval from the
Bankruptcy Court, $75&nbsp;million was drawn under the facility
on March&nbsp;1, 2005. The first of two $25&nbsp;million
increments was drawn on April&nbsp;4, 2005. This loan is second
only to the ATSB Loan with regard to the Company&#146;s assets
that are pledged as collateral. Upon emergence from
Chapter&nbsp;11, the $125&nbsp;million financing package would
then convert to equity in the reorganized US Airways Group. The
interest on the facility is LIBOR plus 6.5% as determined as of
the draw date of each increment. Interest is payable quarterly
in arrears. As part of this agreement, US Airways and Air
Wisconsin also entered into a regional jet services agreement
under which Air Wisconsin may, but is not required to, provide
regional jet service under a US Airways Express code share
arrangement. On April&nbsp;8, 2005, Air Wisconsin notified the
Company of its intention to deploy 70 regional jets, the maximum
number provided for in the agreement, into the US Airways
Express network.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;14, 2005, the Company announced that it reached an
agreement with Republic Airways Holding, Inc. (Republic) and its
majority shareholder, Wexford Capital LLC (Wexford), on an
equity and financing package that includes a $125&nbsp;million
equity investment upon emergence from Chapter&nbsp;11 and
options for obtaining $110&nbsp;million of other liquidity
enhancements prior to emergence. The implementation of
transactions under the agreement was approved by the Bankruptcy
Court on March&nbsp;31, 2005. The investment agreement is
subject to certain conditions that include the Company and
Wexford reaching an agreement on a business plan for the
reorganized US Airways Group and the requirement that the
Company receive aggregate cash equity investments of not less
than $350&nbsp;million upon emergence from Chapter&nbsp;11.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The agreement with Republic and Wexford also provides that US
Airways may exercise an option to obtain $110&nbsp;million of
additional liquidity through the sale of certain assets,
including ten currently owned EMB-170 regional aircraft, three
EMB-170 regional jet aircraft currently scheduled for delivery,
other regional jet related assets such as a flight simulator and
other items and certain commuter slots at Reagan National
Airport and LaGuardia Airport. US Airways also has the option to
assign the leases for an additional 15&nbsp;EMB-170 regional jet
aircraft. Upon the sale and assignment of the leases for the
aircraft, Republic would enter into a regional jet services
agreement with the Company that would continue the operation of
the aircraft as US&nbsp;Airways Express. Republic would lease
back the slots to US Airways and US&nbsp;Airways would have the
right to repurchase the slots at a predetermined price. In the
event that the Company does not exercise the slot sale/leaseback
option, Republic has the option to purchase and assume the debt
and leases for all of the Company&#146;s Embraer regional jets
and fly them as US Airways Express.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Transformation Plan</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since filing for bankruptcy on September&nbsp;12, 2004, the
Company has achieved cost-savings agreements with its principal
collective bargaining groups. Effective January 2005, US Airways
terminated its three mainline defined benefit plans and has
recognized a curtailment gain of $24&nbsp;million and a
$91&nbsp;million minimum pension liability adjustment in the
first quarter of 2005 in connection with the termination, which
is included in Reorganization items in the Statement of
Operations. The Pension Benefit Guaranty Corporation
(PBGC)&nbsp;was appointed trustee of the plans effective
February&nbsp;1, 2005. The Company continues to carry a
liability of $948&nbsp;million related to the three terminated
plans, classified within Liabilities Subject to Compromise on
the Balance Sheet. The liability will be adjusted at such time
that the amount of the PBGC
</DIV>

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<DIV align="left" style="font-size: 10pt;">
claim approved by the Bankruptcy Court is known. Also in January
2005, the Bankruptcy Court approved settlement agreements
between US Airways and its unions and the court-appointed
Section&nbsp;1114 Committee, representing retirees other than
those represented by the International Association of Machinists
and Aerospace Workers (IAM)&nbsp;and the Transport Workers Union
(TWU), to begin the significant curtailment of postretirement
benefits. As a result of the curtailment of these benefits, the
Company recognized a gain of $183&nbsp;million in the first
quarter of 2005, which is included in Reorganization items in
the Statement of Operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Company&#146;s Transformation Plan and newly
ratified collective bargaining agreements, the Company
implemented voluntary furlough and termination programs across
several of its employee groups. In the first quarter of 2005,
the Company recognized a $51&nbsp;million charge, which is
included in Reorganization items in the Statement of Operations,
associated with termination payments and health care benefits
for approximately 2,300 employees participating in these
voluntary programs. The majority of employees expected to
participate in voluntary terminations notified the Company by
March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the outsourcing of a portion of the
Company&#146;s aircraft maintenance and certain fleet service
operations, the closing of its Pittsburgh reservation center,
and the closing of certain airport clubs and city ticket
offices, the Company involuntarily terminated or furloughed
approximately 2,300 employees. In the first quarter of 2005, the
Company recognized a $44&nbsp;million charge, which is included
in Reorganization items in the Statement of Operations,
associated with contractual severance payments and healthcare
benefits for those employees. Notification for the majority of
planned involuntary terminations was completed in the first
quarter of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company expects to make $79&nbsp;million of termination and
benefit payments during the remainder of 2005, $9&nbsp;million
in 2006 and approximately $1&nbsp;million per year in the years
2007 through 2013.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Aircraft Financing</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has reached agreements with certain of its lessors
and lenders restructuring existing aircraft lease and debt
financings. On November&nbsp;19, 2004, the Bankruptcy Court
approved the Company&#146;s agreements for the continued use and
operation of substantially all of its mainline and Express
fleet. The Company reached a comprehensive agreement with GECAS
and GE Engine Service (GEES) (the GE Master Memorandum of
Understanding or Master MOU) on aircraft leasing and financing
and engine services, which provides the Company with short-term
liquidity, reduced debt, lower aircraft ownership costs,
enhanced engine maintenance services, and operating leases for
new regional jets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Regional Jet Leasing Term Sheet under the Master
MOU, General Electric Credit Corporation (GECC)&nbsp;or its
affiliates have agreed to provide leases for up to 31 regional
jet aircraft. These aircraft will consist of 70- to 100-seat
regional jet aircraft manufactured by Bombardier, Inc.
(Bombardier) and/or EMBRAER-Empresa Brasileria de Aeronautica SA
(Embraer) in a mix and subject to such other terms to be agreed
mutually by GECC and US&nbsp;Airways. During the first quarter
of 2005, GECC leased six CRJ-700s to US Airways with terms
expiring on the earlier of the Debtors&#146; emergence from
Chapter&nbsp;11 and June&nbsp;30, 2005. These leases may be
extended. To effectuate the contemplated regional jet leasing,
US Airways and GECC reinstated that portion of the RJ Lease
Transaction and Debt Financing Agreement, dated as of
December&nbsp;18, 2003 (RJ Lease Agreement), pursuant to which
GECC has agreed to provide single investor lease transactions
(provided that the obligations under the reinstated RJ Lease
Agreement will not be afforded administrative expense status),
with certain additional terms and conditions. Each such lease
will be a postpetition agreement, but only rent payable through
June&nbsp;30, 2005 (as such date may be extended) and return
obligations thereunder will be offered administrative expense
status. All other claims under each such lease, including
rejection damages, will be unsecured prepetition claims.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the Company reached aircraft leasing and
financing agreements with Embraer and Bombardier, which were
approved by the Bankruptcy Court in January 2005. Pursuant to
the agreement reached with Embraer, the Company purchased and
took delivery of three EMB-170 aircraft in January 2005 and
committed to purchase and take delivery of three additional
EMB-170 aircraft by March&nbsp;31, 2005. The purchase of the
three EMB-170s delivered in January 2005 was financed by Embraer
through a mortgage
</DIV>

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<DIV align="left" style="font-size: 10pt;">
loan facility and the application of $17&nbsp;million of
existing purchase deposits held by Embraer. As discussed below,
the Company did not take delivery of the second three aircraft
in March 2005. Additionally, $12&nbsp;million of purchase
deposits held by Embraer will be used to fund an Embraer loan
reserve. Embraer will apply the reserve funds in the amounts and
on the dates as and when payments are due under the Embraer
loans during the period from October&nbsp;1, 2004 through
July&nbsp;31, 2005 in full satisfaction of the Company&#146;s
payment obligations with respect to such Embraer loans during
such period. Upon delivery of the first three EMB-170s, which
occurred in January 2005, unless the Company assumes the Embraer
aircraft purchase agreement pursuant to Section&nbsp;365 of the
Bankruptcy Code, no further obligations arise on the part of the
Company or Embraer with respect to the purchase and delivery of
any aircraft, other than those obligations that arise from or
are related to the purchase and delivery of the final three
EMB-170s scheduled for March 2005. Embraer and the Company have
agreed to negotiate a new delivery schedule upon the
Company&#146;s assumption of the Embraer aircraft purchase
agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Due to the Company&#146;s failure to take delivery by
March&nbsp;31, 2005 of the remaining three EMB-170 aircraft,
damages accrue from and after April&nbsp;1, 2005 until the
delivery of the aircraft at the rate of $162,795&nbsp;per month
per aircraft. If the aircraft are not delivered by July&nbsp;31,
2005, Embraer&#146;s obligation to deliver such aircraft will
terminate and its damages with respect to such undelivered
aircraft may be as much as $10&nbsp;million for all three
aircraft (rather than at the rate of $162,795&nbsp;per month per
aircraft), with Embraer having the right to apply any remaining
purchase deposits against Embraer&#146;s aggregate damages. The
Company is currently working to secure financing for these
aircraft and recorded a charge of $2&nbsp;million in the first
quarter of 2005, which is included in Reorganization items in
the Statement of Operations, associated with penalties expected
to be incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the agreement reached with Bombardier, the Company
acquired three new CRJ-700 aircraft in January 2005. The
purchase was financed through the application of
$28&nbsp;million of existing purchase deposits held by
Bombardier, $2&nbsp;million in cash and a financed lease
facility with DVB Bank AG. Additionally, $4&nbsp;million of
existing purchase deposits held by Bombardier were used to
satisfy existing defaults and cure payments. So long as the
Company continues to operate under the protection of
Chapter&nbsp;11 in compliance with the Bankruptcy Code, no
obligations will arise on the part of the Company or Bombardier
with respect to the purchase and delivery of any aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, aircraft manufacturers held purchase
deposits of $76&nbsp;million related to the acquisition of
aircraft.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Basis of Presentation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying Condensed Consolidated Financial Statements
should be read in conjunction with the Consolidated Financial
Statements contained in US Airways Group&#146;s Annual Report to
the Securities and Exchange Commission on Form&nbsp;&nbsp;10-K
for the year ended December&nbsp;31, 2004. The accompanying
Condensed Consolidated Financial Statements include the accounts
of US Airways Group and its wholly owned subsidiaries. Principal
subsidiaries include US Airways, Allegheny Airlines, Inc.,
Piedmont Airlines, Inc. and PSA Airlines, Inc. Effective
July&nbsp;1, 2004, Allegheny Airlines merged with Piedmont
Airlines, with Piedmont Airlines as the surviving entity. All
significant intercompany accounts and transactions have been
eliminated. Certain prior year amounts have been reclassified to
conform with the 2005 presentation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management believes that all adjustments, consisting of normally
recurring items, necessary for a fair presentation of results
have been included in the Condensed Consolidated Financial
Statements for the interim periods presented, which are
unaudited. The preparation of financial statements in conformity
with accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The principal areas
of judgment relate to impairment of goodwill, impairment of
long-lived assets and intangible assets, passenger revenue
recognition, frequent traveler programs, and pensions and other
postretirement benefits.
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Reorganization Items and Liabilities Subject to Compromise</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>Reorganization items</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying consolidated financial statements have been
prepared in accordance with AICPA Statement of
Position&nbsp;90-7, &#147;Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code&#148; (SOP&nbsp;90-7)
and on a going-concern basis. SOP&nbsp;90-7 requires that the
financial statements for periods following the Chapter&nbsp;11
filing through emergence distinguish transactions and events
that are directly associated with the reorganization from the
ongoing operations of the business. Accordingly, revenues,
expenses, realized gains and losses and provisions for losses
directly associated with the reorganization and restructuring of
the business are reported separately as Reorganization items in
the Statements of Operations. Reorganization items, net as shown
on the Statement of Operations consisted of the following for
the three months ended March&nbsp;31, 2005 (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain related to curtailment of postretirement benefits(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>183</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain related to curtailment of pension plans(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest on accumulated cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Severance including benefits(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(95</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability adjustment(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(91</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Professional fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Damage and deficiency claims(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft order penalties(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reorganization items, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    In January 2005, the Bankruptcy Court approved settlement
    agreements between US Airways and its unions and the
    court-appointed Section&nbsp;1114 Committee, representing
    retirees other than those represented by the IAM and TWU, to
    begin the significant curtailment of postretirement medical
    benefits. The Company recognized a gain of $183&nbsp;million in
    connection with this curtailment. Also in January 2005, US
    Airways terminated its three mainline defined benefit plans. The
    Company recognized a curtailment gain of $24&nbsp;million and a
    $91&nbsp;million minimum pension liability adjustment in
    connection with the terminations. See also Notes&nbsp;1 and 6.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    In connection with the Transformation Plan and new labor
    agreements, approximately 4,600 employees across several of the
    Company&#146;s labor groups were involuntarily terminated or
    participated in voluntary furlough and termination programs. See
    also Note&nbsp;1.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Damage and deficiency claims arise as a result of the
    Company&#146;s election to restructure, abandon or reject
    aircraft debt and leases during the bankruptcy proceedings.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    As a result of the Company&#146;s bankruptcy filing in September
    2004, the Company does not expect to be able to secure the
    financing necessary to take on-time delivery of three scheduled
    regional jet aircraft and therefore accrued penalties of
    $2&nbsp;million in the first quarter of 2005. See also
    Note&nbsp;1.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Liabilities Subject to Compromise</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SOP&nbsp;90-7 also requires that prepetition liabilities subject
to compromise should be distinguished from both prepetition
liabilities that are not subject to compromise and postpetition
liabilities. Liabilities subject to compromise are reported at
the amounts expected to be allowed by the Bankruptcy Court, even
if they may be settled for lesser amounts. The following table
summarizes the components of Liabilities Subject to Compromise
as of March&nbsp;31, 2005 (in&nbsp;millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt and capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,387</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Postretirement and other employee related expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,607</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>548</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft-related accruals and deferrals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Liabilities Subject to Compromise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,814</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Earnings (Loss) per Common Share</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Basic Earnings (Loss) per Common Share (EPS)&nbsp;is computed by
dividing net income (loss) by the weighted average number of
shares of common stock outstanding during the period. Diluted
EPS reflects the
</DIV>

<P align="center" style="font-size: 10pt;">9

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
maximum dilution that would result after giving effect to
dilutive stock options, warrants, and non-vested restricted
stock. The number of additional shares is calculated by assuming
that outstanding, in-the-money stock options and warrants were
exercised and the proceeds from such exercises were used to buy
back shares of common stock at the average market price for the
reporting period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the three months ended March&nbsp;31, 2005,
21.1&nbsp;million stock options, warrants and non-vested shares
of restricted stock have been excluded from the computation of
diluted EPS because of the antidilutive effect on EPS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the three months ended March&nbsp;31, 2004,
22.3&nbsp;million stock options, warrants and non-vested shares
of restricted stock have been excluded from the computation of
diluted EPS because of the antidilutive effect on EPS.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company recorded no income tax provision for the first
quarter of 2005 or 2004. The Company continues to record a full
valuation allowance against its net deferred tax asset due to
the uncertainty regarding the ultimate realization of the asset.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that the Company were to experience a change in
ownership, as defined by Internal Revenue Code Section&nbsp;382,
upon emergence from the current Chapter&nbsp;11 filing, the
annual usage of any remaining tax attributes that were generated
prior to the change in ownership would be substantially limited.
The amount of limitation will be determinable at the time of
emergence from the current Chapter&nbsp;11 reorganization.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Employee Benefit Plans</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Components of the net and total periodic benefit cost for the
three months ended March&nbsp;31, 2005 and March&nbsp;31, 2004
include the following (in millions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Other</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Pension</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Postretirement</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Benefits</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Benefits</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior service benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actuarial gain</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Curtailment gain</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total (income) cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(178</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;12, 2004, US Airways filed a motion requesting
a determination from the Bankruptcy Court that US Airways
satisfied the financial requirements for a &#147;distress
termination&#148; of the Retirement Plan for Flight Attendants
in the Service of US Airways, Inc. (AFA Plan), the Pension Plan
for Employees of US Airways, Inc. Who Are Represented by the
International Association of Machinists and Aerospace Workers
(IAM Plan), and the Retirement Plan for Certain Employees of US
Airways, Inc. (CE Plan) under section&nbsp;4041(c)(2)(B)(ii)(IV)
of the Employee Retirement Security Act of 1974, as amended
(ERISA), and approval of each such plan&#146;s termination.
These plans were projected to have benefit obligations and plan
assets aggregating $2.7&nbsp;billion and $1.7&nbsp;billion,
respectively, as of September&nbsp;30, 2004, the most recent
valuation date. On January&nbsp;6, 2005, the Bankruptcy Court
entered an order (i)&nbsp;finding that the financial
requirements under section&nbsp;4041(c)(2)(B)(ii)(IV) of ERISA
for a distress termination of the plans had been met and
(ii)&nbsp;approving termination of the plans. The AFA Plan and
the IAM Plan were terminated effective January&nbsp;10, 2005, by
agreement between the PBGC and US Airways. The CE Plan was
terminated effective
</DIV>

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<DIV align="left" style="font-size: 10pt;">
January&nbsp;17, 2005, by agreement between the PBGC and US
Airways. Effective February&nbsp;1, 2005, the PBGC was appointed
trustee for each of the three plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon termination of the plans, the Company recognized a
curtailment gain of $24&nbsp;million and a $91&nbsp;million
minimum pension liability adjustment, included in Reorganization
items, net in the Statement of Operations. The PBGC has filed
claims totaling approximately $13&nbsp;billion. The Company
believes these claims may potentially be reduced. The Company
continues to carry a liability of $948&nbsp;million related to
the three terminated plans, classified within Liabilities
Subject to Compromise on the Balance Sheet. The liability will
be adjusted at such time that the amount of the PBGC claim
approved by the Bankruptcy Court is known.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During hearings in late 2004 and January 2005, the Bankruptcy
Court approved various settlement agreements between US Airways
and its unions, and between US Airways and the court-appointed
Section&nbsp;1114 Committee (representing retirees not
represented by the unions) to begin the significant curtailments
of postretirement benefits. Effective March&nbsp;1, 2005, those
benefits were significantly reduced. US Airways re-measured its
obligations downward by approximately $1.1&nbsp;billion and
recognized a curtailment gain of $183&nbsp;million. Since the
re-measurement created a significant unrecognized prior service
gain, US Airways expects to recognize net periodic other
postretirement benefit income until the time of emergence from
bankruptcy. At that time all unrecognized items will be
recognized under SOP&nbsp;90-7.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Comprehensive Income (Loss)</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Comprehensive income (loss) was $(168)&nbsp;million and
$(156)&nbsp;million for the three months ended March&nbsp;31,
2005 and 2004, respectively. Comprehensive income encompasses
net income and &#147;other comprehensive income,&#148; which
includes all other non-owner transactions and events that change
stockholders&#146; equity. Other comprehensive income includes
changes in the fair value of certain derivative financial
instruments and adjustments for minimum pension liabilities.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>Recent Accounting Pronouncements and Changes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards
No.&nbsp;123(R), &#147;Share-Based Payment&#148;
(SFAS&nbsp;123(R)), which establishes standards for transactions
in which an entity exchanges its equity instruments for goods or
services. This standard requires a public entity to measure the
cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the
award. This eliminates the exception to account for such awards
using the intrinsic method previously allowable under Accounting
Principle Board Opinion No.&nbsp;25. The Company previously
adopted the fair value recognition provisions of SFAS&nbsp;123,
&#147;Accounting for Stock-Based Compensation,&#148; upon
emergence from the Prior Bankruptcy on March&nbsp;31, 2003.
Accordingly, the Company believes SFAS&nbsp;123(R) will not have
a material impact on its financial statements. The Company
currently expects to adopt SFAS&nbsp;123(R) upon the earlier of
emergence from Chapter&nbsp;11 or January&nbsp;1, 2006, the new
effective date.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='107'></A>
</DIV>

<!-- link1 "Item 2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;2.&nbsp;</B></TD>
    <TD>
    <B>Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations</B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>General Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Part&nbsp;I, Item&nbsp;2 of this report should be read in
conjunction with Part&nbsp;II, Item&nbsp;7 of US Airways Group,
Inc.&#146;s Annual Report on Form&nbsp;10-K for the year ended
December&nbsp;31, 2004. The information contained herein is not
a comprehensive discussion and analysis of the financial
condition and results of operations of the Company, but rather
updates disclosures made in the aforementioned filing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of the statements contained herein should be considered
&#147;forward-looking statements&#148; within the meaning of the
Private Securities Litigation Reform Act of 1995, which reflect
the current views of the Company with respect to current events
and financial performance. You can identify these statements by
forward-looking words such as &#147;may,&#148; &#147;will,&#148;
&#147;expect,&#148; &#147;intend,&#148; &#147;anticipate,&#148;
&#147;believe,&#148; &#147;estimate,&#148; &#147;plan,&#148;
&#147;could,&#148; &#147;should,&#148; and &#147;continue&#148;
or similar words. These forward-looking statements may also use
different phrases. Such forward-looking statements are and will
be, as the case may be, subject to many risks, uncertainties and
factors relating to the Company&#146;s operations and business
environment which may cause the actual results of the Company to
be materially different from any future results, express or
implied, by such forward-looking statements. Factors that could
cause actual results to differ materially from these
forward-looking statements include, but are not limited to, the
following: the ability of the Company to continue as a going
concern; the ability of the Company to obtain and maintain any
necessary financing for operations and other purposes, whether
debtor in possession financing or other financing; the ability
of the Company to maintain adequate liquidity; the ability of
the Company to absorb escalating fuel costs; the Company&#146;s
ability to obtain court approval with respect to motions in the
Chapter&nbsp;11 proceedings prosecuted by it from time to time;
the ability of the Company to develop, prosecute, confirm and
consummate one or more plans of reorganization with respect to
the Chapter&nbsp;11 proceedings; risks associated with third
parties seeking and obtaining court approval to terminate or
shorten the exclusivity period for the Company to propose and
confirm one or more plans of reorganization, to appoint a
Chapter&nbsp;11 trustee or to convert the cases to
Chapter&nbsp;7 cases; the ability of the Company to obtain and
maintain normal terms with vendors and service providers; the
Company&#146;s ability to maintain contracts that are critical
to its operations; the potential adverse impact of the
Chapter&nbsp;11 proceedings on the Company&#146;s liquidity or
results of operations; the ability of the Company to operate
pursuant to the terms of its financing facilities (particularly
the financial covenants); the ability of the Company to fund and
execute its Transformation Plan during the Chapter&nbsp;11
proceedings and in the context of a plan of reorganization and
thereafter; the ability of the Company to attract, motivate
and/or retain key executives and associates; the ability of the
Company to attract and retain customers; the ability of the
Company to maintain satisfactory labor relations; demand for
transportation in the markets in which the Company operates;
economic conditions; labor costs; financing availability and
costs; security-related and insurance costs; competitive
pressures on pricing (particularly from lower-cost competitors)
and on demand (particularly from low-cost carriers and
multi-carrier alliances); weather conditions; government
legislation and regulation; impact of continued military
activities in Iraq; other acts of war or terrorism; and other
risks and uncertainties listed from time to time in the
Company&#146;s reports to the SEC. There may be other factors
not identified above of which the Company is not currently aware
that may affect matters discussed in the forward-looking
statements, and may also cause actual results to differ
materially from those discussed. The Company assumes no
obligation to update such estimates to reflect actual results,
changes in assumptions or changes in other factors affecting
such estimates other than as required by law. Similarly, these
and other factors, including the terms of any reorganization
plan ultimately confirmed, can affect the value of the
Company&#146;s various prepetition liabilities, common stock
and/or other equity securities. Accordingly, the Company urges
that the appropriate caution be exercised with respect to
existing and future investments in any of these liabilities
and/or securities.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Introduction</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;12, 2004, US Airways Group and its domestic
subsidiaries, which account for substantially all of the
operations of the Company, including its principal operating
subsidiary, US Airways,
</DIV>

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<DIV align="left" style="font-size: 10pt;">
filed voluntary petitions for relief under Chapter&nbsp;11 of
the Bankruptcy Code. Each of the Debtors in these cases had
previously filed a voluntary petition for relief under
Chapter&nbsp;11 on August&nbsp;11, 2002. The Debtors emerged
from the Prior Bankruptcy under the First Amended Joint Plan of
Reorganization of US Airways Group, Inc. and Affiliated Debtors
and Debtors-in-Possession, As Modified (the 2003 Plan), which
was confirmed pursuant to an order of the Bankruptcy Court on
March&nbsp;18, 2003 and became effective on March&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the first quarter of 2005, the Company&#146;s operating
revenues were $1.63&nbsp;billion, operating loss was
$201&nbsp;million and diluted loss per common share was $5.14 on
a net loss of $282&nbsp;million. Operating revenues were
$1.70&nbsp;billion, operating loss was $143&nbsp;million and the
diluted loss per common share was $3.28 on a net loss of
$177&nbsp;million for the same period in 2004. As discussed in
&#147;Results of Operations&#148; below, operating results for
the quarter reflect high fuel prices and the continued weak
revenue environment in the Company&#146;s primary operating
region.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chapter&nbsp;11
Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the Debtors continues to operate its business and manage
its property as a debtor in possession pursuant to
Sections&nbsp;1107 and 1108 of the Bankruptcy Code. At hearings
held on September&nbsp;13, 2004, the Bankruptcy Court granted
the Company&#146;s first day motions for relief designed to
stabilize its operations and business relationships with
customers, vendors, employees and others and entered orders
granting permission to the Debtors to, among other things:
(a)&nbsp;pay employee wages and continue benefits, such as
medical and dental insurance; (b)&nbsp;honor prepetition
obligations to customers and continue customer programs,
including US Airways&#146; Dividend Miles program; (c)&nbsp;pay
for fuel under existing supply contracts, and honor existing
fuel supply, distribution and storage agreements;
(d)&nbsp;assume certain contracts related to interline
agreements with other airlines; (e)&nbsp;pay prepetition
obligations to certain foreign vendors, foreign service
providers and foreign governments; and (f)&nbsp;continue
maintenance of existing bank accounts and existing cash
management systems.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the Chapter&nbsp;11 filings, realization of
assets and liquidation of liabilities are subject to significant
uncertainty. While operating as a debtor in possession under the
protection of Chapter&nbsp;11, and subject to Bankruptcy Court
approval or otherwise as permitted in the normal course of
business, the Company may sell or otherwise dispose of assets
and liquidate or settle liabilities for amounts other than those
reflected in the financial statements. Further, a plan of
reorganization could materially change the amounts and
classifications reported in the historical financial statements,
which do not give effect to any adjustments to the carrying
value of assets or amounts of liabilities that might be
necessary as a consequence of confirmation of a plan of
reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To exit Chapter&nbsp;11 successfully, the Company must obtain
confirmation by the Bankruptcy Court of a plan of
reorganization. The Company currently has the exclusive right to
file a plan of reorganization until May&nbsp;31, 2005 and
solicit acceptance of the plan through August&nbsp;31, 2005.
Under the terms of an agreement reached with GECAS, the Company
previously agreed to a deadline of April&nbsp;29, 2005 to file a
plan of reorganization. The deadline has been extended and the
Company remains in discussion with GE to determine a revised
deadline. A plan of reorganization would, among other things,
resolve all prepetition obligations, set forth a revised capital
structure and establish the corporate governance subsequent to
exiting from bankruptcy. The Company is currently working
towards emerging from Chapter&nbsp;11 mid-year 2005, but that
timing is dependent upon, among other things, the timely and
successful confirmation and implementation of a plan of
reorganization. The ultimate recovery to creditors and/or
holders of the common stock, if any, will not be determined
until after a plan of reorganization is confirmed. No assurance
can be given as to what values, if any, will be ascribed in the
Chapter&nbsp;11 cases to these constituencies or what type or
amount of distributions, if any, they would receive. A plan of
reorganization could result in holders of the Company&#146;s
common stock receiving no distribution and cancellation of
existing stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;22, 2005, the Company confirmed that it is in
discussions with America West Holdings Corp., regarding a
potential strategic transaction. The Company emphasized that
there is no assurance that the discussions will lead to a
definitive agreement. The Company does not intend to make any
further
</DIV>

<P align="center" style="font-size: 10pt;">13

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<DIV align="left" style="font-size: 10pt;">
announcements until a definitive agreement is reached or
discussions are terminated. It is the Company&#146;s intention
that if a transaction is consummated, that the transaction would
become an integral component of the plan of reorganization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company notified all known or potential creditors of the
Chapter&nbsp;11 filing for the purposes of identifying and
quantifying all prepetition claims. The Chapter&nbsp;11 filing
triggered defaults on substantially all debt and lease
obligations. Subject to certain exceptions under the Bankruptcy
Code, the Chapter&nbsp;11 filing automatically stayed the
continuation of any judicial or administrative proceedings or
other actions against the Debtors or their property to recover
on, collect or secure a claim arising prior to
September&nbsp;12, 2004. The deadline for filing proofs of claim
with the Bankruptcy Court was February&nbsp;3, 2005 (General Bar
Date), with a limited exception for governmental entities, which
had until March&nbsp;11, 2005. The Debtors&#146; claims agent
received approximately 4,800 timely-filed proofs of claims as of
the General Bar Date totaling approximately $26.0&nbsp;billion
in the aggregate, and approximately 350 proofs of claims
timely-filed by governmental entities totaling approximately
$13.4&nbsp;billion in the aggregate. As is typical in
reorganization cases, differences between amounts scheduled by
the Debtors and claims by creditors are being investigated and
resolved in connection with the claims resolution process. The
aggregate amount of claims filed with the Bankruptcy Court far
exceeds the Debtors&#146; estimate of such liability. The
Debtors believe that many of these claims are duplicative,
including those filed alleging joint and several liability
against each of the Debtors, based upon contingencies that have
not occurred, or otherwise are overstated, and are therefore
invalid. In light of the number of creditors of the Debtors, the
claims resolution process may take considerable time to
complete. Accordingly, the ultimate number and amount of allowed
claims is not presently known.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transformation
Plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since filing for bankruptcy on September&nbsp;12, 2004, the
Company has achieved cost-savings agreements with its principal
collective bargaining groups. Effective January 2005, US Airways
terminated its three mainline defined benefit plans and has
recognized a curtailment gain of $24&nbsp;million and a
$91&nbsp;million minimum pension liability adjustment in the
first quarter of 2005 in connection with the termination, which
is included in Reorganization items in the Statement of
Operations. The Pension Benefit Guaranty Corporation (PBGC) was
appointed trustee of the plans effective February&nbsp;1, 2005.
The Company continues to carry a liability of $948&nbsp;million
related to the three terminated plans, classified within
Liabilities Subject to Compromise on the Balance Sheet. The
liability will be adjusted at such time that the amount of the
PBGC claim approved by the Bankruptcy Court is known. Also in
January 2005, the Bankruptcy Court approved settlement
agreements between US Airways and its unions and the
court-appointed Section&nbsp;1114 Committee, representing
retirees other than those represented by the International
Association of Machinists and Aerospace Workers (IAM) and the
Transport Workers Union (TWU), to begin the significant
curtailment of postretirement benefits. As a result of the
curtailment of these benefits, the Company recognized a gain of
$183&nbsp;million in the first quarter of 2005, which is
included in Reorganization items in the Statement of Operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Company&#146;s Transformation Plan and newly
ratified collective bargaining agreements, the Company
implemented voluntary furlough and termination programs across
several of its employee groups. In the first quarter of 2005,
the Company recognized a $51&nbsp;million charge, which is
included in Reorganization items in the Statement of Operations,
associated with termination payments and health care benefits
for approximately 2,300 employees participating in these
voluntary programs. The majority of employees expected to
participate in voluntary terminations notified the Company by
March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the outsourcing of a portion of the
Company&#146;s aircraft maintenance and certain fleet service
operations, the closing of its Pittsburgh reservation center,
and the closing of certain airport clubs and city ticket
offices, the Company involuntarily terminated or furloughed
approximately 2,300 employees. In the first quarter of 2005, the
Company recognized a $44&nbsp;million charge, which is included
in Reorganization items in the Statement of Operations,
associated with contractual severance payments and healthcare
benefits for those employees. Notification for the majority of
planned involuntary terminations was completed in the first
quarter of 2005.
</DIV>

<P align="center" style="font-size: 10pt;">14

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company expects to make $79&nbsp;million of termination and
benefit payments during the remainder of 2005, $9&nbsp;million
in 2006 and approximately $1&nbsp;million per year in the years
2007 through 2013.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>Results of Operations</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following section pertains to activity included in the
Company&#146;s Condensed Consolidated Statements of Operations
and in &#147;Selected Operating and Financial Statistics&#148;
below. Except where noted, operating statistics referred to
below are for scheduled service only.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Three Months Ended March&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Compared with the</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Three Months Ended March&nbsp;31, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Operating Revenues</U>&nbsp;&#151; <I>Passenger
transportation </I>revenues decreased $66&nbsp;million, or 4.4%.
This was due to a 12.7% decrease in yield, which reduced revenue
by $211&nbsp;million, partially offset by a 9.6% increase in
revenue passenger miles (RPMs), which increased revenue by
$145&nbsp;million. <I>Cargo and freight </I>revenue decreased
$13&nbsp;million, or 38.2%, due to the temporary suspension of
mail delivery and lower volume of transatlantic freight during
the first quarter of 2005. <I>Other</I> operating revenues
increased 3.9% primarily due to revenue generated through
airline partner travel after the Company joined the Star
Alliance in May 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Operating Expenses</U>&nbsp;&#151; Operating expenses
decreased $15&nbsp;million, or 0.8%, on a capacity increase of
5.1% (as measured by available seat miles or ASMs). <I>Personnel
costs </I>decreased 25.6% primarily due to lower wage and
benefits rates as a result of the implementation of the
cost-savings agreements achieved with each of the collective
bargaining groups, including the termination of the
Company&#146;s defined benefit plans and the curtailment of
postretirement benefits, as well as lower headcount as compared
to the period in 2004. These reductions were partially offset by
increases to the workers compensation and pilots&#146; long-term
disability liabilities. <I>Aviation fuel </I>increased 57.9% due
primarily to a 48.1% increase in average fuel prices and a small
increase in consumption. <I>US Airways Express capacity
purchases </I>increased 7.4% due to higher fuel prices that are
paid by US Airways on capacity purchases, partially offset by a
decrease in purchased ASMs. <I>Aircraft rent </I>increased 5.5%
due to new aircraft leases for regional jets delivered
throughout 2004 and the first quarter of 2005. <I>Selling
expenses </I>decreased 1.0% due to decreases in commissions and
computer reservation fees offset by increases in advertising
expense. <I>Depreciation and amortization </I>increased slightly
due to depreciation associated with new regional jets offset by
reduced amortization associated with capitalized software costs.
<I>Other </I>operating expenses increased $2&nbsp;million, or
less than 1%, due to increases in expenses associated with the
redemption of Dividend Miles on partner airlines and passenger
compensation expense partially offset by decreases in expense
related to outside services, ordinary course legal fees and
general insurance expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Other Income (Expense)</U>&nbsp;&#151; Other Income
(Expense), net increased by $47&nbsp;million. See Note&nbsp;3(a)
to the Condensed Consolidated Financial Statements for
additional information on the components of <I>Reorganization
items, net.</I> <I>Interest income</I> was flat due to higher
average interest rates, offset by the classification of
$2&nbsp;million of interest income as a reorganization item.
<I>Interest expense, net</I> increased 34.5% as a result of
interest associated with new regional jets and increased
interest expense on the ATSB Loan, including penalty interest
incurred as a result of the current Chapter&nbsp;11 proceedings.
<I>Other, net </I>for the three months ended March&nbsp;31, 2005
decreased as compared to the same period in 2004 as a result of
mark-to-market adjustments on certain stock options held by the
Company. <I>Other, net </I>for the three month period ended
March&nbsp;31, 2004 included a credit of $13&nbsp;million
related to a business interruption insurance recovery.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Provision for Income Taxes</U>&nbsp;&#151; The Company
recorded no income tax provision for the first quarter of 2005
or 2004 and continues to record a full valuation allowance
against its net deferred tax asset.
</DIV>

<P align="center" style="font-size: 10pt;">15
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Selected Operating and Financial Statistics(1)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenue passenger miles (millions):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,079</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,119</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Available seat miles (millions):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,769</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,988</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total available seat miles (millions):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,771</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,990</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger load factor(2):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Yield(3):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.10&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.01&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.74&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.27&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger revenue per available seat mile(5):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.32&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.24&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.59&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.32&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenue passengers (thousands):*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    System</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,851</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline revenue per available seat mile(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.91&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.62&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline cost per available seat mile (Mainline CASM)(7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.89&#162;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.68&#162;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline average stage length (miles)*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>773</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline cost of aviation fuel per gallon(8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.994</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline cost of aviation fuel per gallon (excluding fuel taxes)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.938</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline gallons of aviation fuel consumed (millions)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>216</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline number of aircraft in operating fleet at period-end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>283</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mainline full-time equivalent employees at period end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,854</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD align="left">
    Scheduled service only (excludes charter service).</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Operating statistics include free frequent travelers and the
    related miles flown. System statistics encompass all wholly
    owned airline subsidiaries of US Airways Group, including US
    Airways, Allegheny Airlines (through June 2004), Piedmont
    Airlines and PSA Airlines as well as operating and financial
    results from capacity purchase agreements with Mesa Airlines,
    Chautauqua Airlines and Trans States Airlines. For purposes of
    Mainline statistical calculations and to provide better
    comparability between periods, Mainline statistics exclude
    revenue and expenses associated with US Airways capacity
    purchase arrangements with certain affiliated airlines and US
    Airways&#146; regional jet division, MidAtlantic Airways
    (MidAtlantic).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Percentage of aircraft seating capacity that is actually
    utilized (RPMs/ ASMs).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Passenger transportation revenue divided by RPMs.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">16

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Mainline passenger revenue excludes US Airways Express and
    MidAtlantic passenger revenue of $314&nbsp;million and
    $303&nbsp;million for the three months ended March&nbsp;31, 2005
    and 2004, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Passenger transportation revenue divided by ASMs (a measure of
    unit revenue).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Mainline operating revenues divided by ASMs (a measure of unit
    revenue). Mainline operating revenues exclude US Airways Express
    and MidAtlantic operating revenues of $315&nbsp;million and
    $304&nbsp;million for the three months ended March&nbsp;31, 2005
    and 2004, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Mainline operating expenses divided by mainline ASMs (a measure
    of unit cost). Mainline operating expenses exclude US Airways
    capacity purchases of $327&nbsp;million and $313&nbsp;million
    for the three months ended March&nbsp;31, 2005 and 2004,
    respectively, and MidAtlantic operating expenses of
    $41&nbsp;million for the three months ended March&nbsp;31, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    Includes fuel taxes and transportation charges and excludes
    service fees.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">17

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Liquidity and Capital Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, the Company&#146;s Cash and cash
equivalents totaled $513&nbsp;million compared to
$738&nbsp;million as of December&nbsp;31, 2004. The decline in
cash during the first quarter is a result of continued net
losses during seasonally weak winter months and aircraft debt
and lease payments of $317&nbsp;million on aircraft essential to
the Transformation Plan. The airline industry continues to be
adversely effected by the historically high aircraft fuel prices
and the continued downward pressure on domestic revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of its reorganization under the Prior Bankruptcy, US
Airways received a $900&nbsp;million loan guarantee under the
Air Transportation Safety and System Stabilization Act from the
ATSB in connection with a $1&nbsp;billion term loan financing
(ATSB Loan). In connection with the September&nbsp;12, 2004
Chapter&nbsp;11 filing, the ATSB and the lenders under the ATSB
Loan agreed to authorize the Company to continue to use cash
collateral securing the ATSB Loan on an interim basis.
Therefore, the Company has access to the cash collateralizing
the ATSB Loan as working capital, subject to certain on-going
conditions and limitations. This interim agreement was approved
by the Bankruptcy Court on September&nbsp;13, 2004 as part of
the first day motions, and was scheduled to expire on
October&nbsp;15, 2004. The Bankruptcy Court approved two
subsequent agreements extending the Company&#146;s ability to
use the cash collateral, including an agreement approved on
January&nbsp;13, 2005 extending the Company&#146;s use of cash
collateral through June&nbsp;30, 2005, subject to certain
conditions and limitations. Under the current agreement, the
Company may continue to access such cash collateral to support
daily operations so long as it maintains an agreed minimum
amount of cash on hand each week. This minimum amount declines
from approximately $500&nbsp;million at the end of January to
$341&nbsp;million on June&nbsp;30, 2005, with weekly cash levels
permitted as low as $325&nbsp;million in March 2005. The Company
must also maintain and achieve certain cumulative earnings
levels during the period, as defined in the agreement. Further,
the Company must comply with restrictions on its ability to make
capital expenditures. In light of continued high fuel prices and
downward pressure on its fares, there can be no assurance that
the Company can continue to comply with the Cash Collateral
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ATSB Loan also contains covenants that limit, among other
things, the Company&#146;s ability to pay dividends, make
additional corporate investments and acquisitions, enter into
mergers and consolidations and modify certain concessions
obtained as part of the Prior Bankruptcy. The ATSB Loan contains
certain mandatory prepayment events including, among other
things, (i)&nbsp;the occurrence of certain asset sales and the
issuance of certain debt or equity securities and (ii)&nbsp;the
decrease in value of the collateral pledged in respect of the
ATSB Loan below specified coverage levels. During the three
months ended March&nbsp;31, 2005, the Company made approximately
$6&nbsp;million in prepayments on the ATSB Loan with proceeds
received from asset sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, $712&nbsp;million was outstanding
under the ATSB Loan. The ATSB Loan is reflected as a current
liability on the accompanying balance sheet at a book value of
$697&nbsp;million, which is net of $15&nbsp;million of
unamortized discount, and is not subject to compromise. As of
March&nbsp;31, 2005, the Company&#146;s $513&nbsp;million in
unrestricted cash and cash equivalents was available to support
daily operations, subject to certain conditions and limitations
under the Cash Collateral Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;18, 2005, the Company announced that it reached
an agreement with Eastshore Aviation, LLC, an investment entity
owned by Air Wisconsin Airlines Corporation and its shareholders
(Air Wisconsin), on a $125&nbsp;million financing commitment to
provide equity funding for a plan of reorganization. The
$125&nbsp;million facility is in the form of a debtor in
possession term loan. After receiving approval from the
Bankruptcy Court, $75&nbsp;million was drawn under the facility
on March&nbsp;1, 2005. The first of two $25&nbsp;million
increments was drawn on April&nbsp;4, 2005. This loan is second
only to the ATSB Loan with regard to the Company&#146;s assets
that are pledged as collateral. Upon emergence from
Chapter&nbsp;11, the $125&nbsp;million financing package would
then convert to equity in the reorganized US Airways Group. The
interest on the facility is LIBOR plus 6.5% as determined as of
the draw date of each increment. Interest is payable quarterly
in arrears. As part of this agreement, US Airways and Air
Wisconsin also entered into a regional jet services agreement
under which Air Wisconsin may, but is not required to, provide
regional jet service under a US&nbsp;Airways Express code share
arrangement. On April&nbsp;8, 2005, Air Wisconsin notified the
Company of its
</DIV>

<P align="center" style="font-size: 10pt;">18

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<DIV align="left" style="font-size: 10pt;">
intention to deploy 70 regional jets, the maximum number
provided for in the agreement, into the US&nbsp;Airways Express
network.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;14, 2005, the Company announced that it reached an
agreement with Republic Airways Holding, Inc. (Republic) and its
majority shareholder, Wexford Capital LLC (Wexford), on an
equity and financing package that includes a $125&nbsp;million
equity investment upon emergence from Chapter&nbsp;11 and
options for obtaining $110&nbsp;million of other liquidity
enhancements prior to emergence. The implementation of
transactions under the agreement was approved by the Bankruptcy
Court on March&nbsp;31, 2005. The investment agreement is
subject to certain conditions that include the Company and
Wexford reaching an agreement on a business plan for the
reorganized US Airways Group and the requirement that the
Company receive aggregate cash equity investments of not less
than $350&nbsp;million upon emergence from Chapter&nbsp;11.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The agreement with Republic and Wexford also provides that US
Airways may exercise an option to obtain $110&nbsp;million of
additional liquidity through the sale of certain assets,
including ten currently owned EMB-170 regional aircraft, three
EMB-170 regional jet aircraft currently scheduled for delivery,
other regional jet related assets such as a flight simulator and
other items and certain commuter slots at Reagan National
Airport and LaGuardia Airport. US Airways also has the option to
assign the leases for an additional 15 EMB-170 regional jet
aircraft. Upon the sale and assignment of the leases for the
aircraft, Republic would enter into a regional jet services
agreement with the Company that would continue the operation of
the aircraft as US&nbsp;Airways Express. Republic would lease
back the slots to US Airways and US Airways would have the right
to repurchase the slots at a predetermined price. In the event
that the Company does not exercise the slot sale/leaseback
option, Republic has the option to purchase and assume the debt
and leases for all of the Company&#146;s Embraer regional jets
and fly them as US Airways Express.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>General Electric</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
GE is the Company&#146;s largest creditor. Together with GEES
and other affiliates, GE directly financed or leased a
substantial portion of the Company&#146;s aircraft prior to the
current Chapter&nbsp;11 filing. In November 2001, US Airways
obtained a $404&nbsp;million credit facility from GE (2001 GE
Credit Facility). The 2001 GE Credit Facility is secured by
collateral including 11 A320-family aircraft and 28 spare
engines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the 2001 GE Credit Facility, GE has provided
financing or guarantees on a significant number of the
Company&#146;s current operating aircraft. It also maintains the
engines on the Company&#146;s B737-family aircraft, A320-family
aircraft, B767 aircraft, EMB-170 aircraft and CRJ-200 aircraft.
In connection with its Prior Bankruptcy, the Company reached a
settlement with GE that resolved substantially all aircraft,
aircraft engine and loan-related issues and the Company obtained
additional financing from GE in the form of a liquidity facility
of up to $360&nbsp;million (2003 GE Liquidity Facility).
Borrowings under the liquidity facility bear interest at LIBOR
plus 4.25%. Every obligation of the Company to GE is generally
cross-defaulted to the 2001 GE Credit Facility, the 2003 GE
Liquidity Facility, the GE regional jet leases and the GE
regional jet mortgage financings. All of the Company&#146;s
obligations to GE are generally cross-collateralized and
cross-defaulted with all other obligations owed by any Debtor to
GECC or any of its affiliates (collectively, the GE Obligations).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the Company reached a comprehensive agreement
with GE and its affiliates as described in the Master MOU that
was approved by the Bankruptcy Court on December&nbsp;16, 2004.
The Master MOU and the transactions contemplated by the term
sheets will provide the Company with short-term liquidity,
reduced debt, lower aircraft ownership costs, enhanced engine
maintenance services and operating leases for new regional jets,
while preserving the vast majority of US Airways&#146; mainline
fleet owned by GECAS. The key aspects of the Master MOU are as
follows: (i)&nbsp;agreements providing for continued use by the
Company of certain Airbus, Boeing and regional jet aircraft, and
the return to GECC of certain other leased Airbus and Boeing
aircraft (the Aircraft Lease Term Sheet); (ii)&nbsp;GECC will
provide a bridge facility of up to approximately
$56&nbsp;million for use by the Debtors during the pendency of
the Chapter&nbsp;11 proceedings (the Bridge Facility Term
Sheet); (iii)&nbsp;GECC will purchase and immediately leaseback
to US Airways (a)&nbsp;the assets securing the 2001 GE Credit
Facility and the 2003 GE Liquidity Facility (collectively, the
2001 Credit Facility Assets), and other GE obligations,
consisting of 11 Airbus aircraft and 28 spare engines and engine
</DIV>

<P align="center" style="font-size: 10pt;">19

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<DIV align="left" style="font-size: 10pt;">
stands, and (b)&nbsp;ten regional jet aircraft currently debt
financed by GECC; (iv)&nbsp;the balance of the 2001
GE&nbsp;Credit Facility will be restructured to provide
additional liquidity of approximately $10&nbsp;million, subject
to the pledge of certain collateral to secure the 2001 GE Credit
Facility; (v)&nbsp;subject to the Company&#146;s satisfaction of
certain financial tests and other conditions, GECC will provide
lease financing for up to 31&nbsp;additional regional jet
aircraft (the Regional Jet Leasing Term Sheet);
(vi)&nbsp;certain of US Airways&#146; engine maintenance
agreements with GEES will be modified and assumed; and
(vii)&nbsp;upon emergence from bankruptcy, convertible notes of
the reorganized US Airways will be issued to GECC in the
aggregate principal amount of $125&nbsp;million (the Convertible
Note&nbsp;Term Sheet).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Bridge Facility Term Sheet provides for a loan facility of
up to $56&nbsp;million made available by GECC to the Debtors in
a series of drawdowns commencing on December&nbsp;20, 2004, and
ending on or before June&nbsp;30, 2005 (the Bridge Facility).
The Company and GECC entered into the Bridge Facility on
December&nbsp;20, 2004, at which time $20&nbsp;million was drawn
down under the facility. As of March&nbsp;31, 2005, the Company
has drawn $42&nbsp;million under the facility. Interest on the
Bridge Facility accrues at the rate of LIBOR plus 4.25% and will
be payable in cash or in kind at the option of the Debtors. The
Bridge Facility matures on the date the Company emerges from
Chapter&nbsp;11 and will be satisfied by the issuance of
Convertible Notes. The Bridge Facility is cross-collateralized
and cross-defaulted with all other GE&nbsp;obligations owed by
any Debtor to GECC or any of its affiliates and will be granted
status as an administrative expense claim with priority over all
other administrative claims other than for aircraft financing
deferrals, which are pari passu, and subordinate only to
(i)&nbsp;the super-priority administrative expense claim of the
ATSB and the ATSB Lenders as defined and provided for in the
Cash Collateral Agreement, (ii)&nbsp;postpetition wages and
benefits, and (iii)&nbsp;any other new money debtor in
possession financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms of the Master MOU, the Company previously agreed
to a deadline of April&nbsp;29, 2005 to file a plan of
reorganization. The deadline has been extended and the Company
remains in discussion with GE to determine a revised deadline.
No other transactions contemplated by the Master MOU have been
implemented in 2005, except as described above related to the
Bridge Facility, and there can be no assurance that additional
transactions contemplated by the Master MOU will occur.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Aircraft Financing</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has reached agreements with certain of its lessors
and lenders restructuring existing aircraft lease and debt
financings. On November&nbsp;19, 2004, the Bankruptcy Court
approved the Company&#146;s agreements for the continued use and
operation of substantially all of its mainline and Express
fleet. Under the Master MOU, the Company reached a comprehensive
agreement with GECAS and GEES on aircraft leasing and financing
and engine services, which provides the Company with short-term
liquidity, reduced debt, lower aircraft ownership costs,
enhanced engine maintenance services, and operating leases for
new regional jets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Regional Jet Leasing Term Sheet under the Master
MOU, GECC or its affiliates have agreed to provide leases for up
to 31 regional jet aircraft. These aircraft will consist of 70-
to 100-seat regional jet aircraft manufactured by Bombardier
and/or Embraer in a mix and subject to other terms to be agreed
mutually upon by GECC and US Airways. During the first quarter
of 2005, GECC leased six CRJ-700s to US Airways with terms
expiring on the earlier of the Debtors&#146; emergence from
Chapter&nbsp;11 and June&nbsp;30, 2005. These leases may be
extended. To effectuate the contemplated regional jet leasing,
US&nbsp;Airways and GECC reinstated that portion of the RJ Lease
Transaction and Debt Financing Agreement, dated as of
December&nbsp;18, 2003 (RJ Lease Agreement), pursuant to which
GECC has agreed to provide single investor lease transactions
(provided that the obligations under the reinstated RJ Lease
Agreement will not be afforded administrative expense status),
with certain additional terms and conditions. Each such lease
will be a postpetition agreement, but only rent payable through
June&nbsp;30, 2005 (as such date may be extended) and return
obligations thereunder will be offered administrative expense
status. All other claims under each such lease, including
rejection damages, will be unsecured prepetition claims.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the Company reached aircraft leasing and
financing agreements with Embraer and Bombardier, which were
approved by the Bankruptcy Court in January 2005. Pursuant to
the agreement
</DIV>

<P align="center" style="font-size: 10pt;">20

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<DIV align="left" style="font-size: 10pt;">
reached with Embraer, the Company purchased and took delivery of
three EMB-170 aircraft in January 2005 and committed to purchase
and take delivery of three additional EMB-170 aircraft by
March&nbsp;31, 2005. The purchase of the three EMB-170s
delivered in January 2005 was financed by Embraer through a
mortgage loan facility and the application of $17&nbsp;million
of existing purchase deposits held by Embraer. As discussed
below, the Company did not take delivery of the second three
aircraft in March 2005. Additionally, $12&nbsp;million of
purchase deposits held by Embraer will be used to fund an
Embraer loan reserve. Embraer will apply the reserve funds in
the amounts and on the dates as and when payments are due under
the Embraer loans during the period from October&nbsp;1, 2004
through July&nbsp;31, 2005 in full satisfaction of the
Company&#146;s payment obligations with respect to such Embraer
loans during such period. Upon delivery of the first three
EMB-170s, which occurred in January 2005, unless the Company
assumes the Embraer aircraft purchase agreement pursuant to
Section&nbsp;365 of the Bankruptcy Code, no further obligations
arise on the part of the Company or Embraer with respect to the
purchase and delivery of any aircraft, other than those
obligations that arise from or are related to the purchase and
delivery of the final three EMB-170s scheduled for March 2005.
Embraer and the Company have agreed to negotiate a new delivery
schedule upon the Company&#146;s assumption of the Embraer
aircraft purchase agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Due to the Company&#146;s failure to take delivery by
March&nbsp;31, 2005 of the remaining three EMB-170 aircraft,
damages accrue from and after April&nbsp;1, 2005 until the
delivery of the aircraft at the rate of $162,795&nbsp;per month
per aircraft. If the aircraft are not delivered by July&nbsp;31,
2005, Embraer&#146;s obligation to deliver such aircraft will
terminate and its damages with respect to such undelivered
aircraft may be as much as $10&nbsp;million for all three
aircraft (rather than at the rate of $162,795&nbsp;per month per
aircraft), with Embraer having the right to apply any remaining
purchase deposits against Embraer&#146;s aggregate damages. The
Company is currently working to secure financing for these
aircraft and recorded a charge of $2&nbsp;million in the first
quarter of 2005, which is included in Reorganization items in
the Statement of Operations, associated with penalties expected
to be incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the agreement reached with Bombardier, the Company
acquired three new CRJ-700 aircraft in January 2005. The
purchase was financed through the application of
$28&nbsp;million of existing purchase deposits held by
Bombardier, $2&nbsp;million in cash and a financed lease
facility with DVB Bank AG. Additionally, $4&nbsp;million of
existing purchase deposits held by Bombardier were used to
satisfy existing defaults and cure payments. So long as the
Company continues to operate under the protection of
Chapter&nbsp;11 in compliance with the Bankruptcy Code, no
obligations will arise on the part of the Company or Bombardier
with respect to the purchase and delivery of any aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, aircraft manufacturers held purchase
deposits of $76&nbsp;million related to the acquisition of
aircraft.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Statement of Cash Flows Narrative</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the first three months of 2005, the Company&#146;s operating
activities before reorganization items used net cash of
$98&nbsp;million, compared to operating activities for the three
months ended March&nbsp;31, 2004 which provided cash of
$75&nbsp;million. Operating cash flows during the first quarter
of 2005 included the use of $11&nbsp;million for reorganization
items. Cash flows for 2005 were adversely affected by the same
factors that affected financial results, including continued
reductions in unit revenue and significant increases in fuel
prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the first three months of 2005, net cash used by investing
activities was $174&nbsp;million due primarily to the increase
in restricted cash of $139&nbsp;million. The increase in
restricted cash reflects additional collateral deposits related
to the Company&#146;s third-party credit card processors. The
Company, in the ordinary course of business, withholds from
employees and collects from passengers funds that are required
to be paid to applicable governmental authorities, which include
withholding for payroll taxes, transportation excise taxes,
passenger facility charges, transportation security charges and
other related fees, and has established trust accounts to fund
these obligations. Net cash flows from investing activities in
the first quarter of 2005 also includes $39&nbsp;million in
capital expenditures, primarily related to the acquisition of
new regional jets.
</DIV>

<P align="center" style="font-size: 10pt;">21

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the first three months of 2004, investing activities
included net cash outflows of $2&nbsp;million related to capital
expenditures and net equipment purchase deposit activity.
Capital expenditures reflects the early return of aircraft
purchase deposits by an aircraft manufacturer of
$31&nbsp;million. The decrease in short-term investments in the
first quarter of 2004 reflects a shift in the investment
portfolio to investments with maturities less than 90&nbsp;days
as of March&nbsp;31, 2004. Investing activities in 2004 also
included an increase in restricted cash of $113&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by financing activities during the three
months ended March&nbsp;31, 2005 was $58&nbsp;million. Principal
payments on debt and capital lease obligations of
$72&nbsp;million includes $6&nbsp;million in prepayments on the
ATSB Loan with proceeds from sales of assets. On March&nbsp;1,
2005, the Company made the first draw of $75&nbsp;million under
the debtor in possession loan provided by Air Wisconsin. Net
cash used by financing activities for the three months ended
March&nbsp;31, 2004 was $272&nbsp;million. Principal payments on
long-term debt and capital lease obligations of
$295&nbsp;million included the $250&nbsp;million prepayment made
in connection with the ATSB Loan amendment in March 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='108'></A>
</DIV>

<!-- link1 "Item 3. Quantitative and Qualitative Disclosures About Market Risk" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;3.&nbsp;</B></TD>
    <TD>
    <B>Quantitative and Qualitative Disclosures About Market Risk</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prices and availability of all petroleum products are subject to
political, economic and market factors that are generally
outside of the Company&#146;s control. Accordingly, the price
and availability of aviation fuel, as well as other petroleum
products, can be unpredictable. Because the operations of the
Company are dependent upon aviation fuel, significant increases
in aviation fuel costs materially and adversely affect the
Company&#146;s liquidity, results of operations and financial
condition. Given forecasted fuel consumption of approximately
1.14&nbsp;billion gallons per year for US Airways Group, a one
cent per gallon increase in fuel price results in a
$1&nbsp;million per month increase in expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has utilized financial derivatives, including fixed
price swap agreements, collar structures and other similar
instruments to manage some of the risk associated with changes
in aviation fuel prices. As of March&nbsp;31, 2005, the Company
had no open fuel hedge positions in place. The Company
previously liquidated hedges representing approximately 4% of
its 2005 anticipated fuel requirements and recognized a
$6&nbsp;million reduction to fuel expense for the three months
ended March&nbsp;31, 2005. The Company will continue to
recognize a $2&nbsp;million reduction to expense per month
through December 2005. The Company had $16&nbsp;million of
unrealized gains related to fuel hedge positions recorded in
Accumulated other comprehensive income, net of income tax
effect, on its Balance Sheet at March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There have been no other material changes to the Company&#146;s
disclosures related to certain market risks as reported under
Part&nbsp;II, Item&nbsp;7A, &#147;Quantitative and Qualitative
Disclosures About Market Risk&#148;, in the Company&#146;s
Annual Report on Form&nbsp;10-K for the year ended
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='109'></A>
</DIV>

<!-- link1 "Item 4. Controls and Procedures" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;4.&nbsp;</B></TD>
    <TD>
    <B>Controls and Procedures</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Disclosure
Controls and Procedures</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company maintains disclosure controls and procedures
designed to ensure that information required to be disclosed by
the Company in reports it files or submits under the Securities
Exchange Act of 1934, as amended (Exchange Act) is recorded,
processed, summarized and reported within the time periods
specified in the SEC&#146;s rules and forms. An evaluation was
performed under the supervision and with the participation of
the Company&#146;s management, including the Chief Executive
Officer (CEO)&nbsp;and Chief Financial Officer (CFO), of the
effectiveness of the design and operation of the Company&#146;s
disclosure controls and procedures (as defined in Exchange Act
Rules&nbsp;13a-15(e) and 15d-15(e)) as of March&nbsp;31, 2005.
Based on that evaluation, the Company&#146;s CEO and CFO have
concluded that the Company&#146;s disclosure controls and
procedures were effective as of such date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes
in Internal Control over Financial Reporting</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There have been no changes in the Company&#146;s internal
control over financial reporting during the three months ended
March&nbsp;31, 2005 that have materially affected or are
reasonably likely to materially affect the Company&#146;s
internal control over financial reporting.
</DIV>

<P align="center" style="font-size: 10pt;">22

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<DIV align="left" style="font-size: 10pt;">
<A name='110'></A>
</DIV>

<!-- link1 "PART II. OTHER INFORMATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;II.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OTHER INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='111'></A>
</DIV>

<!-- link1 "Item 1. Legal Proceedings" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;1.&nbsp;</B></TD>
    <TD>
    <B>Legal Proceedings</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;12, 2004, US Airways Group and its domestic
subsidiaries, including its principal operating subsidiary, US
Airways, filed voluntary petitions for relief under
Chapter&nbsp;11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Eastern District of
Virginia, Alexandria Division (Case Nos. 04-13819-SSM through
03-13823-SSM). Each of the Debtors continues to operate its
business and manage its property as a debtor in possession
pursuant to Sections&nbsp;1107 and 1108 of the Bankruptcy Code.
As a result of the current Chapter&nbsp;11 filing, attempts to
collect, secure or enforce remedies with respect to prepetition
claims against the Debtors are subject to the automatic stay
provisions of Section&nbsp;362(a) of the Bankruptcy Code. No new
material legal proceedings have commenced during the time period
covered by this interim report. In addition, there have been no
significant developments in the pending legal proceedings as
previously reported in the Company&#146;s Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='112'></A>
</DIV>

<!-- link1 "Item 3. Defaults Upon Senior Securities" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;3.&nbsp;</B></TD>
    <TD>
    <B>Defaults Upon Senior Securities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp;The initiation of the Chapter&nbsp;11 proceedings
constituted a default under the agreements governing the
Company&#146;s debt and lease obligations incurred prior to the
Petition Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp;Dividends on Class&nbsp;B Preferred Stock held by the
Retirement Systems of Alabama Holdings LLC aggregating
$4.5&nbsp;million as of March&nbsp;31, 2005 have not been paid
as a result of the Chapter&nbsp;11 proceedings and in accordance
with the ATSB Loan.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='113'></A>
</DIV>

<!-- link1 "Item 6. Exhibits" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;6.&nbsp;</B></TD>
    <TD>
    <B>Exhibits</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Supplemental Order(I)&nbsp;Authorizing Debtors&#146; Use
    of Cash Collateral (II)&nbsp;Providing Adequate Protection
    Pursuant to Bankruptcy Rules&nbsp;4001(b) and 4001(d)
    (incorporated by reference to Exhibit&nbsp;99.1 to US Airways
    Group&#146;s Current Report on Form&nbsp;8-K dated
    January&nbsp;13, 2005)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Junior Secured Debtor-in-Possession Credit Facility Agreement
    dated as of February&nbsp;18, 2005 among US Airways, Inc., a
    Debtor and Debtor-in-Possession under Chapter&nbsp;11 of the
    Bankruptcy Code as Borrower, US Airways Group, Inc., PSA
    Airlines, Inc., and Material Services, Inc., Debtors and
    Debtors-in-Possession under Chapter&nbsp;11 of the Bankruptcy
    Code as Guarantors, and Eastshore Aviation, LLC, as Lender
    (incorporated by reference to Exhibit&nbsp;99 to US Airways
    Group&#146;s Current Report on Form&nbsp;8-K dated
    February&nbsp;28, 2005)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement dated as of March&nbsp;15, 2005, among
    Wexford Capital LLC, Republic Airways Holdings Inc., US Airways
    Group, Inc. and US Airways, Inc. (portions of this exhibit have
    been omitted pursuant to a request for confidential treatment
    and filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;14, to the A319/ A320/ A321 Purchase
    Agreement dated as of October&nbsp;31, 1997 between AVSA,
    S.A.R.L., and US Airways Group, Inc., executed on
    December&nbsp;22, 2004 (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;15 to the A319/ A320/ A321 Purchase Agreement
    dated as of October&nbsp;31, 1997 between AVSA, S.A.R.L., and US
    Airways Group, Inc., executed on January&nbsp;17, 2005 (portions
    of this exhibit have been omitted pursuant to a request for
    confidential treatment and filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;8 to the A330/ A340 Purchase Agreement dated
    as of November&nbsp;24, 1998 between AVSA, S.A.R.L., and US
    Airways Group, Inc., executed on December&nbsp;22, 2004
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-1

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;9 to the A330/ A340 Purchase Agreement dated
    as of November&nbsp;24, 1998, between AVSA, S.A.R.L., and US
    Airways Group, Inc., executed on January&nbsp;17, 2005 (portions
    of this exhibit have been omitted pursuant to a request for
    confidential treatment and filed separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Post-Petition Purchase Agreement Modification and Aircraft
    Financing Term Sheet between US Airways, Inc. and
    EMBRAER&nbsp;&#151; Empresa Brasileira de Aeronautica S.A.,
    executed on December&nbsp;16, 2005</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;6 dated as of January&nbsp;24, 2005 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of the Principal Executive Officer pursuant to
    Rule&nbsp;13a-14(a) or Rule&nbsp;15d-14(a) (Section&nbsp;302 of
    the Sarbanes-Oxley Act of 2002)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of the Principal Financial Officer pursuant to
    Rule&nbsp;13a-14(a) or Rule&nbsp;15d-14(a) (Section&nbsp;302 of
    the Sarbanes-Oxley Act of 2002)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certifications pursuant to 18&nbsp;U.S.C. Section&nbsp;1350, as
    adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act
    of 2002</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-2
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='114'></A>
</DIV>

<!-- link1 "SIGNATURE" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    US AIRWAYS GROUP, INC. (Registrant)</TD>
</TR>

</TABLE>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="center">
    /s/ <FONT style="font-variant:SMALL-CAPS">Anita P. Beier
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Anita P. Beier</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Senior Vice President-Finance and Controller</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    (Chief Accounting Officer)</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Date: May&nbsp;3, 2005
</DIV>

<P align="center" style="font-size: 10pt;">II-3
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='194'></A>
</DIV>

<!-- link1 "ANNEX B-1" -->

<DIV align="right" style="font-size: 10pt;">
<B>ANNEX B-1</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Corporation&#146;s Annual Report on
Form&nbsp;10-K</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>for the year ended December&nbsp;31, 2004</B>
</DIV>

<P align="center" style="font-size: 10pt;">B-1

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 2pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt;">
<B>Form 10-K</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 12pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="wingdings">&#254;</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>ANNUAL REPORT PURSUANT TO SECTION&nbsp;13 or 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>For the fiscal year ended December&nbsp;31, 2004</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <B>OR</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="wingdings">&#111;</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>TRANSITION REPORT PURSUANT TO SECTION&nbsp;13 or 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMMISSION FILE NUMBER 1-12649</B>
</DIV>

<DIV align="center" style="font-size: 24pt;">
<B>America West Holdings Corporation</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact name of registrant as specified in its charter)</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <B>Delaware</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>86-0847214</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or other jurisdiction of<BR>
    incorporation or organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(I.R.S. Employer<BR>
    Identification No.)</I></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>111&nbsp;West Rio Salado Parkway</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>(480) 693-0800</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Tempe, Arizona 85281<BR>
     </B><I>(Address of principal executive offices)</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(Registrant&#146;s telephone number, including area code)</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Securities registered pursuant to Section&nbsp;12(b) of the
Act:</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Title&nbsp;of Each Class</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Name of Each Exchange on Which Registered:</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    Class&nbsp;B Common Stock, $.01 par value</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    New York Stock Exchange</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Securities registered pursuant to Section&nbsp;12(g) of the
Act: None</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMMISSION FILE NUMBER 0-12337</B>
</DIV>

<DIV align="center" style="font-size: 24pt;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact name of registrant as specified in its charter)</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <B>Delaware</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>86-0418245</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or other jurisdiction of incorporation or
    organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(I.R.S. Employer Identification No.)</I></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>4000&nbsp;E.&nbsp;Sky Harbor Boulevard</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>(480) 693-0800</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Phoenix, Arizona 85034-3899</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(Registrant&#146;s telephone number, including area code)</I></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>(Address of principal executive offices)</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Securities registered pursuant to Section&nbsp;12(b) of the
Act: None</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Securities registered pursuant to Section&nbsp;12(g) of the
Act: None</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Title&nbsp;of Class)</I>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark whether each of the registrants:
(1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12&nbsp;months (or for such shorter period
that the registrant was required to file such reports), and
(2)&nbsp;has been subject to such filing requirements for the
past
90&nbsp;days.&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;<FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark if disclosure of delinquent filers
pursuant to Item&nbsp;405 of Regulation&nbsp;S-K is not
contained herein, and will not be contained, to the best of each
of the registrants&#146; knowledge, in definitive proxy or
information statements incorporated by reference in
Part&nbsp;III of this Form&nbsp;10-K or any amendment to this
Form&nbsp;10-K.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#254;
</FONT>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark whether the registrants are accelerated
filers (as defined in Exchange Act Rule&nbsp;12b-2)
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>America West Holdings
Corporation&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;<FONT face="wingdings">&#254;</FONT></B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>No&nbsp;<FONT face="wingdings">&#111;</FONT></B>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>America West Airlines,
Inc.&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;<FONT face="wingdings">&#111;</FONT></B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>No&nbsp;<FONT face="wingdings">&#254;</FONT></B>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
As of June&nbsp;30, 2004, there were 35,204,800&nbsp;shares of
America West Holdings Corporation Class&nbsp;B common stock,
$.01&nbsp;par value issued and outstanding. As of such date,
based on the closing sales price as quoted by the New York Stock
Exchange, 35,029,271&nbsp;shares of Class&nbsp;B common stock,
having an aggregate market value of approximately $318,065,781
were held by non-affiliates. For purposes of the above statement
only, all directors and executive officers of the registrants
are assumed to be affiliates. As of June&nbsp;30, 2004, all
outstanding equity securities of America West Airlines, Inc.
were owned by America West Holdings Corporation.
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;14, 2005, there were 859,117&nbsp;shares of
America West Holdings Corporation Class&nbsp;A common stock and
35,316,871&nbsp;shares of America West Holdings Corporation
Class&nbsp;B common stock outstanding. As of March&nbsp;14,
2005, all outstanding equity securities of America West
Airlines, Inc. were owned by America West Holdings Corporation.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DOCUMENTS INCORPORATED BY REFERENCE</B>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Portions of the proxy statement related to America West Holdings
Corporation&#146;s 2005 annual meeting of stockholders, which
proxy statement will be filed under the Securities Exchange Act
of 1934 within 120&nbsp;days of the end of America West Holdings
Corporation&#146;s fiscal year ended December&nbsp;31, 2004, are
incorporated by reference into Part&nbsp;III of this Annual
Report on Form&nbsp;10-K.
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>America West Airlines, Inc. meets the conditions set forth in
General Instruction&nbsp;I(1)(A) and (B)&nbsp;and is therefore
filing this form with reduced disclosure format pursuant to
General Instruction&nbsp;I(2).</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TABLE OF CONTENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>Page</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="9" align="center" valign="top">
    <B>&nbsp;<A HREF='#101'>PART&nbsp;I</A></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#102'>Item&nbsp;1.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#102'>Business</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#103'>Item&nbsp;2.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#103'>Properties</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#104'>Item&nbsp;3.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#104'>Legal Proceedings</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#105'>Item&nbsp;4.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#105'>Submission of Matters to a Vote of Security
    Holders</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="9" align="center" valign="top">
    <B>&nbsp;<A HREF='#106'>PART&nbsp;II</A></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#107'>Item&nbsp;5.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#107'>Market for Registrants&#146; Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#108'>Item&nbsp;6.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#108'>Selected Consolidated Financial Data</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#109'>Item&nbsp;7.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#109'>Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#110'>Item&nbsp;7A.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#110'>Quantitative and Qualitative Disclosures
    About Market Risk</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#111'>Item&nbsp;8A.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#111'>Consolidated Financial Statements and
    Supplementary Data&nbsp;&#151; America West Holdings
    Corporation</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#112'>Item&nbsp;8B.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#112'>Consolidated Financial Statements and
    Supplementary Data&nbsp;&#151; America West Airlines,
    Inc.</A>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#113'>Item&nbsp;9.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#113'>Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#114'>Item&nbsp;9A.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#114'>Controls and Procedures</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#115'>Item&nbsp;9B.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#115'>Other Information</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="9" align="center" valign="top">
    <B>&nbsp;<A HREF='#116'>PART&nbsp;III</A></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#117'>Item&nbsp;10.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#117'>Directors and Executive Officers of the
    Registrants</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#118'>Item&nbsp;11.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#118'>Executive Compensation</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#119'>Item&nbsp;12.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#119'>Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#120'>Item&nbsp;13.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#120'>Certain Relationships and Related
    Transactions</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#121'>Item&nbsp;14.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#121'>Principal Accountant Fees and Services</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="9" align="center" valign="top">
    <B>&nbsp;<A HREF='#122'>PART&nbsp;IV</A></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">&nbsp;<A HREF='#123'>Item&nbsp;15.</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#123'>Exhibits and Financial Statement
    Schedules</A></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
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</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This combined Annual Report on Form&nbsp;10-K is filed by both
America West Holdings Corporation (&#147;Holdings&#148; or the
&#147;Company&#148;) and its wholly owned subsidiary, America
West Airlines, Inc. (&#147;AWA&#148; or the &#147;Airline&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;Concerning Forward-Looking Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This report contains various forward-looking statements within
the meaning of Section&nbsp;21E of the Securities Exchange Act,
as amended (the &#147;Exchange Act&#148;). These statements are
based on management&#146;s beliefs as well as assumptions made
by and information currently available to management. When used
in this document, the words &#147;anticipate,&#148;
&#147;estimate,&#148; &#147;expect,&#148; &#147;project&#148;
and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those
anticipated, estimated, projected or expected. Among the key
factors that may have a direct bearing on our results are:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    general economic conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the impact of global instability caused by military actions,
    terrorism, disease outbreaks and natural disasters;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    limitations on our flexibility in responding to industry
    conditions due to high fixed costs and restrictions imposed by
    our debt instruments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    changes in federal and state laws and regulations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    changes in prevailing interest rates and the availability of and
    terms of financing to fund our business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability to attract and retain qualified personnel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the cyclical nature of the airline industry;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    competitive practices in the airline industry;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the impact of changes in fuel prices;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    relations with unionized employees generally and the impact and
    outcome of labor negotiations.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For additional discussion of these factors and other risks, see
<I>&#147;Business&nbsp;&#151; Risk Factors Relating to the
Company and Industry Related Risks&#148;</I> included in
Item&nbsp;1 of this Annual Report. In light of these risks,
uncertainties and assumptions, the forward-looking events
described in this annual report on Form&nbsp;10-K might not
occur. Any forward-looking statements speak only as of the date
of this Annual Report.
</DIV>

<P align="center" style="font-size: 10pt;">1
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<DIV align="left" style="font-size: 10pt;">
<A name='101'></A>
</DIV>

<!-- link1 "PART I" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;I</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='102'></A>
</DIV>

<!-- link1 "Item 1. Business" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;1.&nbsp;</B></TD>
    <TD>
    <B>Business</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings, a Delaware corporation formed in 1996, is a holding
company that owns all of the stock of AWA, a Delaware
corporation formed in 1981. AWA accounted for most of the
Company&#146;s revenues and expenses in 2004. Based on 2004
operating revenues and available seat miles, or
&#147;ASMs&#148;, AWA is the eighth largest passenger airline
and the second largest low cost carrier in the United States.
AWA is the largest low-cost carrier that operates a
hub-and-spoke network, with large hubs in both Phoenix, Arizona
and Las Vegas, Nevada. Since 2003, AWA has also offered limited
point-to-point service in certain major transcontinental
markets. At the end of 2004, AWA operated a fleet of 138
aircraft with an average age of 10.7&nbsp;years and served 63
destinations in North America, including eight in Mexico, three
in Canada and one in Costa Rica. Through regional alliance and
code share arrangements with other airlines, AWA served an
additional 51 destinations in North America and the Middle East.
In 2004, AWA flew approximately 21.1&nbsp;million passengers and
generated revenues of approximately $2.3&nbsp;billion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Through its America West Vacations division, AWA also sells
individual and group travel packages, including air
transportation on AWA and Hawaiian Airlines, hotel
accommodations, car rentals, cruise packages and other travel
products, directly to consumers as well as through retail travel
agencies in the United States, Canada, Mexico and Costa Rica.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
General information about us can be found at
<U>www.americawest.com/aboutawa</U> under the investor relations
link. Our annual reports on Form&nbsp;10-K, quarterly reports on
Form&nbsp;10-Q and current reports on Form&nbsp;8-K, as well as
any amendments or exhibits to those reports, are available free
of charge through our website as soon as reasonably practicable
after we file them with, or furnish them to, the Securities and
Exchange Commission or &#147;SEC.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Restatement of Previously Reported Amounts</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Derivative Instruments</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2005, management undertook a review of AWA&#146;s
accounting for its fuel hedging transactions. As a result of
this review, management concluded that AWA&#146;s fuel hedging
transactions did not qualify for hedge accounting under
U.S.&nbsp;generally accepted accounting principles and that the
Company&#146;s financial statements for prior periods required
restatement to reflect the fair value of fuel hedging contracts
in the balance sheets and statements of stockholders equity and
comprehensive income of Holdings and AWA. See Note&nbsp;2,
<I>&#147;Restatement of Previously Reported Amounts&#148;
</I>and Note&nbsp;16, <I>&#147;Quarterly Financial Data
(Unaudited)&#148; </I>in Holdings&#146; and Note&nbsp;2,
<I>&#147;Restatement of Previously Reported Amounts&#148;
</I>and Note&nbsp;15, <I>&#147;Quarterly Financial Data
(Unaudited)&#148; </I>in AWA&#146;s consolidated financial
statements for the financial impact of the restatements. The
Company concluded that these accounting errors were the result
of deficiencies in its internal control over financial
reporting, from the lack of effective reviews of hedge
transaction documentation and of quarterly mark-to-market
accounting entries on open fuel hedging contracts by personnel
at an appropriate level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Developments in 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2004, extremely high jet fuel prices and excess capacity
throughout the domestic air system began to negatively impact
the low cost segment of the airline industry. As a result,
several low cost carriers that had previously operated
profitably, including AWA, experienced declining earnings. AWA
reported a net loss of $85.3&nbsp;million for 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, the Company reported a net loss of $89.0&nbsp;million
compared to net income of $57.4&nbsp;million in 2003. See
Item&nbsp;7&nbsp;&#151; <I>&#147;Management&#146;s Discussion
and Analysis of Financial Condition and Results of
Operations&#148;</I> for further discussion of the 2004
financial performance.
</DIV>

<P align="center" style="font-size: 10pt;">2

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Airline Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our operations and business strategy have traditionally been
focused around our Phoenix and Las Vegas based route-network
(supplemented by regional airline alliances and strategic
relationships with other carriers), our low cost structure and
our emphasis on customer service.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our Route Network</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We operate our route system through a hub-and-spoke network
centered in our Phoenix and Las Vegas hubs. As of
December&nbsp;31, 2004, we were the leading airline serving
Phoenix based on ASMs and takeoffs and landings and ranked
second in Las Vegas based on the same measures. Our operations
have focused on the Phoenix and Las Vegas markets and expanding
our reach beyond those markets through strategic relationships
with other carriers, including a regional alliance with Mesa
Airlines or &#147;Mesa,&#148; and code-sharing arrangements with
other carriers. See <I>&#147;Regional Airline Alliance&#148;
</I>and <I>&#147;Alliances with Other Airlines&#148;</I> below.
In addition to our operations through our hubs, we initiated
point-to-point service in certain transcontinental markets in
October 2003. With continued high jet fuel prices and
substantial competitive reaction to our transcontinental
service, which resulted in increased capacity and decreased
fares, we scaled back our transcontinental flying in late 2004.
Non-stop services from New York City&#146;s John F. Kennedy
International (JFK)&nbsp;and Logan International Airport
(BOS)&nbsp;airports to San&nbsp;Francisco International Airport
(SFO)&nbsp;were suspended in November 2004. We also suspended
service between BOS and Los Angeles International Airport
(LAX)&nbsp;and LAX and Washington Dulles International Airport
in early 2005. Service between LAX and JFK remains in place with
once daily scheduled service. We expect to increase our LAX to
JFK service to twice-daily for the summer peak period from June
through the Labor Day weekend, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Separately, we commenced limited international point-to-point
flying on the west coast. In June 2004, we commenced daily
services from LAX to Vancouver and Edmonton, Canada as well as
Mazatlan and Puerto Vallarta, Mexico. In October 2004, flights
from San&nbsp;Diego to Cabo San&nbsp;Lucas and Puerto Vallarta
were also added. All of the flights to Mexico are flown by Mesa
on our behalf. In addition, we commenced non-stop flights from
San&nbsp;Diego to Vancouver in March 2005.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Cost Control</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We remain committed to maintaining a low cost structure, which
we believe offers a significant competitive advantage over other
major hub-and-spoke airlines in the United States. See
Item&nbsp;7&nbsp;&#151; <I>&#147;Management&#146;s Discussion
and Analysis of Financial Condition and Results of
Operations&#148; </I>for further discussion of the 2004
financial performance.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Revised Pricing Structure</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the comprehensive changes made to our pricing
structure in March 2002, we changed our pricing structure in
February 2004 to make flying first class more affordable for
both business and leisure travelers. This new first class fare
structure features nonrefundable first class fares that are up
to 70% lower than the industry&#146;s traditional first class
fares. Although some airlines also have initiated pricing
changes, industry competitive reaction still is unclear at this
time but there is potential for negative revenue impact on the
industry and AWA. As other airlines continue to make changes to
their pricing structures, we will continue to evaluate the best
solution for AWA. See Item&nbsp;7&nbsp;&#151;
<I>&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; </I>for further
discussion of the revised pricing structure.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Customer Service</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Continued emphasis on customer service is essential to growing
our business and leisure traffic. Therefore, we are committed to
building a successful airline by taking care of our customers.
During 2004,
</DIV>

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<DIV align="left" style="font-size: 10pt;">
we improved and expanded upon a series of customer service and
reliability initiatives. These initiatives make it easier and
more convenient for customers to travel on AWA.
</DIV>

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<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Our &#147;Buy on Board&#148; meal program was expanded to all
    departure segments with a flight duration of
    3<FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">2</FONT>
    hours or greater.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Our day of departure first class upgrade program also was
    expanded in 2004 to allow for purchase up to 24&nbsp;hours prior
    to departure on americawest.com and through our reservation
    centers. This program provides a simple and affordable way to
    upgrade to first class.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Our Web Check-in product was modified in 2004 to allow customers
    to self check-in and obtain a boarding pass 36&nbsp;hours prior
    to departure. This was later modified to 24&nbsp;hours prior to
    departure to meet objectives set forth in a Transportation
    Security Administration or &#147;TSA,&#148; security directive
    to all carriers. In December 2004, Web check-in represented
    almost 7% of all passenger check-ins.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Throughout 2004, we significantly expanded the availability of
    self-service check-in kiosks across our system (218&nbsp;units
    deployed in 43 of our airport facilities). In December 2004,
    self-service check-in represented nearly 50% of all boarding
    passes in stations with kiosks.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Over the year we expanded the number of interline e-ticket
    agreements with other carriers from three (Continental, United
    and American Airlines) to five (now including Delta and
    Hawaiian). In early 2005, we added Northwest Airlines to our
    interline e-ticket agreement list of carriers. These agreements
    make travel easier for customers who need to utilize multiple
    airlines in their itinerary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We were the first airline to introduce an alternative payment
    method called &#147;Bill Me Later&#174;&#148;, making it easier
    for customers to budget for their travel plans. Customers who
    make purchases online at americawest.com with Bill Me
    Later&#174;, have at least 90&nbsp;days to pay the balance in
    full with no interest.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Customers now can give the gift of travel with an America West
    Gift Card. Gift cards in $50, $100 or $250 denominations are
    available for purchase online at americawest.com or by calling
    our reservation center. Gift cards also can be purchased in $50
    and $100 denominations at many grocery, convenience and drug
    stores.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    In addition to the initiatives mentioned above, we emphasize
    improving our handling of customer re-accommodations during
    irregular operations (flight cancellations and delays). Although
    our goal is to operate every flight and depart on time, there
    are circumstances such as weather and Air Traffic Control or
    &#147;ATC,&#148; delays that cause disruption to planned flight
    activity. During 2004, we initiated several new programs and
    improved automation to speed the process of re-accommodating
    customers to alternative flight arrangements during these
    circumstances.</TD>
</TR>

</TABLE>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Regional Airline Alliance</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have a regional airline alliance agreement with Mesa. Mesa,
operating as America West Express, provides regional feeder
service to and from our Phoenix and Las Vegas hubs to
destinations in the western United States, Canada and northern
Mexico operating regional jets and large turboprop aircraft.
Through this arrangement with Mesa, we offered America West
Express service to an additional 33 destinations as of
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, we entered 16 86-seat CRJ-900 regional jets into
America West Express service. Additionally, we completed a
reconfiguration program that converted the CRJ-900 aircraft from
a dual class&nbsp;80-seat configuration to a single class,
86-seat configuration. At December&nbsp;31, 2004, the America
West Express fleet operated by Mesa included 49 aircraft
comprised of 25 CRJ-900s, 18 50-seat CRJ-200s and six 37-seat
Dash&nbsp;8 turboprop aircraft.
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Alliances with Other Airlines</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA maintains alliance agreements with several leading domestic
and international carriers to give customers a greater choice of
destinations. Airline alliance agreements provide an array of
benefits that vary by partner. By code sharing, each airline is
able to offer additional destinations to its customers under its
flight designator code without materially increasing operating
expenses and capital expenditures. Frequent flyer arrangements
provide members with extended networks for earning and redeeming
credits on partner carriers. Lounge arrangements provide lounge
members with access to partner carriers&#146; lounges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA&#146;s alliance agreement with British Airways allows
British Airways to code share on flights operated by AWA
connecting to and from British Airways&#146; Phoenix,
San&nbsp;Francisco, Los Angeles, Dallas, Boston and New York
services. The agreement also allows AWA FlightFund members to
earn credit for travel on British Airways and for frequent flyer
benefits earned by AWA customers to be redeemed for travel on
British Airways&#146; system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Relationships with Northwest Airlines or &#147;Northwest,&#148;
and EVA Airways or &#147;EVA,&#148; provide connecting service
on AWA from those airlines&#146; Pacific routes to Las Vegas and
Phoenix. The frequent flyer agreement with Northwest also
provides for AWA FlightFund members to earn and redeem credit on
Northwest&#146;s transpacific flights. In addition, AWA lounge
members have access to Northwest&#146;s WorldClub lounges in the
United States and EVA&#146;s lounge in Taipei, Taiwan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA&#146;s alliance agreement with Virgin Atlantic Airways or
&#147;Virgin,&#148; allows Virgin to code share on flights
operated by AWA connecting to and from Virgin&#146;s Las Vegas,
San&nbsp;Francisco and Los Angeles services. The agreement also
allows AWA FlightFund members to earn credit for travel on
Virgin and for frequent flyer benefits earned by AWA customers
to be redeemed for travel on Virgin&#146;s system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Relationships with ALIA/ Royal Jordanian Airlines or &#147;Royal
Jordanian,&#148; and Hawaiian Airlines or &#147;Hawaiian,&#148;
allow each carrier to code share flights operated by the other
carrier. AWA&#146;s alliance with Royal Jordanian offers
connecting service from Royal Jordanian&#146;s Chicago, Detroit
and New York services. The agreement also allows AWA FlightFund
members to earn credit for travel on Royal Jordanian and for
frequent flyer benefits earned by AWA customers to be redeemed
for travel on Royal Jordanian&#146;s system. In addition, AWA
lounge members have access to Royal Jordanian&#146;s VIP Clubs
in Amman and Aqaba, Jordan. AWA&#146;s agreement with Hawaiian
offers connecting service to and from Hawaiian&#146;s nonstop
Phoenix to Honolulu service and beyond to the other islands of
Hawaii. AWA FlightFund members can earn and redeem credit for
travel on Hawaiian.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA&#146;s alliance agreement with Big Sky Airlines or &#147;Big
Sky,&#148; allows AWA to code share on Big Sky&#146;s services
from Spokane, Washington, Boise, Idaho, and Billings, Montana to
Big Sky&#146;s destinations in Montana, North Dakota and
Washington State. AWA FlightFund members can earn and redeem
credit for travel on Big Sky.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Airline Marketing</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, we launched the airline industry&#146;s first gift card
program. Gift cards have proven highly successful in the
traditional retailer environment where they account for an
increasing share of consumer purchases, particularly around the
holiday season. We partnered with intermediary companies to
launch gift cards at several large retailers, including Staples,
Rite Aid, 7-Eleven and others, and cards are due to be available
at approximately 10,000 stores nationwide by the first quarter
of 2005. Gift cards also are available for purchase at
americawest.com and currently may be redeemed by calling AWA
reservations. It is anticipated that online redemption will be
available during 2005.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Airline Competition</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The airline industry and most of the markets we serve are highly
competitive. We compete on the basis of pricing, scheduling
(frequency and flight times), on-time performance, type of
equipment, cabin configuration, amenities provided to
passengers, frequent flyer programs, the automation of travel
agent reservation systems, on-board products and other services.
We compete with all of the major full service
</DIV>

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airlines on medium and long haul routes to, from and through our
hubs and in our transcontinental markets and with a number of
carriers for short haul flights at our Phoenix and Las Vegas
hubs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we compete with a growing number of low cost
carriers at our Phoenix and Las Vegas hubs and across our route
system. The low cost carrier sector is growing and for the
12&nbsp;months ended December&nbsp;31, 2004, low cost carrier
capacity (as measured by available seat miles) represented 23.6%
of all domestic mainline service, an increase of 1.1 points from
the 12&nbsp;months ended December&nbsp;31, 2003, when low cost
carrier marketshare accounted for 22.5% of all domestic mainline
service. We compete with other low cost carriers primarily on
the basis of pricing. However, we believe our full service
amenities (for example, first class seating, an award winning
frequent flyer program and assigned seating) provide us with a
competitive advantage against other low cost carriers without
such amenities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Price competition occurs on a market-by-market basis through
price discounts, changes in pricing structures, fare matching,
target promotions and frequent flyer initiatives. Most airlines
will quickly match price reductions in a particular market and
certain airlines have in the past engaged in retaliatory
activities, including steep pricing discounts in certain markets
and termination of alliance agreements, in response to changes
in our pricing structure. Our ability to compete on the basis of
price is limited by our fixed costs and depends on our ability
to maintain low operating costs. Our principal competitor,
Southwest Airlines, and certain other low cost carriers have
lower operating cost structures than we do. In addition, the
consolidation of existing carriers, the entry of additional
carriers including new low cost carriers, the creation of low
fare airline divisions by several major airlines and the
revision of traditional pricing structures by our competitors in
many of our markets (as well as increased services by
established carriers) has resulted in increased pressure on our
pricing. For additional discussion of industry competition and
related government regulation, see <I>&#147;Risk Factors
Relating to America West and Industry Related Risks&nbsp;&#151;
The airline industry and the markets we serve are highly
competitive and we may be unable to compete effectively against
carriers with substantially greater resources or lower cost
structures&#148;</I> and, generally, <I>&#147;Government
Regulations.&#148;</I>
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Frequent Flyer Program</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All major United States airlines offer frequent flyer programs
to encourage travel on their respective airlines and customer
loyalty. AWA offers the FlightFund program, which allows members
to earn mileage credit by flying AWA and America West Express,
by flying on certain partner airlines and by using the services
of a wide variety of other program participants such as hotels,
rental car agencies and other specialty services. AWA also sells
mileage credits to credit card companies, telephone companies,
hotels, car rental agencies and others that participate in the
FlightFund program.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Through the FlightFund program accumulated mileage credits can
be redeemed for free travel on AWA, America West Express and
certain partner airlines and for first class upgrades on AWA.
Use of mileage credits is subject to industry standard
restrictions including availability and blackout dates. AWA must
purchase space on other airlines to accommodate FlightFund
redemption travel on those airlines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, the FlightFund program added new partnerships with
Ameritrade, NetBank, Awards for Mortgage and Real Estate and
Royal Jordanian Airlines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We account for the FlightFund program under the incremental cost
method whereby travel awards are valued at the incremental cost
of carrying one passenger based on expected redemptions. Those
incremental costs are based on expectations of expenses to be
incurred on a per passenger basis and include fuel, liability
insurance, food, beverages, supplies and ticketing costs that
are accrued as FlightFund members accumulate mileage credits. No
profit or overhead margin is included in the accrual for those
incremental costs. Transportation-related revenue from the sale
of mileage credits is deferred and recognized when
transportation is provided. Non-revenue FlightFund travel
accounted for 1.5%, 2.1% and 2.7% of total revenue passenger
miles for the years ended December&nbsp;31, 2004, 2003 and 2002,
respectively. We do not believe that non-revenue FlightFund
travel results in any significant displacement of revenue
passengers.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>America West Vacations</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of January&nbsp;1, 2004, The Leisure Company merged into AWA
and continued to operate as the America West Vacations or
&#147;AWV,&#148; division of AWA. AWV sells individual and group
travel packages including air transportation on AWA, America
West Express and Hawaiian Airlines, hotel accommodations, car
rentals and other travel products directly to consumers and
through retail travel agencies in the United States, Canada,
Mexico and Costa Rica. AWV is one of the largest tour packagers
to Las Vegas in the United States, contracting for volume blocks
of rooms with 31 Las Vegas hotels and resorts in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWV is focused on high-volume leisure travel products that have
traditionally provided high profit margins. AWV negotiated
several strategic partnerships with hotels, Internet travel
sites and media companies to capitalize on the continued growth
in online travel sales. AWV sells vacation packages and hotel
rooms through its call center, via the Internet and its
websites, AmericaWestVacations.com, AWVTravelAgents.com and
AWVCruise.com, through global distribution systems Sabre
TourGuide and WorldSpan Tour Source and through third-party
websites on a co-branded or private-label basis. In 2004,
approximately 55% of AWV&#146;s total bookings were made
electronically compared to 43% in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWV competes in a fragmented travel industry, which is highly
competitive, price sensitive and has relatively low barriers to
entry. AWV competes for customers with other wholesale travel
companies, consolidators and E-travel companies through national
mass media, preferred supplier agreements and Internet
distribution agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2004, AWV operated co-branded websites for 15 partner
companies, including Costco Travel, BestFares.com, Vegas.com,
MandalayBay.com, and Aladdin.com. These co-branded sites allow
AWV to gain a retail presence via distribution channels such as
Costco wholesale warehouses and other company websites where AWA
and AWV may not otherwise be a part of the consumers&#146;
consideration set. AWV intends to continue to add new co-branded
websites as opportunities present themselves.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>The Airline&#146;s Fleet</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA began the year 2004 with 139 aircraft. In 2004, AWA retired
seven 737-200 aircraft (returned five leased aircraft; parked
one leased aircraft; sold one owned aircraft) and took delivery
of one new A319 aircraft and five new A320 aircraft for a net
total of 138 aircraft by the end of 2004 with an average age of
10.7&nbsp;years. AWA&#146;s fleet at the end of 2004 and as
currently planned for the end of 2005 is described in the table
below:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Qty as of 12/31</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Average Age as of 12/31</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Approx.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Aircraft Types</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>No. Seats</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    737-200</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A 1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    737-300</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    757-200</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    A319</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    A320</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Totals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.8</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The last 737-200 aircraft was retired in January 2005</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
In August 2004, AWA amended its aircraft purchase contract with
AVSA S.A.R.L., an affiliate of Airbus Industrie or
&#147;AVSA,&#148; to acquire 22 Airbus A320 family aircraft
(thirteen A320s and nine A319s), all powered by V2500 engines
from International Aero Engines. Of the 22 aircraft, it is
anticipated that 18 will be purchased directly from the
manufacturer and four have been leased under noncancelable
leases from various lessors for aircraft to be delivered in
2005. In the context of this incremental order, AWA also secured
extensive flexibility from Airbus with respect to its existing
A318 order, allowing AWA to better react to market conditions by
enabling it to amend its 15 A318 delivery positions to A319s and
A320s, if it so desires, or to take no additional aircraft under
certain conditions.
</DIV>

<P align="center" style="font-size: 10pt;">7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table illustrates AWA&#146;s committed orders,
scheduled lease expirations, and lessor call and put options as
of December&nbsp;31, 2004.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2006</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2007</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2008</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2009</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Firm orders remaining (EOY)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lessor put options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lease terminations:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Scheduled expirations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lessor call options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2005, AWA retired its one remaining 737-200 aircraft.
While this is the only forecasted 2005 retirement, AWA has the
ability to return five additional leased Boeing 737-300 aircraft
and one leased Airbus A320, and retire five owned Boeing 737-300
aircraft, if market conditions necessitate such a response. In
February 2005, AWA renewed the lease on one Airbus A320 for an
additional three years. These eleven aircraft exclude the
exercise of two lessor put options on two aircraft that could
require AWA to renew the leases for approximately 15&nbsp;months
beyond the current natural lease expiration date. In 2004, one
put option on a Boeing 737-300 aircraft was exercised resulting
in a lease extension of 33&nbsp;months. No call options were
exercised in 2004. Assuming the exercise of all put options, as
of December&nbsp;31, 2004, 52 aircraft have lease expirations
prior to the end of 2008.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Aircraft Jet Fuel</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Jet fuel costs were our second-largest operating expense in
2004. Our average cost of jet fuel over the past five years was
as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Cost</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cost (Millions)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>per Gallon</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Operating Expenses</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2000</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the Company incurs fuel expense for our regional
airline alliance with Mesa. For the years ended
December&nbsp;31, 2004, 2003 and 2002, total fuel expense for
the Mesa alliance was $102.1&nbsp;million, $61.2&nbsp;million
and $46.3&nbsp;million, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The price and supply of jet fuel are unpredictable and fluctuate
based on events outside our control including geopolitical
developments, regional production patterns and environmental
concerns. Price escalations or reductions in the supply of jet
fuel will increase our operating expenses and cause our
operating results and net income to decline. See <I>&#147;Risk
Factors Relating to the Company and Industry Related
Risks&nbsp;&#151; Fluctuations in jet fuel costs could adversely
affect our operating expenses and results.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employees and Labor Relations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s businesses are labor intensive with wages,
salaries and benefits representing approximately 28% of the
Company&#146;s operating expenses during 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, the Company employed
10,712&nbsp;full-time and 2,576&nbsp;part-time employees, for a
full-time equivalent of 11,893 employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A large majority of the employees of the major airlines in the
United States are represented by labor unions. In addition, on
August&nbsp;18, 2004, the National Mediation Board certified the
IBT as the collective bargaining representative for the
Company&#146;s passenger service employees, which includes the
Company&#146;s customer service agents, reservations agents and
customer relations agents. Negotiations are expected to begin in
April 2005. As illustrated in the table below, the majority of
employees have selected union representation and/or negotiated
collective bargaining agreements with AWA. Although there are
few remaining employee
</DIV>

<P align="center" style="font-size: 10pt;">8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
groups who could engage in organization efforts, we cannot
predict the outcome of any future efforts to organize those
remaining employees or the terms of any future labor agreements
or the effect, if any, on the Company&#146;s or AWA&#146;s
operations or financial performance. For more discussion, see
<I>&#147;Risk Factors Relating to the Company and Industry
Related Risks&nbsp;&#151; Negotiations with labor unions could
divert management attention and disrupt operations and new
collective bargaining agreements or amendments to existing
collective bargaining agreements could increase our labor costs
and operating expenses.&#148;</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Approx. No.</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Contract</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Contract</B></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Employee Group</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Employees</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Union</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Effective</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Amendable</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pilots</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Air Line Pilots Association</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    December&nbsp;2003</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    December&nbsp;2006</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dispatchers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Transport Workers Union</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    September&nbsp;2004</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    April 2008(1)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Mechanics and related personnel*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    International Brotherhood of Teamsters</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    October 1998</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    October 2003*(2)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Flight Attendants*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Association of Flight Attendants&nbsp;&#151;<BR>
    Communications Workers of America</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    May 1999</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    May 2004*(3)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fleet Service</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Transport Workers Union</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    June&nbsp;2000</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    June&nbsp;2005</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock Clerks</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    International Brotherhood of Teamsters</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    April 2003</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    April 2008</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;*</TD>
    <TD align="left">
    In contract negotiations.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    On September&nbsp;10, 2004, the Company&#146;s dispatchers,
    represented by the Transport Workers Union, voted to ratify a
    second contract, becoming amendable in April 2008.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Negotiations with the International Brotherhood of
    Teamsters&nbsp;&#151; Airline Division or &#147;IBT,&#148; on a
    second contract covering the Company&#146;s mechanics and
    related employees commenced on October&nbsp;9, 2003 and are
    ongoing.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Negotiations with the Association of Flight
    Attendants&nbsp;&#151; Communications Workers of America or
    &#147;AFA,&#148; on a second contract covering the
    Company&#146;s flight attendants commenced on February&nbsp;4,
    2004 and are ongoing.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Company&#146;s Facilities</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s principal facilities include administrative
office space located in Tempe and Phoenix, Arizona; reservations
centers and other call centers located in Tempe, Arizona and
Reno, Nevada; and airport and airport related facilities
associated with the Airline&#146;s hubs in Phoenix and Las
Vegas. The following table describes the Company&#146;s
principal properties:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Approximate</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Internal Floor</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Principal Properties</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Area (sq. ft)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Nature of Ownership</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tempe, AZ Headquarters</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Nine story complex housing headquarters for Holdings and AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>225,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease expires April 2014</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Terminal&nbsp;4, Phoenix Sky Harbor International Airport</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    42 gates, ticket counter space and administrative offices</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>330,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Airport Use Agreement expires June 2016. Gate use governed by
    month-to-month rates and charges program</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Las Vegas McCarran International Airport</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    17 gates, ticket counter space and concourse areas</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>115,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease expires June 2007</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Maintenance and technical support facility at Phoenix Sky Harbor
    International Airport</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Four hangar bays, hangar shops, office space, warehouse and
    commissary facilities</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>375,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Facilities and land leased from the City of Phoenix. Lease
    expires September 2019</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Flight Training and Systems Operations Control Center, Phoenix,
    AZ</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Complex accommodates training facilities, systems operation
    control and crew scheduling functions</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>164,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Facilities and land leased from the City of Phoenix. Lease
    expires February 2031</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we have leased an aggregate of approximately
260,000&nbsp;square feet of office and warehouse space in Tempe
and Phoenix. Space for ticket counters, gates and back offices
has been obtained at each of the other airports operated by AWA,
either by lease from the airport operator or by sublease from
another airline. Space and facilities at certain airports where
AWA&#146;s operation is managed by Mesa is provided by Mesa as
part of AWA&#146;s ground handling arrangement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Government Regulations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The airline industry is highly regulated as more fully described
below.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>DOT Oversight</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA operates under a certificate of public convenience and
necessity issued by the Department of Transportation or
&#147;DOT&#148;. Although the Airline Deregulation Act of 1978
abolished regulation of domestic routes and fares, the DOT
retains the authority to alter or amend AWA&#146;s certificate
or to revoke that certificate for intentional failure to comply
with the terms and conditions of the certificate. In addition,
the DOT has jurisdiction over international tariffs and pricing,
international routes, computer reservation systems, code share
agreements and economic and consumer protection matters such as
advertising, denied boarding compensation and smoking and has
the authority to impose civil penalties for violation of the
United States Transportation Code or DOT regulations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>FAA Funding</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1997, new aviation taxes were imposed through
September&nbsp;30, 2007 to provide funding for the Federal
Aviation Administration or &#147;FAA&#148;. Effective
January&nbsp;1, 2005, these taxes include a domestic excise tax
of 7.5%, a domestic segment tax of $3.20 and an international
departure and arrival tax of $14.10 (each way). The legislation
also included a 7.5% excise tax on certain amounts paid to an
air carrier for the right to provide mileage and similar awards
(e.g., purchase of frequent flyer miles by a credit card
company). As a result of competitive pressures, AWA and other
airlines have been limited in their ability to pass on the cost
of these taxes to passengers through fare increases.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Passenger Facility Charges</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 1990, Congress enacted legislation to permit airport
authorities, with prior approval from the DOT, to impose
passenger facility charges or &#147;PFCs,&#148; as a means of
funding local airport projects. These charges, which are
intended to be collected by the airlines from their passengers,
are limited to $4.50&nbsp;per enplanement and no more than
$18.00&nbsp;per round trip. As a result of competitive pressure,
AWA and other airlines have been limited in their ability to
pass on the cost of the PFCs to passengers through fare
increases.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Additional Security and Safety Measures</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;19, 2001, the President signed into law the
Aviation and Transportation Security Act or &#147;ATSA.&#148;
This law enhances aviation security measures and federalizes
many aspects of civil aviation security. The ATSA established a
new Transportation Security Administration, now within the
Department of Homeland Security. Under the ATSA, substantially
all security screeners at airports are federal employees and a
significant number of other airport security functions are
overseen and performed by federal employees, including federal
security managers, federal law enforcement officers and federal
air marshals. The ATSA mandated that beginning on
January&nbsp;18, 2002, all checked baggage at United States
airports be screened using explosive detection systems or, where
such systems are not yet available, using other screening
techniques such as positively matching baggage to a passenger
who has boarded an aircraft. The ATSA required all checked
baggage to be screened by explosive detection systems by
December&nbsp;31, 2003. Other requirements in the ATSA that
directly affect airline operations include the strengthening of
cockpit doors, deploying federal air marshals on board certain
flights, improving airline crew security training and expanding
use of criminal background checks of employees. Implementation
of these and other requirements of the ATSA resulted in
increased costs for air carriers and may result in delays and
disruptions to air travel. Under
</DIV>

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<DIV align="left" style="font-size: 10pt;">
the ATSA, funding for the new federal security system is
provided by a $2.50&nbsp;per enplanement ticket tax, not to
exceed $5.00&nbsp;per one-way trip, and by imposing additional
direct fees on air carriers. In 2004 and 2003, the
Company&#146;s cost of compliance with the security requirements
of the ATSA was approximately $14.4&nbsp;million and
$13.2&nbsp;million, respectively. The estimated cost to the
Company of compliance with the security requirements of the ATSA
for 2005 is approximately $17.0&nbsp;million under current law.
Under the proposed White House budget released February&nbsp;7,
2005, this ticket tax for security fees would increase from
$2.50&nbsp;per leg to $5.50, with a cap of $8.00&nbsp;per
one-way trip with multiple legs and $16.00 for a round trip.
This budget proposal is subject to approval of Congress. As a
result of competitive pressure, AWA and other airlines may be
unable to recover all of these additional security costs from
passengers through increased fares. In addition, we cannot
forecast what new security and safety requirements may be
imposed in the future or the costs or financial impact of
complying with any such requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is subject to various other federal, state and local
laws and regulations related to occupational health and safety,
including Occupational Health and Safety Administration and Food
and Drug Administration regulations.
</DIV>

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<TR>
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    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>War Risk Insurance</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since September&nbsp;11, 2001, AWA and other airlines have been
unable to obtain third party war risk (terrorism)&nbsp;insurance
at reasonable rates from the commercial insurance market and
have been obtaining this insurance through a special program
administered by the FAA. Under the recently enacted Vision
100-Century of Aviation Reauthorization Act or &#147;Vision
100,&#148; the President may continue the insurance program
until March&nbsp;30, 2008. Currently the program has been
extended through August&nbsp;31, 2005. Should the federal
insurance program terminate, competitive pressures could limit
AWA and other airlines&#146; ability to pass these additional
costs on to passengers and the increase in costs could be
material to AWA&#146;s financial condition and results of
operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Slot Restrictions</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At New York City&#146;s John F. Kennedy International Airport
and LaGuardia Airport, and at Washington&nbsp;D.C.&#146;s Ronald
Reagan National Airport, which are designated &#147;High Density
Airports&#148; by the FAA, there are restrictions on the number
of aircraft that may land and take-off during peak hours. At the
New York airports, slot restrictions are abolished after
January&nbsp;1, 2007. In addition, the FAA may impose
restrictions at any airport to manage excessive congestion and
air safety. In 2004, certain air carriers, at the request of the
FAA, voluntarily agreed to reduce flights at Chicago O&#146;Hare
International Airport and other operators, including AWA, agreed
not to increase operations there during certain hours. In the
future takeoff and landing time restrictions and other
restrictions on the use of various airports and their facilities
may result in further curtailment of services by, and increased
operating costs for, individual airlines, including AWA,
particularly in light of the increase in the number of airlines
operating at such airports. In general, the FAA rules relating
to allocated slots at High Density Airports contain provisions
requiring the relinquishment of slots for non-use and permit
carriers, under certain circumstances, to sell, lease or trade
their slots to other carriers. All slots must be used on 80% of
the dates during each two-month reporting period. Failure to
satisfy the 80% use rate will result in loss of the slot and
reversion to the FAA for reassignment through a lottery
arrangement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA currently utilizes five slots at Kennedy Airport and eight
slots at National Airport during the restricted periods. AWA
exceeds the requisite 80% use rate for these slots.
</DIV>

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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Perimeter Rule at Washington D.C.&#146;s Ronald Reagan
    National Airport</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There is a federal prohibition on flights exceeding
1,250&nbsp;miles operating to or from National Airport. This
&#147;perimeter rule&#148; generally prevents AWA from flying
nonstop to and from National Airport and its principal hubs of
Phoenix and Las Vegas. In 2000, Congress passed legislation that
authorized the DOT to grant exceptions to the 1,250-mile
perimeter rule for up to 12 slots per day. AWA was authorized
six of these slots to operate two daily Phoenix to National
Airport round trips and one daily Las Vegas to National
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Airport round trip. Vision 100, among other things, authorized
the DOT to grant 12 additional slots exempted from the perimeter
rule. AWA was authorized two additional slots to operate an
additional daily round trip between Phoenix and National Airport
which the Company began flying on June&nbsp;1, 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Noise Abatement and Other Restrictions</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Numerous airports served by AWA, including those in Boston,
Burbank, Denver, Long Beach, Los Angeles, Minneapolis-St. Paul,
New York City, Orange County, San&nbsp;Diego,
San&nbsp;Francisco, San&nbsp;Jose and Washington,&nbsp;D.C.,
have imposed restrictions such as curfews, limits on aircraft
noise levels, mandatory flight paths, runway restrictions and
limits on the number of average daily departures, which limit
the ability of air carriers to provide service to, or increase
service at, such airports. AWA&#146;s Boeing 757-200s, Boeing
737-300s and Airbus A319s and A320s all comply with the current
noise abatement requirements of the airports listed above.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Aircraft Maintenance and Operations</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA is subject to the jurisdiction of the FAA with respect to
aircraft maintenance and operations, including equipment,
dispatch, communications, training, flight personnel and other
matters affecting air safety. The FAA has the authority to issue
new or additional regulations and to impose civil penalties for
violations of the United States Transportation Code or FAA
regulations. To ensure compliance with its regulations, the FAA
conducts regular safety audits and requires AWA to obtain
operating, airworthiness and other certificates, which are
subject to suspension or revocation for cause. In addition, a
combination of FAA and Occupational Safety and Health
Administration or &#147;OSHA,&#148; regulations on both federal
and state levels apply to all of AWA&#146;s ground-based
operations and to in-flight cabin attendants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA also is subject to the jurisdiction of the Department of
Defense with respect to its voluntary participation in their
Commercial Passenger Airlift program administered by the Air
Force&#146;s Air Mobility Command.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Aging Aircraft Maintenance</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FAA issued several Airworthiness Directives or
&#147;ADs,&#148; in 1990 mandating changes to older aircraft
maintenance programs. These ADs were issued to ensure that the
oldest portion of the nation&#146;s aircraft fleet remains
airworthy and to require structural modifications to, or
inspections of, those aircraft. All of AWA&#146;s currently
affected aircraft are in compliance with the aging aircraft
mandates. AWA constantly monitors its fleet of aircraft to
ensure safety levels that meet or exceed those mandated by the
FAA and the DOT. The FAA may in the future issue additional ADs
requiring additional maintenance or modifications to various
aircraft types operated by AWA.
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Environmental Matters</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is subject to regulation under major environmental
laws administered by federal, state and local agencies,
including laws governing air, water and waste management and
disposal activities. While the Company strives to comply with
environmental laws and regulations, it has incurred and will
continue to incur costs to comply with applicable environmental
laws, including soil and groundwater cleanup and other related
response costs. We believe, however, that under current
environmental laws and regulations these costs will not have a
material adverse effect on the Company&#146;s financial
condition or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Comprehensive Environmental Response Compensation and
Liability Act of 1980, also known as Superfund, and comparable
state laws impose liability without regard to fault on certain
classes of persons that may have contributed to the release or
threatened release of a &#147;hazardous substance&#148; into the
environment. These persons include the owner or operator of a
facility and persons that disposed or arranged for the disposal
of hazardous substances. Many airports in the United States,
including Phoenix Sky Harbor International Airport, are the
subject of Superfund investigations or state implemented
groundwater investigations. AWA occupies facilities at some of
these affected airports and is a member of a fuel-handling
consortium that has experienced a fuel leak into ground water at
Phoenix Sky Harbor International Airport.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
AWA does not believe that its operations have been included
within the scope of any of these investigations and does not
believe that its expenses associated with the fuel leak at
Phoenix Sky Harbor International Airport will be material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The trend in environmental regulation is to increasingly place
more restrictions and limitations on activities that may affect
the environment and we expect that the costs of compliance will
continue to increase.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Other</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are also subject to the jurisdiction of the Federal
Communications Commission with respect to the use of radio
facilities and the United States Postal Service with respect to
carriage of United States mail.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risk Factors Relating to the Company and Industry Related
Risks</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We caution the reader that these risk factors may not be
exhaustive. We operate in a continually changing business
environment and new risk factors emerge from time to time.
Management cannot predict such new risk factors, nor can it
assess the impact, if any, of such new risk factors on our
business or the extent to which any factor or combination of
factors may impact our business.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We have sustained, and may continue to sustain significant
    operating losses.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 2004, we incurred an
operating loss of $43.8&nbsp;million. In addition, we incurred
operating losses for the years ended December&nbsp;31, 2001 and
2002 resulting primarily from the decrease in revenue and
passenger demand and the increase in operating costs after the
terrorist attacks of September&nbsp;11, 2001. Recently, the
operating losses resulted primarily from a substantial increase
in the cost of jet fuel and excess domestic industry capacity
resulting in lower revenue per available seat mile. We expect
the threat of further terrorist attacks and continued
instability in oil producing regions to continue to negatively
impact our revenues and costs in the near-term. We may not be
able to effectively counteract increasing costs through our cost
reduction initiatives, customer service initiatives and revised
pricing structures. Moreover, our liquidity and borrowing
options are limited and we may not be able to survive a
prolonged economic downturn, decreases in demand for air travel
or further increases in jet fuel costs. The inability to sustain
profitability may impair our ability to satisfy our obligations
as they become due, obtain future equity or debt financing,
respond to competitive developments and otherwise sustain or
expand our business.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Global instability, caused by events such as terrorism,
    has had and may in the future have a material impact on the
    airline industry and, as a result, our financial condition,
    operations and prospects.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Over the past several years, global instability, caused by
military action, terrorism, disease outbreaks and natural
disasters, has had a profound impact on the airline industry.
The terrorist attacks of September&nbsp;11, 2001 resulted in a
severe strain on our and the other airlines&#146; liquidity as
the government temporarily suspended all flights, passenger
demand dropped precipitously and financial institutions tried to
reduce their exposure by restricting the industry&#146;s access
to capital. In addition, the terrorist attacks led to a decrease
in the value of aircraft and aircraft-related equipment and
facilities and cost increases for enhanced security measures,
aviation insurance, airport rents and landing fees. Subsequent
to the terrorist attacks, other events, such as military action
in Iraq and Afghanistan, general political and economic
instability in oil producing regions, and the Severe Acute
Respiratory Syndrome or &#147;SARS,&#148; outbreak in Asia,
continued to adversely impact passenger demand and operating
costs, especially jet fuel costs. These kinds of events
(including natural disasters such as the recent tsunamis in the
Indian Ocean) are likely to continue to impact the airline
industry. Depending on the severity and geographical impact of
such events, they may have a substantial adverse impact on our
passenger demand, our costs, the value of our assets and our
access to, and cost of capital. We cannot predict whether we
will have sufficient liquidity or access to capital to withstand
the adverse impact of a prolonged decrease in passenger demand
or a substantial increase in costs caused by such global events.
</DIV>

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Increases in insurance costs or reductions in insurance
    coverage may adversely impact our operations and financial
    results.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The terrorist attacks of September&nbsp;11, 2001 led to a
significant increase in insurance premiums and a decrease in the
insurance coverage available to commercial airline carriers.
Accordingly, our insurance costs increased significantly and our
ability to continue to obtain insurance even at current prices
remains uncertain. In addition, AWA and other airlines have been
unable to obtain third party war risk (terrorism)&nbsp;insurance
at reasonable rates from the commercial insurance market and
have been obtaining this insurance through a special program
administered by the FAA. If the Federal insurance program
terminates, we would likely face a material increase in the cost
of war risk insurance. Because of competitive pressures in our
industry, our ability to pass additional insurance costs to
passengers is limited. As a result, further increases in
insurance costs or reductions in available insurance coverage
could harm our earnings.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our high level of fixed obligations limits our ability to
    fund general corporate requirements and obtain additional
    financing, limits our flexibility in responding to competitive
    developments and increases our vulnerability to adverse economic
    and industry conditions.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have a significant amount of fixed obligations, including
debt, aircraft leases and financings, aircraft purchase
commitments, leases of airport and other facilities and other
cash obligations. As of December&nbsp;31, 2004, we had
approximately $786.3&nbsp;million of outstanding debt, of which
$186.0&nbsp;million was secured. In addition, we had
$8.5&nbsp;million of payments to satisfy capital lease
obligations and $3.2&nbsp;billion of operating lease obligations
through lease expiration dates incurred primarily in connection
with off-balance sheet aircraft financings. We also have
guaranteed costs associated with our regional alliance with Mesa
and commitments to purchase aircraft from Airbus. As a result of
the substantial fixed costs associated with these obligations:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A decrease in revenues results in a disproportionately greater
    percentage decrease in earnings.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We may not have sufficient liquidity to fund all of these fixed
    costs if our revenues decline or costs increase.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We may have to use our working capital to fund these fixed costs
    instead of funding general corporate requirements, including
    capital expenditures.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We may not have sufficient liquidity to respond to competitive
    developments and adverse economic conditions.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our obligations also impair our ability to obtain additional
financing, if needed, and our flexibility in the conduct of our
business. Our existing indebtedness is secured by substantially
all of our assets, leaving us with limited collateral for
additional financing. Moreover, the terms of the government
guaranteed loan restrict our ability to incur additional
indebtedness or issue equity unless we use the proceeds of those
transactions to repay the loan, require prepayment if our
employee compensation costs exceed a certain threshold, require
us to maintain a minimum cash balance of $100&nbsp;million, and
restrict our ability to take certain other actions, including
mergers and acquisitions, investments and asset sales.
</DIV>

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Our ability to pay the fixed costs associated with our
contractual obligations depends on our operating performance and
cash flow, which in turn depend on general economic and
political conditions. A failure to pay our fixed costs or breach
of the contractual obligations could result in a variety of
adverse consequences, including the acceleration of our
indebtedness, the withholding of credit card proceeds by the
credit card servicers and the exercise of remedies by our
creditors and lessors. In such a situation, it is unlikely that
we would be able to fulfill our obligations under or repay the
accelerated indebtedness, make required lease payments or
otherwise cover our fixed costs.
</DIV>

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    <B><I>Fluctuations in jet fuel costs could adversely affect our
    operating expenses and results.</I></B></TD>
</TR>

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The price and supply of jet fuel are unpredictable and fluctuate
based on events outside our control, including geopolitical
developments, supply interruptions, regional production patterns
and environmental
</DIV>

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concerns. Since jet fuel is the principal raw material consumed
by our business, accounting for 23% of our total operating
expenses in 2004, price escalations or reductions in the supply
of jet fuel will increase our operating expenses and cause our
operating results and net income to decline. For example, based
on our current level of fuel consumption which includes our Mesa
alliance, we estimate that a one-cent per gallon increase in jet
fuel prices will cause our annual operating expense to increase
by $5.7&nbsp;million.
</DIV>

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We have implemented a fuel-hedging program to manage the risk
and effect of fluctuating jet fuel prices on our business. Our
hedging program is intended to offset increases in jet fuel
costs by using derivative instruments keyed to the future price
of heating oil, which is highly correlated to the price of jet
fuel delivered on the East Coast of the United States. Our
hedging program does not fully protect us against increasing jet
fuel costs because our hedging program does not cover all of our
projected jet fuel volumes for 2005. Hedging transactions are in
place with respect to approximately 45% and 2% of remaining
projected 2005 and 2006 jet fuel requirements, respectively.
Furthermore, our ability to effectively hedge jet fuel prices is
limited because we purchase a substantially larger portion of
our jet fuel requirements on the West Coast of the United States
compared to our large competitors and West Coast fuel prices are
less correlated to heating oil prices and other viable petroleum
derivatives than East Coast fuel prices and, therefore, more
difficult to hedge. The effectiveness of our fuel-hedging
program may also be negatively impacted by continued instability
in oil producing regions such as the Middle East, Nigeria,
Russia and Venezuela.
</DIV>

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    <B><I>Because of our relatively low credit ratings, our
    borrowing costs may be high and our ability to incur additional
    debt may be impaired.</I></B></TD>
</TR>

</TABLE>

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Our credit ratings are relatively low, with Moody&#146;s
assessment of AWA&#146;s senior implied rating and senior
unsecured debt rating at B3 and Caa2, respectively,
Standard&nbsp;&#38; Poor&#146;s assessment of AWA&#146;s and
Holdings&#146; corporate credit ratings at B- and AWA&#146;s
senior unsecured rating at CCC, and Fitch Ratings&#146;
assessment of AWA&#146;s long-term and senior unsecured debt
rating at CCC. In addition, Standard&nbsp;&#38; Poor&#146;s
recently placed AWA&#146;s aircraft debt on CreditWatch with
negative implications as part of a broader review of
aircraft-backed debt. Low credit ratings could cause our future
borrowing costs to increase, which would increase our interest
expense and could affect our earnings and our credit ratings
could adversely affect our ability to obtain additional
financing. The rating agencies base their ratings on our
financial performance and operations, our cash flow and
liquidity, the level of our indebtedness and industry conditions
in general. If our financial performance or industry conditions
do not improve, we may face future downgrades, which could
further negatively impact our borrowing costs and the prices of
our equity or debt securities. In addition, any downgrade of our
credit ratings may indicate a decline in our business and in our
ability to satisfy our obligations under our indebtedness.
</DIV>

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    <B><I>Negotiations with labor unions could divert management
    attention and disrupt operations and new collective bargaining
    agreements or amendments to existing collective bargaining
    agreements could increase our labor costs and operating
    expenses.</I></B></TD>
</TR>

</TABLE>

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Some of our employees are represented by unions and other groups
of our employees may seek union representation in the future.
Negotiations with the IBT for a second collective bargaining
agreement covering the Airline&#146;s mechanics and related
employees commenced on October&nbsp;9, 2003 and are ongoing.
Additionally, negotiations with the AFA on a second contract
covering the Company&#146;s flight attendants commenced on
February&nbsp;4, 2004 and are ongoing. On August&nbsp;18, 2004,
the National Mediation Board certified the IBT as the collective
bargaining representative for the Company&#146;s passenger
service employees and reservations agents. Negotiations are
expected to begin April 2005.
</DIV>

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We cannot predict the outcome of the negotiations with the IBT
or AFA or any future negotiations relating to union
representation or collective bargaining agreements. Agreements
reached in collective bargaining may increase operating expenses
and lower operating results and net income. This is particularly
significant because our current employee costs contribute
substantially to the low cost structure that we believe is one
of our competitive strengths and because we are required to
repay a portion of the government guaranteed loan if our labor
costs exceed a certain threshold. In addition, negotiations with
unions could divert management attention and disrupt operations,
which may result in increased operating expenses and
</DIV>

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lower net income. If we are unable to negotiate acceptable
collective bargaining agreements, we might have to address the
threat of, or wait through, &#147;cooling off&#148; periods,
which could be followed by union-initiated work actions,
including strikes. Depending on the nature of the threat or the
type and duration of any work action, these actions could
disrupt our operations and, as a result, have a significant
adverse affect on our operating results.
</DIV>

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    <B><I>Fluctuations in interest rates could adversely affect our
    liquidity, operating expenses and results.</I></B></TD>
</TR>

</TABLE>

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A substantial portion of our indebtedness bears interest at
fluctuating interest rates based on the London interbank offered
rate for deposits of U.S.&nbsp;dollars, or LIBOR. LIBOR tends to
fluctuate based on general economic conditions, general interest
rates, including the prime rate, and the supply of and demand
for credit in the London interbank market. We have not hedged
our interest rate exposure and, accordingly, our interest
expense for any particular period may fluctuate based on LIBOR.
To the extent LIBOR increases, our interest expense will
increase, in which event, we may have difficulties making
interest payments and funding our other fixed costs and our
available cash flow for general corporate requirements may be
adversely affected.
</DIV>

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    <B><I>Our operating costs could increase as a result of past,
    current or new regulations that impose additional requirements
    and restrictions on airline operations.</I></B></TD>
</TR>

</TABLE>

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The airline industry is heavily regulated. Both federal and
state governments from time to time propose new laws and
regulations that impose additional requirements and restrictions
on airline operations. Implementing these measures, such as
aviation ticket taxes and passenger safety measures, has
increased operating costs for us and the airline industry as a
whole. In addition, new security measures imposed by the ATSA,
or otherwise by Congress, the Department of Homeland Security or
the FAA as a result of concern over continuing terrorist threats
are expected to continue to increase costs for us and the
airline industry as a whole. Furthermore, certain governmental
agencies, such as the DOT and the FAA, have the authority to
impose mandatory orders, such as Airworthiness Directives in
connection with our aircraft and civil penalties for violations
of applicable laws and regulations, each of which can result in
material costs and adverse publicity. For example, the FAA from
time to time may require us to retrofit our aircraft to meet
enhanced safety standards. Depending on the implementation of
these laws, regulations and other measures, our operating costs
could increase significantly. We cannot predict which laws,
regulations and other measures will be adopted or what other
action regulators might take. Accordingly, we cannot guarantee
that future legislative and regulatory acts will not have a
material impact on our operating results.
</DIV>

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    <TD>
    <B><I>Interruptions or disruptions in service at one our hub
    airports could have a material adverse impact on our
    operations.</I></B></TD>
</TR>

</TABLE>

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We operate primarily through our hubs in Phoenix and Las Vegas.
A majority of our flights either originate or fly into one of
these hubs. A significant interruption or disruption in service
at one of our hubs could result in the cancellation or delay of
a significant portion of our flights and, as a result, could
have a severe impact on our business, operations and financial
performance.
</DIV>

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    <TD>
    <B><I>The airline industry and the markets we serve are highly
    competitive and we may be unable to compete effectively against
    carriers with substantially greater resources or lower cost
    structures.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The airline industry and most of the markets we serve are highly
competitive. We compete with other airlines on the basis of
pricing, scheduling (frequency and flight times), on-time
performance, type of equipment, cabin configuration, amenities
provided to passengers, frequent flyer programs, the automation
of travel agent reservation systems, on-board products and other
services. We compete with other low cost carriers primarily on
the basis of pricing. Price competition occurs on a
market-by-market basis through price discounts, changes in
pricing structures, fare matching, target promotions and
frequent flyer initiatives. Most airlines will quickly match
price reductions in a particular market and certain airlines
have in the past engaged in retaliatory activities, including
steep pricing discounts in certain markets and termination of
alliance agreements, in response to changes in our pricing
structure. Our ability to compete on the basis of price is
limited by our fixed costs and depends on our ability to
maintain low operating costs. Our principal competitor,
Southwest Airlines, and certain other low cost carriers have
lower operating cost structures than we do. We also compete
against the legacy carriers, many of which offer more extensive
routes, frequencies
</DIV>

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and customer loyalty, marketing and advertising programs and
have substantially greater resources than we do. We may be
unable to compete effectively against carriers with
substantially greater resources or lower cost structures.
</DIV>

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    <B><I>Recent airline restructurings and bankruptcies could alter
    the competitive environment of the airline industry to our
    detriment.</I></B></TD>
</TR>

</TABLE>

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The terrorist attacks of September&nbsp;11, 2001, the continued
military presence in Iraq and Afghanistan, increased competition
from low cost carriers and soft economic conditions have led to
the airline industry&#146;s significant losses since 2001.
Largely as a result of these losses, ATA Airlines,
U.S.&nbsp;Airways, Aloha Airlines, Hawaiian Airlines and United
Airlines filed for bankruptcy protection. Because bankruptcy
protection may allow for greater flexibility in reducing costs
by voiding contracts and renegotiating existing business
obligations, current and future airline bankruptcies could have
a substantial impact on industry competition. Continued weakness
in the airline industry also may result in additional industry
consolidation, greater reliance on industry alliances and
increased price competition among the existing airlines, each of
which could dramatically alter competitive environments in the
markets we serve.
</DIV>

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    <TD>
    <B><I>Our business is sensitive to general economic conditions,
    unforeseen events and seasonal fluctuations. As a result, our
    prior performance is not necessarily indicative of our future
    results.</I></B></TD>
</TR>

</TABLE>

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The air travel business historically fluctuates on a seasonal
basis and in response to general economic conditions. Due to the
greater demand for air and leisure travel during the summer
months, revenues in the airline industry in the second and third
quarters of the year tend to be greater than revenues in the
first and fourth quarters of the year. In addition, the airline
industry is highly susceptible to unforeseen events that result
in declines in revenues or increased costs, such as political
instability, regional hostilities, terrorist attacks, recession,
fuel price escalation, inflation, infectious disease outbreaks,
adverse weather conditions, consumer preferences, labor
instability or regulatory oversight. Also, our results of
operations for interim periods are not necessarily indicative of
those for an entire year and our prior results are not
necessarily indicative of our future results.
</DIV>

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    <TD>
    <B><I>We depend on the expertise of our management team. If key
    individuals leave unexpectedly, our business and operations
    could suffer.</I></B></TD>
</TR>

</TABLE>

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Many of our executive officers are key to the management of our
business and operations. Our future success depends on our
ability to retain these officers and other capable managers.
Although we believe we could replace key personnel given
adequate prior notice, the unexpected departure of key executive
officers could cause substantial disruption to our business and
operations. In addition, we may not be able to retain and
recruit talented personnel without incurring substantial costs.
Moreover, we must repay a portion of the government guaranteed
loan if our labor costs exceed a certain threshold. As a result,
our ability to spend additional amounts to retain and recruit
talented personnel is limited.
</DIV>

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    <B><I>The stockholders who effectively control the voting power
    of Holdings could take actions that would favor their own
    personal interests to the detriment of our interests.</I></B></TD>
</TR>

</TABLE>

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Currently, two stockholders collectively control more than 50%
of the total voting power of Holdings. These stockholders, TPG
Partners, L.P. and TPG Parallel&nbsp;I, L.P., or collectively,
the TPG Stockholders, are controlled by the same company, TPG
Advisors, Inc. Since TPG Advisors, Inc. is an investment firm,
its strategic objectives may be different than both the
short-term or long-term objectives of our board of directors and
management. We cannot guarantee that the TPG Stockholders will
not try to influence Holdings&#146; business in a way that would
favor their own personal interests to the detriment of our
interests and those of our other stockholders.
</DIV>

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    <TD>
    <B><I>We are at risk of losses and adverse publicity stemming
    from any accident involving any of our aircraft.</I></B></TD>
</TR>

</TABLE>

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If one of our aircraft were to crash or be involved in an
accident, we could be exposed to significant tort liability.
There can be no assurance that the insurance we carry to cover
damages arising from any future
</DIV>

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accidents will be adequate. In the event that our insurance is
not adequate, we may be forced to bear substantial losses from
an accident. Claims resulting from an accident in excess of our
insurance coverage would harm our business and results of
operations. Accidents could also result in unforeseen mechanical
and maintenance costs. In addition, any accident involving an
aircraft that we operate could create a public perception that
our aircraft are not safe or reliable, which could harm our
reputation, result in air travelers being reluctant to fly on
our aircraft and harm our business.
</DIV>

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    <TD>
    <B><I>Our operations are often affected by factors beyond our
    control, including traffic congestion at airports, weather
    conditions and increased security measures, any of which could
    harm our financial condition and results of operations.</I></B></TD>
</TR>

</TABLE>

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Like other airlines, our operations are subject to delays caused
by factors beyond our control, including air traffic congestion
at airports, adverse weather conditions and increased security
measures, such as those required to be implemented under the
ATSA. During periods of fog, snow, rain, storms or other adverse
weather conditions, flights may be cancelled or significantly
delayed. Cancellations and delays frustrate passengers, reduce
aircraft utilization and increase costs, all of which in turn
affect profitability. As a result, cancellations or delays could
harm our financial condition and results of operations.
</DIV>

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    <TD>
    <B><I>We rely heavily on automated systems to operate our
    business and any failure of these systems could harm our
    business.</I></B></TD>
</TR>

</TABLE>

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We depend on automated systems to operate our business,
including our computerized airline reservation system, our
telecommunication systems and our website. In 2004,
approximately 96% of our tickets were issued electronically. Our
website and reservation system must be able to accommodate a
high volume of traffic and deliver important flight information.
Substantial or repeated website, reservations system or
telecommunication systems failures could reduce the
attractiveness of our services and could cause our customers to
purchase tickets from another airline. Any disruption in these
systems could result in the loss of important data, increase our
expenses and generally harm our business.
</DIV>

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    <B><I>Shares of our Class&nbsp;B common stock issuable upon
    exercise or conversion of outstanding securities could adversely
    affect our stock price and dilute the ownership interests of
    existing stockholders.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales and potential sales of substantial amounts of our
Class&nbsp;B common stock or securities exercisable for or into
our Class&nbsp;B common stock in the public market, or the
perception that these sales could occur, could adversely affect
the market price of our Class&nbsp;B common stock. A substantial
number of additional shares of our Class&nbsp;B common stock are
issuable upon the conversion or exercise of outstanding
securities. As of March&nbsp;14, 2005, the outstanding shares of
our Class&nbsp;B common stock were subject to dilution by:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    19,692,000&nbsp;shares of Class&nbsp;B common stock that are
    issuable upon the exercise, at a price of $3.00&nbsp;per share,
    of certain warrants issued in connection with the government
    guaranteed loan, including 18,754,000&nbsp;shares of
    Class&nbsp;B common stock issuable upon exercise of a warrant
    issued to the Air Transportation Stabilization Board, or
    ATSB;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    9,615,245&nbsp;shares of our Class&nbsp;B common stock that are
    issuable upon the exercise of outstanding options.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, 859,117&nbsp;shares of Class&nbsp;B common stock
are issuable upon conversion of the outstanding shares of
Holdings&#146; Class&nbsp;A common stock held by the TPG
Stockholders (but subject to certain contractual restrictions on
transfer), up to 8,095,842&nbsp;shares of Holdings&#146;
Class&nbsp;B common stock are issuable upon the exchange of
AWA&#146;s 7.25%&nbsp;senior exchangeable notes due 2023 (which
exchange may not occur until the trading price of Holdings&#146;
Class&nbsp;B common stock reaches certain thresholds, or other
triggering events occur) and up to approximately
9,400,000&nbsp;shares of Holdings&#146; Class&nbsp;B common
stock are issuable upon conversion of Holdings&#146;
7.5%&nbsp;convertible senior notes due 2009. Holdings has
registered either the issuance or resale of all of these shares,
meaning that upon exercise, exchange or conversion, as
applicable, such shares could be sold in the public market at
any time.
</DIV>

<P align="center" style="font-size: 10pt;">18

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The conversion or exercise of some or all of these notes,
warrants and options will dilute the ownership interests of
existing stockholders and any sales in the public market of our
Class&nbsp;B common stock issuable upon such conversion or
exercise could adversely affect prevailing market prices of our
Class&nbsp;B common stock. In addition, the existence of the
notes, warrants and options may encourage short selling by
market participants because conversion or exercise of the notes
or warrants could depress the price of our Class&nbsp;B common
stock.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Provisions in our charter documents might deter
    acquisition bids for us.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings&#146; Certificate of Incorporation and Bylaws contain
provisions that, among other things:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    authorize Holdings&#146; board of directors to issue preferred
    stock ranking senior to our Class&nbsp;B common stock without
    any action on the part of the stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    establish advance notice procedures for stockholder proposals,
    including nominations of directors, to be considered at
    stockholders&#146; meetings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    authorize Holdings&#146; board of directors to fill vacancies on
    the board resulting from an increase in the authorized number of
    directors or any other cause;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    restrict the ability of stockholders to call special meetings of
    stockholders.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These provisions might make it more difficult for a third party
to acquire us, even if doing so would benefit the stockholders.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our stock price may continue to be volatile and could
    decline substantially.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The stock market has, from time to time, experienced extreme
price and volume fluctuations. Many factors may cause the market
price for the Class&nbsp;B common stock to decline including,
among others, the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    our operating results failing to meet the expectations of
    securities analysts or investors in any quarter;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    downward revisions in securities analysts&#146; estimates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    material announcements by us or our competitors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    public sales of a substantial number of shares of our
    Class&nbsp;B common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    governmental regulatory action;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    adverse changes in general market conditions or economic trends.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
<A name='103'></A>
</DIV>

<!-- link1 "Item 2. Properties" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;2.&nbsp;</B></TD>
    <TD>
    <B>Properties</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For a description of the Company&#146;s properties, see
Item&nbsp;1 of Part&nbsp;I of this Annual Report on
Form&nbsp;10-K.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='104'></A>
</DIV>

<!-- link1 "Item 3. Legal Proceedings" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;3.&nbsp;</B></TD>
    <TD>
    <B>Legal Proceedings</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings, AWA and certain of Holdings&#146; stockholders,
executive officers and directors have been named as defendants
in lawsuits filed in March and April of 1999 and subsequently
consolidated in the Federal District Court of Arizona, alleging
violations of the Exchange Act in connection with Holdings&#146;
public disclosures regarding its business and prospects during
1997 and 1998. The defendants deny the claims set forth in these
lawsuits. A settlement of the lawsuits was reached with the
plaintiffs in November 2004 for $15&nbsp;million. A fairness
hearing was held on March&nbsp;9, 2005 to allow class members to
object to the settlement. No objections were filed and the Court
entered a final judgment. The lawsuit was fully insured, but AWA
contributed $5.1&nbsp;million to the settlement due to the
insolvency of one of its insurers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, Holdings and its subsidiaries are parties to
various legal proceedings, including some purporting to be class
action suits and some that demand large monetary damages or
other relief, which, if
</DIV>

<P align="center" style="font-size: 10pt;">19

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<DIV align="left" style="font-size: 10pt;">
granted, would require significant expenditures. See
Note&nbsp;6, <I>&#147;Commitments and Contingencies&nbsp;&#151;
(e)&nbsp;Contingent Legal Obligations,&#148; </I>in
Holdings&#146; Notes to Consolidated Financial Statements and
Note&nbsp;7, <I>&#147;Commitments and Contingencies&nbsp;&#151;
(e)&nbsp;Contingent Legal Obligations,&#148; </I>in AWA&#146;s
Notes to Consolidated Financial Statements.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='105'></A>
</DIV>

<!-- link1 "Item 4. Submission of Matters to a Vote of Security Holders" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;4.&nbsp;</B></TD>
    <TD>
    <B>Submission of Matters to a Vote of Security Holders</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Executive Officers of the Registrant</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below is information with respect to the names, ages,
positions and offices with Holdings and AWA of the executive
officers of Holdings and AWA as of March&nbsp;14, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>W.&nbsp;Douglas Parker, Age&nbsp;43.</B> Chairman of the
Board, President and Chief Executive Officer of Holdings and
AWA. Mr.&nbsp;Parker joined the Company as Senior Vice President
and Chief Financial Officer in June 1995. He was elected
Executive Vice President of the Company and Executive Vice
President&nbsp;&#151; Corporate Group of AWA in April 1999. He
was elected President of AWA in May 2000 and Chief Operating
Officer of AWA in December 2000. He was elected to his current
positions in September 2001.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>J.&nbsp;Scott Kirby, Age&nbsp;37.</B> Executive Vice
President&nbsp;&#151; Sales and Marketing of AWA. Mr.&nbsp;Kirby
joined AWA as Senior Director&nbsp;&#151; Schedules and Planning
in October 1995. In October 1997, Mr.&nbsp;Kirby was elected to
the position of Vice President&nbsp;&#151; Planning and in May
1998, he was elected to the position of Vice
President&nbsp;&#151; Revenue Management. In January 2000, he
was elected to the positions of Senior Vice
President&nbsp;&#151; E-Business and Technology of AWA. He was
elected to his current position in September 2001.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Jeffrey D. McClelland, Age&nbsp;45.</B> Executive Vice
President and Chief Operating Officer of AWA.
Mr.&nbsp;McClelland joined AWA as Senior Vice
President&nbsp;&#151; Operations in September 1999. He was
elected Executive Vice President&nbsp;&#151; Operations in
September 2001 and was elected Chief Operating Officer in
November 2002. From 1991 until 1999, Mr.&nbsp;McClelland worked
at Northwest Airlines, most recently as Senior Vice
President&nbsp;&#151; Finance and Controller.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Joseph C. Beery, Age&nbsp;42.</B> Senior Vice President and
Chief Information Officer of AWA. Mr.&nbsp;Beery joined AWA in
1999 as Senior Director&nbsp;&#151; Business Technology
Delivery. In July 2000, Mr.&nbsp;Beery was elected to the
position of Vice President&nbsp;&#151; Business Technology
Delivery. He was elected to his current position in December
2002. From 1989 until he joined AWA, Mr.&nbsp;Beery held a
variety of positions in the computer integrated manufacturing
group of Motorola Semiconductor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Hal M. Heule, Age&nbsp;56.</B> Senior Vice
President&nbsp;&#151; Technical Operations of AWA.
Mr.&nbsp;Heule joined AWA in January 2001. From 1994 until the
time he joined AWA, Mr.&nbsp;Heule served as Executive Vice
President for Strand Associates, Inc., an aviation consulting
firm.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>C.A. Howlett, Age&nbsp;61.</B> Senior Vice
President&nbsp;&#151; Public Affairs of AWA and Holdings.
Mr.&nbsp;Howlett joined AWA as Vice President&nbsp;&#151; Public
Affairs in January 1995. On January&nbsp;1, 1997, he was elected
Vice President&nbsp;&#151; Public Affairs of Holdings. He was
elected to his current positions in February 1999.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Derek J. Kerr, Age&nbsp;40.</B> Senior Vice President and
Chief Financial Officer of AWA and Holdings. Mr.&nbsp;Kerr
joined AWA as Senior Director&nbsp;&#151; Financial Planning in
April 1996. He was elected to the position of Vice
President&nbsp;&#151; Financial Planning and Analysis in May
1998. In February 2002, Mr.&nbsp;Kerr was elected Senior Vice
President&nbsp;&#151; Financial Planning and Analysis. He was
elected to his current positions in September 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Anthony V. Mul&#233;, Age&nbsp;61.</B> Senior Vice
President&nbsp;&#151; Customer Service of AWA.
Mr.&nbsp;Mul&#233; joined AWA as Vice President&nbsp;&#151;
In-Flight Services in 1996. He was elected to his current
position in October 2000. Prior to joining AWA,
Mr.&nbsp;Mul&#233; held senior management positions at American
Airlines, Pan American Airways and SuperShuttle, International.
</DIV>

<P align="center" style="font-size: 10pt;">20

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>James E. Walsh&nbsp;III, Age&nbsp;57.</B> Senior Vice
President and General Counsel of AWA. Mr.&nbsp;Walsh joined AWA
as Senior Vice President and General Counsel in August 2004.
Prior to joining AWA, Mr.&nbsp;Walsh was Senior Vice
President&nbsp;&#38; General Counsel of Fairchild Dornier
Corporation. Prior to joining Fairchild in 1991, Mr.&nbsp;Walsh
spent 12&nbsp;years at American Airlines in various positions
including Vice President of Purchasing&nbsp;&#38; Inventory
Control and later Vice President of Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Michael R. Carreon, Age&nbsp;51.</B> Vice President and
Controller of AWA. Mr.&nbsp;Carreon joined AWA as Senior
Director&nbsp;&#151; Corporate Audit in December 1994. He was
elected to his current position in January 1996.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Elise R. Eberwein, Age&nbsp;39.</B> Vice
President&nbsp;&#151; Corporate Communications of AWA.
Ms.&nbsp;Eberwein joined AWA in September 2003. Prior to joining
AWA, Ms.&nbsp;Eberwein held various communication positions for
three other airlines, including Denver-based Frontier Airlines
where she served as Vice President, Communications from 2000
until she joined AWA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Kara L. Gin, Age&nbsp;34.</B> Vice President&nbsp;&#151;
Financial Planning and Analysis of AWA. Mrs.&nbsp;Gin joined AWA
as a Senior Analyst in Financial Planning&nbsp;&#38; Analysis in
June 1996. Prior positions held at AWA include Manager of
Financial Planning, Manager of Flight Profitability, Director of
Financial Planning and Senior Director of Distribution. She was
elected to her current position in May 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Thomas T. Weir, Age&nbsp;49.</B> Vice President and Treasurer
of AWA. Mr.&nbsp;Weir joined AWA in February 2000. From 1988
until 2000, Mr.&nbsp;Weir held various sales finance positions
at Airbus Industrie of North America, Inc., most recently as
Sales Finance Director.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='106'></A>
</DIV>

<!-- link1 "PART II" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;II</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='107'></A>
</DIV>

<!-- link1 "Item 5. Market for Registrants&#146; Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;5.&nbsp;</B></TD>
    <TD>
    <B>Market for Registrants&#146; Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity Securities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings&#146; Class&nbsp;A common stock, par value
$0.01&nbsp;per share, is not publicly traded. Holdings&#146;
Class&nbsp;B common stock, par value $0.01&nbsp;per share, has
been traded on the New York Stock Exchange under the symbol
&#147;AWA&#148; since August&nbsp;26, 1994.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth, for the periods indicated, the
high and low sales prices of the Class&nbsp;B common stock as
reported on the New York Stock Exchange.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Class&nbsp;B</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Common Stock</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>High</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Low</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year Ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    First Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13.6200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.9200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Second Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.2400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.8400</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Third Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.1400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.9300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fourth Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.8600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.9100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year Ended December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    First Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2.3300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.6700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Second Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.9800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.9600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Third Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.0200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.6300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fourth Quarter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.0000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.5500</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, there were two record holders of
Class&nbsp;A common stock and approximately 2,949 record holders
of Class&nbsp;B common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings has not paid cash dividends in any of the last three
fiscal years and does not anticipate paying cash dividends in
the foreseeable future. The terms of the government guaranteed
loan restrict the Company&#146;s ability to pay cash dividends
or repurchases shares of its stock prior to repayment of the
loan in full.
</DIV>

<P align="center" style="font-size: 10pt;">21

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table set forth all purchases made by us or any
&#147;affiliated purchases&#148; (as defined in
Rule&nbsp;10b-18(a)(3) of the Exchange Act), of Class&nbsp;B
common stock during each month within the fourth quarter of
2004. No purchases were made pursuant to a publicly announced
repurchase plan or program.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(d)</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Maximum Number</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(c)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(or Approximate</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dollar Value) of</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares Purchased</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares that May</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(a)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(b)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>as Part of Publicly</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Yet be Purchased</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Announced Plans</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Under the Plans</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares Purchased(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid per Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>or Programs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>or Programs</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    October&nbsp;1, 2004&nbsp;&#151; October&nbsp;31,&nbsp;2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    November&nbsp;1, 2004&nbsp;&#151; November&nbsp;30, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    December&nbsp;1, 2004&nbsp;&#151; December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Amounts consist of shares of Class&nbsp;B common stock purchased
    on the open market by the America West Holdings Corporation
    Future Care 401(k) Plan.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
AWA has 1,000&nbsp;shares of common stock outstanding, all of
which are owned by Holdings. There is no established public
trading market for AWA&#146;s common stock. Except for limited
ability to fund operating expenses of Holdings, AWA&#146;s
ability to pay cash dividends on its common stock is restricted
by the debt instruments and in the manner described above.
</DIV>

<P align="center" style="font-size: 10pt;">22

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='108'></A>
</DIV>

<!-- link1 "Item 6. Selected Consolidated Financial Data" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;6.&nbsp;</B></TD>
    <TD>
    <B>Selected Consolidated Financial Data</B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Selected Consolidated Financial Data of Holdings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The selected consolidated financial data presented below under
the captions <I>&#147;Consolidated Statements of Operations
Data&#148; </I>and <I>&#147;Consolidated Balance Sheet
Data&#148; </I>as of and for the years ended December&nbsp;31,
2004, 2003, 2002, 2001 and 2000 are derived from the audited
consolidated financial statements of Holdings. The selected
consolidated financial data should be read in conjunction with
the consolidated financial statements for the respective
periods, the related notes and the related reports of the
Company&#146;s independent registered public accounting firms.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(in thousands except per share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated statements of operations data:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,338,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,254,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,047,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,065,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,344,354</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,382,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,232,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,206,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,476,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,356,991</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(43,771</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(159,424</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(410,681</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,637</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes (benefit) and cumulative
    effect of change in accounting principle(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(88,993</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(214,757</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(324,387</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,743</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,071</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(74,536</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,064</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before cumulative effect of change in accounting
    principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(179,686</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(249,851</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(387,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(249,851</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) per share before cumulative effect of change in
    accounting principle:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.33</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7.42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.33</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7.42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss) per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11.50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7.42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11.50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7.42</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares used for computation:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,139</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,688</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated balance sheet data (at end of period):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,475,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,614,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,438,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,469,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,568,515</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>635,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>688,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>700,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>224,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145,578</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>667,073</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    The Company has restated its consolidated balance sheet and
    consolidated statement of stockholders&#146; equity and
    comprehensive income as of and for the year ended
    December&nbsp;31, 2003 to reflect the non-compliance with
    SFAS&nbsp;No.&nbsp;133. See Note&nbsp;2<I>, &#147;Restatement of
    Previously Reported Amounts&#148; </I>in Notes to Consolidated
    Financial Statements.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    The 2004 results include a $16.3&nbsp;million net credit
    associated with the termination of the rate per engine hour
    agreement with General Electric Engine Services for overhaul
    maintenance services on V2500-A1 engines, a $0.6&nbsp;million
    credit related to the revision of the estimated costs associated
    with the sale and leaseback of certain aircraft recorded in the
    first quarter of 2002 and a $0.4&nbsp;million credit related to
    the revision of estimated charges associated with the Columbus,
    Ohio hub (&#147;CMH&#148;) closure originally recorded in the
    second quarter of 2003. These credits were partially offset by
    $1.9&nbsp;million of net charges related to the return of
    certain Boeing 737-200 aircraft which includes termination
    payments of $2.1&nbsp;million, the write-down of leasehold
    improvements and deferred rent of $2.8&nbsp;million, offset by
    the net reversal of maintenance reserves of $3.0&nbsp;million.
    The 2003 period includes $16.0&nbsp;million of charges resulting
    from the elimination of AWA&#146;s hub operations in CMH
    ($11.1&nbsp;million), the reduction-in-force of certain
    management, professional and administrative employees
    ($2.3&nbsp;million), the impairment of certain owned Boeing
    737-200 aircraft that have been grounded ($2.6&nbsp;million)
    offset by a $1.1&nbsp;million reduction of charges due to a
    revision of the estimated costs related to the early termination
    of certain aircraft leases and a $0.5&nbsp;million reduction
    related to the revision of estimated costs associated with the
    sale and leaseback of certain aircraft. The 2002 period includes
    $19.0&nbsp;million of charges primarily related to the</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">23

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    restructuring completed on January&nbsp;18, 2002, resulting from
    the events of September&nbsp;11, 2001. The 2001 period includes
    $141.6&nbsp;million of special charges related to the impairment
    of reorganization value in excess of amounts allocable to
    identifiable assets (&#147;ERV&#148;) and owned aircraft and
    engines, as well as the earlier-than-planned return of seven
    leased aircraft and severance expenses following a
    reduction-in-force in 2001. See Note&nbsp;11, <I>&#147;Special
    Charges&#148; </I>in Holdings&#146; Notes to Consolidated
    Financial Statements. The Company reclassified amounts related
    to settled fuel hedge transactions and mark-to-market
    adjustments on open hedge instruments from fuel expense to gain
    (loss) on derivative instruments, net. The amounts for the years
    ended December&nbsp;31, 2004 and 2003 were an addition to fuel
    expense of $30.5&nbsp;million and $10.7&nbsp;million,
    respectively. For the years ended December&nbsp;31, 2002 and
    2001, the amounts reduced fuel expense by $0.7&nbsp;million and
    $7.2&nbsp;million, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Nonoperating income (expense)&nbsp;in the 2004 period includes a
    $30.5&nbsp;million net gain on derivative instruments, which
    included mark-to-market changes and settled transactions, and
    $1.3&nbsp;million for the write-off of debt issue costs in
    connection with the refinancing of the term loan. The 2003
    period includes federal government assistance of
    $81.3&nbsp;million recognized as nonoperating income under the
    Emergency Wartime Supplemental Appropriations Act and
    $8.5&nbsp;million and $108.2&nbsp;million recognized in 2002 and
    2001, respectively, as nonoperating income under the Air
    Transportation Safety and System Stabilization Act. The 2003,
    2002 and 2001 periods include a $10.7&nbsp;million net gain,
    $0.7&nbsp;million net loss and $7.2&nbsp;million net loss on
    derivative instruments, respectively, including mark-to-market
    changes and settled transactions. See Note&nbsp;12,
    <I>&#147;Nonoperating Income (Expenses)&nbsp;&#151; Other,
    Net&#148; </I>in Holdings&#146; Notes to Consolidated Financial
    Statements.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    The Company recalculated its diluted EPS for the year ended
    December&nbsp;31, 2003 to include the 7.25%&nbsp;notes under the
    &#147;if-converted&#148; methodology. The impact reduced diluted
    EPS by $0.03 from $1.29 to $1.26.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">24

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<DIV align="left" style="font-size: 10pt;">
<A name='109'></A>
</DIV>

<!-- link1 "Item 7. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations" -->

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<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;7.&nbsp;</B></TD>
    <TD>
    <B>Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings&#146; primary business activity is ownership of the
capital stock of AWA and, prior to January&nbsp;1, 2004, The
Leisure Company. Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations presented below
relates to the consolidated financial statements of Holdings
presented in Item&nbsp;8A and the consolidated financial
statements for AWA presented in Item&nbsp;8B.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Restatement of Previously Reported Amounts</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Derivative
Instruments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2005, management undertook a review of AWA&#146;s
accounting for its fuel hedging transactions. As a result of
this review, management concluded that AWA&#146;s fuel hedging
transactions did not qualify for hedge accounting under
U.S.&nbsp;generally accepted accounting principles and that the
Company&#146;s financial statements for prior periods required
restatement to reflect the fair value of fuel hedging contracts
in the balance sheets and statements of stockholders equity and
comprehensive income of Holdings and AWA. See Note&nbsp;2,
<I>&#147;Restatement of Previously Reported Amounts&#148;
</I>and Note&nbsp;16, <I>&#147;Quarterly Financial Data
(Unaudited)&#148; </I>in Holdings&#146; and Note&nbsp;2,
<I>&#147;Restatement of Previously Reported Amounts&#148;
</I>and Note&nbsp;15, <I>&#147;Quarterly Financial Data
(Unaudited)&#148; </I>in AWA&#146;s consolidated financial
statements for the financial impact of the restatements. The
Company concluded that these accounting errors were the result
of deficiencies in its internal control over financial
reporting, from the lack of effective reviews of hedge
transaction documentation and of quarterly mark-to-market
accounting entries on open fuel hedging contracts by personnel
at an appropriate level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2004 in Review</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Overview</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Over the past several years, the U.S.&nbsp;domestic airline
industry has experienced an unprecedented financial crisis
caused by the combination of the terrorist attacks of
September&nbsp;11, 2001, soft economic conditions, increased
competition and capacity and high fuel prices. In response to
these conditions, AWA had repositioned itself as a low cost
carrier and was able to operate profitably for 2003. During
2004, however, extremely high jet fuel prices and excessive
capacity throughout the domestic air system began to negatively
impact all airlines including the low cost segment of the
airline industry as well and several low cost carriers that had
previously operated profitably, including AWA, experienced
declining earnings. Despite difficult industry conditions, AWA
was able to complete two financial transactions in the third and
fourth quarters of 2004 that brought additional capital into the
company and extended debt maturities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2004, our constant commitment to lower costs remained a
priority and we implemented the following revenue and cost
reduction initiatives:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We increased point-to-point flying and utilization flying,
    (using an aircraft that would ordinarily be parked at a gate for
    additional flights at minimal additional costs).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We continued to aggressively manage yield during peak travel
    periods.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We overhauled our first class fare structure much in the same
    way we did to our coach fares in 2002. This initiative reduced
    first class fares by up to 70&nbsp;percent in some markets as
    compared to legacy carriers&#146; first class fares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We launched two new websites designed to increase revenues from
    travel agents and corporate travel managers while lowering
    distribution costs.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also continued to position our airline as a low cost carrier
with unique elements that differentiate our service from other
low cost carriers. For example, in 2004 we continued, and intend
to continue, to offer full service amenities that the major
airlines offer, such as first class seating, an award winning
frequent flyer program, FlightFund, and assigned seating. We
believe that leisure and business customers will continue to
</DIV>

<P align="center" style="font-size: 10pt;">25

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<DIV align="left" style="font-size: 10pt;">
value the service of low cost carriers and that our full service
amenities give us a competitive advantage over other low cost
carriers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In spite of these initiatives and others designed to increase
revenue and productivity and reduce costs, we reported a net
loss of $89.0&nbsp;million in 2004 compared to net income of
$57.4&nbsp;million in 2003. The change in earnings was driven by
a $181.1&nbsp;million increase in fuel expense primarily due to
a 39.1% increase in the average price per gallon of fuel. The
2003 results also included a nonoperating gain of
$81.3&nbsp;million related to federal government assistance
recognized under the Emergency Wartime Supplemental
Appropriations Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Capacity, as measured by available seat miles (ASMs), was up
8.1% as compared to 2003. Passenger revenues were up 3.9% to
$2.2&nbsp;billion for 2004 over 2003. Passenger revenue per
available seat mile (RASM)&nbsp;fell 3.8% during 2004 to
7.29&nbsp;cents versus 2003 primarily due to a 5.2% decline in
yield, a 7.9% increase in aircraft utilization and a 4.7%
increase in average stage length.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total operating expenses were $2.4&nbsp;billion, an increase of
6.7% from 2003. The average fuel price per gallon increased
39.1% to $1.24 during 2004. This, along with increased fuel burn
due to increased flying during 2004, resulted in a 48.1%
increase in fuel expenses in 2004 over 2003. In spite of the
enormous increase in the cost of fuel, stringent cost controls
enabled us to decrease unit costs by 1.3% during 2004 to
7.89&nbsp;cents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In spite of our diligent work to contain our costs, we believe
revenues will continue to reflect the excess capacity that
exists across the domestic system and fuel prices will remain
at, or exceed, record highs. Given these conditions, we
anticipate significant losses for full year 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, Holdings&#146; unrestricted and
restricted cash, cash equivalents, short-term investments and
investments in debt securities totaled $419.1&nbsp;million.
Although there can be no assurances, we believe that this cash
balance, coupled with our financing commitments and cash flows
from operating activities during 2005, will be adequate to fund
our operating and capital needs as well as enable us to remain
compliant with our various debt agreements through at least
December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost Control</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We remain committed to maintaining a low cost structure, which
we believe offers a significant competitive advantage over other
major hub-and-spoke airlines in the United States. In 2004, our
operating cost per available seat mile, or CASM, of
7.89&nbsp;cents was the lowest of all the other major
hub-and-spoke airlines in the United States and remained
competitive with the major point-to-point airline, Southwest
Airlines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In light of the current industry environment, we continue to
focus on minimizing capital expenditures and prudent spending
for discretionary expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revised Pricing
Structure</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The revenue environment during 2004 remained challenging. As
background, we restructured our coach fares in March 2002 in an
effort to maximize revenue and increase business traffic. We
eliminated our historic pricing structure and replaced it with a
simplified structure, the primary components of which included
reduced business fares (typically 40-75% below the walkup prices
on major network carriers), elimination of Saturday night stay
requirements and more fares available on a one-way basis. At the
same time, we significantly reduced the number and level of
highly discounted fares available through off-tariff channels.
Immediately following the introduction of the new fare
structure, higher-cost competitors placed extremely low prices
in our nonstop markets and Continental Airlines cancelled its
long-standing code share and frequent flyer agreements with us.
As a result of these actions, our year-over-year domestic unit
revenue performance during 2002 and 2003 was significantly
better than the industry average, and the net effect on revenue
of our revised pricing structure was positive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2004, we revised our first class pricing structure
similar to the coach fare restructuring initiated on our coach
fares in early 2002 and as discussed above. The new first class
fare structure featured
</DIV>

<P align="center" style="font-size: 10pt;">26

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<DIV align="left" style="font-size: 10pt;">
nonrefundable first class fares that are up to 70% lower than
the industry&#146;s traditional first class fares. We believe
that the revised first class fare structure will exploit our
competitive advantages over both the major airlines, as their
higher cost structures may prevent them from reducing their
first class fares to match ours in a profitable manner, and the
other low cost carriers, as many of them do not have first class
cabins.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In spite of these initiatives, during 2004, we experienced
increased low cost carrier (LCC)&nbsp;competition and increased
legacy carrier competition, and the results of these two factors
can be seen in our unit revenue performance relative to the
industry during 2004. Also, in January 2005, Delta Airlines made
significant changes to its domestic pricing structure.
Refundable business fares were reduced approximately 50-60% with
none of the new fares exceeding a coach class cap of $499. First
class fares were capped at $599. Delta also relaxed many of the
rules with regard to leisure fares such as eliminating the
Saturday night minimum stay requirement. While America West
still has lower business fares in most markets than those of
Delta&#146;s, Delta&#146;s new pricing scheme has resulted in a
reduction in the number of markets and magnitude of pricing
advantages previously held by America West. In addition,
long-term industry competitive reaction is unclear at this time,
and there is potential for negative revenue impact on the
industry and America West. However, given the adverse impacts to
our revenues in 2004 from increased LCC competition and
increased legacy carrier response, we believe that the
incremental effect of the Delta initiative will be smaller than
it would have been had the Delta fare initiative occurred
earlier.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Customer Service</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Continued emphasis on customer service is essential to growing
our business and leisure traffic. Therefore, we are committed to
building a successful airline by taking care of our customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA reported the following operating statistics to the DOT for
2004, 2003, and 2002:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent Change</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent Change</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;- 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;- 2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    On-time performance(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Completion factor(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mishandled baggage(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer complaints(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(37.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    Percentage of reported flight operations arriving on time.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    Percentage of scheduled flight operations completed.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Rate of mishandled baggage reports per 1,000 passengers.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    Rate of customer complaints filed with the DOT per 100,000
    passengers.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
2004 proved to be a challenging year from an operations
performance perspective. AWA made a business decision to
increase aircraft utilization approximately 10%, in order to
increase revenues and reduce unit costs. This increased
utilization came through a combination of increased night flying
through the Las Vegas hub and the creation of flight
opportunities during the day when some aircraft previously sat
on the ground for extended periods. Additionally, 2004 was a
difficult year from an Air Traffic Control or &#147;ATC&#148;
perspective. The growth in FAA reportable delays significantly
outpaced the growth of domestic air traffic. For the year, FAA
reportable delays grew 41.1% year-over-year compared to a 4.5%
growth in domestic air traffic. AWA&#146;s utilization growth,
coupled with the increased ATC delays, offset somewhat by
operating improvements, were the contributing factors resulting
in the overall change in operating performance.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>2005 Outlook</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We continue to face considerable challenges in 2005, including
competing with legacy carriers that, through a variety of
restructuring mechanisms, have reduced labor wages, extended
debt maturities and lowered their overall cost per available
seat mile. These actions could cause AWA&#146;s cost advantage
to diminish. In addition, recent fare initiatives by the major
carriers may also cause a reduction in revenue per available
seat mile. In 2004, we made loan repayments of approximately
$85.8&nbsp;million on the government guaranteed loan and
payments of approximately $168.5&nbsp;million in respect to our
off-balance sheet aircraft
</DIV>

<P align="center" style="font-size: 10pt;">27

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<DIV align="left" style="font-size: 10pt;">
financing arrangements. In 2005, we will need to make loan
repayments of approximately $85.8&nbsp;million on the government
guaranteed loan, $41.3&nbsp;million to redeem the
10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>
senior unsecured notes and payments of approximately
$167.8&nbsp;million in respect to our off-balance sheet aircraft
financing arrangements. Although there can be no assurances,
management believes that cash flow from operating activities,
coupled with existing cash balances and financing commitments,
will be adequate to fund the Company&#146;s operating and
capital needs as well as enable it to maintain compliance with
its various debt agreements at least through December&nbsp;31,
2005. See <I>&#147;Risk Factors Relating to the Company and
Industry Related Risks&#148; </I>and <I>&#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&nbsp;&#151; Liquidity and Capital Resources.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Results of Operations</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Summary of Holdings&#146; Financial Results</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings recorded a consolidated net loss of $89.0&nbsp;million
in 2004, or diluted earnings per share of $2.47. This compares
to consolidated income of $57.4&nbsp;million, or $1.26&nbsp;per
diluted share, in 2003 and a consolidated loss before the
cumulative effect of a change in accounting principle of
$179.7&nbsp;million, or $5.33&nbsp;per diluted share, in 2002.
Including the cumulative effect of a change in accounting
principle related to the Company&#146;s adoption of Statement of
Financial Accounting Standards (&#147;SFAS&#148;) No.&nbsp;142,
<I>&#147;Goodwill and Other Intangible Assets,&#148; </I>on
January&nbsp;1, 2002, Holdings&#146; net loss for 2002 was
$387.9&nbsp;million, or $11.50&nbsp;per diluted share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2004 results include a $16.3&nbsp;million net credit
associated with the termination of the rate per engine hour
agreement with General Electric Engine Services for overhaul
maintenance services on V2500-A1 engines. This credit was
partially offset by $1.9&nbsp;million of net charges related to
the return of certain Boeing 737-200 aircraft which includes
termination payments of $2.1&nbsp;million, the write-down of
leasehold improvements and deferred rent of $2.8&nbsp;million,
offset by the net reversal of maintenance reserves of
$3.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2004 results also include a $30.5&nbsp;million net gain on
derivative instruments, including mark-to-market changes and
settled transactions, a $6.1&nbsp;million charge arising from
the resolution of pending litigation, a $4.6&nbsp;million loss
on the sale and leaseback of two new Airbus aircraft and a
$1.3&nbsp;million charge for the write-off of debt issue costs
in connection with the refinancing of the term loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2003 results include a nonoperating gain of
$81.3&nbsp;million related to the federal government assistance
received under the Emergency Wartime Supplemental Appropriations
Act, a $10.8&nbsp;million net gain on derivative instruments,
including mark-to-market changes and settled transactions, a
$9.8&nbsp;million nonoperating gain on sale of the
Company&#146;s investment in Hotwire.com and a $3.3&nbsp;million
nonoperating gain on sale of the Company&#146;s investment in
National Leisure Group. See Note&nbsp;12, <I>&#147;Nonoperating
Income (Expenses)&nbsp;&#151; Other, Net&#148; </I>in
Holdings&#146; Notes to Consolidated Financial Statements. The
2003 results also include an operating gain of $4.4&nbsp;million
related to the purchase and subsequent exchange of an A320
airframe and a $2.8&nbsp;million operating gain related to the
settlement of disputed billings under the Company&#146;s
frequent flyer program. These gains were offset in part by
$19.7&nbsp;million of charges related to the execution of a new
labor agreement with the Air Line Pilots Association
(&#147;ALPA&#148;) net charges of $14.4&nbsp;million resulted
from the elimination of AWA&#146;s hub operations in Columbus,
Ohio ($11.1&nbsp;million), the reduction-in-force of certain
management, professional and administrative employees
($2.3&nbsp;million) and the impairment of certain owned Boeing
737-200 aircraft that have been grounded ($2.6&nbsp;million),
offset by a $1.1&nbsp;million reduction due to a revision of the
estimated costs related to the early termination of certain
aircraft leases and a $0.5&nbsp;million reduction related to the
revision of estimated costs associated with the sale and
leaseback of certain aircraft. See Note&nbsp;11,
<I>&#147;Special Charges&#148; </I>in Holdings&#146; Notes to
Consolidated Financial Statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2002 results include charges of $19.0&nbsp;million primarily
related to the restructuring completed on January&nbsp;18, 2002
and an operating gain of $4.9&nbsp;million related to a change
in the Company&#146;s vacation policy for certain administrative
employees. The Company also recognized a nonoperating charge of
$2.8&nbsp;million related to the write-off of the Company&#146;s
investment in an e-commerce entity and a nonoperating gain of
$8.5&nbsp;million related to the federal government assistance
received under the Air Transportation Safety and
</DIV>

<P align="center" style="font-size: 10pt;">28

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<DIV align="left" style="font-size: 10pt;">
System Stabilization Act in 2002. AWA did not record an income
tax benefit for the year ended December&nbsp;31, 2004 as it
currently expects to continue to record a full valuation
allowance on any future tax benefits until it has achieved
several quarters of consecutive profitable results coupled with
an expectation of continued profitability. Consolidated income
tax expense for financial reporting purposes was
$0.1&nbsp;million for 2003 on pretax income of
$57.5&nbsp;million. This compares to a consolidated income tax
benefit for financial reporting purposes of $35.1&nbsp;million
for the 2002 period on a consolidated loss before income tax
benefit and cumulative effect of a change in accounting
principle of $214.8&nbsp;million. The benefit in 2002 is
primarily due to additional carryback losses made available as a
result of the enactment of new tax legislation allowing an
extended carryback period under the Job Creation and Workers
Assistance Act of 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>AWA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following discussion provides an analysis of AWA&#146;s
results of operations and reasons for material changes therein
for the years ended December&nbsp;31, 2004, 2003 and 2002.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Statements of Operations</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the Years Ended December&nbsp;31, 2004, 2003 and 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,196,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,113,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,929,444</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cargo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,574</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89,545</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,338,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,253,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,046,563</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Salaries and related costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>655,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>658,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>601,870</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft rents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>304,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>297,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>295,016</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other rents and landing fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158,290</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft fuel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>557,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>375,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>299,284</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agency commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,953</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft maintenance materials and repairs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>205,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>223,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,691</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,201</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges (credits), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,432</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,030</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>423,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>402,613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>451,444</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,377,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,227,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,202,779</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39,704</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(156,216</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating income (expenses):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,551</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86,488</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86,743</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(79,529</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal government assistance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,466</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain (loss) on disposition of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,852</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on sale of investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain (loss) on derivative instruments, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(656</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>215</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total nonoperating income (expenses), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45,530</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(55,805</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes (benefit) and cumulative
    effect of change in accounting principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(85,234</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>61,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(212,021</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">29

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below sets forth selected operating data for AWA.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent Change</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent Change</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;-&nbsp;2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;-&nbsp;2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft (end of period)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average daily aircraft utilization (hours)(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Available seat miles (in millions)(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Block hours (in thousands)(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average stage length (miles)(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average passenger journey (miles)(e)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenue passenger miles (in millions)(f)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Load factor (percent)(g)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.0</TD>
    <TD align="left" valign="bottom" nowrap>pts</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.8</TD>
    <TD align="left" valign="bottom" nowrap>pts</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger enplanements (in thousands)(h)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,454</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Yield per revenue passenger mile (cents)(i)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenue per available seat mile:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger (cents)(j)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total (cents)(k)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fuel consumption (gallons in millions)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average fuel price (cents per gallon)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Full-time equivalent employees (end of period)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    Average daily aircraft utilization&nbsp;&#151; The average
    number of block hours per day for all aircraft in service.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    Available seat mile (&#147;ASM&#148;)&nbsp;&#151; A basic
    measure of production. It is one seat flown one statute mile.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Block hours&nbsp;&#151; The hours measured from the moment an
    aircraft first moves under its own power, including taxi time,
    for the purposes of flight until the aircraft is docked at the
    next point of landing and its power is shut down.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    Average stage length&nbsp;&#151; The average of the distances
    flown on each segment of every route.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    Average passenger journey&nbsp;&#151; The average one-way trip
    measured in statute miles for one passenger origination.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (f)</TD>
    <TD></TD>
    <TD valign="top">
    Revenue passenger mile (&#147;RPM&#148;)&nbsp;&#151; A basic
    measure of sales volume. It is one passenger flown one mile.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (g)</TD>
    <TD></TD>
    <TD valign="top">
    Load factor&nbsp;&#151; The percentage of available seats that
    are filled with revenue passengers.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (h)</TD>
    <TD></TD>
    <TD valign="top">
    Passenger enplanements&nbsp;&#151; The number of passengers on
    board an aircraft including local, connecting and through
    passengers.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (i)</TD>
    <TD></TD>
    <TD valign="top">
    Yield&nbsp;&#151; A measure of airline revenue derived by
    dividing passenger revenue by revenue passenger miles and
    expressed in cents per mile.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (j)</TD>
    <TD></TD>
    <TD valign="top">
    Passenger revenue per available seat mile
    (&#147;RASM&#148;)&nbsp;&#151; Total passenger revenues divided
    by total available seat miles.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (k)</TD>
    <TD></TD>
    <TD valign="top">
    Total revenue per available seat mile&nbsp;&#151; Total
    operating revenues divided by total available seat miles.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
The table below sets forth the major components of CASM for AWA
for the applicable years.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent Change</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent Change</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;-&nbsp;2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;-&nbsp;2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in cents)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Salaries and related costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7.9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft rents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other rents and landing fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft fuel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agency commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft maintenance materials and repairs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13.9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges (credits), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.05</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26.9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13.6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">30

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>2004 Compared with 2003</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA realized an operating loss of $39.7&nbsp;million in 2004
compared to operating income of $26.1&nbsp;million in 2003. Loss
before income taxes was $85.3&nbsp;million in 2004 compared to
income before income taxes of $61.4&nbsp;million for the
comparable 2003 period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total operating revenues for 2004 were $2.3&nbsp;billion.
Passenger revenues were $2.2&nbsp;billion in 2004 compared to
$2.1&nbsp;billion in 2003. A 9.6% increase in RPMs exceeded an
8.1% increase in capacity, as measured by ASMs, resulting in a
1.0 point increase in load factor to 77.4%. RASM during 2004
decreased 3.8&nbsp;percent to 7.29 cents, despite a
4.7&nbsp;percent increase in average stage length, while yields
decreased 5.2&nbsp;percent to 9.41 cents. Cargo revenues for
2004 increased $1.3&nbsp;million (4.9%) due to higher mail
volumes. Other revenues remained flat year of year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Operating expenses increased $150.3&nbsp;million or 6.7%
compared to the comparable 2003 period, while ASMs increased
8.1% due to increases in average stage length of 4.7% and
aircraft utilization of 7.9%. CASM decreased 1.3% to 7.89 cents
in 2004 from 7.99 cents in 2003 despite a 39.1% increase in
average fuel price per gallon. The 2004 period includes a
$15.4&nbsp;million reduction in special charges versus a
$14.4&nbsp;million charge in 2003. Significant changes in the
components of operating expense per ASM are explained as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Salaries and related costs per ASM decreased 7.9% due to
    increased productivity and lower benefit costs. ASMs increased
    8.1% and average full-time equivalent employees
    (&#147;FTEs&#148;) decreased 2.2%. This increase in productivity
    was offset in part by a $26.5&nbsp;million increase in pilot
    payroll expense principally as a result of the new labor
    agreement with the Air Line Pilots Association
    (&#147;ALPA&#148;) effective December&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Aircraft rent expense per ASM decreased 5.4% due to the 7.9%
    increase in aircraft utilization.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Other rents and landing fees expense per ASM remained flat year
    over year as increases in airport rents ($6.6&nbsp;million) and
    landing fees ($5.7&nbsp;million) were offset by the 8.1%
    increase in ASMs.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Aircraft jet fuel expense per ASM increased 37.0% due primarily
    to a 39.1% increase in the average price per gallon of fuel to
    123.7 cents in 2004 from 88.9 cents in 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Agency commissions expense per ASM decreased 32.4% due to the
    reductions in various travel agency incentive programs and lower
    override commissions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Aircraft maintenance materials and repair expense per ASM
    decreased 14.8% due to decreases in capitalized maintenance
    amortization expense ($23.4&nbsp;million), and aircraft C-Check
    expense ($4.0&nbsp;million). The decrease in capitalized
    maintenance amortization expense is driven by changes in the
    estimated useful life on certain engines, effective
    January&nbsp;1, 2004, as a result of changes in aircraft
    utilization ($9.2&nbsp;million), and on certain aircraft engine
    overhaul costs, effective April&nbsp;1, 2003, driven by a new
    maintenance agreement that guarantees minimum cycles on engine
    overhauls ($2.3&nbsp;million). During 2004, the net decrease of
    fully amortized assets versus new asset amortization totaled
    $6.6&nbsp;million. These decreases were partially offset by
    increases in airframe maintenance ($6.1&nbsp;million) and engine
    overhaul ($3.7&nbsp;million) expenses.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Depreciation and amortization expense per ASM decreased 24.8%
    due to lower computer hardware and software amortization
    ($6.1&nbsp;million) as a result of AWA&#146;s cash conservation
    program, which reduced capital expenditures and lower
    amortization expenses related to aircraft leasehold improvements
    ($1.7&nbsp;million). The change in the estimated useful life as
    a result of changes in AWA&#146;s fleet plan discussed above
    contributed to the decrease in depreciation for improvements on
    AWA&#146;s owned aircraft ($3.1&nbsp;million), and for rotable
    and repairable spare parts ($2.1&nbsp;million).</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">31

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Other operating expenses per ASM decreased 2.6% to $1.41 from
    $1.44 primarily due to decreases in catering costs
    ($6.3&nbsp;million), bad debt expense ($2.6&nbsp;million) and
    traffic liability insurance ($1.8&nbsp;million). These decreases
    were partially offset by increases in aircraft jet fuel tax
    ($4.7&nbsp;million), passenger traffic related expenses
    ($4.2&nbsp;million), reservation system booking fees
    ($4.1&nbsp;million), legal fees ($3.6&nbsp;million), computer
    credit card discount fees ($3.5&nbsp;million), airport guard
    services ($1.9&nbsp;million) and ground handling expenses
    ($1.6&nbsp;million). As a result, other operating expenses
    increased by $21.4&nbsp;million. In addition, the 2004 period
    also included a $5.1&nbsp;million charge resulting from the
    settlement of the shareholder lawsuit, a $4.6&nbsp;million
    charge related to the sale and leaseback transactions of two new
    aircraft, a $3.5&nbsp;million gain resulting from the settlement
    of a claim in bankruptcy for amounts earned under an executory
    contract, a $2.0&nbsp;million gain resulting from the settlement
    of a lawsuit related to certain computer hardware and software
    that had previously been written off, a $1.0&nbsp;million charge
    related to an arbitration settlement with Aeroxchange and a
    $1.0&nbsp;million volume incentive earned due to certain
    Affinity Card sales levels meeting certain contract thresholds.
    The comparable 2003 period includes a $4.4&nbsp;million gain
    related to the purchase and subsequent exchange of an A320
    airframe.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA had net nonoperating expense of $45.5&nbsp;million in 2004
compared to net nonoperating income of $35.3&nbsp;million in
2003. The 2003 period benefited from $81.3&nbsp;million of
federal government assistance received under the Emergency
Wartime Supplemental Appropriations Act. See Note&nbsp;16,
<I>&#147;Emergency Wartime Supplemental Appropriations Act&#148;
</I>in AWA&#146;s Notes to Consolidated Financial Statements. In
2004, debt issue costs totaling $1.3&nbsp;million were written
off in connection with the refinancing of the term loan. This
was more than offset by a gain on the disposition of property
and equipment ($1.1&nbsp;million) primarily due to the sale of
two Boeing 737-200 aircraft. Interest income increased
$0.9&nbsp;million or 6.9% due to higher average cash balances in
the 2004 period. The changes in the fair value of the
Company&#146;s derivative instruments and the net realized gains
for the settled hedge transactions was a $23.8&nbsp;million
credit in 2004 compared to a $10.7&nbsp;million credit in the
2003 period. Interest expense remained flat year-over-year. The
2003 period also includes a $9.8&nbsp;million gain related to
the sale of an investment in Hotwire.com. See Note&nbsp;12,
<I>&#147;Nonoperating Income (Expenses)&nbsp;&#151; Other,
Net&#148; </I>in AWA&#146;s Notes to Consolidated Financial
Statements.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>2003 Compared with 2002</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA recorded operating income of $26.1&nbsp;million in 2003
compared to an operating loss of $156.2&nbsp;million in 2002.
Income before income taxes was $61.4&nbsp;million in 2003
compared to a loss before income taxes and the cumulative effect
of a change in accounting principle of $212.0&nbsp;million in
2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total operating revenues for 2003 were $2.3&nbsp;billion.
Passenger revenues were $2.1&nbsp;billion in 2003 compared to
$1.9&nbsp;billion in 2002. A 7.1% increase in RPMs exceeded a
3.3% increase in capacity, as measured by ASMs, resulting in a
2.8&nbsp;point increase in load factor to 76.4%. RASM during
2003 increased 6.2&nbsp;percent to 7.58&nbsp;cents, despite a
5.9&nbsp;percent increase in average stage length, while yields
improved 2.3&nbsp;percent to 9.93&nbsp;cents. Cargo revenues for
2003 decreased $0.7&nbsp;million (2.4%) due to lower freight and
mail volumes. Other revenues, which consist primarily of
alcoholic beverage sales, contract service sales, service
charges, America West Vacations net revenues and Mesa codeshare
agreement revenues, increased $23.7&nbsp;million (26.5%) due to
increased net revenues from AWA&#146;s code sharing agreement
with Mesa Airlines, higher excess baggage revenue and higher
ticket refund and reissue penalty fees for ticketing changes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Operating expenses, including special charges of
$14.4&nbsp;million and $19.0&nbsp;million recognized in 2003 and
2002, respectively, (see Note&nbsp;11, <I>&#147;Special
Charges&#148; </I>in AWA&#146;s Notes to Consolidated Financial
Statements) increased $24.9&nbsp;million or 1.1%, while ASMs
increased 3.3% in 2003 as compared to 2002. As a result, CASM
decreased 2.1% to 7.99&nbsp;cents in 2003 from 8.16&nbsp;cents
in 2002. Significant changes in the components of operating
expense per ASM are explained as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Salaries and related costs per ASM increased 5.9% primarily due
    to an increase in the accrual for employee performance bonuses
    and AWArd Pay ($20.1&nbsp;million), charges related to the</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">32

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<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    execution of a new labor agreement between AWA and ALPA
    ($19.7&nbsp;million), higher medical, disability and
    workers&#146; compensation insurance costs ($6.7&nbsp;million),
    vacation expense due to a change in the Company&#146;s vacation
    policy for certain administrative employees in 2002
    ($6.4&nbsp;million) and DOT on-time performance bonuses
    ($2.3&nbsp;million). These increases were offset in part by a
    4.5% decrease FTEs in 2003 as compared to 2002, driven by the
    Company&#146;s decision to eliminate its Columbus hub operations
    and the reduction-in-force of management, administrative and
    professional employees.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Aircraft rent expense per ASM decreased 2.3% due to a reduction
    of rental rates as a result of lease extensions that occurred in
    2003.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Other rents and landing fees expense per ASM decreased 5.4%
    primarily due to lower costs for borrowed parts
    ($5.6&nbsp;million) and other space rental ($1.3&nbsp;million).
    This decrease was offset in part by higher airport rent
    ($1.5&nbsp;million) and landing fees ($1.4&nbsp;million).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Aircraft jet fuel expense per ASM increased 21.7% primarily due
    to a 21.8% increase in the average price per gallon of fuel to
    88.9&nbsp;cents in 2003 from 73.0&nbsp;cents in 2002.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Agency commissions expense per ASM decreased 33.2% primarily due
    to the elimination of base commissions for travel agency tickets
    issued in the United States, effective March&nbsp;21, 2002,
    subsequent reductions in various travel agency incentive
    programs and lower override commissions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Aircraft maintenance materials and repair expense per ASM
    decreased 14.4% primarily due to lower aircraft C-Check
    ($10.1&nbsp;million), airframe maintenance ($3.1&nbsp;million),
    and engine overhaul ($2.9&nbsp;million) expenses and the 3.3%
    increase in ASMs. In addition, a change in the estimated useful
    life of certain aircraft engine overhaul costs, effective
    April&nbsp;1, 2003 and driven by a new maintenance agreement
    that guarantees minimum cycles on engine overhauls, resulted in
    a $12.7&nbsp;million reduction in capitalized maintenance
    amortization expense (see Note&nbsp;1, <I>&#147;Summary of
    Significant Accounting Policies&nbsp;&#151; (e)&nbsp;Aircraft
    Maintenance and Repairs&#148; </I>in AWA&#146;s Notes to
    Consolidated Financial Statements) offset by a $0.9&nbsp;million
    penalty for the return of two spare engines in 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Depreciation and amortization expense per ASM decreased 13.9%
    due primarily to reduced capital expenditures as a result of the
    Company&#146;s cash conservation program and the 3.3% increase
    in ASMs. Decreases in computer hardware, software and facility
    improvements ($4.5&nbsp;million), aircraft leasehold improvement
    amortization ($2.9&nbsp;million) and depreciation expense for
    owned aircraft ($2.0&nbsp;million) were offset in part by an
    increase in depreciation expense for rotable aircraft parts
    ($0.9&nbsp;million).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Other operating expenses per ASM decreased 13.6% from
    1.67&nbsp;cents to 1.44&nbsp;cents primarily due to decreases in
    traffic liability insurance ($11.6&nbsp;million), computer
    reservations system booking fees ($7.7&nbsp;million), security
    services ($6.0&nbsp;million), FlightFund expense
    ($5.2&nbsp;million), bad debt expense ($5.2&nbsp;million) and
    the 3.3% increase in ASMs. These decreases were offset in part
    by increased credit card fees ($6.2&nbsp;million). In addition,
    the 2003 period includes a $4.4&nbsp;million gain related to the
    purchase and subsequent exchange of an A320 airframe and a
    $2.8&nbsp;million credit related to the settlement of disputed
    billings under the Company&#146;s frequent flyer program.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA had net nonoperating income of $35.3&nbsp;million in 2003
compared to $55.8&nbsp;million of net nonoperating expenses in
2002. The 2003 period benefited from $81.3&nbsp;million of
federal government assistance received under the Emergency
Wartime Supplemental Appropriations Act. See Note&nbsp;16,
<I>&#147;Emergency Wartime Supplemental Appropriations Act&#148;
</I>in AWA&#146;s Notes to Consolidated Financial Statements.
Interest expense increased $7.2&nbsp;million in 2003 due to
higher average outstanding debt while interest income decreased
$4.3&nbsp;million primarily due to lower interest rates in 2003
compared to 2002. The 2003 period also includes a
$9.8&nbsp;million gain related to the sale of an investment in
Hotwire.com. See Note&nbsp;12, <I>&#147;Nonoperating Income
(Expenses)&nbsp;&#151; Other, Net&#148; </I>in AWA&#146;s Notes
to Consolidated Financial
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Statements. The 2002 period included $8.5&nbsp;million of
federal government assistance received under the Air
Transportation Safety and System Stabilization Act and a
$2.8&nbsp;million charge related to the write-off of AWA&#146;s
investment in an e-commerce entity. The changes in the fair
value of the Company&#146;s derivative instruments and the net
realized gains and losses for the settled hedge transactions was
a $10.7&nbsp;million credit in 2003 compared to
$0.7&nbsp;million expense in the 2002 period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Liquidity and Capital Resources</B>
</DIV>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <B><I>Sources and Uses of Cash</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, Holdings&#146; and AWA&#146;s total
cash, cash equivalents, short-term investments, investments in
debt securities and restricted cash balances were
$419.1&nbsp;million and $398.5&nbsp;million, respectively. Net
cash provided by operating activities for Holdings and AWA was
$20.8&nbsp;million and $20.6&nbsp;million, respectively, in
2004. This compares to net cash provided by operating activities
of $241.8&nbsp;million and $226.1&nbsp;million for Holdings and
AWA, respectively, in 2003. The year-over-year decrease in net
cash provided by operating activities of $221.0&nbsp;million and
$205.4&nbsp;million for Holdings and AWA, respectively, was
primarily due to the loss in the 2004 period and the receipt of
$81.3&nbsp;million of refunded security fees from the Federal
government in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, net cash used in investing activities was
$16.1&nbsp;million for Holdings and $16.0&nbsp;million for AWA,
respectively. This compares to net cash used in investing
activities of $491.6&nbsp;million for both Holdings and AWA in
2003. Principal investing activities during 2004 included
purchases of property and equipment totaling $219.4&nbsp;million
for both Holdings and AWA and net sales of short-term
investments and investments in debt securities totaling
$205.3&nbsp;million for both Holdings and AWA. The 2003 period
included purchases of property and equipment totaling
$154.4&nbsp;million for both Holdings and AWA and net purchases
of short-term investments totaling $269.4&nbsp;million for both
Holdings and AWA. Restricted cash increased by $2.2&nbsp;million
during 2004 compared to an increase of $23.9&nbsp;million during
2003 primarily due to an increase in cash reserves required
under an agreement for processing the Company&#146;s Visa and
MasterCard credit card transactions. The 2003 period also
included proceeds from the disposition of assets totaling
$25.8&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, net cash used in financing activities was
$41.2&nbsp;million and $42.3&nbsp;million for Holdings and AWA,
respectively, consisting principally of $175.6 debt repayments
including principal repayments of $85.8&nbsp;million for the
government guaranteed loan. In addition, AWA entered into a term
loan financing with GECC resulting in proceeds of
$110.6&nbsp;million, approximately $77.0&nbsp;million of which
was used to pay off the balance of the term loan with Muzuho
Corporate Bank, Ltd. and certain other lenders. The 2004 period
also includes $30.8&nbsp;million of proceeds from the issuance
of senior secured discount notes, secured by the Company&#146;s
leasehold interest in its Phoenix maintenance facility and
flight training center. This compares to net cash provided by
financing activities of $67.4&nbsp;million and
$65.0&nbsp;million for Holdings and AWA, respectively, in 2003.
The 2003 period included proceeds from the issuance of senior
exchangeable notes totaling $86.8&nbsp;million and debt
repayments of $16.8&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Capital expenditures for 2004 were $219.4&nbsp;million for
Holdings and AWA. Capital expenditures for 2003 were
$154.4&nbsp;million for Holdings and AWA. Included in these
amounts are capital expenditures for capitalized maintenance of
approximately $139.2&nbsp;million and $119.3&nbsp;million for
both Holdings and AWA for 2004 and 2003, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD></TD>
    <TD>
    <B><I>Off-Balance Sheet Arrangements</I></B></TD>
</TR>

</TABLE>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <I>The Pass Through Trusts</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since AWA&#146;s restructuring in 1994, AWA has set up 19 pass
through trusts, which have issued over $1.4&nbsp;billion of pass
through trust certificates (also known as &#147;Enhanced
Equipment Trust&nbsp;Certificates&#148; or &#147;EETC&#148;)
covering the financing of 54 aircraft. These trusts are
off-balance sheet entities, the primary purpose of which is to
finance the acquisition of aircraft. Rather than finance each
aircraft separately when such aircraft is purchased or
delivered, these trusts allow the Company to raise the financing
for several aircraft at one time and place such funds in escrow
pending the purchase or delivery of the relevant aircraft.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
The trusts are also structured to provide for certain credit
enhancements, such as liquidity facilities to cover certain
interest payments, that reduce the risks to the purchasers of
the trust certificates and, as a result, reduce the cost of
aircraft financing to AWA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each trust covered a set amount of aircraft scheduled to be
delivered within a specific period of time. At the time of each
covered aircraft financing, the relevant trust used the funds in
escrow to purchase equipment notes relating to the financed
aircraft. The equipment notes were issued, at AWA&#146;s
election, either by AWA in connection with a mortgage financing
of the aircraft or by a separate owner trust in connection with
a leveraged lease financing of the aircraft. In the case of a
leveraged lease financing, the owner trust then leased the
aircraft to AWA. In both cases, the equipment notes are secured
by a security interest in the aircraft. The pass through trust
certificates are not direct obligations of, nor guaranteed by,
Holdings or AWA. However, in the case of mortgage financings,
the equipment notes issued to the trusts are direct obligations
of AWA and in the case of leveraged lease financings, the leases
are direct obligations of AWA. In addition, neither Holdings nor
AWA guarantee or participate in any way in the residual value of
the leased aircraft. All aircraft financed by these trusts are
currently structured as leveraged lease financings, which are
not reflected as debt on the balance sheets of either AWA or
Holdings. In 2004, AWA made $168.5&nbsp;million in lease
payments in respect of the leveraged lease financings under the
pass through trusts.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Other Operating Leases</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the aircraft financed by the pass through trust
certificates, AWA has noncancelable operating leases covering 82
aircraft, of which four aircraft will be delivered in 2005, as
well as leases for certain terminal space, ground facilities and
computer and other equipment. In 2004, AWA made
$197.2&nbsp;million in lease payments related to these operating
leases. See the Airline&#146;s fleet section in Item&nbsp;1 for
further discussion.
</DIV>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <I>Special Facility Revenue Bonds</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 1999, Series&nbsp;1999 special facility revenue bonds
(&#147;new bonds&#148;) were issued by a municipality to fund
the retirement of the Series&nbsp;1994A bonds (&#147;old
bonds&#148;) and the construction of a new concourse with 14
gates at Terminal 4 in Phoenix Sky Harbor International Airport
in support of AWA&#146;s strategic growth plan. The new bonds
are due June 2019 with interest accruing at 6.25%&nbsp;per annum
payable semiannually on June&nbsp;1 and December&nbsp;1,
commencing on December&nbsp;1, 1999. The new bonds are subject
to optional redemption prior to the maturity date on or after
June&nbsp;1, 2009 in whole or in part, on any interest payment
date at the following redemption prices: 101% on June&nbsp;1 or
December&nbsp;1, 2009; 100.5% on June&nbsp;1 or December&nbsp;1,
2010; and 100% on June&nbsp;1, 2011 and thereafter. In
accordance with Emerging Issues Task Force (&#147;EITF&#148;)
Issue No.&nbsp;97-10, <I>&#147;The Effect of Lessee Involvement
in Asset Construction,&#148; </I>the Company accounts for this
as an operating lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with these bonds, AWA entered into an Amended and
Restated Airport Use Agreement, pursuant to which AWA agreed to
make sufficient payments to the Industrial Development Authority
(&#147;IDA&#148;) to cover the principal and interest of the
bonds and to indemnify the IDA for any claims arising out of the
issuance and sale of the bonds and the use and occupancy of the
concourses financed by these bonds and the old bonds. At
December&nbsp;31, 2004, the outstanding principal amount of the
bonds was $21.8&nbsp;million. The Company estimates its
remaining payments to cover the principal and interest of these
bonds will be approximately $43.6&nbsp;million.
</DIV>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <B><I>Commitments</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, we had $786.3&nbsp;million of
long-term debt (including current maturities). This amount
consisted primarily of the $343.2&nbsp;million government
guaranteed loan, a secured term loan financing with General
Electric Capital Corporation (&#147;GECC&#148;), of which
$110.6&nbsp;million remains outstanding, $39.5&nbsp;million
principal amount of
10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
unsecured notes, $112.3&nbsp;million principal amount of
7.5%&nbsp;convertible senior notes (including interest through
December&nbsp;31, 2004 as a deemed loan added to the
</DIV>

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<DIV align="left" style="font-size: 10pt;">
principal thereof) and $252.7&nbsp;million issue price of
7.25%&nbsp;senior exchangeable notes, of which
$86.8&nbsp;million was received at issuance.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Government Guaranteed Loan</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2002, AWA closed a $429&nbsp;million loan supported
by a $380&nbsp;million guarantee provided by the ATSB. Certain
third-party counter-guarantors have fully and unconditionally
guaranteed the payment of an aggregate of $45&nbsp;million of
the outstanding principal amount under the government guaranteed
loan plus accrued and unpaid interest thereon. In addition,
Holdings has fully and unconditionally guaranteed the payment of
all principal, premium, interest and other obligations
outstanding under the government guaranteed loan and has pledged
the stock of AWA to secure its obligations under such guarantee.
Principal amounts under this loan become due in ten installments
of $42.9&nbsp;million on each March&nbsp;31 and
September&nbsp;30, commencing on March&nbsp;31, 2004 and ending
on September&nbsp;30, 2008. Principal amounts outstanding under
the government guaranteed loan bear interest at a rate per annum
equal to LIBOR plus 40&nbsp;basis points.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to certain exceptions, we are required to prepay the
government guaranteed loan with:
</DIV>

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    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the net proceeds of all issuances of debt or equity by either
    Holdings or AWA after January 2002;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    proceeds from asset sales in excess of $20&nbsp;million in any
    fiscal year;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    insurance proceeds in excess of $2&nbsp;million to the extent
    such proceeds are not used to restore or replace the assets from
    which such proceeds are derived.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we are required to prepay the government guaranteed
loan upon a change in control and we may be required to prepay
portions of the loan if our employee compensation costs exceed a
certain threshold. We may, at our option, prepay the government
guaranteed loan without premium or penalty, subject to
reimbursement of the lenders&#146; breakage costs in the case of
prepayment of LIBOR loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The government guaranteed loan requires that AWA maintain a
minimum cash balance of $100&nbsp;million. In addition, the
government loan contains customary affirmative covenants and the
following negative covenants: restrictions on liens,
investments, restricted payments, fundamental changes, asset
sales and acquisitions, the creation of new subsidiaries, sale
and leasebacks, transactions with affiliates, the conduct of
business, mergers or consolidations, issuances and dispositions
of capital stock of subsidiaries, and amendments to other
indebtedness. The government guaranteed loan contains customary
events of default, including payment defaults, cross-defaults,
breach of covenants, bankruptcy and insolvency defaults and
judgment defaults.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>GECC Term Loan&nbsp;Financing</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;10, 2004, AWA entered into a term loan
financing with GECC providing for loans in an aggregate amount
of $110.6&nbsp;million. AWA used approximately
$77.0&nbsp;million of the proceeds from this financing to repay
in full its term loan with Mizuho Corporate Bank, Ltd. and
certain other lenders and to pay certain costs associated with
this transaction. AWA used the remaining proceeds for general
corporate purposes. The new term loan financing consists of two
secured term loan facilities: a $75.6&nbsp;million term loan
facility secured primarily by spare parts, rotables and
appliances (the &#147;Spare Parts Facility&#148;); and a
$35.0&nbsp;million term loan facility secured primarily by
aircraft engines and parts installed in such engines (the
&#147;Engine Facility&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The facilities are cross-collateralized on a subordinated basis
and the collateral securing the facilities also secures on a
subordinated basis certain of AWA&#146;s other existing debt and
lease obligations to GECC and its affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The loans under the Spare Parts Facility are payable in full at
maturity on September&nbsp;10, 2010. The loans under the Engine
Facility are payable in equal quarterly installments of
$1.3&nbsp;million beginning on March&nbsp;10, 2006 through
June&nbsp;10, 2010 with the remaining loan amount of
$11.8&nbsp;million payable at maturity on September&nbsp;10,
2010. The loans under each facility may be prepaid in an amount
not less than $5&nbsp;million
</DIV>

<P align="center" style="font-size: 10pt;">36

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<DIV align="left" style="font-size: 10pt;">
at any time after the 30th monthly anniversary of the funding
date under such facility. If AWA fails to maintain a certain
ratio of rotables to loans under the Spare Parts Facility, it
may be required to pledge additional rotables or cash as
collateral, provide a letter of credit or prepay some or all of
the loans under the Spare Parts Facility. In addition, the loans
under the Engine Facility are subject to mandatory prepayment
upon the occurrence of certain events of loss applicable to, or
certain dispositions of, aircraft engines securing the facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Principal amounts outstanding under the loans bear interest at a
rate per annum based on three-month LIBOR plus a margin. Both
facilities contain customary events of default, including
payment defaults, cross-defaults, breach of covenants,
bankruptcy and insolvency defaults and judgment defaults.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Senior Secured Discount Notes Due 2009</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;27, 2004, AWA raised additional capital by
financing its Phoenix maintenance facility and flight training
center. The flight training center was previously unencumbered,
and the maintenance facility became unencumbered earlier this
year when AWA refinanced its term loan. Using its leasehold
interests in these two facilities as collateral, AWA, through a
wholly owned subsidiary named FTCHP LLC, raised
$30.8&nbsp;million through the issuance of senior secured
discount notes. The notes were issued by FTCHP at a discount
pursuant to the terms of a senior secured term loan agreement
among the Company, FTCHP, Heritage Bank, SSB, as administrative
agent, Citibank, N.A., as the initial lender, and the other
lenders from time to time party thereto. Citibank, N.A.
subsequently assigned all of its interests in the notes to third
party lenders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA has fully and unconditionally guaranteed the payment and
performance of FTCHP&#146;s obligations under the notes and the
loan agreement. The notes require aggregate principal payments
of $36.0&nbsp;million with principal payments of
$1.5&nbsp;million due on each of the first two anniversary dates
and the remaining principal amount due on the fifth anniversary
date. The notes may be prepaid in full at any time (subject to
customary LIBOR breakage costs) and in partial amounts of
$1.5&nbsp;million on the third and fourth anniversary dates. The
unpaid principal amount of the notes bears interest based on
LIBOR plus a margin subject to adjustment based on a loan to
collateral value ratio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The loan agreement contains customary covenants applicable to
loans of this type, including obligations relating to the
preservation of the collateral and restrictions on the
activities of FTCHP. In addition, the loan agreement contains
events of default, including payment defaults, cross-defaults to
other debt of FTCHP, if any, breach of covenants, bankruptcy and
insolvency defaults and judgment defaults.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with this financing, AWA sold all of its leasehold
interests in the maintenance facility and flight training center
to FTCHP and entered into subleases for the facilities with
FTCHP at lease rates expected to approximate the interest
payments due under the notes. In addition, AWA agreed to make
future capital contributions to FTCHP in amounts sufficient to
cover principal payments and other amounts owing pursuant to the
notes and the loan agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The proceeds from this financing, together with
$10.5&nbsp;million from operating cash flow, were irrevocably
deposited with the trustee for AWA&#146;s
10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
unsecured notes due 2005 and subsequently redeemed on
January&nbsp;26, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>10&nbsp;<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;Senior
    Notes due 2005</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 1995, AWA issued $75.0&nbsp;million principal amount
of
10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
unsecured notes due 2005 of which $39.5&nbsp;million remained
outstanding at December&nbsp;31, 2004. Interest on the
10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
unsecured notes is payable semiannually in arrears on
March&nbsp;1 and September&nbsp;1 of each year. The senior notes
were subsequently redeemed on January&nbsp;26, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>7.5%&nbsp;Convertible Senior Notes due 2009</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the closing of the government guaranteed loan
and the related transactions, Holdings issued
$104.5&nbsp;million of 7.5%&nbsp;convertible senior notes due
2009, of which approximately $112.3&nbsp;million
</DIV>

<P align="center" style="font-size: 10pt;">37

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<DIV align="left" style="font-size: 10pt;">
remained outstanding at December&nbsp;31, 2004 (including
interest paid through December&nbsp;31, 2004 as a deemed loan
added to the principal thereof). These notes are convertible
into shares of class&nbsp;B common stock, at the option of the
holders, at an initial conversion price of $12.00&nbsp;per share
or a conversion ratio of approximately 83.333&nbsp;shares per
$1,000 principal amount of such notes, subject to standard
anti-dilution adjustments. Interest on the 7.5%&nbsp;convertible
senior notes is payable semiannually in arrears on June&nbsp;1
and December&nbsp;1 of each year. At Holdings&#146; option, the
first six interest payments were payable in the form of a deemed
loan added to the principal amount of these notes. The
7.5%&nbsp;convertible senior notes will mature on
January&nbsp;18, 2009 unless earlier converted or redeemed. The
payment of principal, premium and interest on the
7.5%&nbsp;convertible senior notes is fully and unconditionally
guaranteed by AWA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings may redeem 7.5%&nbsp;convertible senior notes, in whole
or in part, at the following redemption prices (expressed as
percentages of the principal amount thereof), if redeemed during
the twelve-month period commencing on January&nbsp;18 of the
years set forth below, plus, in each case, accrued and unpaid
interest, if any, to the date of redemption:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Redemption Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103.75%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102.50%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101.25%</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008 and thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.00%</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>7.25%&nbsp;Senior Exchangeable Notes due 2023</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In July and August of 2003, AWA completed a private placement of
approximately $86.8&nbsp;million issue price of
7.25%&nbsp;Senior Exchangeable Notes due 2023. The notes bear
cash interest until July&nbsp;30, 2008. Thereafter, the notes
will cease bearing cash interest and begin accruing original
issue discount daily at a rate of 7.25%&nbsp;per year until
maturity. Each note was issued at a price of $343.61 and is
exchangeable for class&nbsp;B common stock of Holdings at an
exchange ratio of 32.038&nbsp;shares per $1,000 principal amount
at maturity of the notes (subject to adjustment in certain
circumstances). This represents an equivalent conversion price
of approximately $10.73&nbsp;per share. The aggregate amount due
at maturity, including accrued original issue discount from
July&nbsp;31, 2008, will be $252,695,000. The notes are
unconditionally guaranteed on a senior unsecured basis by
Holdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holders may exchange their notes for the shares of class&nbsp;B
common stock of Holdings in any fiscal quarter commencing after
September&nbsp;30, 2003, if, as of the last day of the preceding
fiscal quarter, the closing sale price of the class&nbsp;B
common stock for at least 20 trading days in a period of 30
consecutive trading days ending on the last trading day of such
preceding fiscal quarter is more than 110% of the accreted
exchange price per share of Class&nbsp;B common stock on the
last day of such preceding fiscal quarter. If the foregoing
condition is satisfied, then the notes will be exchangeable at
any time at the option of the holder through maturity. The
accreted exchange price per share as of any day will equal the
issue price of a note plus accrued original issue discount to
that day divided by 32.038, subject to any adjustments to the
exchange rate through that day.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On or before July&nbsp;30, 2018, a holder also may exchange its
notes for shares of the Class&nbsp;B common stock at any time
after a 10 consecutive trading-day period in which the average
of the trading prices for the notes for that 10&nbsp;trading-day
period was less than 103% of the average exchange value for the
notes during that period. Exchange value is equal to the product
of the closing sale price for the shares of Class&nbsp;B common
stock on a given day multiplied by the then current exchange
rate, which is the number of shares of Class&nbsp;B common stock
for which each note is then exchangeable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the holders may exchange the notes if the notes
have been called for redemption or if certain specified
corporate transactions have occurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holders of the notes may require AWA to repurchase the notes at
a price equal to the original issue price plus accrued cash
interest and original issue discount, if any, on July&nbsp;30,
2008, 2013 and 2018. The purchase price of such notes may be
paid in cash or class&nbsp;B common stock of Holdings, subject
to certain restrictions.
</DIV>

<P align="center" style="font-size: 10pt;">38

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<DIV align="left" style="font-size: 10pt;">
In addition, each holder may require AWA to purchase all or a
portion of such holder&#146;s notes upon the occurrence of
certain change of control events concerning AWA or Holdings. AWA
may redeem the notes, in whole or in part, on or after
July&nbsp;30, 2008 at a price equal to the original issue price
plus accrued cash interest and original issue discount, if any.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Other Indebtedness and Obligations</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the above described indebtedness, we had
$39.5&nbsp;million of secured equipment notes and
$45.8&nbsp;million of other unsecured indebtedness, including
$29.3&nbsp;million of industrial revenue bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our cash obligations as of
December&nbsp;31, 2004.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Beyond</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2006</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2007</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2008</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2009</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2009</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment notes&nbsp;&#151; non-EETC(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39,464</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GECC term loan(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,564</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    7.5%&nbsp;convertible senior notes due 2009(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112,299</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    7.25%&nbsp;senior exchangeable notes due 2023(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,695</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Government guaranteed loan(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>343,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State loan(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
    unsecured notes due 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,548</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Industrial development bonds(7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AVSA promissory notes(8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior Secured Discount Notes(9)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,988</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>371,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>979,558</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash aircraft rental payments(10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>343,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>318,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>249,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>223,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,668,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,103,378</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lease payments on equipment and facility operating leases(11)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130,622</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,420</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special facility revenue bonds(12)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft purchase commitments(13)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>272,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>456,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>777,408</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Engine maintenance commitments(14)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>803,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>905,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>469,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>373,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>387,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,127,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,067,986</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Includes approximately $39.5&nbsp;million of equipment notes
    with variable interest rates of 2.88% to 3.37%, averaging 2.96%
    at December&nbsp;31, 2004, installments due 2005 through 2008.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    The amount consists of two the Spare Parts Facility and the
    Engine Facility with a variable interest rate of 6.41% at
    December&nbsp;31, 2004. See <I>&#147;&#151;&nbsp;GECC Term
    Loan&nbsp;Financing&#148; </I>above.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Includes $90.7&nbsp;million principal amount of
    7.5%&nbsp;convertible senior notes, due 2009, and
    $21.6&nbsp;million of interest paid in kind of issuance through
    December&nbsp;31, 2004. For financial reporting purposes, we
    initially recorded the convertible senior notes at their fair
    market value on the date of issuance. As of December&nbsp;31,
    2004, the accreted balance of the convertible senior notes in
    the accompanying consolidated balance sheet is approximately
    $68.5&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Includes $252.7&nbsp;million principal amount of
    7.25%&nbsp;senior exchangeable notes due July 2023 with cash
    interest payable through July 2008 at a rate of 2.49% on the
    principal amount at maturity. Thereafter, the notes will cease
    bearing cash interest and begin accruing original issue discount
    at a rate of 7.25% until maturity. The aggregate amount due at
    maturity, including accrued original issue discount from
    July&nbsp;31, 2008, will be $252.7&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Government guaranteed loan includes $343.2&nbsp;million with a
    variable interest rate of 2.38% at December&nbsp;31, 2004 and
    ratable principal payments due 2005 through 2008. Guarantee fees
    of approximately 8.0% of the outstanding guaranteed principal
    balance in 2005 through 2008 are payable to the
    U.S.&nbsp;Treasury Department and other loan participants.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Includes Arizona State loan of $0.8&nbsp;million due December
    2007 with a variable interest rate of 5.97% at December&nbsp;31,
    2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Includes $29.3&nbsp;million of 6.3% industrial development bonds
    due April 2023.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">39

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<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    Includes AVSA promissory notes of $15.8&nbsp;million due 2005
    with a variable interest rate of 3.61% at December&nbsp;31, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    Includes $36.0&nbsp;million of senior secured discount notes due
    2009 with a variable interest rate of 6.42% at December&nbsp;31,
    2004.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    Includes non-cancelable operating leases for 136 aircraft with
    remaining terms ranging from five&nbsp;months to approximately
    19&nbsp;years. Management estimates the debt equivalent value of
    these operating leases approximates $1.9&nbsp;billion using an
    interest rate of 10%.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)&nbsp;</TD>
    <TD align="left">
    Includes leases for terminal space, ground facilities, the
    flight training center and computer and other equipment under
    non-cancelable operating leases.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(12)&nbsp;</TD>
    <TD align="left">
    Includes Series&nbsp;1999 Terminal&nbsp;4 Improvements Bonds,
    due 2019.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(13)&nbsp;</TD>
    <TD align="left">
    Includes commitments to purchase a total of 20 Airbus aircraft
    and seven spare engines for delivery in 2005 through 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(14)&nbsp;</TD>
    <TD align="left">
    Includes minimum commitments under AWA&#146;s rate per engine
    hour agreement with General Electric Engine Services for
    overhaul maintenance services on CFM56-3B engines through April
    2008. Minimum monthly commitment amounts: for the period through
    and including April 2006&nbsp;&#151; $1.0&nbsp;million, for the
    period May 2006 through and including April 2008&nbsp;&#151;
    $250,000. These amounts reflect the termination agreement signed
    by AWA in late December 2004 which eliminates the V2500-A1
    engines from the program.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
We expect to fund these cash obligations from funds provided by
operations and future financings, if necessary. The cash
available to us from these sources, however, may not be
sufficient to cover these cash obligations because economic
factors outside our control may reduce the amount of cash
generated by operations or increase our costs. For instance, an
economic downturn or general global instability caused by
military actions, terrorism, disease outbreaks and natural
disasters could reduce the demand for air travel, which would
reduce the amount of cash generated by operations. An increase
in our costs, either due to an increase in borrowing costs
caused by a reduction in our credit rating or a general increase
in interest rates or due to an increase in the cost of fuel,
maintenance, aircraft and aircraft engines and parts, could
decrease the amount of cash available to cover the cash
obligations. In addition, we may be required to prepay portions
of the government guaranteed loan if our employee compensation
costs exceed a certain threshold and we may be required to
prepay portions of the term loan to the extent the value of the
collateral securing the term loan decreases. In any of these
cases, our liquidity may be adversely affected and we may not
have sufficient cash to prepay the government loan and meet our
other obligations. Moreover, the government guaranteed loan
contains a $100&nbsp;million minimum cash balance requirement.
As a result, we cannot use all of our available cash to fund
operations, capital expenditures and cash obligations without
violating this requirement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although there can be no assurances, management believes that
cash flow from operating activities, coupled with existing cash
balances and financing commitments, will be adequate to fund the
Company&#146;s operating and capital needs as well as enable it
to maintain compliance with its various debt agreements at least
through December&nbsp;31, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Financial Covenants and Credit Rating</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the minimum cash balance requirements, our
long-term debt agreements contain various negative covenants
that restrict our actions, including our ability to pay
dividends, or make other restricted payments. Finally, our
long-term debt agreements contain cross-default provisions,
which may be triggered by defaults by us under other agreements
relating to indebtedness. See <I>&#147;Risk Factors Relating to
the Company and Industry Related Risks&nbsp;&#151; Our high
level of fixed obligations limits our ability to fund general
corporate requirements and obtain additional financing, limits
our flexibility in responding to competitive developments and
increases our vulnerability to adverse economic and industry
conditions.&#148; </I>As of December&nbsp;31, 2004, Holdings and
AWA were in compliance with the covenants in their long-term
debt agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our credit ratings are relatively low, with Moody&#146;s
assessment of AWA&#146;s senior implied rating and senior
unsecured debt rating at B3 and Caa2, respectively,
Standard&nbsp;&#38; Poor&#146;s assessment of AWA&#146;s and
Holdings&#146; corporate credit ratings at B- and AWA&#146;s
senior unsecured rating at CCC and Fitch Ratings&#146;
assessment of AWA&#146;s long-term and unsecured debt rating at
CCC. In addition, Standard&nbsp;&#38; Poor&#146;s recently
placed AWA&#146;s aircraft debt on CreditWatch with negative
implications as part of a broader review of aircraft-backed
debt. Low credit ratings could cause our borrowing costs to
increase, which would increase our interest expense and could
affect our net income and our credit ratings could adversely
affect our ability to obtain additional financing. The rating
agencies base their ratings on our financial performance and
operations, our cash flow and liquidity, the level of our
indebtedness and industry conditions in general. If
</DIV>

<P align="center" style="font-size: 10pt;">40

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<DIV align="left" style="font-size: 10pt;">
our financial performance or industry conditions do not improve,
we may face future downgrades, which could further negatively
impact our borrowing costs and the prices of our equity or debt
securities. In addition, any downgrade of our credit ratings may
indicate a decline in our business and in our ability to satisfy
our obligations under our indebtedness. See <I>&#147;Risk
Factors Relating to the Company and Industry Related
Risks&nbsp;&#151; Because of our relatively low credit ratings,
our borrowing costs may be high and our ability to incur
additional debt may be impaired.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Other Information</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Labor Relations</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A large majority of the employees of the major airlines in the
United States are represented by labor unions. The majority of
AWA employees have selected union representation and/or
negotiated collective bargaining agreements with AWA. Although
there are few remaining employee groups who could engage in
organization efforts, we cannot predict the outcome of any
future efforts to organize those remaining employees or the
terms of any future labor agreements or the effect, if any, on
the Company&#146;s or AWA&#146;s operations or financial
performance. For more discussion, see <I>&#147;Risk Factors
Relating to the Company and Industry Related Risks&nbsp;&#151;
Negotiations with labor unions could divert management attention
and disrupt operations and new collective bargaining agreements
or amendments to existing collective bargaining agreements could
increase our labor costs and operating expenses.&#148;</I>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Income Taxes</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, the Company had net operating loss
carryforwards (&#147;NOLs&#148;) and tax credit carryforwards
for federal income tax purposes of approximately
$451.4&nbsp;million and $1.1&nbsp;million, respectively. The
NOLs expire during the years 2007 through 2024 while
approximately $0.2&nbsp;million of the tax credit carryforwards
will expire in 2005 and 2006. The Company also had capital loss
carryforwards for federal income tax purposes of approximately
$1.4&nbsp;million which expire in 2009. However, such
carryforwards are not available to offset federal (and in
certain circumstances, state) alternative minimum taxable
income. Further, as a result of a statutory &#147;ownership
change&#148; (as defined for purposes of Section&nbsp;382 of the
Internal Revenue Code) that occurred as a result of the
Company&#146;s reorganization in 1994, the Company&#146;s
ability to utilize its NOLs and business tax credit
carryforwards may be restricted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s reorganization and the associated
implementation of fresh start reporting in 1994 gave rise to
significant items of expense for financial reporting purposes
that are not deductible for income tax purposes. In large
measure, it is these nondeductible expenses that result in an
effective tax expense (benefit) rate for financial reporting
purposes that differs from the current federal statutory income
tax rate of 35%.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Government Regulations</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;19, 2001, the President signed into law the
ATSA. This law enhances aviation security measures and
federalizes many aspects of civil aviation security. The ATSA
established a new Transportation Security Administration, now
within the Department of Homeland Security. Under the ATSA,
substantially all security screeners at airports are federal
employees and a significant number of other airport security
functions are overseen and performed by federal employees,
including federal security managers, federal law enforcement
officers and federal air marshals. The ATSA mandated that
beginning on January&nbsp;18, 2002, all checked baggage at
United States airports be screened using explosive detection
systems or, where such systems are not yet available, using
other screening techniques such as positively matching baggage
to a passenger who has boarded an aircraft. The ATSA required
all checked baggage to be screened by explosive detection
systems by December&nbsp;31, 2003. Other requirements in the
ATSA that directly affect airline operations include the
strengthening of cockpit doors, deploying federal air marshals
on board certain flights, improving airline crew security
training and expanding use of criminal background checks of
employees. Implementation of these and other requirements of the
ATSA resulted in increased costs for air carriers and may result
in delays and disruptions to air travel. Under the ATSA, funding
for the new federal security system is provided by a
$2.50&nbsp;per enplanement ticket tax, not to exceed
$5.00&nbsp;per one-way trip, and by
</DIV>

<P align="center" style="font-size: 10pt;">41

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<DIV align="left" style="font-size: 10pt;">
imposing additional direct fees on air carriers. In 2004 and
2003, the Company&#146;s cost of compliance with the security
requirements of the ATSA was approximately $14.4&nbsp;million
and $13.2&nbsp;million, respectively. The estimated cost to the
Company of compliance with the security requirements of the ATSA
for 2005 is approximately $17.0&nbsp;million under current law.
Under the proposed White House budget released February&nbsp;7,
2005, this ticket tax for security fees would increase from
$2.50&nbsp;per leg to $5.50 with a cap of $8.00 one-way trip
with multiple legs and $16.00 for a round trip. This budget
proposal is subject to approval of Congress. As a result of
competitive pressure, AWA and other airlines may be unable to
recover all of these additional security costs from passengers
through increased fares. In addition, we cannot forecast what
new security and safety requirements may be imposed in the
future or the costs or financial impact of complying with any
such requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1997, new aviation taxes were imposed through
September&nbsp;30, 2007 to provide funding for the FAA. Included
in the law is a phase-in of a modified federal air
transportation excise tax structure with a system that includes
a domestic excise tax which started at 9% and declined to 7.5%
in 1999, a domestic segment tax that started at $1.00 and
increased to $3.00 in 2003, and an increase in taxes imposed on
international travel from $6.00&nbsp;per international departure
to an arrival and departure tax of $12.00 (each way). Both the
domestic segment tax and the international arrival and departure
tax are indexed for inflation. The legislation also included a
7.5% excise tax on certain amounts paid to an air carrier for
the right to provide mileage and similar awards (e.g., purchase
of frequent flyer miles by a credit card company). As a result
of competitive pressures, AWA and other airlines have been
limited in their ability to pass on the cost of these taxes to
passengers through fare increases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For additional information on government regulation and its
effect on the Company see <I>&#147;Government Regulations&#148;
</I>in Item&nbsp;1, Business.
</DIV>

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    <TD>
    <B><I>Related Party Transactions</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of our reorganization in 1994, Continental Airlines and
AWA entered into an alliance agreement that included code
sharing arrangements, reciprocal frequent flyer programs and
ground handling operations. In March 2002, AWA received notice
from Continental of its intention to terminate the code sharing
and frequent flyer agreements between the two airlines,
effective April&nbsp;26, 2002. Two of Continental&#146;s
directors are managing partners of Texas Pacific Group, which,
through TPG Advisors, Inc., effectively controls the voting
power of Holdings. See <I>&#147;Risk Factors Relating to the
Company and Industry Related Risks&nbsp;&#151; The stockholders
who effectively control the voting power of Holdings could take
actions that would favor their own personal interests to the
detriment of our interests.&#148; </I>AWA paid Continental
approximately $13.4&nbsp;million, $17.3&nbsp;million and
$25.5&nbsp;million and also received approximately
$4.1&nbsp;million, $5.0&nbsp;million and $15.9&nbsp;million in
2004 and 2003 and 2002, respectively, from Continental pursuant
to these agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Texas Pacific Group agreed to reimburse the Company
approximately $2.5&nbsp;million for expenses incurred by the
Company on its behalf. As a result, the Company recorded this as
a receivable as of December&nbsp;31, 2004. Subsequent to
December&nbsp;31, 2004, the Company received $1.3&nbsp;million
in such reimbursement and expects to receive an additional
$1.2&nbsp;million in 2005.
</DIV>

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    <TD>
    <B><I>Application of Critical Accounting Policies</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of our consolidated financial statements in
accordance with generally accepted accounting principles
requires that we make certain estimates and assumptions that
affect the reported amount of assets and liabilities, revenues
and expenses, and the disclosure of contingent assets and
liabilities at the date of our financial statements. We believe
our estimates and assumptions are reasonable; however, actual
results could differ from those estimates. We have identified
the following critical accounting policies that require the use
of significant judgments and estimates relating to matters that
are inherently uncertain and may result in materially different
results under different assumptions and conditions.
</DIV>

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    <TD> &#149;</TD>
    <TD align="left">
    <I>Passenger Revenue</I>&nbsp;&#151; Passenger revenue is
    recognized when transportation is provided. Ticket sales for
    transportation that has not yet been provided are recorded as
    air traffic liability. Passenger traffic commissions and related
    fees are expensed when the related revenue is</TD>
</TR>

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    recognized. Passenger traffic commissions and related fees not
    yet recognized are included as a prepaid expense. Due to complex
    pricing structures, refund and exchange policies, and interline
    agreements with other airlines, certain amounts are recognized
    in revenue using estimates regarding both the timing of the
    revenue recognition and the amount of revenue to be recognized.
    These estimates are generally based on the statistical analysis
    of our historical data. Any adjustments resulting from periodic
    evaluations of the estimated air traffic liability are included
    in results of operations during the period in which the
    evaluations are completed.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    <I>Accounting For Long-Lived Assets</I>&nbsp;&#151; Owned
    property and equipment are recorded at cost and depreciated to
    residual values over the estimated useful lives using the
    straight-line method. Leasehold improvements relating to flight
    equipment and other property on operating leases are amortized
    over the life of the lease, or the life of the asset, whichever
    is shorter. Interest on advance payments for aircraft
    acquisitions and on expenditures for aircraft improvements is
    capitalized and added to the cost of the asset. The estimated
    useful lives of our owned aircraft, jet engines, flight
    equipment and rotable parts range from five to 25&nbsp;years.
    The estimated useful lives of our technical support facility and
    flight training center in Phoenix, Arizona are 22&nbsp;years and
    30&nbsp;years, respectively. The estimated useful lives of our
    ground property and equipment range from three to 12&nbsp;years.
    We test for impairment losses on long-lived assets used in
    operations when events and circumstances indicate that the
    assets might be impaired as defined by SFAS&nbsp;No.&nbsp;144,
    <I>&#147;Accounting for the Impairment or Disposal of Long-Lived
    Assets.&#148; </I>An impairment loss is recognized if the
    carrying amount of the asset is not recoverable from its
    undiscounted cash flows and is measured as the difference
    between the carrying amount and fair value of the asset.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    <I>Frequent Flyer Accounting</I>&nbsp;&#151; We maintain a
    frequent travel award program known as &#147;FlightFund&#148;
    that provides a variety of awards to program members based on
    accumulated mileage. The estimated cost of providing the free
    travel is recognized as a liability and charged to operations as
    program members accumulate mileage. Travel awards are valued at
    the incremental cost of carrying one passenger, based on
    expected redemptions. Incremental costs are based on
    expectations of expenses to be incurred on a per passenger basis
    and include fuel, liability insurance, food, beverages, supplies
    and ticketing costs. We also sell mileage credits to companies
    participating in our FlightFund program, such as hotels, car
    rental agencies and credit card companies.
    Transportation-related revenue from the sale of mileage credits
    is deferred and recognized when transportation is provided. A
    change to the estimated cost per mile, minimum award level,
    percentage of revenue to be deferred or deferred recognition
    period could have a significant impact on our revenues or
    mileage liability accrual in the year of the change as well as
    future years.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    <I>Long-Term Maintenance Reserve</I>&nbsp;&#151; We record an
    accrual for the estimated cost of scheduled airframe and engine
    overhauls required to be performed on leased aircraft upon their
    return to the lessors. These estimates are based on historical
    costs and our assumptions regarding the renewal of aircraft
    leases. A significant change to AWA&#146;s fleet plan could have
    a material impact on our reserve requirements.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    <I>Deferred Tax Asset Valuation Allowance</I>&nbsp;&#151; The
    Company initially recorded a full valuation allowance relating
    to its net deferred tax assets at December&nbsp;31, 2001 and to
    tax benefits generated in 2002. In recording that valuation
    allowance, we considered whether it was more likely than not
    that all or a portion of the deferred tax assets will not be
    realized, in accordance with SFAS&nbsp;No.&nbsp;109,
    <I>&#147;Accounting for Income Taxes.&#148; </I>The Company was
    in a cumulative loss position three out of four years between
    December&nbsp;31, 2001 through December&nbsp;31, 2004, which
    weighed heavily in the overall determination that a valuation
    allowance was needed. As of December&nbsp;31, 2004, the Company
    had recorded a valuation allowance of $129.0&nbsp;million
    against its net deferred tax assets. The Company expects to
    continue to record a full valuation allowance on any future tax
    benefits until we have achieved</TD>
</TR>

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    several quarters of consecutive profitable results coupled with
    an expectation of continued profitability.</TD>
</TR>

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    <TD>
    <B><I>Recently Issued Accounting Pronouncements</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the Emerging Issues Task Force
(&#147;EITF&#148;) of the FASB reached a consensus on
EITF&nbsp;04-08, <I>&#147;The Effect of Contingently Convertible
Instruments on Diluted Earnings per Share,&#148; </I>which
requires that issuers of convertible securities with contingent
conversion features use the &#147;if-converted&#148; method to
calculate reported earnings per share (&#147;EPS&#148;)
irrespective of the contingent conversion trigger being met. As
approved by the FASB, this change is effective for years ending
after December&nbsp;15, 2004. The Company applied this
methodology in the accompanying consolidated statement of
operations. The impact of using the &#147;if-converted&#148;
method for the Company&#146;s 7.25%&nbsp;Notes is antidilutive
for the years ended December&nbsp;31, 2004 and 2002. For the
year ended December&nbsp;31, 2003, the inclusion of the
7.25%&nbsp;Notes reduced diluted EPS by $0.03 from $1.29 to
$1.26.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the FASB issued Revised Statement
No.&nbsp;123, <I>&#147;Accounting for Share-Based Payment&#148;
</I>(&#147;SFAS&nbsp;No.&nbsp;123R&#148;). This statement
requires the Company to recognize the grant-date fair value of
stock options in the Statement of Operations. In addition, the
Company will be required to calculate this compensation using
the fair-value based method, versus the intrinsic value method
previously allowed under SFAS&nbsp;No.&nbsp;123. This revision
is effective for periods beginning after June&nbsp;15, 2005.
Accordingly, the Company will adopt this revised SFAS effective
July&nbsp;1, 2005. The Company is currently evaluating how it
will adopt SFAS&nbsp;No.&nbsp;123R and has not determined the
method it will use to value granted stock options. The adoption
of SFAS&nbsp;No.&nbsp;123R is expected to have a material effect
on the Company&#146;s results of operations. See Note&nbsp;1,
<I>&#147;Summary of Significant Accounting Policies&#148;
</I>(n) <I>&#147;Stock Options&#148; </I>for the Company&#146;s
disclosure of the impact of the compensation cost associated
with stock options under SFAS&nbsp;No.&nbsp;123.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='110'></A>
</DIV>

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<B>Item 7A.&nbsp;Quantitative and Qualitative Disclosures About
Market Risk</B>
</DIV>

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    <B><I>Market Risk Sensitive Instruments</I></B></TD>
</TR>

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    <B>(a)&nbsp;Commodity Price Risk</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Aircraft jet fuel costs accounted for approximately 23% of the
Company&#146;s total operating expenses during 2004. At current
consumption levels, a one-cent per gallon change in the price of
jet fuel would affect the Company&#146;s annual operating
results in 2005 by approximately $5.7&nbsp;million which
includes Mesa. Accordingly, a substantial change in the price of
jet fuel would have a significant impact on the Company&#146;s
results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1996, AWA implemented a fuel hedging program to manage the
risk from fluctuating jet fuel prices. The program&#146;s
objectives are to provide some protection against extreme,
upward movements in the price of jet fuel and to protect
AWA&#146;s ability to meet its annual fuel expense budget. Under
the program, AWA may enter into certain hedging transactions
with approved counterparties for future periods generally not
exceeding 12&nbsp;months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, the Company had entered into
costless collar transactions that establish an upper and lower
limit on heating oil futures prices and basis swap transactions
that establish the spread between heating oil and jet fuel.
These transactions are in place with respect to approximately
42% of projected 2005 fuel requirements, including 67% related
to the first quarter of 2005, 46% related to the second quarter,
36% related to the third quarter and 20% for the fourth quarter.
See <I>&#147;Risk Factors Relating to the Company and Industry
Related Risks&nbsp;&#151; Fluctuations in jet fuel costs could
adversely affect our operating expenses and results.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The use of such hedging transactions in the Company&#146;s fuel
hedging program could result in the Company not fully benefiting
from certain declines in heating oil futures prices. At
December&nbsp;31, 2004, the Company estimates that a 10%
increase in heating oil futures prices would increase the fair
value of the costless collar transactions by approximately
$7.5&nbsp;million. The Company estimates that a 10% decrease in
</DIV>

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<DIV align="left" style="font-size: 10pt;">
heating oil futures prices would decrease the fair value of the
costless collar transactions by approximately $9.6&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;14, 2005, approximately 45% and 2% of
AWA&#146;s remaining 2005 and 2006, respectively, projected fuel
requirements are hedged.
</DIV>

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    <B>(b)&nbsp;Interest Rate Risk</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s exposure to interest rate risk relates
primarily to its variable rate long-term debt obligations. At
December&nbsp;31, 2004, the Company&#146;s variable-rate
long-term debt obligations of approximately $545.7&nbsp;million
represented approximately 69.4% of its total long-term debt. If
interest rates increased 10% in 2004, the impact on the
Company&#146;s results of operations would not be material.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='111'></A>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item 8A.&nbsp;Consolidated Financial Statements and
Supplementary Data&nbsp;&#151; America West Holdings
Corporation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Consolidated balance sheets of Holdings as of December&nbsp;31,
2004 and 2003, and the related consolidated statements of
operations, cash flows and stockholders&#146; equity and
comprehensive income for each of the years in the three-year
period ended December&nbsp;31, 2004, together with the related
notes and the reports of KPMG LLP, and PricewaterhouseCoopers
LLP, independent registered public accounting firms, are set
forth on the following pages.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Board of Directors and Stockholders
</DIV>

<DIV align="left" style="font-size: 10pt;">
America West Holdings Corporation:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying consolidated balance sheets of
America West Holdings Corporation and subsidiary as of
December&nbsp;31, 2004 and 2003, and the related consolidated
statements of operations, cash flows and stockholders&#146;
equity and comprehensive income for the years then ended. These
consolidated financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of America West Holdings Corporation and subsidiary as
of December&nbsp;31, 2004 and 2003, and the results of their
operations and their cash flows for the years then ended, in
conformity with U.S.&nbsp;generally accepted accounting
principles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of America West Holdings Corporation&#146;s
internal control over financial reporting as of
December&nbsp;31, 2004, based on criteria established in
<I>Internal Control&nbsp;&#151; Integrated Framework </I>issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated March&nbsp;11, 2005,
expressed an unqualified opinion on management&#146;s assessment
of,<I> </I>and an adverse opinion on the effective operation of,
internal control over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in Note&nbsp;2 to the accompanying consolidated
financial statements, the Company has restated the consolidated
balance sheet as of December&nbsp;31, 2003 and the consolidated
statement of changes in stockholders&#146; equity and
comprehensive income for the year then ended. As discussed in
Note&nbsp;13 to the accompanying consolidated financial
statements, the Company restated its dilutive earnings per share
for the year ended December&nbsp;31, 2003 in connection with the
adoption of Emerging Issue Task Force 04-8, <I>&#147;The Effect
of Contingently Convertible Instruments on Diluted Earnings Per
Share&#148;</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>KPMG LLP</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
Phoenix, Arizona
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;11, 2005
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Board of Directors and Stockholders
</DIV>

<DIV align="left" style="font-size: 10pt;">
of America West Holdings Corporation:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the accompanying consolidated statements of
operations, of cash flows and of stockholders&#146; equity and
comprehensive income for the year ended December&nbsp;31, 2002
present fairly, in all material respects, the results of
operations and cash flows of America West Holdings Corporation
and its subsidiaries for the year ended December&nbsp;31, 2002,
in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these
statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in Note&nbsp;1(k) to the consolidated financial
statements, the Company changed its method of accounting for
reorganization value in excess of amounts allocable to
identifiable assets in connection with the adoption of Statement
of Financial Accounting Standards No.&nbsp;142,
<I>&#147;Goodwill and Other Intangible Assets,&#148;
</I>effective January&nbsp;1, 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PricewaterhouseCoopers LLP</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
Phoenix, Arizona
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;24, 2003
</DIV>

<P align="center" style="font-size: 10pt;">47

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Corporation</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Consolidated Balance Sheets</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004 and 2003</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands except share data)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(As restated&nbsp;&#151;</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>see Note&nbsp;2)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ASSETS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>149,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>153,357</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>322,615</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,900</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, less allowance for doubtful accounts of
    $1,487 in 2004 and $5,807 in 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,235</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expendable spare parts and supplies, less allowance for
    obsolescence of $14,759 in 2004 and $12,254 in 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,575</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>141,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129,368</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>624,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>784,050</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Flight equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>926,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>858,395</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>290,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>273,284</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment purchase deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,050</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,281,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,177,729</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>624,742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>570,017</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>656,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>607,712</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investments in debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,740</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69,876</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112,007</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>193,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>222,623</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,475,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,614,385</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LIABILITIES AND STOCKHOLDERS&#146; EQUITY</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current maturities of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>151,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>103,899</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current obligations under capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,442</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>210,288</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Air traffic liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>194,718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,486</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation and vacation benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,045</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,846</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,277</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>664,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>649,283</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>635,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>688,965</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital leases, less current obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,467</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred credits and other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>141,681</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies (see Note&nbsp;6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock, $.01&nbsp;par value. Authorized
    48,800,000&nbsp;shares; no shares issued</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;A common stock, $.01&nbsp;par value. Authorized
    1,200,000&nbsp;shares; issued and outstanding
    859,117&nbsp;shares at December&nbsp;31, 2004 and 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;B common stock, $.01&nbsp;par value. Authorized
    100,000,000&nbsp;shares; issued and outstanding
    51,564,865&nbsp;shares in 2004 and 51,239,200&nbsp;shares in 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>512</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>632,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>631,269</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(288,617</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(199,594</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Cost of Class&nbsp;B common stock in treasury,
    16,437,575&nbsp;shares in 2004 and 16,283,895&nbsp;shares in 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(307,906</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(306,206</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125,989</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,475,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,614,385</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Consolidated Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">48

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Corporation</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Consolidated Statements of Operations</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the Years Ended December&nbsp;31, 2004, 2003 and 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands except per share data)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,196,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,113,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,929,444</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cargo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,574</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90,098</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,338,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,254,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,047,116</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Salaries and related costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>656,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>660,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>603,657</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft rents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>304,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>297,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>295,016</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other rents and landing fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158,290</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft fuel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>557,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>375,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>299,284</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agency commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,953</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft maintenance materials and repairs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>205,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>223,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,691</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,201</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges (credits), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,432</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,030</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>427,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>453,418</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,382,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,232,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,206,540</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(43,771</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(159,424</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating income (expenses):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,549</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(79,608</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(79,665</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(72,442</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal government assistance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,466</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain (loss) on disposition of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,852</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on sale of investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain (loss) on derivative instruments, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(656</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>602</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total nonoperating income (expenses), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45,222</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(55,333</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes (benefit) and cumulative
    effect of change in accounting principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(88,993</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(214,757</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,071</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before cumulative effect of change in accounting
    principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(179,686</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative effect of change in accounting principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(208,223</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(387,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic earnings (loss) per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) before cumulative effect of change in accounting
    principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.33</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative effect of change in accounting principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6.17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic earnings (loss) per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted earnings (loss) per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) before cumulative effect of change in accounting
    principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.33</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative effect of change in accounting principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6.17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted earnings (loss) per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares used for computation:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,723</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,723</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Consolidated Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">49

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Corporation</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Consolidated Statements of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the Years Ended December&nbsp;31, 2004, 2003 and 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(387,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,894</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of capitalized maintenance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,576</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of deferred credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,208</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,970</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,077</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of deferred rent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,452</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of debt issue costs and guarantee fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,978</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of bond discount</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,894</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of investment discount and premium, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,432</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,055</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on sale of investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,287</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative effect of change in accounting principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>208,223</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,746</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in operating assets and liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42,900</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in accounts receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,337</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,408</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,445</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in expendable spare parts and supplies, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,681</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,061</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49,286</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45,932</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64,726</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in other assets, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,634</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,417</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(71,488</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in air traffic liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,894</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in accrued compensation and vacation benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,347</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,050</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in accrued taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,050</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(24,647</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in other accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,689</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,348</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,022</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>241,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,877</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(219,383</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(154,365</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(157,202</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sale of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(487,505</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(633,711</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(69,987</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales of short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>707,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>364,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of investments in debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(80,436</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales of investments in debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,215</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,908</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sales of aircraft.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175,478</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sales of other property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sale of NLG investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(491,614</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,340</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>141,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>435,386</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(175,640</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,832</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(192,596</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payment of debt issue costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,152</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,236</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,987</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,719</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,299</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(41,157</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>208,102</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,266</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(182,393</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>178,885</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>153,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>335,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156,865</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>149,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>153,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>335,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Consolidated Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">50
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Corporation</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Consolidated Statements of Stockholders&#146; Equity and
Comprehensive Income</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the Years Ended December&nbsp;31, 2004, 2003 and 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands except share data)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Class A</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Class B</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additional</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Retained</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Class B</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid-In</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Earnings/</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Treasury</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Deficit)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Income</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2001</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>593,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>130,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(306,206</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>420,363</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(387,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(387,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive income (loss):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Changes in the fair value of derivative financial instruments,
    net of tax</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>640</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total comprehensive income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(387,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(387,269</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of warrants to purchase Class&nbsp;B common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,384</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cancellation of 15,166&nbsp;shares of Class&nbsp;B common stock
    issued as restricted stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(300</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(300</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2002</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>628,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(257,014</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(306,206</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,178</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Correction of other comprehensive income(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,030</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,030</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Conversion of 82,314&nbsp;shares of Class&nbsp;A common stock to
    Class&nbsp;B common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of 1,653,908&nbsp;shares of Class&nbsp;B common stock
    pursuant to the exercise of stock warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of 451,525&nbsp;shares of Class&nbsp;B common stock
    pursuant to the exercise of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,465</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cancellation of 3,727&nbsp;shares of Class&nbsp;B common stock
    issued as restricted stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2003, as restated</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>631,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(199,594</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(306,206</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125,989</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive loss:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of 153,680&nbsp;shares of Class&nbsp;B treasury
    stock due to default on loan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,700</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,700</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of 151,321&nbsp;shares of Class&nbsp;B common stock
    pursuant to the exercise of stock warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of 174,344&nbsp;shares of Class&nbsp;B common stock
    pursuant to the exercise of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>635</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accelerated vesting</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>544</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>632,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(288,617</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(307,906</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36,447</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Correction of Other Comprehensive Income&nbsp;&#151; See
    Note&nbsp;2, <I>&#147;Restatement of Previously Reported
    Amounts&#148;</I></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Consolidated Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">51

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Corporation</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Notes to Consolidated Financial Statements</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004, 2003 and 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
America West Holdings Corporation (&#147;Holdings&#148; or the
&#147;Company&#148;) is a holding company that owns all of the
stock of America West Airlines, Inc. (&#147;AWA&#148; or the
&#147;Airline&#148;). AWA accounted for most of the
Company&#146;s revenues and expenses in 2004. Based on 2004
operating revenues and available seat miles (&#147;ASMs&#148;),
AWA is the eighth largest passenger airline in the United States
with the lowest cost structure of the eight major hub-and-spoke
airlines. At the end of 2004, AWA operated a fleet of 138
aircraft with an average fleet age of 10.7&nbsp;years and served
63 destinations in North America, including eight in Mexico,
three in Canada and one in Costa Rica. Through regional alliance
and code share arrangements with other airlines, AWA served an
additional 51 destinations in North America and the Middle East
as of December&nbsp;31, 2004. In 2004, AWA flew approximately
21.1&nbsp;million passengers and generated revenues of
approximately $2.3&nbsp;billion. Prior to 2004, Holdings owned
the outstanding stock of The Leisure Company (&#147;TLC&#148;),
which sells individual and group travel packages, including air
transportation of AWA and Hawaiian Airlines, hotel
accommodations, car rentals, cruise packages and other travel
products, directly to consumers as well as through retail travel
agencies in the United States, Canada, Mexico and Costa Rica. As
of January&nbsp;1, 2004, TLC has been merged into AWA and
continues to operate as the America West Vacations division of
AWA.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Summary of Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>Basis of Presentation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated financial statements include the accounts of
Holdings and its wholly owned subsidiary AWA, which includes its
wholly owned subsidiary Flight Training Center Hangar Plan. All
significant intercompany balances and transactions have been
eliminated in consolidation. Certain reclassifications have been
made to the prior years&#146; consolidated financial statements
to conform to the current year&#146;s presentation.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Cash, Cash Equivalents and Short-term Investments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash equivalents consist of all highly liquid debt instruments
purchased with original maturities of three months or less.
Short-term investments consist of cash invested in certain debt
securities with original maturities greater than 90&nbsp;days
and less than one year. The debt securities are classified as
held to maturity and are carried at amortized cost that
approximates fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company reclassified investments in auction rate securities
previously classified as cash equivalents to short-term
investments on the accompanying consolidated balance sheets.
Investments reclassified in 2004 and 2003 were
$58.4&nbsp;million and $249.7&nbsp;million, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</B></TD>
    <TD>
    <B>Expendable Spare Parts and Supplies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Flight equipment expendable spare parts and supplies are valued
at average cost. An allowance for obsolescence is provided, over
the estimated useful life of the related aircraft and engines,
for spare parts expected to be on hand at the date the aircraft
are retired from service.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</B></TD>
    <TD>
    <B>Property and Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment are recorded at cost. Interest
capitalized on advance payments for aircraft acquisitions and on
expenditures for aircraft improvements are part of these costs.
Interest capitalized for the years ended December&nbsp;31, 2004,
2003 and 2002, was $2.2&nbsp;million, $1.6&nbsp;million and
$3.0&nbsp;million, respectively. Property and equipment is
depreciated and amortized to residual values over the estimated
useful lives or the lease term, whichever is less, using the
straight-line method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The estimated useful lives for the Company&#146;s ground
property and equipment range from three to 12&nbsp;years for
owned property and equipment and up to 30&nbsp;years for the
flight training facility. The estimated useful lives of the
Company&#146;s owned aircraft, jet engines, flight equipment and
rotable parts range from five to 25&nbsp;years. Leasehold
improvements relating to flight equipment and other property on
operating leases are amortized over the life of the lease or the
life of the asset, whichever is shorter.
</DIV>

<P align="center" style="font-size: 10pt;">52

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company records impairment losses on long-lived assets used
in operations when events and circumstances indicate that the
assets might be impaired as defined by Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;144,
<I>&#147;Accounting for the Impairment or Disposal of Long-Lived
Assets.&#148;</I> Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset
to undiscounted future net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less cost to sell.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</B></TD>
    <TD>
    <B>Restricted Cash</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Restricted cash includes cash deposits securing certain letters
of credit and surety bonds and cash deposits held by
institutions that process credit card sales transactions.
Current restricted cash includes amounts set aside in an
irrevocable trust for the redemption of the
10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
unsecured notes that was subsequently paid on January&nbsp;26,
2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</B></TD>
    <TD>
    <B>Aircraft Maintenance and Repairs</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Routine maintenance and repairs are charged to expense as
incurred. The cost of major scheduled airframe, engine and
certain component overhauls are capitalized and amortized over
the periods benefited and are included in aircraft maintenance
materials and repairs expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first quarter of 2004, the Company revised the estimated
useful life for certain aircraft and related spare parts
inventory as a result of changes in AWA&#146;s fleet plan and
for capitalized maintenance on certain of its engines as a
result of changes in aircraft utilization. The net impact of
this change in estimate decreased the net loss for 2004 by
approximately $18.4&nbsp;million or $0.51&nbsp;per basic and
diluted share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An accrual for the estimated cost of scheduled airframe and
engine overhauls required to be performed on leased aircraft
prior to their return to the lessors has also been recorded.
These estimates are based on historical costs and our
assumptions regarding the renewal of aircraft leases.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</B></TD>
    <TD>
    <B>Derivative Instruments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA&#146;s fuel hedging contracts do not qualify as cash flow
hedges under Statement of Financial Accounting Standards
No.&nbsp;133, <I>&#147;Accounting for Derivative Instruments and
Hedging Activities&#148;
</I>(&#147;SFAS&nbsp;No.&nbsp;133&#148;). See Note&nbsp;2,
<I>&#147;Restatement of Previously Reported Amounts.&#148;
</I>Accordingly, the derivative hedging instruments are recorded
as an asset or liability on the balance sheet at fair value and
the changes in the fair values are recorded in <I>&#147;Gain
(Loss) on Derivative Instruments, Net&#148;</I> in the
accompanying consolidated statements of operations. See
Note&nbsp;12, <I>&#147;Nonoperating Income
(Expenses)&nbsp;&#151; Other, Net.&#148;</I>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)</B></TD>
    <TD>
    <B>Frequent Flyer Awards</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company maintains a frequent travel award program known as
&#147;FlightFund&#148; that provides a variety of awards to
program members based on accumulated mileage. The estimated cost
of providing the free travel, using the incremental cost method
as adjusted for estimated redemption rates, is recognized as a
liability and charged to operations as program members
accumulate mileage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company also sells mileage credits to companies
participating in its FlightFund program, such as hotels, car
rental agencies and credit card companies.
Transportation-related revenue from the sale of mileage credits
is deferred and recognized when transportation is provided.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)</B></TD>
    <TD>
    <B>Deferred Credits&nbsp;&#151; Operating Leases</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Rents for operating leases were adjusted to fair market value
when the Company emerged from bankruptcy in 1994. The net
present value of the difference between the stated lease rates
and the fair market rates has been recorded as a deferred credit
in the accompanying consolidated balance sheets. The deferred
credit will be increased through charges to interest expense and
decreased on a straight-line basis as a reduction in rent
expense over the applicable lease periods. At December&nbsp;31,
2004 and 2003, the unamortized balance of the deferred credit
was $38.3&nbsp;million and $44.6&nbsp;million, respectively.
</DIV>

<P align="center" style="font-size: 10pt;">53

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2002, AWA closed a $429&nbsp;million loan supported
by a $380&nbsp;million government loan guarantee. This loan
triggered aircraft rent concessions negotiated with
approximately 20 aircraft lessors. Approximately
$18.1&nbsp;million of aircraft rent, which was accrued as of
December&nbsp;31, 2001, was waived by the aircraft lessors. This
amount has been recorded as a deferred credit in the
accompanying consolidated balance sheet and will be amortized
over the remaining lives of the applicable leases as a reduction
in rent expense. At December&nbsp;31, 2004 and 2003, the
unamortized balance of the deferred credit was approximately
$4.2&nbsp;million and $7.8&nbsp;million, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)</B></TD>
    <TD>
    <B>Passenger Revenue</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Passenger revenue is recognized when transportation is provided.
Ticket sales for transportation that has not yet been provided
are recorded as air traffic liability. Passenger traffic
commissions and related fees are expensed when the related
revenue is recognized. Due to complex pricing structures, refund
and exchange policies, and interline agreements with other
airlines, certain amounts are recognized in revenue using
estimates regarding both the timing of the revenue recognition
and the amount of revenue to be recognized. These estimates are
generally based on the statistical analysis of the
Company&#146;s historical data. Any adjustments resulting from
periodic evaluations of the estimated air traffic liability are
included in results of operations during the period in which the
evaluations are completed.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)</B></TD>
    <TD>
    <B>Reorganization Value in Excess of Amounts Allocable to
    Identifiable Assets (&#147;ERV&#148;)</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2001, the Financial Accounting Standards Board
(&#147;FASB&#148;) issued SFAS&nbsp;No.&nbsp;142,
<I>&#147;Goodwill and Other Intangible Assets.&#148;
</I>SFAS&nbsp;No.&nbsp;142 primarily addresses the accounting
for goodwill and intangible assets subsequent to their
acquisition. SFAS&nbsp;No.&nbsp;142 does not permit the
amortization of goodwill as required by Accounting Principles
Board (&#147;APB&#148;) Opinion No.&nbsp;17, <I>&#147;Intangible
Assets.&#148; </I>Rather, goodwill is subject to a periodic
impairment test, using a two-step process. The first step is to
identify a potential impairment. The second step of the goodwill
impairment test measures the amount of the impairment loss,
using a fair value-based approach. Under SFAS&nbsp;No.&nbsp;142,
ERV is reported as goodwill and accounted for in the same manner
as goodwill. SFAS&nbsp;No.&nbsp;142 was effective for fiscal
years beginning after December&nbsp;15, 2001. Upon adoption of
this statement on January&nbsp;1, 2002, the Company recorded an
impairment loss of $208.2&nbsp;million, which was supported by
an independent valuation of the Company. The impairment loss was
recorded as the cumulative effect of a change in accounting
principle.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)</B></TD>
    <TD>
    <B>Advertising Costs</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company expenses the costs of advertising as incurred.
Advertising expense for the years ended December&nbsp;31, 2004,
2003 and 2002 was $8.3&nbsp;million, $9.0&nbsp;million and
$10.6&nbsp;million, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. A valuation allowance is
established, if necessary, for the amount of any tax benefits
that, based on available evidence, are not expected to be
realized.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)</B></TD>
    <TD>
    <B>Stock Options</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, the Company had two stock-based
employee compensation plans, which are described more fully in
Note&nbsp;9, <I>&#147;Stock Options and Awards.&#148; </I>The
Company accounts for its stock option plans in accordance with
the provisions of APB Opinion No.&nbsp;25, <I>&#147;Accounting
for Stock Issued to Employees,&#148; </I>and related
interpretations. As such, compensation expense would be recorded
on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. Accordingly, no
compensation cost has been recognized for stock options in the
consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for
its stock options under
</DIV>

<P align="center" style="font-size: 10pt;">54

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<DIV align="left" style="font-size: 10pt;">
SFAS&nbsp;No.&nbsp;123, <I>&#147;Accounting for Share-Based
Payment,&#148; </I>the Company&#146;s net income (loss) and
earnings (loss) per share would have been reduced to the pro
forma amounts indicated below:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands except per share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss), as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(387,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock-based compensation expense, net of income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,874</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,709</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(94,897</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(391,618</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic&nbsp;&#151; as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic&nbsp;&#151; pro forma</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.63</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted&nbsp;&#151; as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted&nbsp;&#151; pro forma</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.63</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)</B></TD>
    <TD>
    <B>New Accounting Standards</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the Emerging Issues Task Force
(&#147;EITF&#148;) of the FASB reached a consensus on
EITF&nbsp;04-08, <I>&#147;The Effect of Contingently Convertible
Instruments on Diluted Earnings per Share,&#148; </I>which
requires that issuers of convertible securities with contingent
conversion features use the &#147;if-converted&#148; method to
calculate reported earnings per share (&#147;EPS&#148;)
irrespective of the contingent conversion trigger being met. As
approved by the FASB, this change is effective for years ending
after December&nbsp;15, 2004. The Company applied this
methodology in the accompanying consolidated statement of
operations. The impact of using the &#147;if-converted&#148;
method for the Company&#146;s 7.25%&nbsp;Notes is antidilutive
for the years ended December&nbsp;31, 2004 and 2002. For the
year ended December&nbsp;31, 2003, the inclusion of the
7.25%&nbsp;Notes reduced diluted EPS by $0.03 from $1.29 to
$1.26.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the FASB issued Revised Statement
No.&nbsp;123, <I>&#147;Accounting for Share-Based Payment&#148;
</I>(&#147;SFAS&nbsp;No.&nbsp;123R&#148;). This statement
requires the Company to recognize the grant-date fair value of
stock options in the Statement of Operations. In addition, the
Company will be required to calculate this compensation using
the fair-value based method, versus the intrinsic value method
previously allowed under SFAS&nbsp;No.&nbsp;123. This revision
is effective for periods beginning after June&nbsp;15, 2005.
Accordingly, the Company will adopt this revised SFAS effective
July&nbsp;1, 2005. The Company is currently evaluating how it
will adopt SFAS&nbsp;No.&nbsp;123R and has not determined the
method it will use to value granted stock options. The adoption
of SFAS&nbsp;No.&nbsp;123R is expected to have a material effect
on the Company&#146;s results of operations. See Note&nbsp;1,
<I>&#147;Summary of Significant Accounting Policies&#148;
</I>(n) <I>&#147;Stock Options&#148; </I>for the Company&#146;s
disclosure of the impact of the compensation cost associated
with stock options under SFAS&nbsp;No.&nbsp;123.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)</B></TD>
    <TD>
    <B>Use of Estimates</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management of the Company has made certain estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to
prepare these consolidated financial statements in conformity
with accounting principles generally accepted in the United
States. Actual results could differ from those estimates.
</DIV>

<P align="center" style="font-size: 10pt;">55

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)</B></TD>
    <TD>
    <B>Reclassifications</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company reclassified amounts related to settled fuel hedge
transactions and mark-to-market adjustments on open hedge
instruments from <I>&#147;Aircraft Fuel&#148; </I>expense to
<I>&#147;Gain (Loss) on Derivative Instruments, Net&#148; </I>in
the accompanying consolidated statement of operations. In fiscal
years 2004 and 2003, such amounts reduced fuel expense while in
fiscal years 2002 and 2001, such amounts increased fuel expense,
as originally classified. The amounts reclassified are as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amounts Reclassified</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,529</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,746</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(656</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Restatement of Previously Reported Amounts</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Derivative Instruments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February&nbsp;2005, management undertook a review of the
Company&#146;s accounting for its fuel hedging transactions. As
a result of this review, management concluded that the
Company&#146;s fuel hedging transactions did not qualify for
hedge accounting under U.S.&nbsp;generally accepted accounting
principles. Accordingly, management concluded that the financial
statements for prior periods required restatement to reflect the
fair value of fuel hedging contracts in the balance sheets and
statements of stockholders equity and comprehensive income of
Holdings and AWA. Specifically, (i)&nbsp;Holdings has restated
its balance sheet and statement of stockholders&#146; equity and
comprehensive income as of and for the year ended
December&nbsp;31, 2003, and (ii)&nbsp;AWA has restated its
balance sheet and statement of stockholder&#146;s equity and
comprehensive income as of and for the year ended
December&nbsp;31, 2003, and (iii)&nbsp;Holdings and AWA have
restated their 2004 and 2003 interim financial results to
correct the aforementioned accounting errors. The unaudited
interim results as originally reported and as restated are
presented in Note&nbsp;16, <I>&#147;Quarterly Financial Data
(Unaudited).&#148; </I>The Company restated its 2003
consolidated balance sheet to reduce the carrying value of its
derivative instruments asset by $12.5&nbsp;million, which served
to record the asset at fair value of open contracts as of
December&nbsp;31, 2003. The restatement also eliminated
$12.5&nbsp;million in accumulated other comprehensive income,
$2.0&nbsp;million of which was previously recorded in the 2003
beginning balance of accumulated other comprehensive income. The
restated amount of other assets is $112&nbsp;million in the
accompanying 2003 consolidated balance sheet. The restatement
eliminates the balance in accumulated other comprehensive income
in the accompanying 2003 consolidated balance sheet and
consolidated statement of stockholders&#146; equity and
comprehensive income.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Investments in Debt Securities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash equivalents and short-term investments as of
December&nbsp;31 are classified as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,206</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and money market funds</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147,647</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,504</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>149,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>153,357</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term investments:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>126,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>318,845</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,770</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>322,615</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total cash equivalents and short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>275,742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>475,972</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the Company had long-term investments in debt
securities of $30.0&nbsp;million and $40.7&nbsp;million as of
December&nbsp;31, 2004 and 2003, respectively. Long-term
investments consist of cash
</DIV>

<P align="center" style="font-size: 10pt;">56

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<DIV align="left" style="font-size: 10pt;">
invested in certain debt securities with maturities greater than
one year. The debt securities are classified as held to maturity
and are carried at amortized cost that approximates fair value.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Financial Instruments and Risk Management</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>Fair Value of Financial Instruments</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Cash Equivalents, Short-term Investments and
    Receivables</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The carrying amount approximates fair value because of the
short-term nature of these instruments.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Investments in Equity Securities</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2000, Holdings completed the sale of a majority interest
in The Leisure Company, (&#147;TLC&#148;), currently operating
as a division in AWA as America West Vacations, retail
operations, National Leisure Group and The Vacation Store, to
Softbank Capital Partners and General Catalyst LLC. TLC received
$52&nbsp;million in cash and retained a 12% passive ownership
interest in the restructured venture. In response to additional
capital calls, TLC invested an additional $1.2&nbsp;million in
National Leisure Group during 2001. The investment was carried
on the Company&#146;s consolidated balance sheet at cost, which
approximated $7.7&nbsp;million at December&nbsp;31, 2002. In the
fourth quarter of 2003, Holdings completed the sale of its 12%
interest in National Leisure Group to PAR Capital. PAR Capital
owned $10.45&nbsp;million face value of the Company&#146;s
10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
unsecured notes. PAR Capital purchased the Company&#146;s
investment in National Leisure Group in exchange for the
$10.45&nbsp;million face value of the
10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;notes
plus $0.3&nbsp;million in cash. This resulted in a
$3.3&nbsp;million nonoperating gain. See Note&nbsp;12,
<I>&#147;Nonoperating Income (Expenses)&nbsp;&#151; Other,
Net.&#148;</I>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Long-term Debt</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004 and 2003, the fair value of long-term
debt was approximately $721.5&nbsp;million and
$845.6&nbsp;million, respectively. The Company&#146;s variable
rate long-term debt with a carrying value of $545.7&nbsp;million
and $555.9&nbsp;million at December&nbsp;31, 2004 and 2003,
respectively, approximates fair value because these borrowings
have variable interest rate terms that approximate market
interest rates for similar debt instruments. The fair values of
the Company&#146;s other long-term debt are determined based on
quoted market prices if available or market prices for
comparable debt instruments.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Fuel Price Risk Management</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under its fuel hedging program, the Company may enter into
certain hedging transactions with approved counterparties for a
period generally not exceeding 12&nbsp;months. As of
December&nbsp;31, 2004, the Company had entered into costless
collar and basis swap transactions hedging approximately 42% of
its projected 2005 fuel requirements. The fair value of the
Company&#146;s financial derivative instruments was a net asset
of approximately $0.2&nbsp;million and $2.7&nbsp;million at
December&nbsp;31, 2004 and 2003, respectively. See Note&nbsp;2,
<I>&#147;Restatement of Previously Reported Amounts.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is exposed to credit risks in the event any
counterparty fails to meet its obligations. The Company does not
anticipate such non-performance as counterparties are selected
based on credit ratings, exposure to any one counterparty is
limited based on formal guidelines and the relative market
positions with such counterparties are closely monitored.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</B></TD>
    <TD>
    <B>Concentration of Credit Risk</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company does not believe it is subject to any significant
concentration of credit risk. Most of the Company&#146;s
receivables result from tickets sold to individual passengers
through the use of major credit cards or from tickets sold by
other airlines and used by passengers on AWA. These receivables
are short-term, generally being settled shortly after the sale.
</DIV>

<P align="center" style="font-size: 10pt;">57

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Long-Term Debt</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Long-term debt at December&nbsp;31, 2004 and 2003 consists of
the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <U>Secured</U></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment notes payable, variable interest rates of 2.88% to
    3.37%, averaging 2.96%, installments due 2005 through 2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,454</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GECC term loan, variable interest rate of 6.41%, quarterly
    installments beginning 2006 through 2010(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Term loan, variable interest rate, paid off September 2004(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74,775</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior secured discount notes, variable interest rate of 6.42%,
    installments due 2005 through 2009(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>186,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,229</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <U>Unsecured</U></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Government guaranteed loan, variable interest rate of 2.38%,
    installments due 2005 through 2008(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>343,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>429,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
    unsecured notes, interest only payments until due in 2005(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,548</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    7.5%&nbsp;convertible senior notes, interest only payments until
    due in 2009(e)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,328</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    7.25%&nbsp;senior exchangeable notes, due 2023 with cash
    interest at 2.49% payable through 2008 and original issue
    discount of 7.25% thereafter(f)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,695</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment notes payable, interest rates of 90-day LIBOR +1.25%,
    averaging 3.61%, installments due through 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Industrial development bonds, fixed interest rate of 6.3% due
    2023(g)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State loan, variable interest rate of 5.97%, installments due
    2005 through 2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>793,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>861,621</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>979,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>984,850</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Unamortized discount on debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(193,246</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(191,986</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(151,183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(103,899</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>635,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>688,965</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    On September&nbsp;10, 2004, AWA entered into a term loan
    financing with GECC providing for loans in an aggregate amount
    of $110.6&nbsp;million. AWA used approximately
    $77.0&nbsp;million of the proceeds from this financing to repay
    in full its term loan with Mizuho Corporate Bank, Ltd. and
    certain other lenders and to pay certain costs associated with
    this transaction. AWA used the remaining proceeds for general
    corporate purposes. The new term loan financing consists of two
    secured term loan facilities: a $75.6&nbsp;million term loan
    facility secured primarily by spare parts, rotables and
    appliances (the &#147;Spare Parts Facility&#148;); and a
    $35.0&nbsp;million term loan facility secured primarily by
    aircraft engines and parts installed in such engines (the
    &#147;Engine Facility&#148;).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The facilities are cross-collateralized on a subordinated basis
    and the collateral securing the facilities also secures on a
    subordinated basis certain of AWA&#146;s other existing debt and
    lease obligations to GECC and its affiliates.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The loans under the Spare Parts Facility are payable in full at
    maturity on September&nbsp;10, 2010. The loans under the Engine
    Facility are payable in equal quarterly installments of
    $1.3&nbsp;million beginning on March&nbsp;10, 2006 through
    June&nbsp;10, 2010 with the remaining loan amount of
    $11.8&nbsp;million payable at maturity on September&nbsp;10,
    2010. The loans under each facility may be prepaid in an amount
    not less than $5&nbsp;million at any time after the 30th monthly
    anniversary of the funding date under such facility. If AWA
    fails to maintain a certain ratio of rotables to loans under the
    Spare Parts Facility, it may be required to pledge additional
    rotables or cash as collateral, provide a letter of credit or
    prepay some or all of the loans under the Spare Parts Facility.
    In addition, the loans under the Engine Facility are subject to
    mandatory prepayment upon the occurrence of certain events of
    loss applicable to, or certain dispositions of, aircraft engines
    securing the facility.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Principal amounts outstanding under the loans bear interest at a
    rate per annum based on three-month LIBOR plus a margin. Both
    facilities contain customary events of default, including
    payment defaults, cross-defaults, breach of covenants,
    bankruptcy and insolvency defaults and judgment defaults.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    On December&nbsp;27, 2004, AWA raised additional capital by
    financing its Phoenix maintenance facility and flight training
    center. The flight training center was previously unencumbered,
    and the maintenance facility became unencumbered earlier this
    year when AWA refinanced its term loan. Using its leasehold
    interest these two facilities as collateral, AWA, through a
    wholly owned subsidiary named FTCHP LLC, raised
    $30.8&nbsp;million through the issuance of a senior secured
    discount notes. The notes were issued by FTCHP at a discount
    pursuant to the terms of a senior secured term loan agreement
    among the Company, FTCHP, Heritage Bank, SSB, as</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">58

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    administrative agent, Citibank, N.A., as the initial lender, and
    the other lenders from time to time party thereto. Citibank,
    N.A. subsequently assigned all of its interests in the notes to
    third party lenders.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    AWA has fully and unconditionally guaranteed the payment and
    performance of FTCHP&#146;s obligations under the notes and the
    loan agreement. The notes require aggregate principal payments
    of $36&nbsp;million with principal payments of $1.5&nbsp;million
    due on each of the first two anniversary dates and the remaining
    principal amount due on the fifth anniversary date. The notes
    may be prepaid in full at any time (subject to customary LIBOR
    breakage costs) and in partial amounts of $1.5&nbsp;million on
    the third and fourth anniversary dates. The unpaid principal
    amount of the notes bears interest based on LIBOR plus a margin
    subject to adjustment based on a loan to collateral value ratio.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The loan agreement contains customary covenants applicable to
    loans of this type, including obligations relating to the
    preservation of the collateral and restrictions on the
    activities of FTCHP. In addition, the loan agreement contains
    events of default, including payment defaults, cross-defaults to
    other debt of FTCHP, if any, breach of covenants, bankruptcy and
    insolvency defaults and judgment defaults.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In connection with this financing, AWA sold all of its leasehold
    interests in the maintenance facility and flight training center
    to FTCHP and entered into subleases for the facilities with
    FTCHP at lease rates expected to approximate the interest
    payments due under the notes. In addition, AWA agreed to make
    future capital contributions to FTCHP in amounts sufficient to
    cover principal payments and other amounts owing pursuant to the
    notes and the loan agreement.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The proceeds from this financing, together with
    $10.5&nbsp;million from operating cash flow, were irrevocably
    deposited with the trustee for AWA&#146;s
    10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
    unsecured notes due 2005 and subsequently redeemed on
    January&nbsp;26, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    In January 2002, AWA closed a $429&nbsp;million loan backed by a
    $380&nbsp;million federal loan guarantee provided by the Air
    Transportation Stabilization Board (the &#147;ATSB&#148;).
    Certain third-party counter-guarantors have fully and
    unconditionally guaranteed the payment of an aggregate of
    $45&nbsp;million of the outstanding principal amount under the
    government guaranteed loan plus accrued and unpaid interest
    thereon. In addition, Holdings has fully and unconditionally
    guaranteed the payment of all principal, premium, interest and
    other obligations outstanding under the government guaranteed
    loan and has pledged the stock of AWA to secure its obligations
    under such guarantee. Principal amounts under this loan become
    due in ten installments of $42.9&nbsp;million on each
    March&nbsp;31 and September&nbsp;30, commencing on
    March&nbsp;31, 2004 and ending on September&nbsp;30, 2008.
    Principal amounts outstanding under the government guaranteed
    loan bear interest at a rate per annum equal to LIBOR plus
    40&nbsp;basis points.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Subject to certain exceptions, AWA is required to prepay the
    government guaranteed loan with:</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">

    &#149; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
    net proceeds of all issuances of debt or equity by either
    Holdings or AWA after January 2002;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">

    &#149; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;proceeds
    from asset sales in excess of $20&nbsp;million in any fiscal
    year;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">

    &#149; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;insurance
    proceeds in excess of $2&nbsp;million to the extent such
    proceeds are not used to restore or replace the assets from
    which such proceeds are derived.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In addition, AWA is required to prepay the government guaranteed
    loan upon a change in control and we may be required to prepay
    portions of the loan if our employee compensation costs exceed a
    certain threshold. AWA may, at its option, prepay the government
    guaranteed loan without premium or penalty, subject to
    reimbursement of the lenders&#146; breakage costs in the case of
    prepayment of LIBOR loans.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The government guaranteed loan requires that AWA maintain a
    minimum cash balance of $100&nbsp;million. In addition, the
    government loan contains customary affirmative covenants and the
    following negative covenants: restrictions on liens,
    investments, restricted payments, fundamental changes, asset
    sales and acquisitions, the creation of new subsidiaries, sale
    and leasebacks, transactions with affiliates, the conduct of
    business, mergers or consolidations, issuances and dispositions
    of capital stock of subsidiaries, and amendments to other
    indebtedness. The government guaranteed loan contains customary
    events of default, including payment defaults, cross-defaults,
    breach of covenants, bankruptcy and insolvency defaults and
    judgment defaults.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    In August 1995, AWA issued $75.0&nbsp;million principal amount
    of
    10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
    unsecured notes due 2005 of which $39.5&nbsp;million remained
    outstanding at December&nbsp;31, 2004. Interest on the
    10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
    unsecured notes is payable semiannually in arrears on
    March&nbsp;1 and September&nbsp;1 of each year. On
    December&nbsp;27, 2004, AWA called for the redemption on
    January&nbsp;26, 2005 of all of the senior unsecured notes at a
    redemption price of 100% of the principal amount thereof plus
    accrued and unpaid interest through the redemption date. In
    addition, AWA irrevocably deposited the $30.8&nbsp;million
    raised through the maintenance facility and flight training
    center financing, together with an additional $10.5&nbsp;million
    from its operating cash flow, with the trustee for the senior
    unsecured notes. The senior notes were subsequently redeemed on
    January&nbsp;26, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    In connection with the closing of the government guaranteed loan
    and the related transactions, Holdings issued
    $104.5&nbsp;million of 7.5%&nbsp;convertible senior notes due
    2009, of which approximately $112.3&nbsp;million remained
    outstanding at December&nbsp;31, 2004 (including
    $21.6&nbsp;million of interest paid through December&nbsp;31,
    2004 as a deemed loan added to the initial principal thereof).
    Beginning January&nbsp;18, 2005, these notes are convertible
    into shares of class&nbsp;B common stock, at the option of the
    holders, at an initial conversion price of $12.00&nbsp;per share
    or a conversion ratio of approximately 83.333&nbsp;shares per
    $1,000 principal amount of such notes, subject to standard
    anti-dilution adjustments. Interest on the 7.5%&nbsp;convertible
    senior notes is payable semiannually in arrears on June&nbsp;1
    and December&nbsp;1 of each year. At Holdings&#146; option, the
    first six interest payments were payable in the form of a deemed
    loan added to the principal amount of these notes. The
    7.5%&nbsp;convertible senior notes will mature on
    January&nbsp;18, 2009 unless earlier converted or redeemed. The
    payment of principal, premium and interest on the
    7.5%&nbsp;convertible senior notes is fully and unconditionally
    guaranteed by AWA.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Holdings may redeem some or all of the 7.5%&nbsp;convertible
    senior notes at any time before January&nbsp;18, 2005, at a
    redemption price equal to $1,000&nbsp;per note to be redeemed if
    (A)&nbsp;the closing price of the class&nbsp;B common stock has
    exceeded 120% of the conversion</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">59

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    price then in effect for at least 20 trading days within a
    period of 30 consecutive trading days ending on the trading day
    before the date of the mailing of the redemption notice, and
    (B)&nbsp;a shelf registration statement covering resales of the
    notes and the class&nbsp;B common stock issuable upon conversion
    thereof is effective and available for use and is expected to
    remain effective and available for use for the 30&nbsp;days
    following the redemption date, unless registration is no longer
    required. Holdings may redeem the 7.5%&nbsp;convertible senior
    notes, in whole or in part, on or after January&nbsp;18, 2005 at
    the following redemption prices (expressed as percentages of the
    principal amount thereof), if redeemed during the twelve- month
    period commencing on January 18 of the years set forth below,
    plus, in each case, accrued and unpaid interest, if any, to the
    date of redemption:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Redemption Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008 and thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    For financial reporting purposes, the Company recorded the
    convertible senior notes at their fair market value on the date
    of issuance. The balance at December&nbsp;31, 2004 is net of an
    unamortized discount of $22.2&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (f)</TD>
    <TD></TD>
    <TD valign="top">
    In July and August of 2003, AWA completed a private placement of
    approximately $86.8&nbsp;million issue price of
    7.25%&nbsp;Senior Exchangeable Notes due 2023. The notes bear
    cash interest at 2.49%&nbsp;per year until July&nbsp;30, 2008.
    Thereafter, the notes will cease bearing cash interest and begin
    accruing original issue discount daily at a rate of
    7.25%&nbsp;per year until maturity. Each note was issued at a
    price of $343.61 and is exchangeable for class&nbsp;B common
    stock of Holdings at an exchange ratio of 32.038&nbsp;shares per
    $1,000 principal amount at maturity of the notes (subject to
    adjustment in certain circumstances). This represents an
    equivalent conversion price of approximately $10.73&nbsp;per
    share. The aggregate amount due at maturity, including accrued
    original issue discount from July&nbsp;31, 2008, will be
    $252,695,000. The notes are unconditionally guaranteed on a
    senior unsecured basis by Holdings.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Holders may exchange their notes for the shares of class&nbsp;B
    common stock of Holdings in any fiscal quarter commencing after
    September&nbsp;30, 2003, if, as of the last day of the preceding
    fiscal quarter, the closing sale price of the class&nbsp;B
    common stock for at least 20 trading days in a period of 30
    consecutive trading days ending on the last trading day of such
    preceding fiscal quarter is more than 110% of the accreted
    exchange price per share of Class&nbsp;B common stock on the
    last day of such preceding fiscal quarter. If the foregoing
    condition is satisfied, then the notes will be exchangeable at
    any time at the option of the holder through maturity. The
    accreted exchange price per share as of any day will equal the
    issue price of a note plus accrued original issue discount to
    that day divided by 32.038, subject to any adjustments to the
    exchange rate through that day.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    On or before July&nbsp;30, 2018, a holder also may exchange its
    notes for shares of the Class&nbsp;B common stock at any time
    after a 10 consecutive trading-day period in which the average
    of the trading prices for the notes for that 10 trading-day
    period was less than 103% of the average exchange value for the
    notes during that period. Exchange value is equal to the product
    of the closing sale price for the shares of Class&nbsp;B common
    stock on a given day multiplied by the then current exchange
    rate, which is the number of shares of Class&nbsp;B common stock
    for which each note is then exchangeable. In addition, the
    holders may exchange the notes if the notes have been called for
    redemption or if certain specified corporate transactions have
    occurred.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Holders of the notes may require AWA to repurchase the notes at
    a price equal to the original issue price plus accrued cash
    interest and original issue discount, if any, on July&nbsp;30,
    2008, 2013 and 2018. The purchase price of such notes may be
    paid in cash or class&nbsp;B common stock of Holdings, subject
    to certain restrictions. In addition, each holder may require
    AWA to purchase all or a portion of such holder&#146;s notes
    upon the occurrence of certain change of control events
    concerning AWA or Holdings. AWA may redeem the notes, in whole
    or in part, on or after July&nbsp;30, 2008 at a price equal to
    the original issue price plus accrued cash interest and original
    issue discount, if any.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (g)</TD>
    <TD></TD>
    <TD valign="top">
    The industrial development revenue bonds are due April 2023.
    Interest at 6.3% is payable semiannually (April&nbsp;1 and
    October 1). The bonds are subject to optional redemption prior
    to the maturity date on or after April&nbsp;1, 2008, in whole or
    in part, on any interest payment date at the following
    redemption prices: 102% on April&nbsp;1 or October&nbsp;1, 2008;
    101% on April&nbsp;1 or October&nbsp;1, 2009; and 100% on
    April&nbsp;1, 2010 and thereafter.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Secured financings totaling $186.0&nbsp;million are
collateralized by assets, primarily aircraft, engines,
simulators, rotable aircraft parts and AWA&#146;s hangar
facility, with a net book value of $268.4&nbsp;million at
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, the estimated maturities of long-term
debt are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,183</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101,042</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,509</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107,570</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147,327</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>371,927</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>979,558</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">60

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of the Company&#146;s long-term debt agreements contain
minimum cash balance requirements and other covenants with which
Holdings and AWA are in compliance. Certain of these covenants
restrict the Company&#146;s ability to pay cash dividends on its
common stock and make certain other restricted payments (as
specified therein). Finally, AWA&#146;s long-term debt
agreements contain cross-default provisions, which may be
triggered by defaults by AWA under other agreements relating to
indebtedness.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Commitments and Contingencies</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>Leases</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, the Company had 136 aircraft under
operating leases, including four aircraft that will be delivered
in 2005, with remaining terms ranging from five months to
approximately 19&nbsp;years. In January 2002, in connection with
the government guaranteed loan, AWA restructured its aircraft
lease commitments. Under the restructured lease agreements,
annual rent payments have been reduced for each of the next five
years. Certain of these leases contain put options pursuant to
which the lessors could require AWA to renew the leases for
periods ranging from eight months to approximately nine years or
call options pursuant to which the lessors could require AWA to
return the aircraft to the lessors upon receipt of six to nine
months written notice. The Company also has options to purchase
certain of the aircraft at fair market values at the end of the
lease terms. Certain of the agreements require security
deposits, minimum return provisions and supplemental rent
payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since AWA&#146;s restructuring in 1994, AWA has set up 19 pass
through trusts, which have issued over $1.4&nbsp;billion of pass
through trust certificates (also known as &#147;Enhanced
Equipment Trust&nbsp;Certificates&#148; or &#147;EETC&#148;)
covering the financing of 54 aircraft. These trusts are
off-balance sheet entities, the primary purpose of which is to
finance the acquisition of aircraft. Rather than finance each
aircraft separately when such aircraft is purchased or
delivered, these trusts allow the Company to raise the financing
for several aircraft at one time and place such funds in escrow
pending the purchase or delivery of the relevant aircraft. The
trusts are also structured to provide for certain credit
enhancements, such as liquidity facilities to cover certain
interest payments, that reduce the risks to the purchasers of
the trust certificates and, as a result, reduce the cost of
aircraft financings to AWA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each trust covered a set amount of aircraft scheduled to be
delivered within a specific period of time. At the time of each
covered aircraft financing, the relevant trust used the funds in
escrow to purchase equipment notes relating to the financed
aircraft. The equipment notes were issued, at AWA&#146;s
election, either by AWA in connection with a mortgage financing
of the aircraft or by a separate owner trust in connection with
a leveraged lease financing of the aircraft. In the case of a
leveraged lease financing, the owner trust then leased the
aircraft to AWA. In both cases, the equipment notes are secured
by a security interest in the aircraft. The pass through trust
certificates are not direct obligations of, nor guaranteed by,
Holdings or AWA. However, in the case of mortgage financings,
the equipment notes issued to the trusts are direct obligations
of AWA and in the case of leveraged lease financings, the leases
are direct obligations of AWA. In addition, neither Holdings nor
AWA guarantee or participate in any way in the residual value of
the leased aircraft. All aircraft financed by these trusts are
currently structured as leveraged lease financings, which are
not reflected as debt on the balance sheets of either AWA or
Holdings. The Company does not provide residual value guarantees
under these lease arrangements. Each lease contains a purchase
option that allows the Company to purchase the aircraft at a
fixed price, which at the inception of the lease approximated
the aircraft&#146;s expected fair market value at the option
date, near the end of the lease term. These leasing entities
meet the criteria for variable interest entities. However, they
do not meet the consolidation criteria under FASB Interpretation
No.&nbsp;46, <I>&#147;Consolidation of Variable Interest
Entities,&#148; </I>because the Company is not the primary
beneficiary under these arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the rent restructuring associated with the
government guaranteed loan, one aircraft lease was amended to
include a bargain purchase option. As a result, this lease has
been classified as a capital lease in accordance with
SFAS&nbsp;No.&nbsp;13, <I>&#147;Accounting for Leases,&#148;
</I>as amended, with an asset value of $14.8&nbsp;million which
includes accumulated amortization of $2.1&nbsp;million and
corresponding lease obligation of $8.5&nbsp;million at
December&nbsp;31, 2004.
</DIV>

<P align="center" style="font-size: 10pt;">61

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2004, one aircraft lessor exercised its put rights
under the aircraft lease agreement to extend the lease for one
Boeing 737-300 aircraft for an additional 33&nbsp;months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company also leases certain terminal space, ground
facilities and computer and other equipment under noncancelable
operating leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, the scheduled future minimum cash
rental payments under capital leases and noncancelable operating
leases with initial terms of more than one year are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Operating</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Years Ending December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leases</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leases</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>361,671</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>335,412</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>314,892</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>264,017</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>238,074</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,719,934</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total minimum lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,234,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Amounts of lease payments that represent interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,884</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Present value of future minimum capital lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Current obligations under capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,475</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Rent expense (excluding landing fees) was approximately
$421.1&nbsp;million, $406.8&nbsp;million and $409.4&nbsp;million
for the years ended December&nbsp;31, 2004, 2003 and 2002,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Collectively, the operating lease agreements require security
deposits with lessors of $24.0&nbsp;million, which have been
classified as <I>&#147;Other Assets, Net&#148; </I>in the
accompanying consolidated balance sheets, and bank letters of
credit of $13.8&nbsp;million. The letters of credit are
collateralized by $13.9&nbsp;million of restricted cash.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Revenue Bonds</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 1999, Series&nbsp;1999 special facility revenue bonds
(&#147;new bonds&#148;) were issued by a municipality to fund
the retirement of the Series&nbsp;1994A bonds (&#147;old
bonds&#148;) and the construction of a new concourse with 14
gates at Terminal 4 in Phoenix Sky Harbor International Airport
in support of AWA&#146;s strategic growth plan. The new bonds
are due June 2019 with interest accruing at 6.25%&nbsp;per annum
payable semiannually on June&nbsp;1 and December&nbsp;1,
commencing on December&nbsp;1, 1999. The new bonds are subject
to optional redemption prior to the maturity date on or after
June&nbsp;1, 2009 in whole or in part, on any interest payment
date at the following redemption prices: 101% on June&nbsp;1 or
December&nbsp;1, 2009; 100.5% on June&nbsp;1 or December&nbsp;1,
2010; and 100% on June&nbsp;1, 2011 and thereafter. In
accordance with EITF Issue No.&nbsp;97-10, <I>&#147;The Effect
of Lessee Involvement in Asset Construction,&#148; </I>the
Company accounts for this as an operating lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with these bonds, AWA entered into an Amended and
Restated Airport Use Agreement, pursuant to which AWA agreed to
make sufficient payments to the Industrial Development Authority
(&#147;IDA&#148;) to cover the principal and interest of the
bonds and to indemnify the IDA for any claims arising out of the
issuance and sale of the bonds and the use and occupancy of the
concourses financed by these bonds and the old bonds. At
December&nbsp;31, 2004, the outstanding principal amount of the
bonds was $21.8&nbsp;million. The Company estimates its
remaining payments to cover the principal and interest of these
bonds will be approximately $43.6&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the Company is also the lessee under certain
long-term leases at various airports. At certain of these
airports, municipalities have issued revenue bonds to improve
airport facilities that are leased by the Company and accounted
for as operating leases. The Company does not guarantee the
underlying debt related to these operating leases.
</DIV>

<P align="center" style="font-size: 10pt;">62

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</B></TD>
    <TD>
    <B>Aircraft Acquisitions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 2004, AWA amended its aircraft purchase contract with
AVSA S.A.R.L., an affiliate of Airbus Industrie or
&#147;AVSA,&#148; to acquire 22 Airbus A320 family aircraft
(thirteen A320s and nine A319s), all powered by V2500 engines
from International Aero Engines. Of the 22 aircraft, it is
anticipated that 18 will be purchased directly from the
manufacturer and four have been leased under noncancelable
leases from various lessors for aircraft to be delivered in
2005. In the context of this incremental order, AWA also secured
extensive flexibility from Airbus with respect to its existing
A318 order, allowing AWA to better react to market conditions by
enabling it to amend its 15 A318 delivery positions to A319s and
A320s, if it so desires, or to take no additional aircraft under
certain conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has an agreement with International Aero Engines or
&#147;IAE,&#148; which provides for the purchase by the Company
of seven new V2500-A5 spare engines scheduled for delivery
through 2007 for use on certain of the Airbus A320 fleet. At
December&nbsp;31, 2004, the seven engines have an estimated
gross cost of $39&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table reflects estimated net cash payments under
the restructured aircraft purchase agreement with AVSA and the
IAE engine contract. Actual payments may vary due to inflation
factor adjustments and changes in the delivery schedule of the
equipment.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>272,820</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>456,891</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,697</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>777,408</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</B></TD>
    <TD>
    <B>Sale-Leaseback Transactions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the fourth quarter of 2004, the Company completed two
separate aircraft sale-leaseback transactions on one Airbus A320
aircraft and one Airbus A319 aircraft resulting in a combined
loss of $4.6&nbsp;million. This amount was recorded in
<I>&#147;Other Operating Expenses.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2004, the Company completed a sale-leaseback transaction
on one V2500-A5 engine resulting in a gain of $2.9&nbsp;million
which has been deferred and will be amortized over the lease
term of seven years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In July 2004, the Company completed a sale-leaseback transaction
on one V2500-A5 engine resulting in a gain of $0.8&nbsp;million
which has been deferred and will be amortized over the lease
term of seven years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of the restructuring completed on January&nbsp;18, 2002,
AWA committed to the sale and leaseback of eight aircraft. The
sales and leaseback of six of these aircraft were completed in
2002 and resulted in losses of approximately $3.8&nbsp;million.
The sale and leaseback of one aircraft was completed in June
2003 and resulted in a loss of approximately $0.6&nbsp;million.
The sale and leaseback of the final aircraft was completed in
September 2003 and resulted in a loss of approximately
$0.7&nbsp;million. The losses on the sale-leaseback
transactions, which were subject to a firm commitment in January
2002, were accrued in the accompanying consolidated statements
of operations classified in <I>&#147;Special Charges&#148;
</I>in the first quarter of 2002. See Note&nbsp;11,
<I>&#147;Special Charges.&#148;</I>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</B></TD>
    <TD>
    <B>Contingent Legal Obligations</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings and its subsidiaries are parties to various legal
proceedings, including some purporting to be class action suits,
and some that demand large monetary damages or other relief,
which, if granted, would require significant expenditures. In
certain cases where it is probable that the outcome will result
in monetary damages, the Company has reviewed available
information and determined that the best estimate of losses to
be incurred related to these cases is $2&nbsp;million, which has
been accrued. For those cases where a loss is possible, or cases
where a range of loss is probable but no amount within the range
is a better estimate than any other amount, the estimated amount
of additional exposure ranges from $0 to $25&nbsp;million. In
these instances, no accrual has been recorded.
</DIV>

<P align="center" style="font-size: 10pt;">63

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</B></TD>
    <TD>
    <B>General Guarantees and Indemnifications</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is the lessee under many aircraft financing
agreements (including leveraged lease financings of aircraft
under the pass through trusts) and real estate leases. It is
common in such transactions for the Company as the lessee to
agree to indemnify the lessor and other related third parties
for the manufacture, design, ownership, financing, use,
operation and maintenance of the aircraft, and for tort
liabilities that arise out of or relate to the Company&#146;s
use or occupancy of the leased asset. In some cases, this
indemnity extends to related liabilities arising from the
negligence of the indemnified parties, but usually excludes any
liabilities caused by their gross negligence or willful
misconduct. Additionally, in the case of real estate leases, the
Company typically indemnifies such parties for any environmental
liability that arises out of or relates to the Company&#146;s
use of the leased premises. The Company expects that it would be
covered by insurance (subject to deductibles) for most tort
liabilities and related indemnities described above with respect
to leased real estate and operated aircraft.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company recorded income tax expense (benefit) as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(35,071</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,071</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(35,071</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s emergence from bankruptcy reorganization in
1994 and the associated implementation of fresh start reporting
gave rise to significant items of expense for financial
reporting purposes that are not deductible for income tax
purposes. In large measure, it is these nondeductible (for
income tax purposes) expenses that result in an effective tax
expense (benefit) rate for financial reporting purposes that
differs from the current federal statutory income tax rate of
35%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income tax expense (benefit) differs from amounts computed at
the federal statutory income tax rate as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense (benefit) at the federal statutory income tax
    rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(31,148</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(75,165</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State income tax expense (benefit), net of federal income tax
    expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,196</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,024</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State rate change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,229</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,334</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,137</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expired tax credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,987</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,843</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,994</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(35,071</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, the Company has available net
operating loss carryforwards (&#147;NOLs&#148;) and tax credit
carryforwards for federal income tax purposes of approximately
$451.4&nbsp;million and $1.1&nbsp;million, respectively. The
NOLs expire during the years 2007 through 2024 while
approximately $0.2&nbsp;million of the tax credit carryforwards
will expire in 2005 and 2006. The Company also had capital loss
carryforwards for federal income tax purposes of approximately
$1.4&nbsp;million which expire in 2009. However, such
carryforwards are not available to offset federal (and in
certain circumstances, state) alternative minimum taxable
income. Further, as a result of a statutory &#147;ownership
change&#148; (as defined for purposes of Section&nbsp;382 of the
Internal Revenue Code) that occurred as a result of the
Company&#146;s reorganization in 1994, the Company&#146;s
ability to utilize its NOLs and tax credit carryforwards may be
restricted.
</DIV>

<P align="center" style="font-size: 10pt;">64

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September 2003, Holdings filed its 2002 consolidated income
tax return with the IRS, which included a claim to carryback
losses incurred in 2002 to the tax years 1999 and 2000. This
resulted in a refund of approximately $3.1&nbsp;million, of
which substantially all was received in the fourth quarter of
2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Composition of Deferred Tax Items:</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. As of December&nbsp;31, the
significant components of the Company&#146;s deferred tax assets
and liabilities are a result of the temporary differences
related to the items described as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net operating loss carryforwards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>184,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>126,219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,347</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vacation accrual</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,948</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Frequent flyer accrual</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,958</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring and other reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,858</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax credit carryforwards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,112</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,767</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>225,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169,209</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accelerated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(95,365</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(70,534</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Partnership losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,421</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,420</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(229</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(781</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross deferred tax liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(97,015</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(72,735</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred tax assets before valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128,966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96,474</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(128,966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(96,474</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SFAS&nbsp;No.&nbsp;109, <I>&#147;Accounting for Income
Taxes,&#148; </I>requires that a valuation allowance be
established when it is &#147;more likely than not&#148; that all
or a portion of deferred tax assets will not be realized. A
review of all available positive and negative evidence needs to
be considered, including the company&#146;s performance, the
market environment in which the company operates, forecasts of
future profitability, the utilization of past tax credits,
length of carryforward periods and similar factors.
SFAS&nbsp;No.&nbsp;109 further states that it is difficult to
conclude that a valuation allowance is not needed when there is
negative evidence such as cumulative losses in recent years.
Therefore, cumulative losses weigh heavily in the overall
assessment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company was in a cumulative loss position three out of four
years between December&nbsp;31, 2001 through December&nbsp;31,
2004, which weighed heavily in the overall determination that a
valuation allowance was needed. As of December&nbsp;31, 2004,
the Company had recorded a valuation allowance of
$129.0&nbsp;million against its net deferred tax assets. The
Company expects to continue to record a full valuation allowance
on any future tax benefits until we have achieved several
quarters of consecutive profitable results coupled with an
expectation of continued profitability. As of December 2004 and
2003, the valuation allowance totaled $129.0&nbsp;million and
$96.5&nbsp;million, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>Capital Stock</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Preferred Stock</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s Board of Directors by resolution may
authorize the issuance of the preferred stock as a class, in one
or more series, having the number of shares, designations,
relative voting rights, dividend rights, liquidation and other
preferences and limitations that the Board of Directors fixes,
without any stockholder approval. No shares of preferred stock
have been issued.
</DIV>

<P align="center" style="font-size: 10pt;">65

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Common Stock</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of Class&nbsp;A common stock are entitled to fifty
votes per share, and the holders of Class&nbsp;B common stock
are entitled to one vote per share, on all matters submitted to
a vote of common stockholders except that voting rights of
non-U.S.&nbsp;citizens are limited. The Class&nbsp;A common
stock is convertible into an equal number of Class&nbsp;B shares
at any time at the election of the holders of the Class&nbsp;A
common stock. Holdings&#146; Class&nbsp;B common stock is listed
on the New York Stock Exchange.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holders of common stock of all classes participate equally as to
any dividends or distributions on the common stock, except that
dividends payable in shares of common stock, or securities to
acquire common stock, will be made in the same class of common
stock as that held by the recipient of the dividend. Holders of
common stock have no right to cumulate their votes in the
election of directors. The common stock votes together as a
single class, subject to the right to a separate class vote in
certain instances required by law.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Treasury Stock</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September 1995, Holdings adopted a stock repurchase program.
The program was amended in December 1995, August 1997, August
1998, May 1999 and February 2000. During 1995 through 2000,
Holdings repurchased approximately 16.5&nbsp;million shares of
Class&nbsp;B common stock and 7.4&nbsp;million warrants to
purchase Class&nbsp;B common stock. Holdings has not repurchased
any Class&nbsp;B common stock during the last four fiscal years.
Holdings&#146; stock repurchase program expired on
December&nbsp;31, 2002. The terms of the government guaranteed
loan restricted the Company&#146;s ability to repurchase shares
of its stock prior to repayment of the loan in full.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March and April 2004, Holdings reacquired 153,680&nbsp;shares
of Class&nbsp;B common stock from a former executive in payment
for approximately $1.7&nbsp;million of nonrecourse loans made by
Holdings between 1994 and 1997.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Warrants</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As compensation for various elements of the Company&#146;s
financial restructuring completed in January 2002, Holdings
issued a warrant to purchase&nbsp;18.8&nbsp;million shares of
its Class&nbsp;B common stock to the federal government and
additional warrants to purchase&nbsp;3.8&nbsp;million shares of
its Class&nbsp;B common stock to other loan participants, in
each case at an exercise price of $3&nbsp;per share and a term
of ten years. For accounting purposes, the warrants were valued
at $35.4&nbsp;million, or $1.57&nbsp;per share, using the
Black-Scholes pricing model with the following assumptions:
expected dividend yield of 0.0%, risk-free interest rate of
4.8%, volatility of 44.9% and an expected life of ten years.
This amount has been recorded in the accompanying consolidated
balance sheets, classified as <I>&#147;Other Assets, Net,&#148;
</I>and will be amortized over the life of the government
guaranteed loan as an increase to interest expense. In the first
quarter of 2004, approximately 220,000 warrant were exercised at
$3&nbsp;per share. In the third quarter of 2003, approximately
2.6&nbsp;million warrants were exercised at $3&nbsp;per share.
These warrant exercises were cashless transactions resulting in
the issuance of approximately 1.6&nbsp;million shares of
Holdings&#146; Class&nbsp;B common stock.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>9.</B></TD>
    <TD>
    <B>Stock Options and Awards</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the 1994 Incentive Equity Plan, as amended (the &#147;1994
Incentive Plan&#148;), the Company&#146;s Board of Directors
(the &#147;Board&#148;) was authorized to grant stock options to
officers and key employees. The maximum number of shares of
Class&nbsp;B common stock authorized for issuance under the Plan
was 9.0&nbsp;million shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;27, 2002, only 205,831&nbsp;shares of the
Company&#146;s Class&nbsp;B common stock remained available for
future grants under the 1994 Incentive Plan. As of that date,
although awards covering an aggregate of 6,799,570&nbsp;shares
of Class&nbsp;B common stock remained outstanding under the 1994
Incentive Plan, all options granted prior to December&nbsp;31,
2001 were significantly out-of-the-money (based on the
$5.55&nbsp;per share closing price of the Company&#146;s
Class&nbsp;B common stock as reported on the New York Stock
Exchange on March&nbsp;27, 2002) due to the significant drop in
the price of the Company&#146;s stock during 2001 (largely as a
result of the events of September&nbsp;11, 2001 and its
aftermath). Consequently, these options had lost substantially
all value as retention and incentive tools. The Board is
strongly opposed to repricing outstanding
</DIV>

<P align="center" style="font-size: 10pt;">66

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<DIV align="left" style="font-size: 10pt;">
stock options and, in connection with the government guaranteed
loan, the Company agreed not to reprice any outstanding stock
options so long as the loan remains outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For these reasons, on March&nbsp;27, 2002, the Board adopted the
Company&#146;s 2002 Incentive Equity Plan (the &#147;2002
Incentive Plan&#148;). A total of 8.0&nbsp;million shares of
Class&nbsp;B common stock, which the Company believes will be
adequate to fund the requirements under its long-term
compensation arrangements through 2005, have been reserved for
issuance under the 2002 Incentive Plan. At the same time, the
Board determined that, regardless of share availability, no new
awards will be granted under the 1994 Incentive Plan following
stockholder approval of the 2002 Incentive Plan. In May 2002,
the Company&#146;s stockholders approved the adoption of the
2002 Incentive Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stock options are granted with an exercise price equal to the
stock&#146;s fair market value at the date of grant, generally
become exercisable over a three-year period and expire if
unexercised at the end of 10&nbsp;years. At December&nbsp;31,
2004, approximately 2.5&nbsp;million shares are available for
grant under the 2002 Incentive Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stock option activity during the years indicated is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>1994 Plan</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2001:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,288,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15.74</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>986,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.79</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Canceled</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(362,267</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11.38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2002:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,913,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14.01</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(235,737</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.09</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Canceled</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,088,089</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15.33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2003:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,589,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14.10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,672</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.80</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Canceled</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(506,046</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9.90</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2004:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,060,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14.69</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>2002 Plan</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2002:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,021,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,780,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.68</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(215,788</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4.78</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Canceled</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(182,661</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4.77</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2003:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,404,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4.34</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,973,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10.10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(150,672</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.63</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Canceled</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(138,513</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.09</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2004:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,088,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.52</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">67

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, options outstanding and exercisable
by price range for both plans are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4" align="center" nowrap><B>Range of Exercise Prices</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Outstanding</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Currently</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Remaining</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Contractual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Life</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;1.93 to $&nbsp;3.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,192,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,067,382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;4.88 to $&nbsp;9.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,846,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,049,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.02</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10.13 to $10.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,831,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>516,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10.48</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10.82 to $17.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,845,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,831,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13.26</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18.06 to $29.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,431,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,431,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21.58</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,148,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,895,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11.91</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There were 4,959,604 and 4,669,601&nbsp;stock options
exercisable as of December&nbsp;31, 2003 and December&nbsp;31,
2002, respectively. The per share weighted-average fair value of
stock options granted during 2004, 2003 and 2002 was $4.50,
$2.03 and $2.87, respectively, on the date of grant using the
Black-Scholes option pricing model with the following
weighted-average assumptions: 2004&nbsp;&#151; expected dividend
yield of 0.0%, risk-free interest rate of 3.4%, volatility of
54.0% and an expected life of five years; 2003&nbsp;&#151;
expected dividend yield of 0.0%, risk-free interest rate of
2.8%, volatility of 70.4% and an expected life of five years;
2002&nbsp;&#151; expected dividend yield of 0.0%, risk-free
interest rate of 3.9%, volatility of 87.9% and an expected life
of four years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There were no restricted stock grants in the last three fiscal
years. The Company recognized compensation expense of
$0.1&nbsp;million, $1.1&nbsp;million and $0.7&nbsp;million
related to restricted stock grants under the 1994 Incentive Plan
in 2004, 2003 and 2002, respectively. At December&nbsp;31, 2004,
135,342&nbsp;shares of restricted stock were vested.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The stock option plans also provide for the issuance of stock
and grant of stock options to non-employee directors. The
Company has granted options to purchase&nbsp;563,000&nbsp;shares
of Class&nbsp;B common stock to members of the Board of
Directors who are not employees of the Company. The options have
a ten-year term and are exercisable six months after the date of
grant. As of December&nbsp;31, 2004, 409,000 options were
outstanding and exercisable at prices ranging from $1.93 to
$29.19&nbsp;per share. There were no grants of Class&nbsp;B
common stock to non-employee directors in 2004 or 2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>10.</B></TD>
    <TD>
    <B>Employee Benefit Plan</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has a 401(k) defined contribution plan, covering
essentially all employees of the Company. Participants may
contribute from 1 to 50% of their pretax earnings to a maximum
of $13,000 in 2004. The Company&#146;s matching contribution is
determined annually by the Board of Directors. The
Company&#146;s contribution expense to the plan totaled
$11.4&nbsp;million, $8.7&nbsp;million and $8.7&nbsp;million in
2004, 2003 and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the third quarter of 2004, the Company became aware that
an insufficient number of shares of its Class&nbsp;B common
stock were registered for offer and sale through its 401(k)
plan. In response to this registration shortfall, the Company
promptly filed a new registration statement on Form&nbsp;S-8 on
August&nbsp;13, 2004, which registered an additional
4,500,000&nbsp;shares of Class&nbsp;B common stock to permit the
continued offer and sale of such shares to participants through
the 401(k) plan. Because the 401(k) plan in the past has
purchased and in the future expects to continue to purchase
shares of Class&nbsp;B common stock needed for allocation to
participant accounts only in the open market and not directly
from the Company, the registration of these additional shares
and their purchase by the 401(k) plan will have no dilutive
impact on the outstanding equity of the Company. As a result of
the registration shortfall, however, participants who acquired
unregistered shares through their 401(k) plan accounts after
June&nbsp;30, 2003, and prior to August&nbsp;13, 2004, may be
entitled to rescission rights or other remedies under the
Securities Act of 1933, as amended. The Company has notified
affected existing and former plan participants of their
potential rescission rights, but cannot predict the extent to
which any such rescission rights may be exercised or the impact
of any possible federal or state regulatory action pertaining to
the registration shortfall. The Company does not
</DIV>

<P align="center" style="font-size: 10pt;">68

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<DIV align="left" style="font-size: 10pt;">
believe, however, that any consequences arising from the
registration shortfall will have a material adverse effect on
its financial position or results of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>11.</B></TD>
    <TD>
    <B>Special Charges</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first quarter of 2004, the Company recorded a
$0.6&nbsp;million reduction in special charges related to the
revision of estimated costs associated with the sale and
leaseback of certain aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 2004, the Company entered into definitive agreements
with two lessors to return six Boeing 737-200 aircraft. Three of
these aircraft were returned to the lessors in the third
quarter, two were returned in the fourth quarter and one was
returned in January 2005. In addition, the Company continues
negotiating with one lessor on the return of its remaining two
Boeing 737-200 aircraft, one of which was parked in March 2002.
The other aircraft was removed from service in January 2005. In
connection with the return of the aircraft, the Company recorded
$1.9&nbsp;million of special charges which include lease
termination payment of $2.1&nbsp;million, the write-down of
leasehold improvements and aircraft rent balance of
$2.8&nbsp;million, offset by the net reversal of maintenance
reserves of $3.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the Company and General Electric
(&#147;GE&#148;) mutually agreed to terminate the V2500&nbsp;A-1
power by hour (PBH)&nbsp;agreement effective January&nbsp;1,
2005. This agreement was entered into March 1998 with an
original term of ten years. For terminating the agreement early,
the Company received a $20.0&nbsp;million credit to be applied
to amounts due for other engines under the 1998 agreement that
is expected to be fully applied by December&nbsp;31, 2005. The
Company had capitalized PBH payments for V2500&nbsp;A-1 engines
in excess of the unamortized cost of the overhauls performed by
GE of approximately $3.7&nbsp;million. With the termination of
this agreement, these payments were not realizable and as a
result, the Company wrote off this amount against the
$20.0&nbsp;million credit referred to above resulting in a
$16.3&nbsp;million net gain.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2003, AWA announced the elimination of its hub
operations in Columbus, Ohio. As a result, 12 regional jets, all
of which were operated by Chautauqua Airlines under the America
West Express banner, have been phased out of the fleet. In
addition, the hub has been downsized from 49 daily departures to
15&nbsp;destinations to four flights per day to Phoenix and Las
Vegas. Service to New York City La&nbsp;Guardia Airport was also
eliminated because perimeter rules at the airport prohibit
flights beyond 1,500&nbsp;miles, precluding service from
AWA&#146;s hubs in Phoenix and Las Vegas. In the first and
second quarters of 2003, the Company recorded special charges of
$1.0&nbsp;million and $9.6&nbsp;million, respectively, related
to the costs associated with the termination of certain aircraft
and facility contracts, employee transfer and severance expenses
and the write-off of leasehold improvements in Columbus, Ohio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first quarter of 2003, the Company recorded a
$1.1&nbsp;million reduction in special charges related to the
earlier-than-planned return of certain leased aircraft in 2001
and 2002, as all payments related to these aircraft returns have
been made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2003, as part of a cost reduction program, the Company
implemented a plan to reduce management, professional and
administrative payroll costs which resulted in 179 fewer
employees within these workgroups. As a result, the Company
recorded a special charge of $2.3&nbsp;million related to this
reduction-in-force.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2003, the Company recorded an impairment loss of
$2.6&nbsp;million related to three owned Boeing 737-200 aircraft
that were grounded and subsequently sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the third quarter of 2003, the Company recorded an additional
$0.5&nbsp;million of special charges associated with the
elimination of our hub operations in Columbus, Ohio. These
special charges were offset by a $0.5&nbsp;million reduction in
special charges related to the revision of estimated costs
associated with the sale and leaseback of certain aircraft.
</DIV>

<P align="center" style="font-size: 10pt;">69

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first quarter of 2002, the Company recorded a special
charge of $21.1&nbsp;million, primarily related to the
restructuring completed on January&nbsp;18, 2002, resulting from
the events of September&nbsp;11, 2001. Components of the special
charge are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Special Charges</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fleet restructuring costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,915</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses on sale-leaseback transactions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,328</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Professional fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,745</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of computer system and security equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,411</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Severance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>656</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revision of estimate for second quarter 2001 special charge</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,055</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Of this amount, approximately $10.3&nbsp;million, principally
related to losses on sale-leaseback transactions, fleet
restructuring costs, professional fees and severance was accrued.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the third quarter of 2002, the Company recorded a
$2.0&nbsp;million reduction in special charges due to a revision
of the estimated costs related to the early termination of
certain aircraft leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents the payments and other settlements
made during 2002, 2003 and 2004 and the remaining special charge
accruals as of December&nbsp;31, 2004.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Contract</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Sale-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fleet</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Professional</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Reductions-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Termination/</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leaseback</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Restructuring</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fees</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>in-Force</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other Costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,869</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,030</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclassification of aircraft rent due to restructuring</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,696</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,516</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,489</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(714</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,719</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of convertible notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Forfeiture of security deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,289</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,289</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on sale-leasebacks</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,852</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,852</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclassification of capitalized maintenance for parked aircraft</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(902</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(902</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revision of estimate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,833</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(510</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,370</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(896</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,344</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,446</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,686</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on sale-leasebacks</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,361</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,361</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of leasehold improvements due to Columbus hub closure</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(539</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(539</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Impairment loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,617</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,617</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,389</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(600</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,313</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,908</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(292</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,528</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,733</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revision of estimate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reversal of maintenance reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of leasehold improvements, engine overhauls and
    deferred rent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,751</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,751</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>764</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company expects to make payments related to these special
charges through the fourth quarter of 2005.
</DIV>

<P align="center" style="font-size: 10pt;">70

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>12.</B></TD>
    <TD>
    <B>Nonoperating Income (Expenses)&nbsp;&#151; Other, Net</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the term loan refinancing with GECC, the
Company wrote off $1.3&nbsp;million of debt issue costs
associated to the term loan with Mizuho in 2004. This amount was
recorded in nonoperating expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The changes in the fair value of the Company&#146;s derivative
instruments and the net realized gains and losses for the
settled hedge transactions was a $30.5&nbsp;million credit in
2004, $10.7&nbsp;million credit in 2003 and $0.6&nbsp;million
expense in 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2003, the Senate and House of Representatives of the
United States of America passed, and the President signed, the
Emergency Wartime Supplemental Appropriations Act to provide
certain aviation-related assistance. $2.3&nbsp;billion of the
appropriation was for grants by the TSA to U.S.&nbsp;air
carriers based on the proportional share each carrier had paid
or collected as of the date of enactment of the legislation for
passenger security and air carrier security fees. In May 2003,
AWA received approximately $81.3&nbsp;million representing its
proportional share of passenger security and air carrier
security fees paid or collected as of April 2003, which has been
classified as <I>&#147;Federal Government Assistance&#148;
</I>in the accompanying consolidated statements of operations.
See Note&nbsp;17, <I>&#147;Emergency Wartime Supplemental
Appropriations Act.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the fourth quarter of 2003, IAC/ InterActiveCorp completed
its acquisition of Hotwire.com, a discount travel website.
Hotwire was founded by the Texas Pacific Group, American
Airlines, Continental Airlines, Northwest Airlines, United
Airlines, US Airways and AWA in October 2000. AWA had an
ownership interest of approximately 1.5% in Hotwire.com with a
carrying value of approximately $0.03&nbsp;million. Upon closing
of the transaction, AWA received cash of $9.8&nbsp;million.
Accordingly, AWA recognized a nonoperating gain of
$9.8&nbsp;million in the fourth quarter of 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the fourth quarter of 2003, Holdings completed the sale of
its 12% interest in National Leisure Group to PAR Capital. The
investment in National Leisure Group was carried on the
Company&#146;s consolidated balance sheet at cost, which
approximated $7.7&nbsp;million. PAR Capital owned
$10.45&nbsp;million face value of the Company&#146;s
10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
unsecured notes. PAR Capital purchased the Company&#146;s
investment in National Leisure Group in exchange for the
$10.45&nbsp;million face value of the
10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;notes
plus $0.3&nbsp;million in cash. This resulted in a
$3.3&nbsp;million nonoperating gain. See Note&nbsp;4,
<I>&#147;Financial Instruments and Risk Management&nbsp;&#151;
(a)&nbsp;Fair Value of Financial Instruments&nbsp;&#151;
Investments in Equity Securities.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the airline compensation provisions of the Air
Transportation Safety and System Stabilization Act (the
&#147;Act&#148;), each air carrier was entitled to receive the
lesser of: (i)&nbsp;its direct and incremental losses for the
period September&nbsp;11, 2001 to December&nbsp;31, 2001 or
(ii)&nbsp;its proportional available seat mile allocation (based
on available seat miles for August 2001) of the
$4.5&nbsp;billion compensation available under the Act. In 2001,
AWA received $98.2&nbsp;million under the Act from the United
States government and expected to receive, based on its losses
and its share of available seat miles, at least an additional
$10.0&nbsp;million. In accordance with EITF Issue
No.&nbsp;01-10, <I>&#147;Accounting for the Impact of the
Terrorist Attacks of September&nbsp;11, 2001,&#148; </I>AWA
recognized $108.2&nbsp;million of federal government assistance
in 2001 as nonoperating income because direct and incremental
losses incurred during 2001 exceeded that amount. In July 2002,
AWA received an additional $12.3&nbsp;million under the Act.
Accordingly, $10.0&nbsp;million was credited against the
receivable established in 2001 and $2.3&nbsp;million was
recognized as nonoperating income in the second quarter of 2002.
In August 2002, AWA received an additional payment of
$6.2&nbsp;million under the Act, which was recognized as
nonoperating income in the third quarter of 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2002, the Company wrote down its investment in
Aeroxchange, an e-commerce entity, which was carried at cost, to
net realizable value recognizing a loss of $2.8&nbsp;million.
</DIV>

<P align="center" style="font-size: 10pt;">71

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>13.</B></TD>
    <TD>
    <B>Earnings (Loss) Per Share</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands of dollars except per share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    BASIC EARNINGS (LOSS)&nbsp;PER SHARE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before cumulative effect of change in accounting
    principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(179,686</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative effect of change in accounting principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(208,223</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(387,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,026,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,550,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,723,252</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic earnings (loss) per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) before cumulative effect of change in accounting
    principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.33</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative effect of change in accounting principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6.17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    DILUTED EARNINGS (LOSS)&nbsp;PER SHARE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before cumulative effect of change in accounting
    principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(179,686</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative effect of change in accounting principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(208,223</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(387,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense on 7.5%&nbsp;convertible senior notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense on 7.25%&nbsp;senior exchangeable notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) for purposes of computing diluted net income
    (loss) per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(89,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>70,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(387,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Share computation:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,026,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,550,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,723,252</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed exercise of stock options and warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,966,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed conversion of 7.5%&nbsp;convertible senior notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,157,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed conversion of 7.25%&nbsp;senior exchangeable notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,437,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares outstanding as adjusted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,026,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,112,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,723,252</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted earnings (loss) per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) before cumulative effect of change in accounting
    principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.33</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative effect of change in accounting principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6.17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2.47</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11.50</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 2004, 5,248,891 stock
options and 7,352,988 warrants issued in conjunction with the
government guaranteed loan and related transactions are not
included in the computation of diluted EPS because the option
and warrant exercise prices were greater than the average market
price of common stock for the period. In addition,
8,095,842&nbsp;shares issuable upon conversion of the
7.25%&nbsp;senior exchangeable notes due 2023 and 8,694,000
issuable upon conversion of the 7.5%&nbsp;convertible senior
notes are not included in the computation of diluted EPS because
of the antidilutive effect on EPS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 2003, 5,256,111 stock
options and 11,410,318 warrants issued in conjunction with the
government guaranteed loan and related transactions are not
included in the computation of diluted EPS because the option
and warrant exercise prices were greater than the average market
price of common stock for the period. In November 2004, the
Emerging Issues Task Force (&#147;EITF&#148;) of the FASB
reached a consensus on EITF&nbsp;04-08, <I>&#147;The Effect of
Contingently Convertible Instruments on Diluted Earnings per
Share,&#148;</I> which requires that issuers of convertible
securities with contingent conversion features use the
&#147;if-converted&#148; method to calculate reported earnings
per share (&#147;EPS&#148;) irrespective of the contingent
conversion trigger being met. As approved by the FASB, this
change is effective for years ending after December&nbsp;15,
2004. The Company applied this methodology in the accompanying
consolidated statement of operations. The impact of using the
&#147;if-converted&#148; method for the Company&#146;s
7.25%&nbsp;Notes is
</DIV>

<P align="center" style="font-size: 10pt;">72

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
antidilutive for the years ended December&nbsp;31, 2004 and
2002. For the year ended December&nbsp;31, 2003, the inclusion
of the 7.25%&nbsp;Notes reduced diluted EPS by $0.03 from $1.29
to $1.26.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 2002, 22,074 stock options
and 2,794,399 warrants issued in conjunction with the government
guaranteed loan and related transactions are not included in the
computation of diluted EPS because of the antidilutive effect on
EPS. In addition, 7,292,706 stock options and 19,742,601
warrants are not included in the computation of diluted EPS
because the option and warrant exercise prices were greater than
the average market price of common stock for the period. The
shares issuable upon conversion of the 7.5%&nbsp;convertible
senior notes are not included in the computation of diluted EPS
because of the antidilutive effect on EPS.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>14.</B></TD>
    <TD>
    <B>Supplemental Information to Consolidated Statements of Cash
    Flows</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Supplemental disclosure of cash flow information and non-cash
investing and financing activities were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash transactions:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclassification of investments in debt securities to short-term</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of convertible notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,902</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cancellation of convertible notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(660</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,279</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cancellation of 10.75%&nbsp;senior unsecured notes related to
    sale of NLG investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,370</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,383</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercise of warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment acquired through capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,753</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment acquired with issuance of notes payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,163</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable issued for equipment purchase deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable canceled under the aircraft purchase agreement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,500</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payment in kind notes issued, net of returns</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,756</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of shares due to loan default</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash transactions:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest paid, net of amounts capitalized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,942</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes paid (refunded)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,605</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(63,353</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>15.</B></TD>
    <TD>
    <B>Related Party Transactions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of AWA&#146;s reorganization in 1994, Continental
Airlines and AWA entered into an alliance agreement that
included code sharing arrangements, reciprocal frequent flyer
programs and ground handling operations. In March 2002, AWA
received notice from Continental of its intention to terminate
the code sharing and frequent flyer agreements between the two
airlines, effective April&nbsp;26, 2002. Two of
Continental&#146;s directors are managing partners of Texas
Pacific Group, which, through TPG Advisors, Inc., effectively
controls the voting power of Holdings. AWA paid Continental
approximately $13.4&nbsp;million, $17.3&nbsp;million and
$25.5&nbsp;million and also received approximately
$4.1&nbsp;million, $5.0&nbsp;million and $15.9&nbsp;million in
2004, 2003 and 2002, respectively, from Continental pursuant to
these agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Texas Pacific Group agreed to reimburse the Company
approximately $2.5&nbsp;million for expenses incurred by the
Company on its behalf. As a result, the Company recorded this as
a receivable as of December&nbsp;31, 2004. Subsequent to
December&nbsp;31, 2004, the Company received $1.3&nbsp;million
in such reimbursement and expects to receive an additional
$1.2&nbsp;million in 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>16.</B></TD>
    <TD>
    <B>Quarterly Financial Data (Unaudited)</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2004 and 2003 unaudited quarterly financial data has been
restated to reflect the accounting for fuel hedging derivative
instruments pursuant to management&#146;s determination that the
Company did not qualify for hedge accounting under
SFAS&nbsp;No.&nbsp;133. In addition, the restated amounts also
reflect corrections to properly
</DIV>

<P align="center" style="font-size: 10pt;">73

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
reflect the fair value of open derivative instruments at each
quarter end. See Note&nbsp;2, <I>&#147;Restatement of Previously
Reported Amounts.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Summarized quarterly financial data for 2004 and 2003 follows
(in thousands of dollars except per share amounts):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
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    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>1st&nbsp;Quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2nd&nbsp;Quarter</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;"></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>576,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>576,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>605,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>605,074</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,685</TD>
    <TD align="left" valign="bottom" nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,330</TD>
    <TD align="left" valign="bottom" nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,848</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating expenses, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,248</TD>
    <TD align="left" valign="bottom" nowrap>)(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,652</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,669</TD>
    <TD align="left" valign="bottom" nowrap>)(3)(4)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,154</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,563</TD>
    <TD align="left" valign="bottom" nowrap>)(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,661</TD>
    <TD align="left" valign="bottom" nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,694</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss) per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.04</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.03</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.11</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>3rd&nbsp;Quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>4th&nbsp;Quarter</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;"></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>578,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>578,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>578,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>578,716</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,038</TD>
    <TD align="left" valign="bottom" nowrap>)(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28,237</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(38,748</TD>
    <TD align="left" valign="bottom" nowrap>)(7)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,681</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating income (expenses), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,373</TD>
    <TD align="left" valign="bottom" nowrap>(5)(6)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,830</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30,678</TD>
    <TD align="left" valign="bottom" nowrap>)(7)(8)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26,001</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28,665</TD>
    <TD align="left" valign="bottom" nowrap>)(6)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47,067</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(69,456</TD>
    <TD align="left" valign="bottom" nowrap>)(8)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49,712</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.79</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.92</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.38</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.79</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.92</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.38</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>1st&nbsp;Quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2nd&nbsp;Quarter</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;"></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>523,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>523,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>575,771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>575,771</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(56,376</TD>
    <TD align="left" valign="bottom" nowrap>)(9)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(46,140</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,447</TD>
    <TD align="left" valign="bottom" nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,305</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating income (expenses), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,045</TD>
    <TD align="left" valign="bottom" nowrap>)(9)(10)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,878</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,425</TD>
    <TD align="left" valign="bottom" nowrap>(11)(12)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,379</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(63,421</TD>
    <TD align="left" valign="bottom" nowrap>)(10)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(62,018</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78,872</TD>
    <TD align="left" valign="bottom" nowrap>(12)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79,684</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss) per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.88</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.84</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.88</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.84</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.02</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>3rd&nbsp;Quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>4th&nbsp;Quarter</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;"></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>592,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>592,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>563,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>563,191</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,268</TD>
    <TD align="left" valign="bottom" nowrap>(13)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,796</TD>
    <TD align="left" valign="bottom" nowrap>(15)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,581</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating expenses, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,678</TD>
    <TD align="left" valign="bottom" nowrap>)(13)(14)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,193</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,303</TD>
    <TD align="left" valign="bottom" nowrap>)(15)(16)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,655</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(114</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(114</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,590</TD>
    <TD align="left" valign="bottom" nowrap>(14)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,379</TD>
    <TD align="left" valign="bottom" nowrap>(16)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,812</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.13</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">74

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<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $3.1&nbsp;million net credit from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $2.7&nbsp;million net expense to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $4.5&nbsp;million net credit from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $5.0&nbsp;million net credit to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $7.8&nbsp;million net credit from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $18.4&nbsp;million net credit to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $15.0&nbsp;million net credit from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148; </I>Note, an additional
    $7.6&nbsp;million of losses on derivative instruments was
    recorded directly to <I>&#147;Gain (Loss) on Derivative
    Instruments, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $19.7&nbsp;million net expense to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $10.2&nbsp;million net credit from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $1.4&nbsp;million net expense to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $0.2&nbsp;million net expense from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(12)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $0.8&nbsp;million net expense to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(13)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $0.1&nbsp;million net expense from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(14)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $1.4&nbsp;million net expense to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(15)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $0.8&nbsp;million net credit from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(16)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $3.6&nbsp;million net credit to
    eliminate hedge accounting for the period presented.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
Earnings per share are computed independently for each of the
quarters presented. Therefore, the sum of the quarterly earnings
per share in 2004 and 2003 does not equal the total computed for
the year.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>17.</B></TD>
    <TD>
    <B>Emergency Wartime Supplemental Appropriations Act</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2003, the Senate and House of Representatives of the
United States of America passed, and the President signed, the
Emergency Wartime Supplemental Appropriations Act to provide
certain aviation-related assistance. The bill included the
following key provisions:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    $2.3&nbsp;billion of the appropriation was for grants by the
    Transportation Security Administration (&#147;TSA&#148;) to
    U.S.&nbsp;air carriers based on the proportional share each
    carrier had paid or collected as of the date of enactment of the
    legislation for passenger security and air carrier security
    fees. In May 2003, the Company received approximately
    $81.3&nbsp;million representing its proportional share of
    passenger security and air carrier security fees paid or
    collected as of April 2003. The Company recorded this amount as
    nonoperating income in the accompanying consolidated statements
    of operations. See Note&nbsp;12, <I>&#147;Nonoperating Income
    (Expenses)&nbsp;&#151; Other, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    The TSA would not impose passenger security fees during the
    period beginning June&nbsp;1, 2003 and ending September&nbsp;30,
    2003.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    $100&nbsp;million of the appropriation would be available to
    compensate air carriers for the direct costs associated with the
    strengthening of flight deck doors and locks on aircraft. AWA
    received approximately $4.6&nbsp;million in 2003 as
    reimbursement for the costs of reinforcing flight deck doors and
    locks.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Aviation war risk insurance provided by the federal government
    is extended until August 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Certain airlines that received the aviation-related assistance,
    principally those airlines with trans-Pacific or trans-Atlantic
    flights, agreed to limit the total cash compensation for certain
    executive officers during the 12-month period beginning
    April&nbsp;1, 2003 to an amount equal to the annual salary paid
    to that officer during the air carrier&#146;s fiscal year 2002.
    Any violation of this agreement would have required the carrier
    to repay to the government the amount reimbursed for airline
    security fees. Since AWA does not operate trans-Pacific or
    trans-Atlantic flights, AWA was not subject to this provision.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>18.</B></TD>
    <TD>
    <B>Segment Disclosures</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings is one reportable operating segment. Accordingly, the
segment reporting financial data required by
SFAS&nbsp;No.&nbsp;131 is included in the accompanying
consolidated balance sheets and consolidated statements of
operations.
</DIV>

<P align="center" style="font-size: 10pt;">75

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<DIV align="left" style="font-size: 10pt;">
<A name='112'></A>
</DIV>

<!-- link1 "Item 8B. Consolidated Financial Statements and Supplementary Data --America West Airlines, Inc. (&#147;AWA&#148;)" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item 8B.&nbsp;</B></TD>
    <TD>
    <B>Consolidated Financial Statements and Supplementary
    Data&nbsp;&#151; America West Airlines, Inc.
    (&#147;AWA&#148;)</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Consolidated balance sheets of AWA as of December&nbsp;31, 2004
and 2003, and the related consolidated statements of operations,
cash flows and stockholder&#146;s equity and comprehensive
income for each of the years in the three-year period ended
December&nbsp;31, 2004, together with the related notes and the
reports of KPMG LLP, and PricewaterhouseCoopers LLP, independent
registered public accounting firms, are set forth on the
following pages.
</DIV>

<P align="center" style="font-size: 10pt;">76

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Board of Directors and Stockholder
</DIV>

<DIV align="left" style="font-size: 10pt;">
America West Airlines, Inc.:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying consolidated balance sheets of
America West Airlines, Inc. as of December&nbsp;31, 2004 and
2003, and the related consolidated statements of operations,
cash flows and stockholder&#146;s equity and comprehensive
income for the years then ended. These consolidated financial
statements are the responsibility of the Company&#146;s
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of America West Airlines, Inc., and subsidiary as of
December&nbsp;31, 2004 and 2003, and the results of their
operations and their cash flows for the years then ended, in
conformity with U.S.&nbsp;generally accepted accounting
principles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in Note&nbsp;2 to the accompanying consolidated
financial statements, the Company has restated the consolidated
balance sheet as of December&nbsp;31, 2003 and the consolidated
statement of changes in stockholder&#146;s equity and
comprehensive income for the year then ended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>/s/ KPMG LLP</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
Phoenix, Arizona
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;11, 2005
</DIV>

<P align="center" style="font-size: 10pt;">77

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Board of Directors and Stockholder
</DIV>

<DIV align="left" style="font-size: 10pt;">
of America West Airlines, Inc.:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the accompanying consolidated statements of
operations, of cash flows and of stockholder&#146;s equity and
comprehensive income for the year ended December&nbsp;31, 2002
present fairly, in all material respects, the results of
operations and cash flows of America West Airlines, Inc. (a
wholly-owned subsidiary of America West Holdings Corporation)
for the year ended December&nbsp;31, 2002, in conformity with
accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of
the Company&#146;s management. Our responsibility is to express
an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with the
standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in Note&nbsp;1(k) to the consolidated financial
statements, the Company changed its method of accounting for
reorganization value in excess of amounts allocable to
identifiable assets in connection with the adoption of Statement
of Financial Accounting Standards No.&nbsp;142,
<I>&#147;Goodwill and Other Intangible Assets,&#148;
</I>effective January&nbsp;1, 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PricewaterhouseCoopers LLP</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
Phoenix, Arizona
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;24, 2003, except for the effects of the
</DIV>

<DIV align="left" style="font-size: 10pt;">
reorganization transaction described in Note&nbsp;1(a)
</DIV>

<DIV align="left" style="font-size: 10pt;">
as to which the date is August&nbsp;2, 2004
</DIV>

<P align="center" style="font-size: 10pt;">78

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Consolidated Balance Sheets</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004 and 2003</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands except share data)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated -</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>See Note&nbsp;2)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ASSETS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>128,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>134,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>322,615</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,900</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, less allowance for doubtful accounts of
    $1,487 in 2004 and $5,806 in 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,235</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expendable spare parts and supplies, less allowance for
    obsolescence of $14,759 in 2004 and $12,254 in 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,575</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>141,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129,291</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>604,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>764,766</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Flight equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>926,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>858,395</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>289,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>271,593</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment purchase deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,050</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,279,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,176,038</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>624,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>569,468</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>655,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>606,570</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investments in debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,740</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69,876</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Advances to parent company, net (see Note&nbsp;5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>258,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>254,792</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,198</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>451,138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>475,606</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,710,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,846,942</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LIABILITIES AND STOCKHOLDER&#146;S EQUITY</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current maturities of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>151,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>103,899</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current obligations under capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,442</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>209,373</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payable to affiliate, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,926</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Air traffic liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>194,718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,486</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation and vacation benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,045</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,117</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,277</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>651,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>637,565</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>635,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>688,965</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital leases, less current obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,467</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred credits and other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>139,873</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies (see Note&nbsp;7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholder&#146;s equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;B common stock, $.01&nbsp;par value. Authorized
    1,000&nbsp;shares; issued and outstanding 1,000&nbsp;shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>555,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>555,115</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(268,300</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(183,043</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholder&#146;s equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>286,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>372,072</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,710,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,846,942</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Consolidated Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">79

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Consolidated Statements of Operations</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the Years Ended December&nbsp;31, 2004, 2003 and 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,196,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,113,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,929,444</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cargo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,574</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89,545</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,338,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,253,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,046,563</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Salaries and related costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>655,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>658,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>601,870</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft rents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>304,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>297,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>295,016</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other rents and landing fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158,290</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft fuel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>557,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>375,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>299,284</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agency commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,953</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft maintenance materials and repairs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>205,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>223,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,691</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,201</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges (credits), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,432</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,030</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>423,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>402,613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>451,444</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,377,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,227,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,202,779</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39,704</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(156,216</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating income (expenses):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,551</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86,488</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86,743</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(79,529</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal government assistance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,466</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain (loss) on disposition of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,852</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on sale of investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain (loss) on derivative instruments, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(656</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>215</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total nonoperating income (expenses), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45,530</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(55,805</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes (benefit) and cumulative
    effect of change in accounting principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(85,234</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(212,021</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30,544</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before cumulative effect of change in accounting
    principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(85,257</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(181,477</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative effect of change in accounting principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(208,223</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(85,257</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>61,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(389,700</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Consolidated Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">80

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Consolidated Statements of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the Years Ended December&nbsp;31, 2004, 2003 and 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(85,257</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>61,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(389,700</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cumulative effect of change in accounting principle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>208,223</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,894</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of capitalized maintenance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,576</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of deferred credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,208</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,970</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,077</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of deferred rent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,452</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of debt issue costs and guarantee fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,978</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of bond discount</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,894</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of investment discount and premium, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gain on sale of investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,287</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,432</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,055</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,801</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in operating assets and liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42,900</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in accounts receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,337</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,009</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in expendable spare parts and supplies, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,681</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,061</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49,286</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45,932</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64,350</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in other assets, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,635</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(254</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,319</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(37,120</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(61,525</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in air traffic liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,894</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in accrued compensation and vacation benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,347</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,050</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease in accrued taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,614</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(68,909</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in other accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,689</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,348</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,022</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>226,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,287</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(219,383</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(154,365</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(157,202</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(487,505</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(633,711</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(69,987</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales of short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>707,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>364,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of investments in debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(80,436</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales of investments in debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,215</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,908</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sales of aircraft.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175,478</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sales of other property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sale of NLG investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(491,614</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,340</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>141,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>435,386</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(175,640</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,832</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(192,596</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payment of debt issue costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,152</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,236</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,987</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,900</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42,338</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>208,403</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,653</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(200,529</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>180,776</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>134,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>334,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>153,903</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>128,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>134,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>334,679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Consolidated Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">81

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Consolidated Statements of Stockholder&#146;s Equity and
Comprehensive Income</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the Years Ended December&nbsp;31, 2004, 2003 and 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands except share data)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additional</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Retained</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid-In</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Earnings/</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Deficit)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Income</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2001</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>519,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>145,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>666,509</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(389,700</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(389,700</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive income:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in the fair value of derivative financial instruments,
    net of tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>640</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total comprehensive income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(389,700</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(389,060</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash capital contribution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,384</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2002</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>555,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(244,329</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>312,833</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,286</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Correction of other comprehensive income(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,030</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,030</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercise of warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2003, as restated</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>555,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(183,043</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>372,072</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(85,257</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD align="left" valign="bottom" nowrap></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(85,257</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercise of warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>555,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(268,300</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>286,814</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Correction of Other Comprehensive Income&nbsp;&#151; See
    Note&nbsp;2, <I>&#147;Restatement of Previously Reported
    Amounts.&#148;</I></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes to Consolidated Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;">82

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Notes to Consolidated Financial Statements</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004, 2003 and 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
America West Airlines, Inc. (&#147;AWA&#148; or the
&#147;Airline&#148;) is a wholly owned subsidiary of America
West Holdings Corporation (&#147;Holdings&#148; or the
&#147;Company&#148;). AWA accounted for most of the
Company&#146;s revenues and expenses in 2004. Based on 2004
operating revenues and available seat miles (&#147;ASMs&#148;),
AWA is the eighth largest passenger airline in the United States
with the lowest cost structure of the eight major hub-and-spoke
airlines. At the end of 2004, AWA operated a fleet of 138
aircraft with an average fleet age of 10.7&nbsp;years and served
63 destinations in North America, including eight in Mexico,
three in Canada and one in Costa Rica. Through regional alliance
and code share arrangements with other airlines, AWA served an
additional 51 destinations in North America and the Middle East.
In 2004, AWA flew approximately 21.1&nbsp;million passengers and
generated revenues of approximately $2.3&nbsp;billion.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Summary of Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>Basis of Presentation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated financial statements include the accounts of
America West Airlines and its wholly owned subsidiary Flight
Training Center Hangar Plan (&#147;FTCHP&#148;). All significant
intercompany balances and transactions have been eliminated in
consolidation. Certain reclassifications have been made to prior
years&#146; consolidated financial statements to conform to the
current year&#146;s presentation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Leisure Company (&#147;TLC&#148;), previously a wholly owned
subsidiary of Holdings, was merged into AWA on January&nbsp;1,
2004 and continues to operate as the America West Vacations
division of AWA. This transaction was accounted for as a
reorganization of entities under common control. The 2003 and
2002 consolidated financial statements are presented on a
comparable basis with the 2004 consolidated financial
statements, as if the reorganization had occurred
January&nbsp;1, 2002. All intercompany transactions between AWA
and TLC have been eliminated.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Cash, Cash Equivalents and Short-term Investments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash equivalents consist of all highly liquid debt instruments
purchased with original maturities of three months or less.
Short-term investments consist of cash invested in certain debt
securities with original maturities greater than 90&nbsp;days
and less than one year. The debt securities are classified as
held to maturity and are carried at amortized cost that
approximates fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA reclassified investments in auction rate securities
previously classified as cash equivalents to short-term
investments on the accompanying consolidated balance sheets.
Investments reclassified in 2004 and 2003 were
$58.4&nbsp;million and $249.7&nbsp;million, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</B></TD>
    <TD>
    <B>Expendable Spare Parts and Supplies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Flight equipment expendable spare parts and supplies are valued
at average cost. An allowance for obsolescence is provided, over
the estimated useful life of the related aircraft and engines,
for spare parts expected to be on hand at the date the aircraft
are retired from service.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</B></TD>
    <TD>
    <B>Property and Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment are recorded at cost. Interest
capitalized on advance payments for aircraft acquisitions and on
expenditures for aircraft improvements are part of these costs.
Interest capitalized for the years ended December&nbsp;31, 2004,
2003 and 2002 was $2.2&nbsp;million, $1.6&nbsp;million and
$3.0&nbsp;million, respectively. Property and equipment is
depreciated and amortized to residual values over the estimated
useful lives or the lease term, whichever is less, using the
straight-line method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The estimated useful lives for AWA&#146;s ground property and
equipment range from three to 12&nbsp;years for owned property
and equipment and up to 30&nbsp;years for the flight training
facility. The estimated useful lives of AWA&#146;s owned
aircraft, jet engines, flight equipment and rotable parts range
from five to 25&nbsp;years. Leasehold improvements relating to
flight equipment and other property on operating leases are
amortized over the life of the lease or the life of the asset,
whichever is shorter.
</DIV>

<P align="center" style="font-size: 10pt;">83

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the
assets might be impaired as defined by SFAS&nbsp;No.&nbsp;144,
<I>&#147;Accounting for the Impairment or Disposal of Long-Lived
Assets.&#148; </I>Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset
to undiscounted future net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less cost to sell.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</B></TD>
    <TD>
    <B>Restricted Cash</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Restricted cash includes cash deposits securing certain letters
of credit and surety bonds and cash deposits held by
institutions that process credit card sales transactions.
Current restricted cash includes amounts set aside in an
irrevocable trust for the redemption of the
10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
unsecured notes which was subsequently paid on January&nbsp;26,
2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</B></TD>
    <TD>
    <B>Aircraft Maintenance and Repairs</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Routine maintenance and repairs are charged to expense as
incurred. The cost of major scheduled airframe, engine and
certain component overhauls are capitalized and amortized over
the periods benefited and are included in aircraft maintenance
materials and repairs expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first quarter of 2004, the Company revised the estimated
useful life for certain aircraft and related spare parts
inventory as a result of changes in AWA&#146;s fleet plan and
for capitalized maintenance on certain of its engines as a
result of changes in aircraft utilization. The net impact of
this change in estimate decreased the net loss for 2004 by
approximately $18.4&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An accrual for the estimated cost of scheduled airframe and
engine overhauls required to be performed on leased aircraft
prior to their return to the lessors has also been recorded.
These estimates are based on historical costs and our
assumptions regarding the renewal of aircraft leases.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</B></TD>
    <TD>
    <B>Derivative Instruments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA&#146;s fuel hedging contracts do not qualify as cash flow
hedges under Statement of Financial Accounting Standards
No.&nbsp;133, <I>&#147;Accounting for Derivative Instruments and
Hedging Activities&#148;
</I>(&#147;SFAS&nbsp;No.&nbsp;133&#148;). See Note&nbsp;2,
<I>&#147;Restatement of Previously Reported Amounts.&#148;
</I>Accordingly, the derivative hedging instruments are recorded
as an asset or liability on the balance sheet at fair value and
the changes in the fair values are recorded in <I>&#147;Gain
(Loss) on Derivative Instruments, Net&#148;</I> in the
accompanying consolidated statements of operations. See
Note&nbsp;12, <I>&#147;Nonoperating Income
(Expenses)&nbsp;&#151; Other, Net.&#148;</I>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)</B></TD>
    <TD>
    <B>Frequent Flyer Awards</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA maintains a frequent travel award program known as
&#147;FlightFund&#148; that provides a variety of awards to
program members based on accumulated mileage. The estimated cost
of providing the free travel, using the incremental cost method
as adjusted for estimated redemption rates, is recognized as a
liability and charged to operations as program members
accumulate mileage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA also sells mileage credits to companies participating in its
FlightFund program, such as hotels, car rental agencies and
credit card companies. Transportation-related revenue from the
sale of mileage credits is deferred and recognized when
transportation is provided.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)</B></TD>
    <TD>
    <B>Deferred Credit-Operating Leases</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Rents for operating leases were adjusted to fair market value
when AWA emerged from bankruptcy in 1994. The net present value
of the difference between the stated lease rates and the fair
market rates has been recorded as a deferred credit in the
accompanying balance sheets. The deferred credit will be
increased through charges to interest expense and decreased on a
straight-line basis as a reduction in rent expense over the
applicable lease periods. At December&nbsp;31, 2004 and 2003,
the unamortized balance of the deferred credit was
$38.3&nbsp;million and $44.6&nbsp;million, respectively.
</DIV>

<P align="center" style="font-size: 10pt;">84

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2002, AWA closed a $429&nbsp;million loan supported
by a $380&nbsp;million government loan guarantee. This loan
triggered aircraft rent concessions negotiated with
approximately 20 aircraft lessors. Approximately
$18.1&nbsp;million of aircraft rent, which was accrued as of
December&nbsp;31, 2001, was waived by the aircraft lessors. This
amount has been recorded as a deferred credit in the
accompanying consolidated balance sheet and will be amortized
over the remaining lives of the applicable leases as a reduction
in rent expense. At December&nbsp;31, 2004 and 2003, the
unamortized balance of the deferred credit was approximately
$4.2&nbsp;million and $7.8&nbsp;million, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)</B></TD>
    <TD>
    <B>Passenger Revenue</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Passenger revenue is recognized when transportation is provided.
Ticket sales for transportation which has not yet been provided
are recorded as air traffic liability. Passenger traffic
commissions and related fees are expensed when the related
revenue is recognized. Passenger traffic commissions and related
fees not yet recognized are included as a prepaid expense. Due
to complex pricing structures, refund and exchange policies, and
interline agreements with other airlines, certain amounts are
recognized in revenue using estimates regarding both the timing
of the revenue recognition and the amount of revenue to be
recognized. These estimates are generally based on the
statistical analysis of AWA&#146;s historical data. Any
adjustments resulting from periodic evaluations of the estimated
air traffic liability are included in results of operations
during the period in which the evaluations are completed.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)</B></TD>
    <TD>
    <B>Reorganization Value in Excess of Amounts Allocable to
    Identifiable Assets (&#147;ERV&#148;)</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2001, the FASB issued SFAS&nbsp;No.&nbsp;142,
<I>&#147;Goodwill and Other Intangible Assets.&#148;
</I>SFAS&nbsp;No.&nbsp;142 primarily addresses the accounting
for goodwill and intangible assets subsequent to their
acquisition. SFAS&nbsp;No.&nbsp;142 does not permit the
amortization of goodwill as required by APB Opinion No.&nbsp;17,
<I>&#147;Intangible Assets.&#148; </I>Rather, goodwill is
subject to a periodic impairment test, using a two-step process.
The first step is to identify a potential impairment. The second
step of the goodwill impairment test measures the amount of the
impairment loss, using a fair value-based approach. Under
SFAS&nbsp;No.&nbsp;142, ERV is reported as goodwill and
accounted for in the same manner as goodwill.
SFAS&nbsp;No.&nbsp;142 was effective for fiscal years beginning
after December&nbsp;15, 2001. Upon adoption of this statement on
January&nbsp;1, 2002, AWA recorded an impairment loss of
$208.2&nbsp;million, which was supported by an independent
valuation of the Company. The impairment loss was recorded as
the cumulative effect of a change in accounting principle.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)</B></TD>
    <TD>
    <B>Advertising Costs</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA expenses the costs of advertising as incurred. Advertising
expense for the years ended December&nbsp;31, 2004, 2003 and
2002 was $8.3&nbsp;million, $5.8&nbsp;million and
$6.5&nbsp;million, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. A valuation allowance is
established, if necessary, for the amount of any tax benefits
that, based on available evidence, are not expected to be
realized.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)</B></TD>
    <TD>
    <B>Stock Options</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of AWA&#146;s employees are eligible to participate in
the stock option plans of Holdings. Holdings accounts for its
stock option plans in accordance with the provisions of APB
Opinion No.&nbsp;25, <I>&#147;Accounting for Stock Issued to
Employees,&#148; </I>and related interpretations. As such,
compensation expense would be recorded on the date of grant only
if the current market price of the underlying stock exceeded the
exercise price. Accordingly, no compensation cost has been
recognized for stock options in Holdings&#146; condensed
consolidated financial statements. Had Holdings determined
compensation cost based on the fair value at the grant date for
its stock options under SFAS&nbsp;No.&nbsp;123,
<I>&#147;Accounting for Share-Based Payments,&#148; </I>and
allocated
</DIV>

<P align="center" style="font-size: 10pt;">85

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<DIV align="left" style="font-size: 10pt;">
the compensation expense to AWA for its employees participating
in the stock option plans, AWA&#146;s net income (loss) would
have been reduced to the pro forma amounts indicated below:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss), as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(85,257</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>61,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(389,700</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock-based compensation expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,874</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,709</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(91,131</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>56,966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(393,409</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)</B></TD>
    <TD>
    <B>New Accounting Standards</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the FASB issued Revised Statement
No.&nbsp;123, <I>&#147;Accounting for Share-Based Payment&#148;
</I>(&#147;SFAS&nbsp;No.&nbsp;123R&#148;). This statement
requires AWA to recognize the grant-date fair value of stock
options in the Statement of Operations. In addition, AWA will be
required to calculate this compensation using the fair-value
based method, versus the intrinsic value method previously
allowed under SFAS&nbsp;No.&nbsp;123. This revision is effective
for periods beginning after June&nbsp;15, 2005. Accordingly, AWA
will adopt this revised SFAS effective July&nbsp;1, 2005. AWA is
currently evaluating how it will adopt SFAS&nbsp;No.&nbsp;123R
and has not determined the method it will use to value granted
stock options. The adoption of SFAS&nbsp;No.&nbsp;123R is
expected to have a material effect on AWA&#146;s results of
operations. See Note&nbsp;1, <I>&#147;Summary of Significant
Accounting Policies&#148; </I>(n) <I>&#147;Stock Options&#148;
</I>for AWA&#146;s disclosure of the impact of the compensation
cost associated with stock options under SFAS&nbsp;No.&nbsp;123.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)</B></TD>
    <TD>
    <B>Use of Estimates</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management of AWA has made certain estimates and assumptions
relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with accounting
principles generally accepted in the United States. Actual
results could differ from those estimates.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)</B></TD>
    <TD>
    <B>Reclassifications</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain reclassifications have been made to the prior
years&#146; consolidated financial statements to conform to the
current year&#146;s presentation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA reclassified amounts related to settled fuel hedge
transactions and mark-to-market adjustments on open hedge
instruments from <I>&#147;Aircraft Fuel&#148;</I> expense to
<I>&#147;Gain (Loss) on Derivative Instruments, Net&#148; </I>in
the accompanying consolidated statement of operations. In fiscal
years 2004 and 2003, such amounts reduced fuel expense while in
fiscal years 2002 and 2001, such amounts increased fuel expense,
as originally classified. The amounts reclassified are as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amounts Reclassified</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,529</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,746</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(656</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Restatement of Previously Reported Amounts</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Derivative Instruments</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2005, management undertook a review of AWA&#146;s
accounting for its fuel hedging transactions. As a result of
this review, management concluded that AWA&#146;s hedging
transactions did not qualify for hedge accounting under
U.S.&nbsp;generally accepted accounting principles. Accordingly,
management concluded that the financial statements for prior
periods required restatement to reflect the fair value of fuel
hedging contracts in the balance sheets and statements of
stockholders equity and comprehensive income of Holdings and
AWA. Specifically, (i)&nbsp;AWA has restated its balance sheet
and statement of stockholder&#146;s equity and comprehensive
income as of and for the year ended December&nbsp;31, 2003, and
(ii)&nbsp;AWA has restated its 2004 and 2003 interim financial
results to correct the aforementioned accounting errors. The
unaudited interim results as originally reported and as restated
are presented in Note&nbsp;15, <I>&#147;Quarterly Financial
Data</I>
</DIV>

<P align="center" style="font-size: 10pt;">86

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<DIV align="left" style="font-size: 10pt;">
<I>(Unaudited).&#148; </I>AWA restated its 2003 consolidated
balance sheet to reduce the carrying value of its derivative
instruments asset by $12.5&nbsp;million, which served to record
the asset at fair value of open contracts as of
December&nbsp;31, 2003. The restatement also eliminated
$12.5&nbsp;million in accumulated other comprehensive income,
$2.0&nbsp;million of which was previously recorded in the 2003
beginning balance of accumulated other comprehensive income. The
restated amount of other assets is $110.2&nbsp;million in the
accompanying 2003 consolidated balance sheet. The restatement
eliminates the balance in accumulated other comprehensive income
in the accompanying 2003 consolidated balance sheet and
consolidated statement of stockholders&#146; equity and
comprehensive income.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Investments in Debt Securities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash equivalents and short-term investments as of
December&nbsp;31 are classified as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,205</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and money market funds</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128,441</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,504</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>128,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>134,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term investments:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>126,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>318,845</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,770</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>322,615</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total cash equivalents and short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>255,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>456,765</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, AWA had long-term investments in debt securities of
$30.0&nbsp;million and $40.7&nbsp;million as of
December&nbsp;31, 2004 and 2003, respectively. Long-term
investments consist of cash invested in certain debt securities
with maturities greater than one year. The debt securities are
classified as held to maturity and are carried at amortized cost
that approximates fair value.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Financial Instruments and Risk Management</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>Fair Value of Financial Instruments</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Cash Equivalents, Short-term Investments and
    Receivables</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The carrying amount approximates fair value because of the
short-term nature of these instruments.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Long-term Debt</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004 and 2003, the fair value of long-term
debt was approximately $721.5&nbsp;million and
$845.6&nbsp;million, respectively. AWA&#146;s variable rate
long-term debt with a carrying value of $545.7&nbsp;million and
$555.9&nbsp;million at December&nbsp;31, 2004 and 2003,
respectively, approximates fair value because these borrowings
have variable interest rate terms that approximate market
interest rates for similar debt instruments. The fair values of
AWA&#146;s other long-term debt are determined based on quoted
market prices if available or market prices for comparable debt
instruments.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Fuel Price Risk Management</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under its fuel hedging program, AWA may enter into certain
hedging transactions with approved counterparties for a period
generally not exceeding 12&nbsp;months. As of December&nbsp;31,
2004, AWA had entered into costless collar and basis swap
transactions hedging approximately 42% of its projected 2005
fuel requirements. The fair value of AWA&#146;s financial
derivative instruments was a net asset of approximately
$0.2&nbsp;million and $2.7&nbsp;million at December&nbsp;31,
2004 and 2003, respectively. See Note&nbsp;2,
<I>&#147;Restatement of Previously Reported Amounts.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA is exposed to credit risks in the event any counterparty
fails to meet its obligations. AWA does not anticipate such
non-performance as counterparties are selected based on credit
ratings, exposure to any one
</DIV>

<P align="center" style="font-size: 10pt;">87

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
counterparty is limited based on formal guidelines and the
relative market positions with such counterparties are closely
monitored.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</B></TD>
    <TD>
    <B>Concentration of Credit Risk</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA does not believe it is subject to any significant
concentration of credit risk. Most of AWA&#146;s receivables
result from tickets sold to individual passengers through the
use of major credit cards or from tickets sold by other airlines
and used by passengers on AWA. These receivables are short-term,
generally being settled shortly after the sale.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Advances to Parent Company and Affiliate</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2002, AWA closed a $429&nbsp;million loan supported
by a $380&nbsp;million government loan guarantee. The terms of
this loan and AWA&#146;s secured term loan restrict
Holdings&#146; and AWA&#146;s ability to incur additional
indebtedness or issue equity unless the proceeds of those
transactions are used to prepay the government guaranteed loan
and the term loan. Accordingly, as a result of this transaction,
AWA&#146;s net advances to Holdings have been classified in
&#147;Other Assets&#148; on AWA&#146;s balance sheet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA&#146;s net advances to Holdings were approximately
$258.8&nbsp;million and $213.1&nbsp;million at December&nbsp;31,
2004 and 2003, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Long-Term Debt</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Long-term debt at December&nbsp;31, 2004 and 2003 consists of
the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Secured</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment notes payable, variable interest rates of 2.88% to
    3.37%, averaging 2.96%, installments due 2005 through 2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,454</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GECC term loan, variable interest rate of 6.41%, quarterly
    installments beginning 2006 through 2010(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Term loan, variable interest rate, paid off September 2004(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74,775</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior secured discount notes, variable interest rate of 6.42%,
    installments due 2005 through 2009(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>186,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,229</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unsecured</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Government guaranteed loan, variable interest rate of 2.38%,
    installments due 2005 through 2008(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>343,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>429,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
    unsecured notes, interest only payments until due in 2005(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,548</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    7.5%&nbsp;convertible senior notes, interest only payments until
    due in 2009(e)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,328</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    7.25%&nbsp;senior exchangeable notes, due 2023 with cash
    interest at 2.49% payable through 2008 and original issue
    discount of 7.25% thereafter(f)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,695</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment notes payable, interest rates of 90-day LIBOR +1.25%,
    averaging 3.61%, installments due through 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Industrial development bonds, fixed interest rate of 6.3% due
    2023(g)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State loan, variable interest rate of 5.97%, installments due
    2005 through 2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>793,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>861,621</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>979,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>984,850</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Unamortized discount on debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(193,246</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(191,986</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;Current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(151,183</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(103,899</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>635,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>688,965</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    On September&nbsp;10, 2004, AWA entered into a term loan
    financing with GECC providing for loans in an aggregate amount
    of $110.6&nbsp;million. AWA used approximately
    $77.0&nbsp;million of the proceeds from this financing to repay
    in full its term loan with Mizuho Corporate Bank, Ltd. and
    certain other lenders and to pay certain costs associated with
    this transaction. AWA used the remaining proceeds for general
    corporate purposes. The new term loan financing consists of two
    secured term loan facilities: a</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">88

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    $75.6&nbsp;million term loan facility secured primarily by spare
    parts, rotables and appliances (the &#147;Spare Parts
    Facility&#148;); and a $35.0&nbsp;million term loan facility
    secured primarily by aircraft engines and parts installed in
    such engines (the &#147;Engine Facility&#148;).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The facilities are cross-collateralized on a subordinated basis
    and the collateral securing the facilities also secures on a
    subordinated basis certain of AWA&#146;s other existing debt and
    lease obligations to GECC and its affiliates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The loans under the Spare Parts Facility are payable in full at
    maturity on September&nbsp;10, 2010. The loans under the Engine
    Facility are payable in equal quarterly installments of
    $1.3&nbsp;million beginning on March&nbsp;10, 2006 through
    June&nbsp;10, 2010 with the remaining loan amount of
    $11.8&nbsp;million payable at maturity on September&nbsp;10,
    2010. The loans under each facility may be prepaid in an amount
    not less than $5&nbsp;million at any time after the 30th monthly
    anniversary of the funding date under such facility. If AWA
    fails to maintain a certain ratio of rotables to loans under the
    Spare Parts Facility, it may be required to pledge additional
    rotables or cash as collateral, provide a letter of credit or
    prepay some or all of the loans under the Spare Parts Facility.
    In addition, the loans under the Engine Facility are subject to
    mandatory prepayment upon the occurrence of certain events of
    loss applicable to, or certain dispositions of, aircraft engines
    securing the facility.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Principal amounts outstanding under the loans bear interest at a
    rate per annum based on three-month LIBOR plus a margin. Both
    facilities contain customary events of default, including
    payment defaults, cross-defaults, breach of covenants,
    bankruptcy and insolvency defaults and judgment defaults.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    On December&nbsp;27, 2004, AWA raised additional capital by
    financing its Phoenix maintenance facility and flight training
    center. The flight training center was previously unencumbered,
    and the maintenance facility became unencumbered earlier this
    year when AWA refinanced its term loan. Using its leasehold
    interest in these two facilities as collateral, AWA, through a
    wholly owned subsidiary named FTCHP LLC, raised
    $30.8&nbsp;million through the issuance of senior secured
    discount notes. The notes were issued by FTCHP at a discount
    pursuant to the terms of a senior secured term loan agreement
    among AWA, FTCHP, Heritage Bank, SSB, as administrative agent,
    Citibank, N.A., as the initial lender, and the other lenders
    from time to time party thereto. Citibank, N.A. subsequently
    assigned all of its interests in the notes to third party
    lenders.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    AWA has fully and unconditionally guaranteed the payment and
    performance of FTCHP&#146;s obligations under the notes and the
    loan agreement. The notes require aggregate principal payments
    of $36&nbsp;million with principal payments of $1.5&nbsp;million
    due on each of the first two anniversary dates and the remaining
    principal amount due on the fifth anniversary date. The notes
    may be prepaid in full at any time (subject to customary LIBOR
    breakage costs) and in partial amounts of $1.5&nbsp;million on
    the third and fourth anniversary dates. The unpaid principal
    amount of the notes bears interest based on LIBOR plus a margin
    subject to adjustment based on a loan to collateral value ratio.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The loan agreement contains customary covenants applicable to
    loans of this type, including obligations relating to the
    preservation of the collateral and restrictions on the
    activities of FTCHP. In addition, the loan agreement contains
    events of default, including payment defaults, cross-defaults to
    other debt of FTCHP, if any, breach of covenants, bankruptcy and
    insolvency defaults and judgment defaults.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In connection with this financing, AWA sold all of its leasehold
    interests in the maintenance facility and flight training center
    to FTCHP and entered into subleases for the facilities with
    FTCHP at lease rates expected to approximate the interest
    payments due under the notes. In addition, AWA agreed to make
    future capital contributions to FTCHP in amounts sufficient to
    cover principal payments and other amounts owing pursuant to the
    notes and the loan agreement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The proceeds from this financing, together with
    $10.5&nbsp;million from operating cash flow, were irrevocably
    deposited with the trustee for AWA&#146;s
    10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
    unsecured notes due 2005 and subsequently redeemed on
    January&nbsp;26, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    In January 2002, AWA closed a $429&nbsp;million loan backed by a
    $380&nbsp;million federal loan guarantee provided by the Air
    Transportation Stabilization Board (the &#147;ATSB&#148;).
    Certain third-party counter-guarantors have fully and
    unconditionally guaranteed the payment of an aggregate of
    $45&nbsp;million of the outstanding principal amount under the
    government guaranteed loan plus accrued and unpaid interest
    thereon. In addition, Holdings has fully and unconditionally
    guaranteed the payment of all principal, premium, interest and
    other obligations outstanding under the government guaranteed
    loan and has pledged the stock of AWA to secure its obligations
    under such guarantee. Principal amounts under this loan become
    due in ten installments of $42.9&nbsp;million on each
    March&nbsp;31 and September&nbsp;30, commencing on
    March&nbsp;31, 2004 and ending on September&nbsp;30, 2008.
    Principal amounts outstanding under the government guaranteed
    loan bear interest at a rate per annum equal to LIBOR plus
    40&nbsp;basis points.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Subject to certain exceptions, AWA is required to prepay the
    government guaranteed loan with:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="4%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the net proceeds of all issuances of debt or equity by either
    Holdings or AWA after January 2002;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    proceeds from asset sales in excess of $20&nbsp;million in any
    fiscal year;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    insurance proceeds in excess of $2&nbsp;million to the extent
    such proceeds are not used to restore or replace the assets from
    which such proceeds are derived.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In addition, AWA is required to prepay the government guaranteed
    loan upon a change in control and we may be required to prepay
    portions of the loan if our employee compensation costs exceed a
    certain threshold. AWA may, at its option, prepay the government
    guaranteed loan without premium or penalty, subject to
    reimbursement of the lenders&#146; breakage costs in the case of
    prepayment of LIBOR loans.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    The government guaranteed loan requires that AWA maintain a
    minimum cash balance of $100&nbsp;million. In addition, the
    government loan contains customary affirmative covenants and the
    following negative covenants: restrictions on liens,
    investments, restricted payments, fundamental changes, asset
    sales and acquisitions, the creation of new subsidiaries, sale
    and leasebacks, transactions with</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">89

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    affiliates, the conduct of business, mergers or consolidations,
    issuances and dispositions of capital stock of subsidiaries, and
    amendments to other indebtedness. The government guaranteed loan
    contains customary events of default, including payment
    defaults, cross-defaults, breach of covenants, bankruptcy and
    insolvency defaults and judgment defaults.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    In August 1995, AWA issued $75.0&nbsp;million principal amount
    of
    10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
    unsecured notes due 2005 of which $39.5&nbsp;million remained
    outstanding at December&nbsp;31, 2004. Interest on the
    10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
    unsecured notes is payable semiannually in arrears on
    March&nbsp;1 and September&nbsp;1 of each year. On
    December&nbsp;27, 2004, AWA called for the redemption on
    January&nbsp;26, 2005 of all of the senior unsecured notes at a
    redemption price of 100% of the principal amount thereof plus
    accrued and unpaid interest through the redemption date. In
    addition, AWA irrevocably deposited the $30.8&nbsp;million
    raised through the maintenance facility and flight training
    center financing, together with an additional $10.5&nbsp;million
    from its operating cash flow, with the trustee for the senior
    unsecured notes. The senior notes were subsequently redeemed on
    January&nbsp;26, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    In connection with the closing of the government guaranteed loan
    and the related transactions, Holdings issued
    $104.5&nbsp;million of 7.5%&nbsp;convertible senior notes due
    2009, of which approximately $112.3&nbsp;million remained
    outstanding at December&nbsp;31, 2004 (including
    $21.6&nbsp;million of interest paid through December&nbsp;31,
    2004 as a deemed loan added to the initial principal thereof).
    Beginning January&nbsp;18, 2005, these notes are convertible
    into shares of class&nbsp;B common stock, at the option of the
    holders, at an initial conversion price of $12.00&nbsp;per share
    or a conversion ratio of approximately 83.333&nbsp;shares per
    $1,000 principal amount of such notes, subject to standard
    anti-dilution adjustments. Interest on the 7.5%&nbsp;convertible
    senior notes is payable semiannually in arrears on June&nbsp;1
    and December&nbsp;1 of each year. At Holdings&#146; option, the
    first six interest payments were payable in the form of a deemed
    loan added to the principal amount of these notes. The
    7.5%&nbsp;convertible senior notes will mature on
    January&nbsp;18, 2009 unless earlier converted or redeemed. The
    payment of principal, premium and interest on the
    7.5%&nbsp;convertible senior notes is fully and unconditionally
    guaranteed by AWA.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top"  style="font-size: 8pt;">
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Holdings may redeem some or all of the 7.5%&nbsp;convertible
    senior notes at any time before January&nbsp;18, 2005, at a
    redemption price equal to $1,000&nbsp;per note to be redeemed if
    (A)&nbsp;the closing price of the class&nbsp;B common stock has
    exceeded 120% of the conversion price then in effect for at
    least 20 trading days within a period of 30 consecutive trading
    days ending on the trading day before the date of the mailing of
    the redemption notice, and (B)&nbsp;a shelf registration
    statement covering resales of the notes and the class&nbsp;B
    common stock issuable upon conversion thereof is effective and
    available for use and is expected to remain effective and
    available for use for the 30&nbsp;days following the redemption
    date, unless registration is no longer required. Holdings may
    redeem the 7.5%&nbsp;convertible senior notes, in whole or in
    part, on or after January&nbsp;18, 2005 at the following
    redemption prices (expressed as percentages of the principal
    amount thereof), if redeemed during the twelve-month period
    commencing on January 18 of the years set forth below, plus, in
    each case, accrued and unpaid interest, if any, to the date of
    redemption:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Redemption Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008 and thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    For financial reporting purposes, AWA recorded the convertible
    senior notes at their fair market value on the date of issuance.
    The balance at December&nbsp;31, 2004 is net of an unamortized
    discount of $22.2&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (f)</TD>
    <TD></TD>
    <TD valign="top">
    In July and August of 2003, AWA completed a private placement of
    approximately $86.8&nbsp;million issue price of
    7.25%&nbsp;Senior Exchangeable Notes due 2023. The notes bear
    cash interest at 2.49%&nbsp;per year until July&nbsp;30, 2008.
    Thereafter, the notes will cease bearing cash interest and begin
    accruing original issue discount daily at a rate of
    7.25%&nbsp;per year until maturity. Each note was issued at a
    price of $343.61 and is exchangeable for class&nbsp;B common
    stock of Holdings at an exchange ratio of 32.038&nbsp;shares per
    $1,000 principal amount at maturity of the notes (subject to
    adjustment in certain circumstances). This represents an
    equivalent conversion price of approximately $10.73&nbsp;per
    share. The aggregate amount due at maturity, including accrued
    original issue discount from July&nbsp;31, 2008, will be
    $252,695,000. The notes are unconditionally guaranteed on a
    senior unsecured basis by Holdings.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Holders may exchange their notes for the shares of class&nbsp;B
    common stock of Holdings in any fiscal quarter commencing after
    September&nbsp;30, 2003, if, as of the last day of the preceding
    fiscal quarter, the closing sale price of the class&nbsp;B
    common stock for at least 20 trading days in a period of 30
    consecutive trading days ending on the last trading day of such
    preceding fiscal quarter is more than 110% of the accreted
    exchange price per share of Class&nbsp;B common stock on the
    last day of such preceding fiscal quarter. If the foregoing
    condition is satisfied, then the notes will be exchangeable at
    any time at the option of the holder through maturity. The
    accreted exchange price per share as of any day will equal the
    issue price of a note plus accrued original issue discount to
    that day divided by 32.038, subject to any adjustments to the
    exchange rate through that day.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    On or before July&nbsp;30, 2018, a holder also may exchange its
    notes for shares of the Class&nbsp;B common stock at any time
    after a 10 consecutive trading-day period in which the average
    of the trading prices for the notes for that 10 trading-day
    period was less than 103% of the average exchange value for the
    notes during that period. Exchange value is equal to the product
    of the closing sale price for the shares of Class&nbsp;B common
    stock on a given day multiplied by the then current exchange
    rate, which is the number of shares of Class&nbsp;B common stock
    for which each note is then exchangeable.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In addition, the holders may exchange the notes if the notes
    have been called for redemption or if certain specified
    corporate transactions have occurred.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    Holders of the notes may require AWA to repurchase the notes at
    a price equal to the original issue price plus accrued cash
    interest and original issue discount, if any, on July&nbsp;30,
    2008, 2013 and 2018. The purchase price of such notes may be
    paid in cash or</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">90

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    class&nbsp;B common stock of Holdings, subject to certain
    restrictions. In addition, each holder may require AWA to
    purchase all or a portion of such holder&#146;s notes upon the
    occurrence of certain change of control events concerning AWA or
    Holdings. AWA may redeem the notes, in whole or in part, on or
    after July&nbsp;30, 2008 at a price equal to the original issue
    price plus accrued cash interest and original issue discount, if
    any.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (g)</TD>
    <TD></TD>
    <TD valign="top">
    The industrial development revenue bonds are due April 2023.
    Interest at 6.3% is payable semiannually (April&nbsp;1 and
    October 1). The bonds are subject to optional redemption prior
    to the maturity date on or after April&nbsp;1, 2008, in whole or
    in part, on any interest payment date at the following
    redemption prices: 102% on April&nbsp;1 or October&nbsp;1, 2008;
    101% on April&nbsp;1 or October&nbsp;1, 2009; and 100% on
    April&nbsp;1, 2010 and thereafter.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Secured financings totaling $186.0&nbsp;million are
collateralized by assets, primarily aircraft, engines,
simulators, rotable aircraft parts and AWA&#146;s hangar
facility, with a net book value of $268.4&nbsp;million at
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, the estimated maturities of long-term
debt are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,183</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101,042</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,509</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107,570</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147,327</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>371,927</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>979,558</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of AWA&#146;s long-term debt agreements contain minimum
cash balance requirements and other covenants with which
Holdings and AWA are in compliance. Certain of these covenants
restrict AWA&#146;s ability to pay cash dividends on its common
stock and make certain other restricted payments (as specified
therein). Finally, AWA&#146;s long-term debt agreements contain
cross-default provisions, which may be triggered by defaults by
AWA under other agreements relating to indebtedness.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Commitments and Contingencies</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>Leases</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, AWA had 136 aircraft under
operating leases, including four aircraft that will be delivered
in 2005, with remaining terms ranging from five months to
approximately 19&nbsp;years. In January 2002, AWA closed a
$429&nbsp;million loan supported by a $380&nbsp;million
government loan guarantee that resulted in a restructuring of
its aircraft lease commitments. Under the restructured lease
agreements, annual rent payments have been reduced for each of
the next five years. Certain of these leases contain put options
pursuant to which the lessors could require AWA to renew the
leases for periods ranging from eight months to approximately
nine years or call options pursuant to which the lessors could
require AWA to return the aircraft to the lessors upon receipt
of six to nine months written notice. AWA also has options to
purchase certain of the aircraft at fair market values at the
end of the lease terms. Certain of the agreements require
security deposits, minimum return provisions and supplemental
rent payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since AWA&#146;s restructuring in 1994, AWA has set up
19&nbsp;pass through trusts, which have issued over
$1.4&nbsp;billion of pass through trust certificates (also known
as <I>&#147;Enhanced Equipment Trust&nbsp;Certificates&#148;
</I>or &#147;EETC&#148;) covering the financing of 54 aircraft.
These trusts are off-balance sheet entities, the primary purpose
of which is to finance the acquisition of aircraft. Rather than
finance each aircraft separately when such aircraft is purchased
or delivered, these trusts allow AWA to raise the financing for
several aircraft at one time and place such funds in escrow
pending the purchase or delivery of the relevant aircraft. The
trusts are also structured to provide for certain credit
enhancements, such as liquidity facilities to cover certain
interest payments, that reduce the risks to the purchasers of
the trust certificates and, as a result, reduce the cost of
aircraft financings to AWA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each trust covered a set amount of aircraft scheduled to be
delivered within a specific period of time. At the time of each
covered aircraft financing, the relevant trust used the funds in
escrow to purchase equipment notes relating to the financed
aircraft. The equipment notes were issued, at AWA&#146;s
election, either by AWA in connection with a mortgage financing
of the aircraft or by a separate owner trust in connection with a
</DIV>

<P align="center" style="font-size: 10pt;">91

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
leveraged lease financing of the aircraft. In the case of a
leveraged lease financing, the owner trust then leased the
aircraft to AWA. In both cases, the equipment notes are secured
by a security interest in the aircraft. The pass through trust
certificates are not direct obligations of, nor guaranteed by,
Holdings or AWA. However, in the case of mortgage financings,
the equipment notes issued to the trusts are direct obligations
of AWA and in the case of leveraged lease financings, the leases
are direct obligations of AWA. In addition, neither Holdings nor
AWA guarantee or participate in any way in the residual value of
the leased aircraft. All aircraft financed by these trusts are
currently structured as leveraged lease financings, which are
not reflected as debt on the balance sheets of either AWA or
Holdings. AWA does not provide residual value guarantees under
these lease arrangements. Each lease contains a purchase option
that allows AWA to purchase the aircraft at a fixed price, which
at the inception of the lease approximated the aircraft&#146;s
expected fair market value at the option date, near the end of
the lease term. These leasing entities meet the criteria for
variable interest entities. However, they do not meet the
consolidation criteria under FASB Interpretation No.&nbsp;46,
<I>&#147;Consolidation of Variable Interest Entities,&#148;
</I>because AWA is not the primary beneficiary under these
arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of the rent restructuring associated with the
government guaranteed loan, one aircraft lease was amended to
include a bargain purchase option. As a result, this lease has
been classified as a capital lease in accordance with
SFAS&nbsp;No.&nbsp;13, <I>&#147;Accounting for Leases,&#148;
</I>as amended, with an asset value of $14.8&nbsp;million which
includes accumulated amortization of $2.1&nbsp;million and
corresponding lease obligation of $8.5&nbsp;million at
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2004, one aircraft lessor exercised its put rights
under the aircraft lease agreement to extend the lease for one
Boeing&nbsp;737-300 aircraft for an additional 33&nbsp;months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA also leases certain terminal space, ground facilities and
computer and other equipment under noncancelable operating
leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, the scheduled future minimum cash
rental payments under capital leases and noncancelable operating
leases with initial terms of more than one year are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Operating</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Years Ending December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leases</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leases</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>361,671</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>335,412</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>314,892</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>264,017</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>238,074</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,719,934</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total minimum lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,234,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Amounts of lease payments that represent interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,884</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Present value of future minimum capital lease payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Current obligations under capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,475</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Rent expense (excluding landing fees) was approximately
$421.1&nbsp;million, $406.8&nbsp;million and $409.4&nbsp;million
for the years ended December&nbsp;31, 2004, 2003 and 200,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Collectively, the operating lease agreements require security
deposits with lessors of $24.0&nbsp;million, which have been
classified as <I>&#147;Other Assets, Net&#148; </I>in the
accompanying balance sheets, and bank letters of credit of
$13.8&nbsp;million. The letters of credit are collateralized by
$13.9&nbsp;million of restricted cash.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Revenue Bonds</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 1999, Series&nbsp;1999 special facility revenue bonds
(&#147;new bonds&#148;) were issued by a municipality to fund
the retirement of the Series&nbsp;1994A bonds (&#147;old
bonds&#148;) and the construction of a new concourse with 14
gates at Terminal 4 in Phoenix Sky Harbor International Airport
in support of AWA&#146;s strategic
</DIV>

<P align="center" style="font-size: 10pt;">92

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
growth plan. The new bonds are due June 2019 with interest
accruing at 6.25%&nbsp;per annum payable semiannually on
June&nbsp;1 and December&nbsp;1, commencing on December&nbsp;1,
1999. The new bonds are subject to optional redemption prior to
the maturity date on or after June&nbsp;1, 2009 in whole or in
part, on any interest payment date at the following redemption
prices: 101% on June&nbsp;1 or December&nbsp;1, 2009; 100.5% on
June&nbsp;1 or December&nbsp;1, 2010; and 100% on June&nbsp;1,
2011 and thereafter. In accordance with EITF Issue
No.&nbsp;97-10, <I>&#147;The Effect of Lessee Involvement in
Asset Construction,&#148; </I>AWA accounts for this as an
operating lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with these bonds, AWA entered into an Amended and
Restated Airport Use Agreement, pursuant to which AWA agreed to
make sufficient payments to the Industrial Development Authority
(&#147;IDA&#148;) to cover the principal and interest of the
bonds and to indemnify the IDA for any claims arising out of the
issuance and sale of the bonds and the use and occupancy of the
concourses financed by these bonds and the old bonds. At
December&nbsp;31, 2004, the outstanding principal amount of the
bonds was $21.8&nbsp;million. AWA estimates its remaining
payments to cover the principal and interest of these bonds will
be approximately $43.6&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, AWA is also the lessee under certain long-term
leases at various airports. At certain of these airports,
municipalities have issued revenue bonds to improve airport
facilities that are leased by AWA and accounted for as operating
leases. AWA does not guarantee the underlying debt related to
these operating leases.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</B></TD>
    <TD>
    <B>Aircraft Acquisitions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 2004, AWA amended its aircraft purchase contract with
AVSA S.A.R.L., an affiliate of Airbus Industrie or
&#147;AVSA,&#148; to acquire 22&nbsp;Airbus A320 family aircraft
(thirteen A320s and nine&nbsp;A319s), all powered by V2500
engines from International Aero Engines. Of the
22&nbsp;aircraft, it is anticipated that 18&nbsp;will be
purchased directly from the manufacturer and four have been
leased under noncancelable leases from various lessors for
aircraft to be delivered in 2005. AWA has negotiated lease
agreements for the four leased aircraft. In the context of this
incremental order, AWA also secured extensive flexibility from
Airbus with respect to its existing A318 order, allowing AWA to
better react to market conditions by enabling it to amend its
15&nbsp;A318 delivery positions to A319s and A320s, if it so
desires, or to take no additional aircraft under certain
conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA has an agreement with International Aero Engines
(&#147;IAE&#148;) which provides for the purchase by AWA of
seven new V2500-A5 spare engines scheduled for delivery through
2007 for use on certain of the Airbus A320 fleet. At
December&nbsp;31, 2004, the seven engines have an estimated
gross cost of $39&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table reflects estimated net cash payments under
the restructured aircraft purchase agreement with AVSA and the
IAE engine contract. Actual payments may vary due to inflation
factor adjustments and changes in the delivery schedule of the
equipment.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>272,820</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>456,891</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,697</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>777,408</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="17%"></TD>
    <TD width="83%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</B></TD>
    <TD>
    <B>Sale-Leaseback Transactions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the fourth quarter of 2004, AWA completed two separate
aircraft sale-leaseback transactions on one Airbus A320 aircraft
and one Airbus A319 aircraft resulting in a combined loss of
$4.6&nbsp;million. This amount was recorded in <I>&#147;Other
Operating Expenses.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2004, AWA completed a sale-leaseback transaction on one
V2500-A5 engine resulting in a gain of $2.9&nbsp;million which
has been deferred and will be amortized over the lease term of
seven years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In July 2004, AWA completed a sale-leaseback transaction on one
V2500-A5 engine resulting in a gain of $0.8&nbsp;million which
has been deferred and will be amortized over the lease term of
seven years.
</DIV>

<P align="center" style="font-size: 10pt;">93

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of the restructuring completed on January&nbsp;18, 2002,
AWA committed to the sale and leaseback of eight aircraft. The
sales and leaseback of six of these aircraft were completed in
2002 and resulted in losses of approximately $3.8&nbsp;million.
The sale and leaseback of one aircraft was completed in June
2003 and resulted in a loss of approximately $0.6&nbsp;million.
The sale and leaseback of the final aircraft was completed in
September 2003 and resulted in a loss of approximately
$0.7&nbsp;million. The losses on the sale-leaseback
transactions, which were subject to a firm commitment in January
2002, were accrued in the accompanying statements of operations
classified in <I>&#147;Special Charges&#148; </I>in the first
quarter of 2002. See Note&nbsp;11, <I>&#147;Special
Charges.</I>&#148;
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</B></TD>
    <TD>
    <B>Contingent Legal Obligations</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings and its subsidiaries are parties to various legal
proceedings, including some purporting to be class action suits,
and some that demand large monetary damages or other relief,
which, if granted, would require significant expenditures. In
certain cases where it is probable that the outcome will result
in monetary damages, AWA has reviewed available information and
determined that the best estimate of losses to be incurred
related to these cases is $2&nbsp;million, which has been
accrued. For those cases where a loss is possible, or cases
where a range of loss is probable but no amount within the range
is a better estimate than any other amount, the estimated amount
of additional exposure ranges from $0 to $25&nbsp;million. In
these instances, no accrual has been recorded.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="16%"></TD>
    <TD width="84%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</B></TD>
    <TD>
    <B>General Guarantees and Indemnifications</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA is the lessee under many aircraft financing agreements
(including leveraged lease financings of aircraft under the pass
through trusts) and real estate leases. It is common in such
transactions for AWA as the lessee to agree to indemnify the
lessor and other related third parties for the manufacture,
design, ownership, financing, use, operation and maintenance of
the aircraft, and for tort liabilities that arise out of or
relate to AWA&#146;s use or occupancy of the leased asset. In
some cases, this indemnity extends to related liabilities
arising from the negligence of the indemnified parties, but
usually excludes any liabilities caused by their gross
negligence or willful misconduct. Additionally, in the case of
real estate leases, AWA typically indemnifies such parties for
any environmental liability that arises out of or relates to
AWA&#146;s use of the leased premises. AWA expects that it would
be covered by insurance (subject to deductibles) for most tort
liabilities and related indemnities described above with respect
to leased real estate and operated aircraft.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA is included in Holdings&#146; consolidated income tax
return. Income tax expense in the accompanying statements of
operations has been determined on a separate company basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA recorded income tax expense (benefit) as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current taxes:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(30,544</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30,544</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(30,544</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA&#146;s emergence from bankruptcy reorganization in 1994 and
the associated implementation of fresh start reporting gave rise
to significant items of expense for financial reporting purposes
that are not deductible for income tax purposes. In large
measure, it is these nondeductible (for income tax purposes)
expenses that result in an effective tax expense (benefit) rate
for financial reporting purposes that differs from the current
federal statutory income tax rate of 35%.
</DIV>

<P align="center" style="font-size: 10pt;">94

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income tax expense (benefit) differs from amounts computed at
the federal statutory income tax rate as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense (benefit) at the federal statutory income
    tax&nbsp;rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(29,832</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(74,207</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State income tax expense (benefit), net of federal income tax
    expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,057</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,920</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State rate change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,229</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,532</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44,461</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expired tax credits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,988</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,147</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(866</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(30,544</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, AWA has available net operating
loss carryforwards (&#147;NOLs&#148;) and tax credit
carryforwards for federal income tax purposes of approximately
$447.6&nbsp;million and $1.1&nbsp;million, respectively. The
NOLs expire during the years 2007 through 2024 while
approximately $0.2&nbsp;million of the tax credit carryforwards
will expire in 2005 and 2006. AWA also had capital loss
carryforwards for federal income tax purposes of approximately
$1.4&nbsp;million which expire in 2009. However, such
carryforwards are not available to offset federal (and in
certain circumstances, state) alternative minimum taxable
income. Further, as a result of a statutory &#147;ownership
change&#148; (as defined for purposes of Section&nbsp;382 of the
Internal Revenue Code) that occurred as a result of AWA&#146;s
reorganization in 1994, AWA&#146;s ability to utilize its NOLs
and tax credit carryforwards may be restricted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September 2003, Holdings filed its 2002 consolidated income
tax return with the IRS, which included a claim to carryback
losses incurred in 2002 to the tax years 1999 and 2000. This
resulted in a refund of approximately $3.1&nbsp;million, of
which substantially all was received in the fourth quarter of
2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Composition of Deferred Tax Items</I></B>:</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. As of December&nbsp;31, the
significant components of AWA&#146;s deferred tax assets and
liabilities are a result of the temporary differences related to
the items described as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net operating loss carryforwards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>183,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>126,220</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,347</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vacation accrual</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,948</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Frequent flyer accrual</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,958</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restructuring and other reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,858</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax credit carryforwards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,112</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,740</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>224,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169,183</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accelerated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(95,365</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(70,534</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Partnership losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,421</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,420</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(254</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(781</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross deferred tax liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(97,040</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(72,735</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred tax assets before valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>127,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96,448</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(127,484</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(96,448</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">95

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SFAS&nbsp;No.&nbsp;109, <I>&#147;Accounting for Income
Taxes,&#148; </I>requires that a valuation allowance be
established when it is &#147;more likely than not&#148; that all
or a portion of deferred tax assets will not be realized. A
review of all available positive and negative evidence needs to
be considered, including AWA&#146;s performance, the market
environment in which AWA operates, forecasts of future
profitability, the utilization of past tax credits, length of
carryforward periods and similar factors. SFAS&nbsp;No.&nbsp;109
further states that it is difficult to conclude that a valuation
allowance is not needed when there is negative evidence such as
cumulative losses in recent years. Therefore, cumulative losses
weigh heavily in the overall assessment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA was in a cumulative loss position three out of four years
between December&nbsp;31, 2001 through December&nbsp;31, 2004,
which weighed heavily in the overall determination that a
valuation allowance was needed. As of December&nbsp;31, 2004,
AWA had recorded a valuation allowance of $127.5&nbsp;million
against its net deferred tax assets. AWA expects to continue to
record a full valuation allowance on any future tax benefits
until we have achieved several quarters of consecutive
profitable results coupled with an expectation of continued
profitability. As of December 2004 and 2003, the valuation
allowance totaled $127.5&nbsp;million and $96.4&nbsp;million,
respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>9.</B></TD>
    <TD>
    <B>Capital Stock</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Common Stock</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of common stock are entitled to one vote for each
share of stock held by the holder. Holders of common stock have
no right to cumulate their votes in the election of directors.
The holders of common stock are entitled to receive, when and if
declared by the Board of Directors, out of the assets of AWA
which are by law available, dividends payable either in cash, in
stock or otherwise.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Warrants</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As compensation for various elements of AWA&#146;s financial
restructuring completed in January 2002, Holdings issued a
warrant to purchase&nbsp;18.8&nbsp;million shares of its
Class&nbsp;B common stock to the federal government and
additional warrants to purchase&nbsp;3.8&nbsp;million shares of
its Class&nbsp;B common stock to other loan participants, in
each case at an exercise price of $3&nbsp;per share and a term
of ten years. For accounting purposes, the warrants were valued
at $35.4&nbsp;million, or $1.57&nbsp;per share, using the
Black-Scholes pricing model with the following assumptions:
expected dividend yield of 0.0%, risk-free interest rate of
4.8%, volatility of 44.9% and an expected life of ten years. The
warrants were recorded by AWA as a non-cash capital contribution
in the accompanying consolidated statements of
stockholder&#146;s equity and comprehensive income and
classified as <I>&#147;Other Assets, Net&#148; </I>in the
accompanying consolidate balance sheets. The warrants will be
amortized over the life of the government guaranteed loan as an
increase to interest expense. In the first quarter of 2004,
approximately 220,000 warrants were exercised at $3&nbsp;per
share. In the third quarter of 2003, approximately
2.6&nbsp;million warrants were exercised at $3&nbsp;per share.
These warrant exercises were cashless transactions resulting in
the issuance of approximately 1.6&nbsp;million shares of
Holdings&#146; Class&nbsp;B common stock.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>10.</B></TD>
    <TD>
    <B>Employee Benefit Plan</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings has a 401(k) defined contribution plan, covering
essentially all employees of AWA. Participants may contribute
from 1 to 50% of their pretax earnings to a maximum of $13,000
in 2004. AWA&#146;s matching contribution is determined annually
by the Board of Directors. AWA&#146;s contribution expense to
the plan totaled $11.4&nbsp;million, $8.6&nbsp;million and
$8.6&nbsp;million in 2004, 2003 and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the third quarter of 2004, Holdings became aware that an
insufficient number of shares of its Class&nbsp;B common stock
were registered for offer and sale through its 401(k) plan. In
response to this registration shortfall, Holdings promptly filed
a new registration statement on Form&nbsp;S-8 on August&nbsp;13,
2004, which registered an additional 4,500,000&nbsp;shares of
Class&nbsp;B common stock to permit the continued offer and sale
of such shares to participants through the 401(k) plan. Because
the 401(k) plan in the past has purchased and in the future
expects to continue to purchase shares of Class&nbsp;B common
stock needed for allocation to participant accounts only in the
open market and not directly from Holdings, the registration of
these additional shares and their purchase by the 401(k) plan
will have no dilutive impact on the outstanding equity of
Holdings. As a result of the registration shortfall, however,
participants who acquired unregistered shares
</DIV>

<P align="center" style="font-size: 10pt;">96

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<DIV align="left" style="font-size: 10pt;">
through their 401(k)&nbsp;plan accounts after June&nbsp;30,
2003, and prior to August&nbsp;13, 2004, may be entitled to
rescission rights or other remedies under the Securities Act of
1933, as amended. Holdings has notified affected existing and
former plan participants of their potential rescission rights,
but cannot predict the extent to which any such rescission
rights may be exercised or the impact of any possible federal or
state regulatory action pertaining to the registration
shortfall. Holdings does not believe, however, that any
consequences arising from the registration shortfall will have a
material adverse effect on its financial position or results of
operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>11.</B></TD>
    <TD>
    <B>Special Charges</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first quarter of 2004, AWA recorded a $0.6&nbsp;million
reduction in special charges related to the revision of
estimated costs associated with the sale and leaseback of
certain aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 2004, AWA entered into definitive agreements with two
lessors to return six Boeing 737-200 aircraft. Three of these
aircraft were returned to the lessors in the third quarter, two
were returned in the fourth quarter and one was returned in
January 2005. In addition, AWA continues negotiating with one
lessor on the return of its remaining two Boeing 737-200
aircraft, one of which was parked in March 2002. The other
aircraft was removed from service in January 2005. In connection
with the return of the aircraft, AWA recorded $1.9&nbsp;million
of special charges which include lease termination payments of
$2.1&nbsp;million, the write-down of leasehold improvements and
aircraft rent balances of $2.8&nbsp;million, offset by the net
reversal of maintenance reserves of $3.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, AWA and General Electric (&#147;GE&#148;)
mutually agreed to terminate the V2500&nbsp;A-1 power by hour
(PBH)&nbsp;agreement effective January&nbsp;1, 2005. This
agreement was entered into March 1998 with an original term of
ten years. For terminating the agreement early, AWA received a
$20.0&nbsp;million credit to be applied to amounts due for other
engines under the 1998 agreement that is expected to be fully
applied by December&nbsp;31, 2005. AWA had capitalized PBH
payments for V2500&nbsp;A-1 engines in excess of the unamortized
cost of the overhauls performed by GE of approximately
$3.7&nbsp;million. With the termination of this agreement, these
payments were not realizable and as a result, AWA wrote off this
amount against the $20.0&nbsp;million credit referred to above
resulting in a $16.3&nbsp;million net gain.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2003, AWA announced the elimination of its hub
operations in Columbus, Ohio. As a result, 12&nbsp;regional
jets, all of which were operated by Chautauqua Airlines under
the America West Express banner, have been phased out of the
fleet. In addition, the hub has been downsized from 49 daily
departures to 15&nbsp;destinations to four flights per day to
Phoenix and Las Vegas. Service to New York City La&nbsp;Guardia
Airport was also eliminated because perimeter rules at the
airport prohibit flights beyond 1,500&nbsp;miles, precluding
service from AWA&#146;s hubs in Phoenix and Las Vegas. In the
first and second quarters of 2003, AWA recorded special charges
of $1.0&nbsp;million and $9.6&nbsp;million, respectively,
related to the costs associated with the termination of certain
aircraft and facility contracts, employee transfer and severance
expenses and the write-off of leasehold improvements in
Columbus, Ohio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first quarter of 2003, AWA recorded a $1.1&nbsp;million
reduction in special charges related to the earlier-than-planned
return of certain leased aircraft in 2001 and 2002, as all
payments related to these aircraft returns have been made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2003, as part of a cost reduction program, AWA
implemented a plan to reduce management, professional and
administrative payroll costs which resulted in 161 fewer
employees within these workgroups. As a result, AWA recorded a
special charge of $1.8&nbsp;million related to this
reduction-in-force.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2003, AWA recorded an impairment loss of
$2.6&nbsp;million related to three owned Boeing 737-200 aircraft
that were grounded and subsequently sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the third quarter of 2003, AWA recorded an additional
$0.5&nbsp;million of special charges associated with the
elimination of our hub operations in Columbus, Ohio. These
special charges were offset by a $0.5&nbsp;million reduction in
special charges related to the revision of estimated costs
associated with the sale and leaseback of certain aircraft.
</DIV>

<P align="center" style="font-size: 10pt;">97

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first quarter of 2002, AWA recorded a special charge of
$21.0&nbsp;million, primarily related to the restructuring
completed on January&nbsp;18, 2002, resulting from the events of
September&nbsp;11, 2001. Components of the special charge are as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Special Charges</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fleet restructuring costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,915</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses on sale-leaseback transactions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,328</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Professional fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,745</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of computer system and security equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,411</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Severance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>631</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revision of estimate for second quarter 2001 special charge</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,030</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Of this amount, approximately $10.3&nbsp;million, principally
related to losses on sale-leaseback transactions, fleet
restructuring costs, professional fees and severance was accrued.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the third quarter of 2002, AWA recorded a $2.0&nbsp;million
reduction in special charges due to a revision of the estimated
costs related to the early termination of certain aircraft
leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents the payments and other settlements
made during 2002, 2003 and 2004 and the remaining special charge
accruals as of December&nbsp;31, 2004.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Contract</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Sale-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fleet</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Professional</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Reductions-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Termination/</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Leaseback</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Restructuring</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fees</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>in-force</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other Costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2001</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,869</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,030</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclassification of aircraft rent due to restructuring</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,696</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,516</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,489</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(714</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,719</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of convertible notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Forfeiture of security deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,289</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,289</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on sale-leasebacks</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,852</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,852</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclassification of capitalized maintenance for parked
    aircraft.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(902</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(902</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revision of estimate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,833</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(510</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,979</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(896</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,003</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,446</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,345</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on sale-leasebacks</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,361</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,361</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of leasehold improvements due to Columbus hub closure</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(539</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(539</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Impairment loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,617</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,617</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,389</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,950</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(600</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,313</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,908</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(242</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,528</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,683</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revision of estimate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reversal of maintenance reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of leasehold improvements, engine overhauls and
    deferred rent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,751</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,751</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>764</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA expects to make payments related to these special charges
through the fourth quarter of 2005.
</DIV>

<P align="center" style="font-size: 10pt;">98

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>12.</B></TD>
    <TD>
    <B>Nonoperating Income (Expenses)&nbsp;&#151; Other, Net</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the term loan refinancing with GECC, AWA
wrote off $1.3&nbsp;million of debt issue costs associated to
the term loan with Mizuho in 2004. This amount was recorded in
nonoperating expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The changes in the fair value of AWA&#146;s derivative
instruments and the net realized gains and losses for the
settled hedge transactions was a $30.5&nbsp;million credit in
2004, $10.7&nbsp;million credit in 2003 and $0.6&nbsp;million
expense in 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2003, the Senate and House of Representatives of the
United States of America passed, and the President signed, the
Emergency Wartime Supplemental Appropriations Act to provide
certain aviation-related assistance. $2.3&nbsp;billion of the
appropriation was for grants by the TSA to U.S.&nbsp;air
carriers based on the proportional share each carrier had paid
or collected as of the date of enactment of the legislation for
passenger security and air carrier security fees. In May 2003,
AWA received approximately $81.3&nbsp;million representing its
proportional share of passenger security and air carrier
security fees paid or collected as of April 2003, which has been
classified as <I>&#147;Federal Government Assistance&#148;
</I>in the accompanying statements of operations. See
Note&nbsp;16, <I>&#147;Emergency Wartime Supplemental
Appropriations Act.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the fourth quarter of 2003, IAC/ InterActiveCorp completed
its acquisition of Hotwire.com, a discount travel website.
Hotwire was founded by the Texas Pacific Group, American
Airlines, Continental Airlines, Northwest Airlines, United
Airlines, US Airways and AWA in October 2000. AWA had an
ownership interest of approximately 1.5% in Hotwire.com with a
carrying value of approximately $0.03&nbsp;million. Upon closing
of the transaction, AWA received cash of $9.8&nbsp;million.
Accordingly, AWA recognized a nonoperating gain of
$9.8&nbsp;million in the fourth quarter of 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the airline compensation provisions of the Air
Transportation Safety and System Stabilization Act (the
&#147;Act&#148;), each air carrier was entitled to receive the
lesser of: (i)&nbsp;its direct and incremental losses for the
period September&nbsp;11, 2001 to December&nbsp;31, 2001 or
(ii)&nbsp;its proportional available seat mile allocation (based
on available seat miles for August 2001) of the
$4.5&nbsp;billion compensation available under the Act. In 2001,
AWA received $98.2&nbsp;million under the Act from the United
States government and expected to receive, based on its losses
and its share of available seat miles, at least an additional
$10.0&nbsp;million. In accordance with EITF Issue
No.&nbsp;01-10, <I>&#147;Accounting for the Impact of the
Terrorist Attacks of September&nbsp;11, 2001,&#148; </I>AWA
recognized $108.2&nbsp;million of federal government assistance
in 2001 as nonoperating income because direct and incremental
losses incurred during 2001 exceeded that amount. In July 2002,
AWA received an additional $12.3&nbsp;million under the Act.
Accordingly, $10.0&nbsp;million was credited against the
receivable established in 2001 and $2.3&nbsp;million was
recognized as nonoperating income in the second quarter of 2002.
In August 2002, AWA received an additional payment of
$6.2&nbsp;million under the Act, which was recognized as
nonoperating income in the third quarter of 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2002, AWA wrote down its investment in Aeroxchange, an
e-commerce entity, which was carried at cost, to net realizable
value recognizing a loss of $2.8&nbsp;million.
</DIV>

<P align="center" style="font-size: 10pt;">99

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>13.</B></TD>
    <TD>
    <B>Supplemental Information to Statements of Cash Flows</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Supplemental disclosure of cash flow information and non-cash
investing and financing activities were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash transactions:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclassification of investments in debt securities to short-term
    investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclassification of advances to parent company, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>265,810</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of convertible notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,902</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cancellation of convertible notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(660</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,280</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cancellation of 10.75%&nbsp;senior unsecured notes related to
    sale of NLG investment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,370</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,383</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercise of warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment acquired through capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,753</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment acquired with issuance of notes payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,163</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable issued for equipment purchase deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable canceled under the aircraft purchase agreement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,500</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payment in kind notes issued, net of returns</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,756</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash transactions:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest paid, net of amounts capitalized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,942</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes paid (refunded)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,493</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(63,503</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>14.</B></TD>
    <TD>
    <B>Related Party Transactions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of our reorganization in 1994, Continental Airlines and
AWA entered into an alliance agreement that included code
sharing arrangements, reciprocal frequent flyer programs and
ground handling operations. In March 2002, AWA received notice
from Continental of its intention to terminate the code sharing
and frequent flyer agreements between the two airlines,
effective April&nbsp;26, 2002. Two of Continental&#146;s
directors are managing partners of Texas Pacific Group, which,
through TPG Advisors, Inc., effectively controls the voting
power of Holdings. AWA paid Continental approximately
$13.4&nbsp;million, $17.3&nbsp;million and $25.5&nbsp;million
and also received approximately $4.1&nbsp;million,
$5.0&nbsp;million and $15.9&nbsp;million in 2004, 2003 and 2002,
respectively, from Continental pursuant to these agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Texas Pacific Group agreed to reimburse AWA approximately
$2.5&nbsp;million for expenses incurred by AWA on its behalf. As
a result, AWA recorded this as a receivable as of
December&nbsp;31, 2004. Subsequent to December&nbsp;31, 2004,
AWA received $1.3&nbsp;million in such reimbursement and expects
to receive an additional $1.2&nbsp;million in 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>15.</B></TD>
    <TD>
    <B>Quarterly Financial Data (Unaudited)</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2004 and 2003 unaudited quarterly financial data has been
restated to reflect the accounting for fuel hedging derivative
instruments pursuant to management&#146;s determination that AWA
did not qualify for hedge accounting under
SFAS&nbsp;No.&nbsp;133. In addition, the restated amounts also
reflect corrections to properly reflect the fair value of open
derivative instruments at each quarter end. See Note&nbsp;2,
<I>&#147;Restatement of Previously Reported Amounts.&#148;</I>
</DIV>

<P align="center" style="font-size: 10pt;">100

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Summarized quarterly financial data for 2004 and 2003 follows
(in thousands of dollars):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>1st&nbsp;Quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2nd&nbsp;Quarter</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>576,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>576,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>604,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>604,904</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,481</TD>
    <TD align="left" valign="bottom" nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,266</TD>
    <TD align="left" valign="bottom" nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,784</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating expenses, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,275</TD>
    <TD align="left" valign="bottom" nowrap>)(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,679</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,741</TD>
    <TD align="left" valign="bottom" nowrap>)(3)(4)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(794</TD>
    <TD align="left" valign="bottom" nowrap>)(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,525</TD>
    <TD align="left" valign="bottom" nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,558</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>3rd&nbsp;Quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>4th&nbsp;Quarter</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>578,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>578,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>578,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>578,546</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,069</TD>
    <TD align="left" valign="bottom" nowrap>)(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,268</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(37,382</TD>
    <TD align="left" valign="bottom" nowrap>)(7)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,315</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating income (expenses), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,307</TD>
    <TD align="left" valign="bottom" nowrap>(5)(6)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,896</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30,821</TD>
    <TD align="left" valign="bottom" nowrap>)(7)(8)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26,144</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,762</TD>
    <TD align="left" valign="bottom" nowrap>)(6)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(46,164</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(68,226</TD>
    <TD align="left" valign="bottom" nowrap>)(8)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(48,482</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>1st&nbsp;Quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2nd&nbsp;Quarter</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>523,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>523,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>575,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>575,601</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(55,356</TD>
    <TD align="left" valign="bottom" nowrap>)(9)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45,120</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,457</TD>
    <TD align="left" valign="bottom" nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,315</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating income (expenses), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,066</TD>
    <TD align="left" valign="bottom" nowrap>)(9)(10)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,899</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,403</TD>
    <TD align="left" valign="bottom" nowrap>(11)(12)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,357</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(62,422</TD>
    <TD align="left" valign="bottom" nowrap>)(10)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(61,019</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79,860</TD>
    <TD align="left" valign="bottom" nowrap>(12)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80,672</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>3rd&nbsp;Quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>4th&nbsp;Quarter</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as previously</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(as restated)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reported)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>592,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>592,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>563,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>563,021</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,170</TD>
    <TD align="left" valign="bottom" nowrap>(13)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,821</TD>
    <TD align="left" valign="bottom" nowrap>(15)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,606</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating expenses, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,702</TD>
    <TD align="left" valign="bottom" nowrap>)(13)(14)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,217</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,327</TD>
    <TD align="left" valign="bottom" nowrap>)(15)(16)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,679</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(114</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(114</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,468</TD>
    <TD align="left" valign="bottom" nowrap>(14)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,380</TD>
    <TD align="left" valign="bottom" nowrap>(16)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,813</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $3.1&nbsp;million net credit from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $2.7&nbsp;million net expense to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $4.5&nbsp;million net credit from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $5.0&nbsp;million net credit to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $7.8&nbsp;million net credit from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $18.4&nbsp;million net credit to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $15.0&nbsp;million net credit from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148; </I>Note, an additional
    $7.6&nbsp;million of losses on derivative instruments was
    recorded directly to <I>&#147;Gain (Loss) on Derivative
    Instruments, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $19.7&nbsp;million net expense to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $10.2&nbsp;million net credit from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $1.4&nbsp;million net expense to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $0.2&nbsp;million net expense from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(12)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $0.8&nbsp;million net expense to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(13)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $0.1&nbsp;million net expense from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">101

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(14)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $1.4&nbsp;million net expense to
    eliminate hedge accounting for the period presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(15)&nbsp;</TD>
    <TD align="left">
    Reflects reclassification of $0.8&nbsp;million net credit from
    <I>&#147;Aircraft Fuel&#148; </I>expense to <I>&#147;Gain (Loss)
    on Derivative Instruments, Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(16)&nbsp;</TD>
    <TD align="left">
    Reflects the restatement of $3.6&nbsp;million net credit to
    eliminate hedge accounting for the period presented.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>16.</B></TD>
    <TD>
    <B>Emergency Wartime Supplemental Appropriations Act</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2003, the Senate and House of Representatives of the
United States of America passed, and the President signed, the
Emergency Wartime Supplemental Appropriations Act to provide
certain aviation-related assistance. The bill included the
following key provisions:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    $2.3&nbsp;billion of the appropriation was for grants by the TSA
    to U.S.&nbsp;air carriers based on the proportional share each
    carrier had paid or collected as of the date of enactment of the
    legislation for passenger security and air carrier security
    fees. In May 2003, AWA received approximately $81.3&nbsp;million
    representing its proportional share of passenger security and
    air carrier security fees paid or collected as of April 2003.
    AWA recorded this amount as nonoperating income in the
    accompanying statements of operations. See Note&nbsp;12,
    <I>&#147;Nonoperating Income (Expenses)&nbsp;&#151; Other,
    Net.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    The TSA would not impose passenger security fees during the
    period beginning June&nbsp;1, 2003 and ending September&nbsp;30,
    2003.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    $100&nbsp;million of the appropriation would be available to
    compensate air carriers for the direct costs associated with the
    strengthening of flight deck doors and locks on aircraft. AWA
    received approximately $4.6&nbsp;million in 2003 as
    reimbursement for the costs of reinforcing flight deck doors and
    locks.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Aviation war risk insurance provided by the federal government
    is extended until August 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Certain airlines that received the aviation-related assistance,
    principally those airlines with trans-Pacific or trans-Atlantic
    flights, agreed to limit the total cash compensation for certain
    executive officers during the 12-month period beginning
    April&nbsp;1, 2003 to an amount equal to the annual salary paid
    to that officer during the air carrier&#146;s fiscal year 2002.
    Any violation of this agreement would have required the carrier
    to repay to the government the amount reimbursed for airline
    security fees. Since AWA does not operate trans-Pacific or
    trans-Atlantic flights, AWA was not subject to this provision.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>17.</B></TD>
    <TD>
    <B>Segment Disclosures</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA is one reportable operating segment. Accordingly, the
segment reporting financial data required by
SFAS&nbsp;No.&nbsp;131 is included in the accompanying balance
sheets and statements of operations.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='113'></A>
</DIV>

<!-- link1 "Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure" -->

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;9.&nbsp;</B></TD>
    <TD>
    <B>Changes In and Disagreements with Accountants on Accounting
    and Financial Disclosure</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Holdings&#146; Audit Committee has selected and retained
KPMG LLP as the Company&#146;s independent registered public
accounting firm for the fiscal year ended December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
PricewaterhouseCoopers LLP served as the Company&#146;s and
AWA&#146;s independent registered public accounting firm for the
fiscal years ended December&nbsp;31, 2002 and 2001. On
August&nbsp;21, 2003, the Company dismissed
PricewaterhouseCoopers LLP as the Company&#146;s and AWA&#146;s
independent registered public accounting firm. The Company
appointed KPMG as independent registered public accounting firm
for the Company and AWA on August&nbsp;21, 2003. The decision to
change independent auditors was approved by the Company&#146;s
Audit Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The audit reports of PricewaterhouseCoopers LLP on
Holdings&#146; and AWA&#146;s consolidated balance sheets as of
December&nbsp;31, 2001 and 2002 and the related statements of
operations, cash flows and stockholders&#146; equity for each of
such years did not contain an adverse opinion or disclaimer of
opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the audits of the fiscal years ended
December&nbsp;31, 2001 and 2002 and through August&nbsp;21,
2003, there were no disagreements between Holdings or AWA and
PricewaterhouseCoopers LLP as to any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of PricewaterhouseCoopers LLP,
would have caused it to make reference to the subject matter of
the disagreement in its reports on the financial statements for
such periods within the meaning of Item&nbsp;304(a)(1)(iv) of
Regulation&nbsp;S-K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the fiscal years ended December&nbsp;31, 2001 and 2002
and through August&nbsp;21, 2003, there were no reportable
events (as defined in Item&nbsp;304(a)(1)(v) of
Regulation&nbsp;S-K).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings and AWA did not consult with KPMG LLP prior to its
engagement regarding the application of accounting principles to
a specified transaction, either completed or proposed, the type
of audit opinion that might be rendered on the financial
statements of Holdings or AWA or any matter that was either the
subject of a disagreement or a reportable event within the
meaning of Item&nbsp;304(a)(1) of Regulation&nbsp;S-K.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='114'></A>
</DIV>

<!-- link1 "Item 9A. Controls and Procedures" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item 9A.&nbsp;Controls and Procedures</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
Evaluation of Disclosure Controls and Procedures.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s internal control system was designed to
provide reasonable assurance to the Company&#146;s management
and board of directors regarding the preparation and fair
presentation of published financial statements. All internal
control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Our Chief
Executive Officer and Chief Financial Officer believe that our
disclosure controls and procedures were not effective at the
&#147;reasonable assurance&#148; level as of the end of the
period covered by this report since they resulted in a need to
restate our financial statements as described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
Management&#146;s Report on Internal Control over Financial
Reporting.</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Management&#146;s Report on Internal Control over Financial
    Reporting</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management is responsible for establishing and maintaining
effective internal control over Holdings&#146; financial
reporting as defined in Rules&nbsp;13a-15(f) and 15d-15(f) under
the Exchange Act. Management assessed the effectiveness of
Holdings&#146; internal control over financial reporting as of
December&nbsp;31, 2004. In making this assessment, management
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (&#147;COSO&#148;) in
<I>Internal Control&nbsp;&#151; Integrated Framework.</I> Based
on this assessment, management has concluded that as of
December&nbsp;31, 2004, the Company did not maintain effective
internal control over financial reporting, due to a material
weakness associated with the accounting for AWA&#146;s fuel
hedging program, as described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2005, management undertook a review of AWA&#146;s
accounting for its fuel hedging transactions. As a result of
this review, management concluded that AWA&#146;s fuel hedging
transactions did not qualify for hedge accounting under
U.S.&nbsp;generally accepted accounting principles and that the
Company&#146;s
</DIV>

<P align="center" style="font-size: 10pt;">103

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<DIV align="left" style="font-size: 10pt;">
financial statements for prior periods required restatement to
reflect the fair value of fuel hedging contracts in the balance
sheets and statements of stockholders equity and comprehensive
income of Holdings and AWA. See Note&nbsp;2,
<I>&#147;Restatement of Previously Reported Amounts&#148;
</I>and Note&nbsp;16, <I>&#147;Quarterly Financial Data
(Unaudited)&#148; </I>in Holdings&#146; and Note&nbsp;2,
<I>&#147;Restatement of Previously Reported Amounts&#148;
</I>and Note&nbsp;15, <I>&#147;Quarterly Financial Data
(Unaudited)&#148; </I>in AWA&#146;s consolidated financial
statements for the financial impact of the restatements. The
Company concluded that these accounting errors were the result
of deficiencies in its internal control over financial
reporting, from the lack of effective reviews of hedge
transaction documentation and of quarterly mark-to-market
accounting entries on open fuel hedging contracts by personnel
at an appropriate level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s independent registered public accounting
firm, KPMG LLP, have audited and issued their report on
management&#146;s assessment of Holdings&#146; effectiveness of
internal control over financial reporting as of
December&nbsp;31, 2004. The report of KPMG LLP appears in
(d)&nbsp;below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
Changes in Internal Controls.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There were no changes, in our internal controls over financial
reporting during the period covered by this report that
materially affected, or were reasonably likely to materially
affect, our internal controls over financial reporting. However,
prior to the filing of this report, we have implemented changes
to our internal controls to correct the material weakness
identified, as described above. Specifically, we have corrected
this material weakness by implementing a review process that
verifies the quarterly mark-to-market adjustment on open
derivative positions. In addition, the Company will utilize the
mark-to-market method of accounting for its derivative
instruments going forward until such time it is able to
implement processes and controls necessary to ensure that
appropriate hedge documentation is obtained at hedge inception.
At that time, the Company will evaluate whether it will re-apply
hedge accounting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)
Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Board of Directors and Stockholders
</DIV>

<DIV align="left" style="font-size: 10pt;">
America West Holdings Corporation:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited management&#146;s assessment, included in the
accompanying Management&#146;s Report on Internal Control Over
Financial Reporting (Item&nbsp;9A(b)), that America West
Holdings Corporation (&#147;Holdings&#148; or the
&#147;Company&#148;) and its subsidiary America West Airlines,
Inc. (&#147;AWA&#148;) did not maintain effective internal
control over financial reporting as of December&nbsp;31, 2004,
because of the effect of the material weakness identified in
management&#146;s assessment associated with the Company&#146;s
accounting for fuel hedging transactions, based on criteria
established in <I>Internal Control&nbsp;&#151; Integrated
Framework </I>issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Company&#146;s management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting. Our responsibility is to express an opinion
on management&#146;s assessment and an opinion on the
effectiveness of the Company&#146;s internal control over
financial reporting based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
management&#146;s assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A company&#146;s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company&#146;s
internal control over financial reporting includes those
policies and procedures that (1)&nbsp;pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
</DIV>

<P align="center" style="font-size: 10pt;">104

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<DIV align="left" style="font-size: 10pt;">
company; (2)&nbsp;provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with U.S.&nbsp;generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (3)&nbsp;provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company&#146;s assets that could have a material effect on the
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A material weakness is a control deficiency, or combination of
control deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. The
following material weakness has been identified and included in
management&#146;s assessment: As of December&nbsp;31, 2004, the
Company did not maintain effective internal control over
financial reporting due to a material weakness associated with
its accounting for AWA&#146;s fuel hedging transactions.
Management concluded that AWA&#146;s fuel hedging transactions
did not qualify for hedge accounting under U.S.&nbsp;generally
accepted accounting principles and that the Company&#146;s
financial statements for prior periods required restatement to
reflect the fair value of fuel hedging contracts in the balance
sheets and statements of stockholders equity and comprehensive
income of Holdings and AWA. These accounting errors resulted
from the lack of effective reviews of hedge transaction
documentation and of quarterly mark-to-market accounting entries
on open fuel hedging contracts by personnel at an appropriate
level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of the Company as of
December&nbsp;31, 2004 and 2003, and the related consolidated
statements of operations, cash flows and stockholders&#146;
equity and comprehensive income, for the years then ended. The
aforementioned material weakness was considered in determining
the nature, timing, and extent of audit tests applied in our
audit of the Company&#146;s 2004 consolidated financial
statements, and this report does not affect our report dated
March&nbsp;11, 2005, which expressed an unqualified opinion on
the Company&#146;s consolidated financial statements<I>.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, management&#146;s assessment that the Company
did not maintain effective internal control over financial
reporting as of December&nbsp;31, 2004, is fairly stated, in all
material respects, based on criteria established in <I>Internal
Control&nbsp;&#151; Integrated Framework </I>issued by COSO.
Also, in our opinion, because of the effect of the material
weakness described above on the achievement of the objectives of
the control criteria, the Company has not maintained effective
internal control over financial reporting as of
December&nbsp;31, 2004, based on criteria established in
<I>Internal Control&nbsp;&#151; Integrated Framework </I>issued
by COSO.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
/s/ <B>KPMG LLP</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
Phoenix, Arizona
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;11, 2005
</DIV>

<P align="center" style="font-size: 10pt;">105

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<DIV align="left" style="font-size: 10pt;">
<A name='115'></A>
</DIV>

<!-- link1 "Item 9B. Other Information" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item&nbsp;9B.&nbsp;Other Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;10, 2005, the Compensation Committee of
Holdings&#146; Board of Directors approved grants of stock
options to executive officers of Holdings and AWA as set forth
in the table below. All of the options have an exercise price
equal to $5.13, the fair market value of Holdings&#146; common
stock on the date of grant, and will vest in equal thirds on
each of March&nbsp;10, 2006, 2007 and 2008.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of Shares</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Position</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underlying Stock Options</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    W. Douglas Parker</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chairman, President and Chief Executive Officer of Holdings and
    AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    J. Scott Kirby</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President&nbsp;&#151; Sales and Marketing of AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>100,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jeffrey D. McClelland</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President and Chief Operating Officer of AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>100,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Joseph C. Beery</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President and Chief Information Officer of AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>30,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hal M. Heule</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President&nbsp;&#151; Technical Operations of AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>30,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    C.A. Howlett</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President&nbsp;&#151; Public Affairs of Holdings and
    AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>30,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Derek J. Kerr</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President and Chief Financial Officer of Holdings
    and AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>35,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Anthony Mule</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President&nbsp;&#151; Customer Service of AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>30,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James E. Walsh&nbsp;III</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President and General Counsel of AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>30,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Michael R. Carreon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President and Controller of AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>22,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Elise R. Eberwein</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President&nbsp;&#151; Corporate Communications of AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Kara L. Gin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President&nbsp;&#151; Financial Planning and Analysis of AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>22,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas T. Weir</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President and Treasurer of AWA</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>22,000</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<A name='116'></A>
</DIV>

<!-- link1 "PART III" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;III</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='117'></A>
</DIV>

<!-- link1 "Item 10. Directors and Executive Officers of the Registrants" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;10.&nbsp;</B></TD>
    <TD>
    <B>Directors and Executive Officers of the Registrants</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Information respecting continuing directors and nominees of the
Company will be set forth under the caption
<I>&#147;Proposal&nbsp;I: Election of Directors&#148; </I>in
Holdings&#146; Proxy Statement relating to its 2005 Annual
Meeting of Stockholders (the &#147;Proxy Statement&#148;) and is
incorporated by reference into this Annual Report on
Form&nbsp;10-K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Information respecting compliance with Section&nbsp;16(a) of the
Exchange Act will be set forth under the caption
<I>&#147;Section&nbsp;16(a) Beneficial Ownership Reporting
Compliance&#148; </I>in the Proxy Statement and is incorporated
by reference into this Annual Report on Form&nbsp;10-K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have adopted a Code of Business Conduct and Ethics, or the
&#147;Code,&#148; within the meaning of Item&nbsp;406(b) of
Regulation&nbsp;S-K. The Code applies to our principal executive
officer, principal financial officer, principal accounting
officer or controller, and persons performing similar functions.
The Code, our Corporate Governance Guidelines and the charters
of our Board committees are publicly available on our website at
<U>www.americawest.com</U>. Printed copies of the Code, our
Corporate Governance Guidelines and the charters of our Board
committees are available at no charge to any stockholder upon
request to the Company&#146;s Corporate Secretary at America
West Holdings Corporation, 111 West Rio Salado Parkway, Tempe,
Arizona 85281. If we make substantive amendments to the Code or
grant any waiver, including any implicit waiver, to our
principal executive officer, principal financial offer,
principal accounting officer or controller, and persons
performing similar functions, we will disclose the nature of
such amendment or waiver on our website or in a Current Report
on Form&nbsp;8-K in accordance with applicable rules and
regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other information required by Item&nbsp;10 will be set forth
under an appropriate caption in the Proxy Statement and
incorporated by reference into this Annual Report on
Form&nbsp;10-K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Proxy Statement will be filed with the SEC in accordance
with Rule&nbsp;14a-6(c) promulgated under the Exchange Act. With
the exception of the foregoing information and other information
specifically incorporated by reference into this Form&nbsp;10-K
Report, the Proxy Statement is not being filed as a part hereof.
Information respecting executive officers of the Company is set
forth at Part&nbsp;I of this Annual Report on Form&nbsp;10-K.
</DIV>

<P align="center" style="font-size: 10pt;">106

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<DIV align="left" style="font-size: 10pt;">
<A name='118'></A>
</DIV>

<!-- link1 "Item 11. Executive Compensation" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;11.&nbsp;</B></TD>
    <TD>
    <B>Executive Compensation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Information concerning executive compensation will be set forth
under the captions <I>&#147;Report of the Compensation and Human
Resources Committee of the Board of Directors on Executive
Compensation,&#148; &#147;Executive Compensation&#148; </I>and
<I>&#147;Employment Agreements&#148; </I>in the Proxy Statement
and is incorporated by reference into this Annual Report on
Form&nbsp;10-K.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='119'></A>
</DIV>

<!-- link1 "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;12.&nbsp;</B></TD>
    <TD>
    <B>Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Information concerning security ownership of certain beneficial
owners and management will be set forth under the captions
<I>&#147;Security Ownership of Certain Beneficial Owners and
Management&#148; </I>and <I>&#147;Equity Compensation Plan
Information&#148; </I>in the Proxy Statement and is incorporated
by reference into this Annual Report on Form&nbsp;10-K.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='120'></A>
</DIV>

<!-- link1 "Item 13. Certain Relationships and Related Transactions" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.&nbsp;</B></TD>
    <TD>
    <B>Certain Relationships and Related Transactions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Information concerning certain relationships and related
transactions required by Item&nbsp;13 is set forth under the
captions <I>&#147;Employment Agreements&#148; </I>and
<I>&#147;Certain Transactions&#148; </I>in the Proxy Statement
and is incorporated by reference into this Annual Report on
Form&nbsp;10-K.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='121'></A>
</DIV>

<!-- link1 "Item 14. Principal Accountant Fees and Services" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.&nbsp;</B></TD>
    <TD>
    <B>Principal Accountant Fees and Services</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Information concerning principal accountant fees and services
will be set forth under the captions <I>&#147;Independent
Registered Public Accounting Firm&#146;s Fees,&#148; &#147;Audit
Committee Disclosure&#148;</I> and <I>&#147;Policy on Audit
Committee Pre-Approval&#148;</I> in the Proxy Statement and is
incorporated by reference into this Annual Report on
Form&nbsp;10-K.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='122'></A>
</DIV>

<!-- link1 "PART IV" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;IV</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='123'></A>
</DIV>

<!-- link1 "Item 15. Exhibits and Financial Statement Schedules" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.&nbsp;</B></TD>
    <TD>
    <B>Exhibits and Financial Statement Schedules</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(a)(1) Financial Statements</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following financial statements and the Reports of
Independent Registered Public Accounting Firms are filed in
Part&nbsp;II, Items&nbsp;8A and 8B of this report on the pages
indicated:
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>America West Holdings Corporation</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Report of Independent Registered Public Accounting
    Firm&nbsp;&#151; page&nbsp;41.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Report of Independent Registered Public Accounting
    Firm&nbsp;&#151; page&nbsp;42.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Consolidated Balance Sheets&nbsp;&#151; December&nbsp;31, 2004
    and 2003&nbsp;&#151; page&nbsp;43.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Consolidated Statements of Operations&nbsp;&#151; Years ended
    December&nbsp;31, 2004, 2003 and 2002&nbsp;&#151; page&nbsp;44.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Consolidated Statements of Cash Flows&nbsp;&#151; Years ended
    December&nbsp;31, 2004, 2003 and 2002&nbsp;&#151; page&nbsp;45.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Consolidated Statements of Stockholders&#146; Equity and
    Comprehensive Income&nbsp;&#151; Years ended December&nbsp;31,
    2003, 2002 and 2001&nbsp;&#151; page&nbsp;46.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Notes to Consolidated Financial Statements&nbsp;&#151;
    page&nbsp;47.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>America West Airlines, Inc.</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Report of Independent Registered Public Accounting
    Firm&nbsp;&#151; page&nbsp;73.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Report of Independent Registered Public Accounting
    Firm&nbsp;&#151; page&nbsp;74.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Consolidated Balance Sheets&nbsp;&#151; December&nbsp;31, 2004
    and 2003&nbsp;&#151; page&nbsp;75.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Consolidated Statements of Operations&nbsp;&#151; Years ended
    December&nbsp;31, 2004, 2003 and 2002&nbsp;&#151; page&nbsp;76.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">107

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Consolidated Statements of Cash Flows&nbsp;&#151; Years ended
    December&nbsp;31, 2003, 2002 and 2001&nbsp;&#151; page&nbsp;77.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Consolidated Statements of Stockholder&#146;s Equity and
    Comprehensive Income&nbsp;&#151; Years ended December&nbsp;31,
    2003, 2002 and 2001&nbsp;&#151; page&nbsp;78.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Notes to Consolidated Financial Statements&nbsp;&#151;
    page&nbsp;79.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B>(a)(2) Financial Statement Schedules</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>America West Holdings Corporation</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Report of Independent Registered Public Accounting Firm on
    Financial Statement Schedule&nbsp;&#151; page&nbsp;114.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Report of Independent Registered Public Accounting Firm on
    Financial Statement Schedule&nbsp;&#151; page&nbsp;115.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Schedule&nbsp;II:&nbsp;Valuation and Qualifying
    Accounts&nbsp;&#151; page&nbsp;116.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>America West Airlines, Inc.</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Report of Independent Registered Public Accounting Firm on
    Financial Statement Schedule&nbsp;&#151; page&nbsp;117.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Report of Independent Registered Public Accounting Firm on
    Financial Statement Schedule&nbsp;&#151; page&nbsp;118.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Schedule&nbsp;II:&nbsp;Valuation and Qualifying
    Accounts&nbsp;&#151; page&nbsp;119.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All other information and schedules have been omitted as not
applicable or because the required information is included in
the financial statements or notes thereto.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;</B></TD>
    <TD>
    <B>Exhibits</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement and Plan of Merger, dated as of December&nbsp;19,
    1996, by and among America West Holdings Corporation
    (&#147;Holdings&#148;), America West Airlines, Inc.
    (&#147;AWA&#148;) and AWA Merger, Inc., with an effective date
    and time as of midnight on December&nbsp;31, 1996&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;2.1 to Holdings&#146;
    Registration Statement on Form&nbsp;8-B dated January&nbsp;13,
    1997.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Restated Certificate of Incorporation of AWA (included in
    Exhibit&nbsp;2.2 above).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bylaws of AWA.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certificate of Incorporation of Holdings&nbsp;&#151; Filed with
    the Secretary of State of the State of Delaware on
    December&nbsp;13, 1996 and incorporated by reference to
    Exhibit&nbsp;3.1 of Holdings&#146; Registration Statement on
    Form&nbsp;8-B dated January&nbsp;13, 1997. Holdings&#146;
    Certificate of Incorporation was subsequently amended by a
    Certificate of Amendment, filed with the Delaware Secretary of
    State on May&nbsp;24, 2004 and incorporated herein by reference
    to Exhibit&nbsp;3.1 to Holdings&#146; and AWA&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended June&nbsp;30,
    2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.4*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bylaws of Holdings.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture, dated as of July&nbsp;30, 2003, between America West
    Airlines, Inc. and U.S.&nbsp;Bank National Association, as
    trustee and not in its individual capacity, for America West
    Airlines, Inc. Senior Exchangeable Notes due 2023&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;4.1 to Holdings&#146;
    and AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of America West Airlines, Inc. Senior Exchangeable Note due
    2023&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;4.2
    to Holdings&#146; and AWA&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended September&nbsp;30, 2003.</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">108

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated as of July&nbsp;30, 2003,
    with respect to shares of Class&nbsp;B Common Stock underlying
    the America West Airlines, Inc. Senior Exchangeable Notes due
    2023&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;4.3
    to Holdings&#146; and AWA&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended September&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Guarantee and Exchange Agreement, dated as of July&nbsp;30,
    2003, between America West Holdings Corporation and
    U.S.&nbsp;Bank, National Association, as exchange agent and
    trustee and not in its individual capacity, for America West
    Airlines Inc. Senior Exchangeable Notes due 2023&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;4.4 to Holdings&#146;
    and AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Option Agreement, dated as of December&nbsp;31, 1996,
    between Holdings and AWA&nbsp;&#151; Incorporated by reference
    to Exhibit&nbsp;4.5 to Holdings&#146; Registration Statement on
    Form&nbsp;8-B dated January&nbsp;13, 1997.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement dated as of August&nbsp;25, 1994,
    among AWA, AmWest Partners, L.P. and other holders&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;4.6 to the AWA&#146;s
    Current Report on Form&nbsp;8-K dated August&nbsp;25, 1994 (File
    No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Assumption of Certain Obligations Under Registration Rights
    Agreement executed by Holdings for the benefit of TPG Partners,
    L.P., TPG Parallel&nbsp;I, L.P., Air Partners II, L.P.,
    Continental Airlines, Inc., Mesa Airlines, Inc., Lehman
    Brothers, Inc., Belmont Capital Partners&nbsp;II, L.P. and
    Belmont Fund, L.P.&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;4.7 to Holdings&#146; Registration Statement on
    Form&nbsp;8-B dated January&nbsp;13, 1997.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Pass Through Trust&nbsp;Agreement, dated as of
    November&nbsp;26, 1996, between AWA and Fleet National Bank, as
    Trustee&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;4.1 to AWA&#146;s Current Report on Form&nbsp;8-K
    dated November&nbsp;26, 1996 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Pass Through Trust&nbsp;Agreement, dated as of
    June&nbsp;17, 1997, between AWA and Fleet National Bank, as
    Trustee&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;4.5 to AWA&#146;s Registration Statement on
    Form&nbsp;S-3 dated June&nbsp;4, 1997 (File No.&nbsp;333-27351).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Forms of Pass Through Trust&nbsp;Agreements, dated as of
    October&nbsp;6, 1998, between AWA and Wilmington Trust Company,
    as Trustee&nbsp;&#151; Incorporated by reference to
    Exhibits&nbsp;4.4, 4.5, 4.6, 4.7, 4.8 and 4.9 to AWA&#146;s
    Registration Statement on Form&nbsp;S-4 dated March&nbsp;25,
    1999 (File No.&nbsp;333-71615).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Pass Through Trust&nbsp;Agreements, dated as of
    September&nbsp;21, 1999, between AWA and Wilmington Trust
    Company, as Trustee, made with respect to the formation of
    America West Airlines Pass Through Trusts,
    Series&nbsp;1999-1G-S, 1999-1G-O, 1999-1C-S and 1999-1C-O and
    the issuance of 7.93% Initial Pass Through Certificates
    Series&nbsp;1999-1G-S and 1999-1G-O, the issuance of 8.54%
    Initial Pass Through Certificates, Series&nbsp;1999-1C-S and
    1999-1C-O, the issuance of 7.93% Exchange Pass Through
    Certificates, Series&nbsp;1999-1G-S and 1999-1G-O, and the
    issuance of 8.54% Exchange Pass Through Certificates,
    Series&nbsp;1999-1C-S and 1999-1C-O&nbsp;&#151; Incorporated by
    reference to AWA&#146;s Quarterly Report on Form&nbsp;10-Q for
    the period ended September&nbsp;30, 1999 (File No. 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Insurance and Indemnity Agreement, dated as of
    September&nbsp;21, 1999, among AWA, Ambac Assurance Corporation
    as Policy Provider and Wilmington Trust Company as Subordination
    Agent and Trustee under the Pass Through
    Trust&nbsp;1999-1G-O&nbsp;&#151; Incorporated by reference to
    Exhibits&nbsp;4.15 to AWA&#146;s Registration Statement on
    Form&nbsp;S-4 dated March&nbsp;16, 2000 (File
    No.&nbsp;333-93393).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Pass Through Trust&nbsp;Agreement, dated as of July&nbsp;7,
    2000, between AWA, and Wilmington Trust Company, as Trustee,
    made with respect to the formation of America West Airlines Pass
    Through Trust, Series&nbsp;2000-1G-0, 2000-1G-S, 2000-1C-O and
    2000-1C-S, the issuance of 8.057% Initial Pass Through
    Certificates, Series&nbsp;2000-1G-O and 2000-1G-S, the issuance
    of 9.244% Initial Pass Through Certificates,
    Series&nbsp;2000-1C-O and 2000-1C-S, the issuance of 8.057%
    Exchange Pass Through Certificates, Series&nbsp;2000-1G-O and
    2000-1G-S and the issuance of 9.244% Exchange Pass Through
    Certificates, Series&nbsp;2000-1C-O and 2000-1C-S&nbsp;&#151;
    Incorporated by reference to Exhibits&nbsp;4.3, 4.4, 4.5 and 4.6
    to AWA&#146;s Registration Statement on Form&nbsp;S-4 dated
    September&nbsp;12, 2002 (File No.&nbsp;333-44930).</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">109

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Insurance and Indemnity Agreement, dated as of July&nbsp;7,
    2000, among AWA, Ambac Assurance Corporation as Policy Provider
    and Wilmington Trust company as Subordination Agent and Trustee
    under the Pass Through Trust&nbsp;2000-1G&nbsp;&#151;
    Incorporated by reference to Exhibits&nbsp;4.15 to AWA&#146;s
    Registration Statement on Form&nbsp;S-4 dated September&nbsp;12,
    2002 (File No.&nbsp;333-44930).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Insurance and Indemnity Agreement (Series&nbsp;G), dated as of
    May&nbsp;17, 2001, among AWA, Ambac Assurance Corporation as
    Policy Provider and Wilmington Trust company as Subordination
    Agent&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;4.20
    to AWA&#146;s Registration Statement on Form&nbsp;S-4 dated
    February&nbsp;14, 2002 (File No.&nbsp;333-69356).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture, dated as of January&nbsp;18, 2002, between America
    West Holdings Corporation and Wilmington Trust Company, as
    Trustee and not in its individual capacity, for America West
    Holdings Corporation 7.5%&nbsp;Convertible Senior Notes due
    2009&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;4.15
    to Holdings&#146; and AWA&#146;s Current Report on Form&nbsp;8-K
    dated January&nbsp;31, 2002 (File Nos. 001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of America West Holdings Corporation 7.5%&nbsp;Convertible
    Senior Notes due 2009&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;4.16 to Holdings&#146; and AWA&#146;s Current
    Report on Form&nbsp;8-K dated January&nbsp;31, 2002 (File Nos.
    001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated January&nbsp;18, 2002, with
    respect to shares of Class&nbsp;B Common Stock underlying the
    America West Holdings Corporation 7.5%&nbsp;Convertible Senior
    Notes due 2009&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;4.17 to Holdings&#146; and AWA&#146;s Current
    Report on Form&nbsp;8-K dated January&nbsp;31, 2002 (File Nos.
    001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Guaranty, dated as of January&nbsp;18, 2002, by America West
    Airlines, Inc., in favor of the Holders and the Trustee under
    the Indenture dated January&nbsp;18, 2002&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;4.18 to Holdings&#146;
    and AWA&#146;s Current Report on Form&nbsp;8-K dated
    January&nbsp;31, 2002 (File Nos. 001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Warrant to Purchase Class&nbsp;B Common Stock, dated
    January&nbsp;18, 2002, issued to the Air Transportation
    Stabilization Board and certain warrant recipients&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;4.19 to Holdings&#146;
    and AWA&#146;s Current Report on Form&nbsp;8-K dated
    January&nbsp;31, 2002 (File Nos. 001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated January&nbsp;18, 2002,
    between America West Holdings Corporation and the Air
    Transportation Stabilization Board with respect to shares of
    Class&nbsp;B Common Stock underlying the Warrant to Purchase
    Class&nbsp;B Common Stock&nbsp;&#151; Incorporated by reference
    to Exhibit&nbsp;4.20 to Holdings&#146; and AWA&#146;s Current
    Report on Form&nbsp;8-K dated January&nbsp;31, 2002 (File Nos.
    001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Warrant Registration Rights Agreement between America West
    Holdings Corporation and certain warrant recipients&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;4.21 to Holdings&#146;
    and AWA&#146;s Current Report on Form&nbsp;8-K dated
    January&nbsp;31, 2002 (File Nos. 001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Airport Use Agreement, dated as of July&nbsp;1, 1989, among the
    City of Phoenix, The Industrial Development Authority of the
    City of Phoenix, Arizona and AWA (&#147;Airport Use
    Agreement&#148;)&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10-(D)(9) to AWA&#146;s Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 1989 (File
    No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Airport Use Agreement, dated as of
    August&nbsp;1, 1990&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10-(D)(9) to AWA&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended September&nbsp;30, 1990
    (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Management Rights Agreement, dated as of August&nbsp;25, 1994,
    between TPG Partners L.P., TPG Genpar, L.P. and AWA&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.47 to AWA&#146;s
    Registration Statement on Form&nbsp;S-1 dated August&nbsp;23,
    1994, as amended (File No.33-54243).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Financing Agreement, dated as of April&nbsp;1, 1998, between the
    Industrial Development Authority of the City of Phoenix, Arizona
    and AWA&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.29 to Holdings&#146; Quarterly Report on
    Form&nbsp;10-Q for the quarter ended June&nbsp;30, 1998 (File
    No.&nbsp;001-12649).</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">110

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture of Trust, dated as of April&nbsp;1, 1998, from the
    Industrial Development Authority of the City of Phoenix, Arizona
    to Norwest Bank, Arizona N.A.&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.30 to Holdings&#146; Quarterly
    Report on Form&nbsp;10-Q for the quarter ended June&nbsp;30,
    1998 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to Airport Use Agreement, dated as of
    August&nbsp;25, 1995&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.34 to AWA&#146;s Annual Report on Form&nbsp;10-K
    for the year ended December&nbsp;31, 1998 (File
    No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture of Trust, dated as of June&nbsp;1, 1999, from The
    Industrial Development Authority of the City of Phoenix, Arizona
    to Bank One Arizona, N.A.&nbsp;&#151; Incorporated by reference
    to Exhibit&nbsp;10.35 to AWA&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended June&nbsp;30, 1999 (File
    No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Airbus A320/ A319 Purchase Agreement, dated as of
    September&nbsp;12, 1997, between AVSA S.A.R.L and AWA, including
    Letter Agreements Nos. 1-10&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.26 to Holdings&#146; Quarterly
    Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 1997 (File No.&nbsp;001- 12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1, dated as of March&nbsp;31, 1998, to the
    Airbus A320/ A319 Purchase Agreement, dated as of
    September&nbsp;12, 1997, between AVSA S.A.R.L. and
    AWA&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.28
    to Holdings&#146; Quarterly Report on Form&nbsp;10-Q for the
    quarter ended June&nbsp;30, 1998 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2, dated as of December&nbsp;9, 1998, to the
    Airbus A320/ A319 Purchase Agreement, dated as of
    September&nbsp;12, 1997, between AVSA S.A.R.L. and
    AWA&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.32
    to AWA&#146;s Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 1998 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3, dated as of October&nbsp;14, 1999, to the
    Airbus A320/319 Purchase Agreement, dated as of
    September&nbsp;12, 1997, between AVSA, S.A.R.L. and AWA,
    including Letter Agreement Nos. 1&nbsp;&#151; 8
    thereto&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.36 to Holdings&#146; and AWA&#146;s Annual
    Report on Form&nbsp;10-K for the year ended December&nbsp;31,
    1999 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4, dated as of July&nbsp;1, 2000, to the
    Airbus A320/319 Purchase Agreement, dated as of
    September&nbsp;12, 1997, between AVSA S.A.R.L. and
    AWA&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.38
    to AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended September&nbsp;30, 2000 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;5, dated as of October&nbsp;12, 2000, to the
    Airbus A320/319 Purchase Agreement, dated as of
    September&nbsp;12, 1997, between AVSA S.A.R.L. and
    AWA&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.39
    to AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended September&nbsp;30, 2000 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;7, dated July&nbsp;30, 2004, to the A319/
    A320 Purchase Agreement dated September&nbsp;12, 1997, between
    AVSA, S.A.R.L. and AWA and Letter Agreement Nos. 2&nbsp;&#151;
    8&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.15 to
    Holdings&#146; and AWA&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended September&nbsp;30, 2004 (File
    No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated V2500 Support Contract, dated as of
    October&nbsp;7, 1998, between AWA and IAE International Aero
    Engines AG and Side Letters Nos. 1 and 2 thereto&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.20 to
    Holdings&#146; and AWA&#146;s Annual Report on Form&nbsp;10-K
    for the year ended December&nbsp;31, 1998 (File
    No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Side Letter No.&nbsp;15, dated May&nbsp;26, 2004, to the Amended
    and Restated V2500 Support Contract, dated October&nbsp;7, 1998,
    between AWA and IAE International Aero Engines AG&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.16 to
    Holdings&#146; and AWA&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended September&nbsp;30, 2004 (File
    No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Priority Distribution Agreement, dated as of August&nbsp;25,
    1994, between TPG Partners, L.P., TPG Parallel&nbsp;I, L.P., Air
    Partners&nbsp;II, L.P., and Continental Airlines,
    Inc.&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;3 to
    Schedule&nbsp;13D filed by TPG Partners, L.P. on
    September&nbsp;6, 1994.</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">111

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Disposition and Redevelopment Agreement, dated as of
    February&nbsp;5, 2001, between AWA and the City of Phoenix,
    AZ&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.44
    to AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended March&nbsp;31, 2001 (File No. 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Unsubordinated Ground Lease, dated as of February&nbsp;5, 2001,
    between AWA and the City of Phoenix, AZ&nbsp;&#151; Incorporated
    by reference to Exhibit&nbsp;10.45 to AWA&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31,
    2001 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Code Share and Revenue Sharing Agreement, dated as of
    March&nbsp;20, 2001, between AWA and Mesa Airlines,
    Inc.&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.46
    to AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended March&nbsp;31, 2001 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $429,000,000 Loan Agreement, dated as of January&nbsp;18, 2002,
    among America West Airlines, Inc., Citibank, N.A., as Agent,
    KPMG Consulting, Inc., as Loan&nbsp;Administrator, Citibank,
    N.A., as Initial Lender and the Air Transportation Stabilization
    Board&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.51 to Holdings&#146; and AWA&#146;s Current
    Report on Form&nbsp;8-K dated January&nbsp;31, 2002 (File Nos.
    001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Undertaking (regarding restrictions on transfer of Class&nbsp;A
    Common Stock), dated as of January&nbsp;18, 2002, among America
    West Holdings Corporation, TPG Partners, L.P., TPG
    Parallel&nbsp;I, L.P. and Air Partners&nbsp;II, L.P. for the
    benefit of the Air Transportation Stabilization
    Board&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.53 to Holdings&#146; and AWA&#146;s Current
    Report on Form&nbsp;8-K dated January&nbsp;31, 2002 (File Nos.
    001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.24</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to Code Share and Revenue Sharing Agreement, as
    amended, dated as of October&nbsp;24, 2002, by and among AWA,
    Mesa Airlines, Inc., Freedom Airlines, Inc. and Air Midwest,
    Inc.&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.56
    of Holdings&#146; and AWA&#146;s Annual Report on Form&nbsp;10-K
    for the year ended December&nbsp;31, 2002.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.25</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to Code Share and Revenue Sharing Agreement
    dated as of January&nbsp;29, 2003 among AWA, Mesa Airlines, Inc.
    and Freedom Airlines, Inc.&nbsp;&#151; Incorporated by reference
    to Exhibit&nbsp;10.1 to Holdings&#146; and AWA&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.26(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fourth Amendment to Code Share and Revenue Sharing Agreement and
    Release dated as of September&nbsp;5, 2003 among AWA, Mesa
    Airlines, Inc., Air Midwest, Inc. and Freedom Airlines,
    Inc.&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.2
    to Holdings&#146; and AWA&#146;s Amendment No.&nbsp;1 to
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.27</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement [Engines], dated as of September&nbsp;3, 2004,
    among AWA, GECC, as administrative agent, original Series&nbsp;A
    lender and original Series&nbsp;B lender, Wells Fargo Bank
    Northwest, National Association (&#147;Wells Fargo&#148;), as
    security trustee and the lenders from time to time party
    thereto&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.1 to Holdings&#146; and AWA&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.28</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Engine Mortgage and Security Agreement, dated as of
    September&nbsp;3, 2004, between AWA and Wells Fargo&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.2 to Holdings&#146;
    and AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2004 (File No. 001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.29</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mortgage and Security Agreement Supplement No.&nbsp;1, dated
    September&nbsp;10, 2004, of AWA&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.3 to Holdings&#146; and AWA&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.30</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subordinated Engine Mortgage and Security Agreement, dated as of
    September&nbsp;3, 2004, between AWA and Wells Fargo&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.4 to Holdings&#146;
    and AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.31</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subordinated Mortgage and Security Agreement Supplement
    No.&nbsp;1, dated September&nbsp;10, 2004, of AWA&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.5 to Holdings&#146;
    and AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2004 (File No. 001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.32</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Security Trustee Agreement [Engines], dated as of
    September&nbsp;3, 2004, among Wells Fargo, as security trustee
    and the beneficiaries named therein&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.6 to Holdings&#146; and AWA&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">112

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.33</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Payment and Indemnity Agreement [Engines], dated as of
    September&nbsp;3, 2004, among AWA, certain beneficiaries listed
    on Schedule&nbsp;1 and Wells Fargo&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.7 to Holdings&#146; and AWA&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.34</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Restructure Letter Agreement [Engines], dated as of
    September&nbsp;3, 2004, among AWA and GECC&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.8 to Holdings&#146;
    and AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.35</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement [Spare Parts], dated as of September&nbsp;3,
    2004, among AWA, GECC, as administrative agent, original
    Series&nbsp;A lender and original Series&nbsp;B lender, Wells
    Fargo, as security trustee and the lenders from time to time
    party thereto&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.9 to Holdings&#146; and AWA&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.36</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Spare Parts Mortgage and Security Agreement, dated as of
    September&nbsp;3, 2004, between AWA and Wells Fargo&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.10 to
    Holdings&#146; and AWA&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended September&nbsp;30, 2004 (File
    No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.37</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subordinated Spare Parts Mortgage and Security Agreement, dated
    as of September&nbsp;3, 2004, between AWA and Wells
    Fargo&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.11 to Holdings&#146; and AWA&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.38</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Security Trustee Agreement [Spare Parts], dated as of
    September&nbsp;3, 2004, among Wells Fargo, as security trustee
    and the beneficiaries named therein&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.12 to Holdings&#146; and AWA&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.39</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Payment and Indemnity Agreement [Spare Parts], dated as of
    September&nbsp;3, 2004, among AWA, certain beneficiaries listed
    on Schedule&nbsp;1 and Wells Fargo&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.13 to Holdings&#146; and AWA&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.40</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Restructure Letter Agreement [Spare Parts], dated as of
    September&nbsp;3, 2004, among AWA and GECC&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.14 to
    Holdings&#146; and AWA&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended September&nbsp;30, 2004 (File No.
    001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.41*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $30,790,000 Senior Secured Term Loan Agreement, dated
    December&nbsp;23, 2004, among FTCHP LLC, as Borrower, America
    West Airlines, Inc., as Guarantor, Heritage Bank, SSB, as
    Administrative Agent and Citibank, N.A. (and other lenders named
    therein) as Lenders.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.42*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Secured Discount Note, dated December&nbsp;23, 2004,
    issued by FTCHP LLC.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.43*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Unconditional Guaranty Agreement, dated December&nbsp;23, 2004,
    by America West Airlines, Inc. in favor of Citibank, N.A.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.44+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated America West 1994 Incentive Equity
    Plan&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.21
    to AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended March&nbsp;31, 2001 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.45+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2002 Incentive Equity Plan&nbsp;&#151; Incorporated by reference
    to Appendix&nbsp;A to Holdings&#146; Proxy Statement on
    Schedule&nbsp;14A filed on April&nbsp;17, 2002 (File
    No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.46+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Performance-based Award Plan&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.57 to Holdings&#146; and AWA&#146;s
    quarterly Report on Form&nbsp;10-Q for the quarter ended
    June&nbsp;30, 2003 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.47*+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Offer Letter.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.48*+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Change of Control and Severance Benefit Agreement for
    Vice Presidents.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.49*+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Change of Control and Severance Benefit Agreement for
    Senior Vice Presidents.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.50*+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Summary of Officer Benefits.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.51*+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Summary of Director Compensation and Benefits.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.52+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Letter Agreement for Directors&#146; Travel&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.32 to
    Holdings&#146; and AWA&#146;s Annual Report on Form&nbsp;10-K
    for the period ended December&nbsp;31, 2003.</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">113

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.53*+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, dated February&nbsp;24, 2004, by and among
    America West Holdings Corporation, America West Airlines, Inc.
    and W.&nbsp;Douglas Parker.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subsidiaries of Holdings.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of KPMG LLP.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of PricewaterhouseCoopers LLP.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney, pursuant to which amendments to this Annual
    Report on Form&nbsp;10-K may be filed, is included on the
    signature pages of this Annual Report on Form&nbsp;10-K.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of Holdings&#146; Chief Executive Officer pursuant
    to Rule&nbsp;13a-14(a) under the Securities Exchange Act of
    1934, as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of Holdings&#146; Chief Financial Officer pursuant
    to Rule&nbsp;13a-14(a) under the Securities Exchange Act of
    1934, as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.3*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of AWA&#146;s Chief Executive Officer pursuant to
    Rule&nbsp;13a-14(a) under the Securities Exchange Act of 1934,
    as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.4*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of AWA&#146;s Chief Financial Officer pursuant to
    Rule&nbsp;13a-14(a) under the Securities Exchange Act of 1934,
    as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of Holdings&#146; Chief Executive Officer and
    Chief Financial Officer pursuant to Section&nbsp;906 of the
    Sarbanes-Oxley Act of 2002.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of AWA&#146;s Chief Executive Officer and Chief
    Financial Officer pursuant to Section&nbsp;906 of the
    Sarbanes-Oxley Act of 2002.</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;*</TD>
    <TD align="left">
    Filed herewith.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;+&nbsp;&nbsp;Represents a management contract or
compensatory plan or arrangement.
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The Company has sought confidential treatment for portions of
    the referenced exhibit.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">114

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of Section&nbsp;13 or 15(d) of the
Securities Exchange Act of 1934, as amended, America West
Holdings Corporation has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    AMERICA WEST HOLDINGS CORPORATION</TD>
</TR>

</TABLE>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="left">
    /s/ W. Douglas Parker</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    W. Douglas Parker,</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Chairman, President and Chief Executive Officer</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Date: March&nbsp;14, 2005
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>POWER OF ATTORNEY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, the undersigned, directors and officers of America West
Holdings Corporation, do hereby severally constitute and appoint
W.&nbsp;Douglas Parker and Derek&nbsp;J. Kerr and each or any of
them, our true and lawful attorneys and agents, with full power
of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign
any and all amendments to the Registrant&#146;s Annual Report on
Form&nbsp;10-K for the fiscal year ended December&nbsp;31, 2004,
and to file the same with all exhibits thereto, and all other
documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents,
and each or any of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys and agents, and each of them, or his substitute
or substitutes, may lawfully do or cause to be done by virtue
hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed by the following
persons on behalf of the registrant and in the capacities
indicated on March&nbsp;14, 2005.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>SIGNATURE</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>TITLE</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ W. Douglas Parker<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>W.
    Douglas Parker</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Chairman, President and Chief Executive Officer<BR>
    (Principal Executive Officer)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Derek J. Kerr<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Derek
    J. Kerr</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Senior Vice President<BR>
    (Principal Financial and Accounting Officer)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Herbert M. Baum<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Herbert
    M. Baum</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ John L. Goolsby<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>John
    L. Goolsby</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Matthew J. Hart<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Mathew
    J. Hart</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Walter T. Klenz<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Walter
    T. Klenz</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Richard C. Kraemer<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Richard
    C. Kraemer</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">115

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>SIGNATURE</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>TITLE</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Robert J. Miller<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Robert
    J. Miller</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Denise M. O&#146;Leary<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Denise
    M. O&#146;Leary</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Richard P. Schifter<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Richard
    P. Schifter</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ John F. Tierney<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>John
    F. Tierney</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ J. Steven Whisler<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>J.
    Steven Whisler</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">116

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of Section&nbsp;13 or 15(d) of the
Securities Exchange Act of 1934, as amended, America West
Airlines, Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    AMERICA WEST AIRLINES, INC.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="center">
    /s/ W. Douglas Parker</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    W. Douglas Parker,</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Chairman, President and Chief Executive Officer</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Date: March&nbsp;14, 2005
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>POWER OF ATTORNEY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, the undersigned, directors and officers of America West
Airlines, Inc., do hereby severally constitute and appoint
W.&nbsp;Douglas Parker and Derek&nbsp;J. Kerr and each or any of
them, our true and lawful attorneys and agents, with full power
of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign
any and all amendments to the Registrant&#146;s Annual Report on
Form&nbsp;10-K for the fiscal year ended December&nbsp;31, 2004,
and to file the same with all exhibits thereto, and all other
documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents,
and each or any of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys and agents, and each of them, or his substitute
or substitutes, may lawfully do or cause to be done by virtue
hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed by the following
persons on behalf of the registrant and in the capacities
indicated on March&nbsp;14, 2005.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>SIGNATURE</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>TITLE</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ W. Douglas Parker<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>W.
    Douglas Parker</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Chairman, President and Chief Executive Officer<BR>
    (Principal Executive Officer)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Derek J. Kerr<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Derek
    J. Kerr</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Senior Vice President<BR>
    (Principal Financial Officer)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Michael R. Carreon<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Michael
    R. Carreon</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Vice President and Controller<BR>
    (Principal Accounting Officer)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Herbert M. Baum<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Herbert
    M. Baum</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ John L. Goolsby<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>John
    L. Goolsby</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Matthew J. Hart<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Mathew
    J. Hart</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Walter T. Klenz<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Walter
    T. Klenz</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">117

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>SIGNATURE</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>TITLE</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Richard C. Kraemer<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Richard
    C. Kraemer</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Robert J. Miller<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Robert
    J. Miller</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Denise M. O&#146;Leary<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Denise
    M. O&#146;Leary</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Richard P. Schifter<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Richard
    P. Schifter</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ John F. Tierney<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>John
    F. Tierney</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ J. Steven Whisler<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>J.
    Steven Whisler</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">118

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>on Financial Statement Schedule</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Board of Directors and Stockholders
</DIV>

<DIV align="left" style="font-size: 10pt;">
America West Holdings Corporation:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The audits referred to in our report dated March&nbsp;11, 2005
included the related consolidated financial statement schedule
for the years ended December&nbsp;31, 2004 and 2003, included
herein. The consolidated financial statement schedule is the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on the consolidated
financial statement schedule based on our audits. In our
opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in Note&nbsp;2 to the accompanying consolidated
financial statements, the Company has restated the consolidated
balance sheet as of December&nbsp;31, 2003 and the consolidated
statement of changes in stockholders&#146; equity and
comprehensive income for the year then ended. As discussed in
Note&nbsp;13 to the accompanying consolidated financial
statements, the Company restated its dilutive earnings per share
for the year ended December&nbsp;31, 2003 in connection with the
adoption of Emerging Issue Task Force 04-8, <I>&#147;The Effect
of Contingently Convertible Instruments on Diluted Earnings Per
Share&#148;</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
/s/ <B>KPMG LLP</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
Phoenix, Arizona
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;11, 2005
</DIV>

<P align="center" style="font-size: 10pt;">119

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<P><HR noshade><P>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>on Financial Statement Schedule</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Board of Directors
</DIV>

<DIV align="left" style="font-size: 10pt;">
of America West Holdings Corporation:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our audit of the consolidated financial statements of America
West Holdings Corporation referred to in our report dated
March&nbsp;24, 2003 appearing in this Annual Report on
Form&nbsp;10-K also included an audit of the 2002 financial
statement schedule information included in the financial
statement schedule listed in Item&nbsp;15(a)(2) of this
Form&nbsp;10-K. In our opinion, the 2002 financial statement
schedule information presents fairly, in all material respects,
the information set forth therein when read in conjunction with
the related consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>/s/&nbsp;PricewaterhouseCoopers LLP</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
Phoenix, Arizona
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;24, 2003
</DIV>

<P align="center" style="font-size: 10pt;">120
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Corporation</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Schedule&nbsp;II&nbsp;&#151; Valuation and Qualifying
Accounts</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the Years Ended December&nbsp;31, 2004, 2003 and 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Beginning</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>at End</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deductions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Period</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful receivables:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,487</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,807</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,767</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for obsolescence:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,759</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,254</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,261</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance on deferred tax asset, net:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>96,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>56,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>128,966</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>78,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>38,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>96,474</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>46,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>78,787</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Leased aircraft return provision:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,959</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,872</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,441</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">121

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>on Financial Statement Schedule</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Board of Directors and Stockholder
</DIV>

<DIV align="left" style="font-size: 10pt;">
America West Airlines, Inc.:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The audits referred to in our report dated March&nbsp;11, 2005
included the related consolidated financial statement schedule
for the years ended December&nbsp;31, 2004 and 2003, included
herein. The consolidated financial statement schedule is the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on the consolidated
financial statement schedule based on our audits. In our
opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in Note&nbsp;2 to the accompanying consolidated
financial statements, the Company has restated the consolidated
balance sheet as of December&nbsp;31, 2003 and the consolidated
statement of changes in stockholder&#146;s equity and
comprehensive income for the year then ended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
/s/ <B>KPMG LLP</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
Phoenix, Arizona
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;11, 2005
</DIV>

<P align="center" style="font-size: 10pt;">122

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>on Financial Statement Schedule</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Board of Directors
</DIV>

<DIV align="left" style="font-size: 10pt;">
of America West Airlines, Inc.:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our audit of the consolidated financial statements of America
West Airlines, Inc. referred to in our report dated
March&nbsp;24, 2003, except for the effects of the
reorganization transaction described in Note&nbsp;1(a) as to
which the date is August&nbsp;2, 2004, appearing in this Annual
Report on Form&nbsp;10-K also included an audit of the 2002
financial statement schedule information included in the
financial statement schedule listed in Item&nbsp;15(a)(2) of
this Form&nbsp;10-K. In our opinion, the 2002 financial
statement schedule information presents fairly, in all material
respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>/s/&nbsp;PricewaterhouseCoopers LLP</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
Phoenix, Arizona
</DIV>

<DIV align="left" style="font-size: 10pt;">
March&nbsp;24, 2003, except for the effects of the
</DIV>

<DIV align="left" style="font-size: 10pt;">
reorganization transaction described in Note&nbsp;1(a)
</DIV>

<DIV align="left" style="font-size: 10pt;">
as to which the date is August&nbsp;2, 2004
</DIV>

<P align="center" style="font-size: 10pt;">123
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Schedule&nbsp;II&nbsp;&#151; Valuation and Qualifying
Accounts</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the Years Ended December&nbsp;31, 2004, 2003 and 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Balance</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Beginning</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>at End</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Period</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deductions</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Period</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for doubtful receivables:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,487</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,807</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,767</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allowance for obsolescence:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,759</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,254</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,261</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance on deferred tax asset, net:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>96,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>127,484</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>78,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>96,448</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>52,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>78,602</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Leased aircraft return provision:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,959</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,872</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Year ended December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,441</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">124

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Index to Exhibits</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement and Plan of Merger, dated as of December&nbsp;19,
    1996, by and among America West Holdings Corporation
    (&#147;Holdings&#148;), America West Airlines, Inc.
    (&#147;AWA&#148;) and AWA Merger, Inc., with an effective date
    and time as of midnight on December&nbsp;31, 1996&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;2.1 to Holdings&#146;
    Registration Statement on Form&nbsp;8-B dated January&nbsp;13,
    1997.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Restated Certificate of Incorporation of AWA (included in
    Exhibit&nbsp;2.2 above).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bylaws of AWA.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certificate of Incorporation of Holdings&nbsp;&#151; Filed with
    the Secretary of State of the State of Delaware on
    December&nbsp;13, 1996 and incorporated by reference to
    Exhibit&nbsp;3.1 of Holdings&#146; Registration Statement on
    Form&nbsp;8-B dated January&nbsp;13, 1997. Holdings&#146;
    Certificate of Incorporation was subsequently amended by a
    Certificate of Amendment, filed with the Delaware Secretary of
    State on May&nbsp;24, 2004 and incorporated herein by reference
    to Exhibit&nbsp;3.1 to Holdings&#146; and AWA&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended June&nbsp;30,
    2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.4*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bylaws of Holdings.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture, dated as of July&nbsp;30, 2003, between America West
    Airlines, Inc. and U.S.&nbsp;Bank National Association, as
    trustee and not in its individual capacity, for America West
    Airlines, Inc. Senior Exchangeable Notes due 2023&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;4.1 to Holdings&#146;
    and AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of America West Airlines, Inc. Senior Exchangeable Note due
    2023&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;4.2
    to Holdings&#146; and AWA&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended September&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated as of July&nbsp;30, 2003,
    with respect to shares of Class&nbsp;B Common Stock underlying
    the America West Airlines, Inc. Senior Exchangeable Notes due
    2023&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;4.3
    to Holdings&#146; and AWA&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended September&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Guarantee and Exchange Agreement, dated as of July&nbsp;30,
    2003, between America West Holdings Corporation and
    U.S.&nbsp;Bank, National Association, as exchange agent and
    trustee and not in its individual capacity, for America West
    Airlines Inc. Senior Exchangeable Notes due 2023&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;4.4 to Holdings&#146;
    and AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Stock Option Agreement, dated as of December&nbsp;31, 1996,
    between Holdings and AWA&nbsp;&#151; Incorporated by reference
    to Exhibit&nbsp;4.5 to Holdings&#146; Registration Statement on
    Form&nbsp;8-B dated January&nbsp;13, 1997.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement dated as of August&nbsp;25, 1994,
    among AWA, AmWest Partners, L.P. and other holders&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;4.6 to the AWA&#146;s
    Current Report on Form&nbsp;8-K dated August&nbsp;25, 1994 (File
    No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Assumption of Certain Obligations Under Registration Rights
    Agreement executed by Holdings for the benefit of TPG Partners,
    L.P., TPG Parallel&nbsp;I, L.P., Air Partners II, L.P.,
    Continental Airlines, Inc., Mesa Airlines, Inc., Lehman
    Brothers, Inc., Belmont Capital Partners&nbsp;II, L.P. and
    Belmont Fund, L.P.&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;4.7 to Holdings&#146; Registration Statement on
    Form&nbsp;8-B dated January&nbsp;13, 1997.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Pass Through Trust&nbsp;Agreement, dated as of
    November&nbsp;26, 1996, between AWA and Fleet National Bank, as
    Trustee&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;4.1 to AWA&#146;s Current Report on Form&nbsp;8-K
    dated November&nbsp;26, 1996 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Pass Through Trust&nbsp;Agreement, dated as of
    June&nbsp;17, 1997, between AWA and Fleet National Bank, as
    Trustee&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;4.5 to AWA&#146;s Registration Statement on
    Form&nbsp;S-3 dated June&nbsp;4, 1997 (File No.&nbsp;333-27351).</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">125

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Forms of Pass Through Trust&nbsp;Agreements, dated as of
    October&nbsp;6, 1998, between AWA and Wilmington Trust Company,
    as Trustee&nbsp;&#151; Incorporated by reference to
    Exhibits&nbsp;4.4, 4.5, 4.6, 4.7, 4.8 and 4.9 to AWA&#146;s
    Registration Statement on Form&nbsp;S-4 dated March&nbsp;25,
    1999 (File No.&nbsp;333-71615).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Pass Through Trust&nbsp;Agreements, dated as of
    September&nbsp;21, 1999, between AWA and Wilmington Trust
    Company, as Trustee, made with respect to the formation of
    America West Airlines Pass Through Trusts,
    Series&nbsp;1999-1G-S, 1999-1G-O, 1999-1C-S and 1999-1C-O and
    the issuance of 7.93% Initial Pass Through Certificates
    Series&nbsp;1999-1G-S and 1999-1G-O, the issuance of 8.54%
    Initial Pass Through Certificates, Series&nbsp;1999-1C-S and
    1999-1C-O, the issuance of 7.93% Exchange Pass Through
    Certificates, Series&nbsp;1999-1G-S and 1999-1G-O, and the
    issuance of 8.54% Exchange Pass Through Certificates,
    Series&nbsp;1999-1C-S and 1999-1C-O&nbsp;&#151; Incorporated by
    reference to AWA&#146;s Quarterly Report on Form&nbsp;10-Q for
    the period ended September&nbsp;30, 1999 (File
    No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Insurance and Indemnity Agreement, dated as of
    September&nbsp;21, 1999, among AWA, Ambac Assurance Corporation
    as Policy Provider and Wilmington Trust Company as Subordination
    Agent and Trustee under the Pass Through
    Trust&nbsp;1999-1G-O&nbsp;&#151; Incorporated by reference to
    Exhibits&nbsp;4.15 to AWA&#146;s Registration Statement on
    Form&nbsp;S-4 dated March&nbsp;16, 2000 (File
    No.&nbsp;333-93393).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Pass Through Trust&nbsp;Agreement, dated as of July&nbsp;7,
    2000, between AWA, and Wilmington Trust Company, as Trustee,
    made with respect to the formation of America West Airlines Pass
    Through Trust, Series&nbsp;2000-1G-0, 2000-1G-S, 2000-1C-O and
    2000-1C-S, the issuance of 8.057% Initial Pass Through
    Certificates, Series&nbsp;2000-1G-O and 2000-1G-S, the issuance
    of 9.244% Initial Pass Through Certificates,
    Series&nbsp;2000-1C-O and 2000-1C-S, the issuance of 8.057%
    Exchange Pass Through Certificates, Series&nbsp;2000-1G-O and
    2000-1G-S and the issuance of 9.244% Exchange Pass Through
    Certificates, Series&nbsp;2000-1C-O and 2000-1C-S&nbsp;&#151;
    Incorporated by reference to Exhibits&nbsp;4.3, 4.4, 4.5 and 4.6
    to AWA&#146;s Registration Statement on Form&nbsp;S-4 dated
    September&nbsp;12, 2002 (File No.&nbsp;333-44930).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Insurance and Indemnity Agreement, dated as of July&nbsp;7,
    2000, among AWA, Ambac Assurance Corporation as Policy Provider
    and Wilmington Trust company as Subordination Agent and Trustee
    under the Pass Through Trust&nbsp;2000-1G&nbsp;&#151;
    Incorporated by reference to Exhibits&nbsp;4.15 to AWA&#146;s
    Registration Statement on Form&nbsp;S-4 dated September&nbsp;12,
    2002 (File No.&nbsp;333-44930).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Pass Through Trust&nbsp;Agreement, dated as of May&nbsp;17,
    2001, between AWA and Wilmington Trust Company, as Trustee, made
    with respect to the formation of America West Airlines Pass
    Through Trust, Series&nbsp;2001-1G-O, 2001-1G-S, 2001-1C-O,
    2001-1C-S, 2001-1D-O and 2001-1D-S, the issuance of 7.10%
    Initial Pass Through Certificates, Series&nbsp;2001-1G-O and
    2001-1G-S, the issuance of 8.37% Initial Pass Through
    Certificates, Series&nbsp;2001-1C-O and 2001-1G-S, the issuance
    of Six-Month LIBOR plus 3.20% Initial Pass Through Certificates,
    Series&nbsp;2001-1D-O and Series&nbsp;2001-1D-S, the issuance of
    7.10% Exchange Pass Through Certificates, Series&nbsp;2001-1G-O
    and 2001-1G-S, the issuance of 8.37% Exchange Pass Through
    Certificates, Series&nbsp;2001-1C-O and 2001-1G-S, and the
    issuance of Six-Month LIBOR plus 3.20% Exchange Pass Through
    Certificates, Series&nbsp;2001-1D-O and
    Series&nbsp;2001-1D-S&nbsp;&#151; Incorporated by reference to
    Exhibits&nbsp;4.4, 4.5, 4.6, 4.7, 4.8 and 4.9 to AWA&#146;s
    Registration Statement on Form&nbsp;S-4 dated February&nbsp;14,
    2002 (File No.&nbsp;333-69356).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Insurance and Indemnity Agreement (Series&nbsp;G), dated as of
    May&nbsp;17, 2001, among AWA, Ambac Assurance Corporation as
    Policy Provider and Wilmington Trust company as Subordination
    Agent&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;4.20
    to AWA&#146;s Registration Statement on Form&nbsp;S-4 dated
    February&nbsp;14, 2002 (File No.&nbsp;333-69356).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture, dated as of January&nbsp;18, 2002, between America
    West Holdings Corporation and Wilmington Trust Company, as
    Trustee and not in its individual capacity, for America West
    Holdings Corporation 7.5%&nbsp;Convertible Senior Notes due
    2009&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;4.15
    to Holdings&#146; and AWA&#146;s Current Report on Form&nbsp;8-K
    dated January&nbsp;31, 2002 (File Nos.&nbsp;001-12649 and
    000-12337).</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">126

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of America West Holdings Corporation 7.5%&nbsp;Convertible
    Senior Notes due 2009&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;4.16 to Holdings&#146; and AWA&#146;s Current
    Report on Form&nbsp;8-K dated January&nbsp;31, 2002 (File Nos.
    001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated January&nbsp;18, 2002, with
    respect to shares of Class&nbsp;B Common Stock underlying the
    America West Holdings Corporation 7.5%&nbsp;Convertible Senior
    Notes due 2009&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;4.17 to Holdings&#146; and AWA&#146;s Current
    Report on Form&nbsp;8-K dated January&nbsp;31, 2002 (File
    Nos.&nbsp;001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Guaranty, dated as of January&nbsp;18, 2002, by America West
    Airlines, Inc., in favor of the Holders and the Trustee under
    the Indenture dated January&nbsp;18, 2002&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;4.18 to Holdings&#146;
    and AWA&#146;s Current Report on Form&nbsp;8-K dated
    January&nbsp;31, 2002 (File Nos.&nbsp;001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Warrant to Purchase Class&nbsp;B Common Stock, dated
    January&nbsp;18, 2002, issued to the Air Transportation
    Stabilization Board and certain warrant recipients&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;4.19 to Holdings&#146;
    and AWA&#146;s Current Report on Form&nbsp;8-K dated
    January&nbsp;31, 2002 (File Nos.&nbsp;001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement, dated January&nbsp;18, 2002,
    between America West Holdings Corporation and the Air
    Transportation Stabilization Board with respect to shares of
    Class&nbsp;B Common Stock underlying the Warrant to Purchase
    Class&nbsp;B Common Stock&nbsp;&#151; Incorporated by reference
    to Exhibit&nbsp;4.20 to Holdings&#146; and AWA&#146;s Current
    Report on Form&nbsp;8-K dated January&nbsp;31, 2002 (File
    Nos.&nbsp;001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Warrant Registration Rights Agreement between America West
    Holdings Corporation and certain warrant recipients&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;4.21 to Holdings&#146;
    and AWA&#146;s Current Report on Form&nbsp;8-K dated
    January&nbsp;31, 2002 (File Nos.&nbsp;001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Airport Use Agreement, dated as of July&nbsp;1, 1989, among the
    City of Phoenix, The Industrial Development Authority of the
    City of Phoenix, Arizona and AWA (&#147;Airport Use
    Agreement&#148;)&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10-(D)(9) to AWA&#146;s Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 1989 (File
    No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Airport Use Agreement, dated as of
    August&nbsp;1, 1990&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10-(D)(9) to AWA&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended September&nbsp;30, 1990
    (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Management Rights Agreement, dated as of August&nbsp;25, 1994,
    between TPG Partners L.P., TPG Genpar, L.P. and AWA&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.47 to AWA&#146;s
    Registration Statement on Form&nbsp;S-1 dated August&nbsp;23,
    1994, as amended (File No.&nbsp;33-54243).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Financing Agreement, dated as of April&nbsp;1, 1998, between the
    Industrial Development Authority of the City of Phoenix, Arizona
    and AWA&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.29 to Holdings&#146; Quarterly Report on
    Form&nbsp;10-Q for the quarter ended June&nbsp;30, 1998 (File
    No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture of Trust, dated as of April&nbsp;1, 1998, from the
    Industrial Development Authority of the City of Phoenix, Arizona
    to Norwest Bank, Arizona N.A.&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.30 to Holdings&#146; Quarterly
    Report on Form&nbsp;10-Q for the quarter ended June&nbsp;30,
    1998 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to Airport Use Agreement, dated as of
    August&nbsp;25, 1995&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.34 to AWA&#146;s Annual Report on Form&nbsp;10-K
    for the year ended December&nbsp;31, 1998 (File
    No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture of Trust, dated as of June&nbsp;1, 1999, from The
    Industrial Development Authority of the City of Phoenix, Arizona
    to Bank One Arizona, N.A.&nbsp;&#151; Incorporated by reference
    to Exhibit&nbsp;10.35 to AWA&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended June&nbsp;30, 1999 (File
    No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Airbus A320/ A319 Purchase Agreement, dated as of
    September&nbsp;12, 1997, between AVSA S.A.R.L and AWA, including
    Letter Agreements Nos. 1-10&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.26 to Holdings&#146; Quarterly
    Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 1997 (File No.&nbsp;001- 12649).</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">127

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1, dated as of March&nbsp;31, 1998, to the
    Airbus A320/ A319 Purchase Agreement, dated as of
    September&nbsp;12, 1997, between AVSA S.A.R.L. and
    AWA&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.28
    to Holdings&#146; Quarterly Report on Form&nbsp;10-Q for the
    quarter ended June&nbsp;30, 1998 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2, dated as of December&nbsp;9, 1998, to the
    Airbus A320/ A319 Purchase Agreement, dated as of
    September&nbsp;12, 1997, between AVSA S.A.R.L. and
    AWA&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.32
    to AWA&#146;s Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 1998 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3, dated as of October&nbsp;14, 1999, to the
    Airbus A320/319 Purchase Agreement, dated as of
    September&nbsp;12, 1997, between AVSA, S.A.R.L. and AWA,
    including Letter Agreement Nos. 1&nbsp;&#151; 8
    thereto&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.36 to Holdings&#146; and AWA&#146;s Annual
    Report on Form&nbsp;10-K for the year ended December&nbsp;31,
    1999 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4, dated as of July&nbsp;1, 2000, to the
    Airbus A320/319 Purchase Agreement, dated as of
    September&nbsp;12, 1997, between AVSA S.A.R.L. and
    AWA&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.38
    to AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended September&nbsp;30, 2000 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;5, dated as of October&nbsp;12, 2000, to the
    Airbus A320/319 Purchase Agreement, dated as of
    September&nbsp;12, 1997, between AVSA S.A.R.L. and
    AWA&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.39
    to AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended September&nbsp;30, 2000 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;7, dated July&nbsp;30, 2004, to the A319/
    A320 Purchase Agreement dated September&nbsp;12, 1997, between
    AVSA, S.A.R.L. and AWA and Letter Agreement Nos. 2&nbsp;&#151;
    8&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.15 to
    Holdings&#146; and AWA&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended September&nbsp;30, 2004 (File
    No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated V2500 Support Contract, dated as of
    October&nbsp;7, 1998, between AWA and IAE International Aero
    Engines AG and Side Letters Nos. 1 and 2 thereto&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.20 to
    Holdings&#146; and AWA&#146;s Annual Report on Form&nbsp;10-K
    for the year ended December&nbsp;31, 1998 (File
    No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Side Letter No.&nbsp;15, dated May&nbsp;26, 2004, to the Amended
    and Restated V2500 Support Contract, dated October&nbsp;7, 1998,
    between AWA and IAE International Aero Engines AG&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.16 to
    Holdings&#146; and AWA&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended September&nbsp;30, 2004 (File
    No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Purchase Agreement, dated as of December&nbsp;27, 2000, between
    Holdings, AWA and Continental Airlines, Inc., including Letter
    Agreement&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.40 to Holdings&#146; and AWA&#146;s Annual
    Report on Form&nbsp;10-K for the year ended December&nbsp;31,
    2000 (File Nos.&nbsp;001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Priority Distribution Agreement, dated as of August&nbsp;25,
    1994, between TPG Partners, L.P., TPG Parallel&nbsp;I, L.P., Air
    Partners&nbsp;II, L.P., and Continental Airlines,
    Inc.&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;3 to
    Schedule&nbsp;13D filed by TPG Partners, L.P. on
    September&nbsp;6, 1994.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Disposition and Redevelopment Agreement, dated as of
    February&nbsp;5, 2001, between AWA and the City of Phoenix,
    AZ&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.44
    to AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended March&nbsp;31, 2001 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Unsubordinated Ground Lease, dated as of February&nbsp;5, 2001,
    between AWA and the City of Phoenix, AZ&nbsp;&#151; Incorporated
    by reference to Exhibit&nbsp;10.45 to AWA&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31,
    2001 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Code Share and Revenue Sharing Agreement, dated as of
    March&nbsp;20, 2001, between AWA and Mesa Airlines,
    Inc.&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.46
    to AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended March&nbsp;31, 2001 (File No.&nbsp;000-12337).</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">128

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $429,000,000 Loan Agreement, dated as of January&nbsp;18, 2002,
    among America West Airlines, Inc., Citibank, N.A., as Agent,
    KPMG Consulting, Inc., as Loan&nbsp;Administrator, Citibank,
    N.A., as Initial Lender and the Air Transportation Stabilization
    Board&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.51 to Holdings&#146; and AWA&#146;s Current
    Report on Form&nbsp;8-K dated January&nbsp;31, 2002 (File
    Nos.&nbsp;001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Undertaking (regarding restrictions on transfer of Class&nbsp;A
    Common Stock), dated as of January&nbsp;18, 2002, among America
    West Holdings Corporation, TPG Partners, L.P., TPG
    Parallel&nbsp;I, L.P. and Air Partners&nbsp;II, L.P. for the
    benefit of the Air Transportation Stabilization
    Board&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.53 to Holdings&#146; and AWA&#146;s Current
    Report on Form&nbsp;8-K dated January&nbsp;31, 2002 (File
    Nos.&nbsp;001-12649 and 000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.24</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to Code Share and Revenue Sharing Agreement, as
    amended, dated as of October&nbsp;24, 2002, by and among AWA,
    Mesa Airlines, Inc., Freedom Airlines, Inc. and Air Midwest,
    Inc.&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.56
    of Holdings&#146; and AWA&#146;s Annual Report on Form&nbsp;10-K
    for the year ended December&nbsp;31, 2002.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.25</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to Code Share and Revenue Sharing Agreement
    dated as of January&nbsp;29, 2003 among AWA, Mesa Airlines, Inc.
    and Freedom Airlines, Inc.&nbsp;&#151; Incorporated by reference
    to Exhibit&nbsp;10.1 to Holdings&#146; and AWA&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.26(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fourth Amendment to Code Share and Revenue Sharing Agreement and
    Release dated as of September&nbsp;5, 2003 among AWA, Mesa
    Airlines, Inc., Air Midwest, Inc. and Freedom Airlines,
    Inc.&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.2
    to Holdings&#146; and AWA&#146;s Amendment No.&nbsp;1 to
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.27</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement [Engines], dated as of September&nbsp;3, 2004,
    among AWA, GECC, as administrative agent, original Series&nbsp;A
    lender and original Series&nbsp;B lender, Wells Fargo Bank
    Northwest, National Association (&#147;Wells Fargo&#148;), as
    security trustee and the lenders from time to time party thereto
    &#150;Incorporated by reference to Exhibit&nbsp;10.1 to
    Holdings&#146; and AWA&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended September&nbsp;30, 2004 (File
    No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.28</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Engine Mortgage and Security Agreement, dated as of
    September&nbsp;3, 2004, between AWA and Wells Fargo&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.2 to Holdings&#146;
    and AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.29</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Mortgage and Security Agreement Supplement No.&nbsp;1, dated
    September&nbsp;10, 2004, of AWA&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.3 to Holdings&#146; and AWA&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.30</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subordinated Engine Mortgage and Security Agreement, dated as of
    September&nbsp;3, 2004, between AWA and Wells Fargo&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.4 to Holdings&#146;
    and AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.31</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subordinated Mortgage and Security Agreement Supplement
    No.&nbsp;1, dated September&nbsp;10, 2004, of AWA&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.5 to Holdings&#146;
    and AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.32</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Security Trustee Agreement [Engines], dated as of
    September&nbsp;3, 2004, among Wells Fargo, as security trustee
    and the beneficiaries named therein&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.6 to Holdings&#146; and AWA&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.33</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Payment and Indemnity Agreement [Engines], dated as of
    September&nbsp;3, 2004, among AWA, certain beneficiaries listed
    on Schedule&nbsp;1 and Wells Fargo&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.7 to Holdings&#146; and AWA&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.34</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Restructure Letter Agreement [Engines], dated as of
    September&nbsp;3, 2004, among AWA and GECC&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.8 to Holdings&#146;
    and AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">129

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.35</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement [Spare Parts], dated as of September&nbsp;3,
    2004, among AWA, GECC, as administrative agent, original
    Series&nbsp;A lender and original Series&nbsp;B lender, Wells
    Fargo, as security trustee and the lenders from time to time
    party thereto&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.9 to Holdings&#146; and AWA&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.36</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Spare Parts Mortgage and Security Agreement, dated as of
    September&nbsp;3, 2004, between AWA and Wells Fargo&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.10 to
    Holdings&#146; and AWA&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended September&nbsp;30, 2004 (File
    No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.37</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subordinated Spare Parts Mortgage and Security Agreement, dated
    as of September&nbsp;3, 2004, between AWA and Wells
    Fargo&nbsp;&#151; Incorporated by reference to
    Exhibit&nbsp;10.11 to Holdings&#146; and AWA&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.38</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Security Trustee Agreement [Spare Parts], dated as of
    September&nbsp;3, 2004, among Wells Fargo, as security trustee
    and the beneficiaries named therein&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.12 to Holdings&#146; and AWA&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.39</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Payment and Indemnity Agreement [Spare Parts], dated as of
    September&nbsp;3, 2004, among AWA, certain beneficiaries listed
    on Schedule&nbsp;1 and Wells Fargo&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.13 to Holdings&#146; and AWA&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2004 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.40</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Restructure Letter Agreement [Spare Parts], dated as of
    September&nbsp;3, 2004, among AWA and GECC&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.14 to
    Holdings&#146; and AWA&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended September&nbsp;30, 2004 (File
    No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.41*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $30,790,000 Senior Secured Term Loan Agreement, dated
    December&nbsp;23, 2004, among FTCHP LLC, as Borrower, America
    West Airlines, Inc., as Guarantor, Heritage Bank, SSB, as
    Administrative Agent and Citibank, N.A. (and other lenders named
    therein) as Lenders.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.42*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Secured Discount Note, dated December&nbsp;23, 2004,
    issued by FTCHP LLC.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.43*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Unconditional Guaranty Agreement, dated December&nbsp;23, 2004,
    by America West Airlines, Inc. in favor of Citibank, N.A.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.44+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated America West 1994 Incentive Equity
    Plan&nbsp;&#151; Incorporated by reference to Exhibit&nbsp;10.21
    to AWA&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended March&nbsp;31, 2001 (File No.&nbsp;000-12337).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.45+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2002 Incentive Equity Plan&nbsp;&#151; Incorporated by reference
    to Appendix&nbsp;A to Holdings&#146; Proxy Statement on
    Schedule&nbsp;14A filed on April&nbsp;17, 2002 (File
    No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.46+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Performance-based Award Plan&nbsp;&#151; Incorporated by
    reference to Exhibit&nbsp;10.57 to Holdings&#146; and AWA&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    June&nbsp;30, 2003 (File No.&nbsp;001-12649).</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.47*+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Offer Letter.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.48*+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Change of Control and Severance Benefit Agreement for
    Vice Presidents.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.49*+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Change of Control and Severance Benefit Agreement for
    Senior Vice Presidents.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.50*+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Summary of Officer Benefits.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.51*+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Summary of Director Compensation and Benefits.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.52+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Letter Agreement for Directors&#146; Travel&nbsp;&#151;
    Incorporated by reference to Exhibit&nbsp;10.32 to
    Holdings&#146; and AWA&#146;s Annual Report on Form&nbsp;10-K
    for the period ended December&nbsp;31, 2003.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.53*+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, dated February&nbsp;24, 2004, by and among
    America West Holdings Corporation, America West Airlines, Inc.
    and W.&nbsp;Douglas Parker.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subsidiaries of Holdings.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of KPMG LLP.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of PricewaterhouseCoopers LLP.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney, pursuant to which amendments to this Annual
    Report on Form&nbsp;10-K may be filed, is included on the
    signature pages of this Annual Report on Form&nbsp;10-K.</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">130

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of Holdings&#146; Chief Executive Officer pursuant
    to Rule&nbsp;13a-14(a) under the Securities Exchange Act of
    1934, as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of Holdings&#146; Chief Financial Officer pursuant
    to Rule&nbsp;13a-14(a) under the Securities Exchange Act of
    1934, as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.3*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of AWA&#146;s Chief Executive Officer pursuant to
    Rule&nbsp;13a-14(a) under the Securities Exchange Act of 1934,
    as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.4*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of AWA&#146;s Chief Financial Officer pursuant to
    Rule&nbsp;13a-14(a) under the Securities Exchange Act of 1934,
    as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of Holdings&#146; Chief Executive Officer and
    Chief Financial Officer pursuant to Section&nbsp;906 of the
    Sarbanes-Oxley Act of 2002.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD align="left" valign="top" nowrap>.2*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of AWA&#146;s Chief Executive Officer and Chief
    Financial Officer pursuant to Section&nbsp;906 of the
    Sarbanes-Oxley Act of 2002.</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;*&nbsp;&nbsp;Filed herewith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;+&nbsp;&nbsp;Represents a management contract or
compensatory plan or arrangement.
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The Company has sought confidential treatment for portions of
    the referenced exhibit.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">131

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='195'></A>
</DIV>

<!-- link1 "ANNEX B-2" -->

<DIV align="right" style="font-size: 10pt;">
<B>ANNEX B-2</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings&#146; Corporation&#146;s Quarterly
Report on Form&nbsp;10-Q</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>for the three months ended March&nbsp;31, 2005</B>
</DIV>

<P align="center" style="font-size: 10pt;">B-2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 2pt;">
<FONT style="font-size: 10pt">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</FONT>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt;">
<B>Form&nbsp;10-Q</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 12pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
</TR>

<TR style="font-size: 10pt;">
    <TD align="center" nowrap>(Mark One)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="wingdings">&#254;
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>QUARTERLY REPORT PURSUANT TO SECTION&nbsp;13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>For the quarterly period ended March&nbsp;31, 2005</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <B>or</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="wingdings">&#111;</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>TRANSITION REPORT PURSUANT TO SECTION&nbsp;13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <B>For the transition period
    from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Commission file number 1-12649</B>
</DIV>

<DIV align="center" style="font-size: 24pt;">
<B>America West Holdings Corporation</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact name of registrant as specified in its charter)</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Delaware</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>86-0847214</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or other jurisdiction of<BR>
    incorporation or organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(I.R.S. Employer<BR>
    Identification No.)</I></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>111 West Rio Salado Parkway,<BR>
    Tempe, Arizona<BR>
     </B><I>(Address of principal executive offices)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>85281<BR>
     </B><I>(Zip Code)</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>(480)&nbsp;693-0800</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Registrant&#146;s telephone number, including area code)</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>N/A</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Former name, former address and former fiscal year, if
changed since last report)</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Commission file number 0-12337</B>
</DIV>

<DIV align="center" style="font-size: 24pt;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact name of registrant as specified in its charter)</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Delaware</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>86-0418245</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or other jurisdiction of<BR>
    incorporation or organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(I.R.S. Employer<BR>
    Identification No.)</I></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>4000 East Sky Harbor Blvd,<BR>
    Phoenix, Arizona<BR>
     </B><I>(Address of principal executive offices)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>85034<BR>
     </B><I>(Zip Code)</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>(480)&nbsp;693-0800</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Registrant&#146;s telephone number, including area code)</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>N/A</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Former name, former address and former fiscal year, if
changed since last report)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark whether each registrant (1)&nbsp;has
filed all reports required to be filed by Section&nbsp;13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12&nbsp;months (or for such shorter period that the
registrant was required to file such reports), and (2)&nbsp;has
been subject to such filing requirements for the past
90&nbsp;days.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;<FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark whether the Registrants are accelerated
filers (as defined in Exchange Act Rule&nbsp;12b-2).
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    America West Holdings Corporation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Yes&nbsp;<FONT face="wingdings">&#254;
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    No&nbsp;<FONT face="wingdings">&#111;
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    America West Airlines, Inc.</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Yes&nbsp;<FONT face="wingdings">&#111;
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    No&nbsp;<FONT face="wingdings">&#254;
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of April&nbsp;25, 2005, America West Holdings Corporation has
859,117&nbsp;shares of Class&nbsp;A common stock and
35,316,871&nbsp;shares of Class&nbsp;B common stock outstanding.
As of April&nbsp;25, 2005, America West Airlines, Inc. has
1,000&nbsp;shares of Class&nbsp;B common stock outstanding, all
of which are held by America West Holdings Corporation.
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;I&nbsp;&#151; FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
America West Holding Corporation (&#147;Holdings&#148; or the
&#147;Company&#148;) is the holding company that owns all of the
stock of America West Airlines, Inc. (&#147;AWA&#148; or the
&#147;Airline&#148;). AWA, the eighth largest passenger airline
and the second largest low cost carrier in the United States,
accounted for most of Holdings&#146; revenues and expenses in
2004. Through its America West Vacations division, AWA also
sells individual and group travel packages. This combined
Form&nbsp;10-Q is filed by both Holdings and AWA and includes
the financial statements of each company in Item&nbsp;1A and
Item&nbsp;1B, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;1A.&nbsp;</B></TD>
    <TD>
    <B>Condensed Consolidated Financial Statements&nbsp;&#151;
    America West Holdings Corporation.</B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Corporation</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Condensed Consolidated Balance Sheets</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands except share data)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="center" valign="top">
    <U>ASSETS</U></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>129,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>149,091</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,651</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,264</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,837</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expendable spare parts and supplies, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,563</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>208,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>141,571</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>654,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>624,977</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Flight equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>914,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>926,930</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>297,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>290,897</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment purchase deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,450</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,282,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,281,277</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>606,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>624,742</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>675,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>656,535</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investments in debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,091</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91,661</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>193,752</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,580,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,475,264</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="center" valign="top">
    <U>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</U></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current maturities of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>151,183</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current obligations under capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,475</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>184,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173,887</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Air traffic liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>276,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>194,718</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation and vacation benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,699</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,796</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,958</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>765,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>664,716</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>588,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>635,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital leases, less current obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,061</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred credits and other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,672</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133,911</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock, $.01&nbsp;par value. Authorized
    48,800,000&nbsp;shares; no shares issued</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;A common stock, $.01&nbsp;par value. Authorized
    1,200,000&nbsp;shares; issued and outstanding
    859,117&nbsp;shares at March&nbsp;31, 2005 and December&nbsp;31,
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Class&nbsp;B common stock, $.01&nbsp;par value. Authorized
    100,000,000&nbsp;shares; issued and outstanding
    51,600,766&nbsp;shares at March&nbsp;31, 2005 and
    51,564,865&nbsp;shares at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>516</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>632,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>632,446</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(255,041</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(288,617</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>378,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>344,353</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Cost of Class&nbsp;B common stock in treasury,
    16,437,575&nbsp;shares at March&nbsp;31, 2005 and
    December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(307,906</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(307,906</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,447</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,580,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,475,264</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes&nbsp;to Condensed Consolidated Financial
Statements.
</DIV>

<P align="center" style="font-size: 10pt;">2
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Corporation</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Condensed Consolidated Statements of Operations</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands except per share data)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>575,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>537,333</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Express</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,651</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cargo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,903</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,440</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>722,812</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>649,327</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Salaries and related costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>166,275</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft rents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,185</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other rents and landing fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,241</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft fuel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,212</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Realized and unrealized gains on fuel hedging instruments, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(60,483</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(404</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agency commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft maintenance materials and repairs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,054</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,791</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges (credits), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(600</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Express expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,302</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94,432</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>672,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>634,238</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,089</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating income (expenses):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,518</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,979</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19,752</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,582</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total nonoperating expenses, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,502</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,652</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,563</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,563</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.04</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.04</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares used for computation:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,851</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,851</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes&nbsp;to Condensed Consolidated Financial
Statements.
</DIV>

<P align="center" style="font-size: 10pt;">3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Corporation</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Condensed Consolidated Statements of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>113,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,432</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(56,613</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,979</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(99,650</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(164,565</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales of short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>131,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172,710</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of investments in debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales of investments in debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19,457</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,081</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from disposition of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,397</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(43,492</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26,356</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86,189</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47,370</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,142</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>373</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(90,331</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(46,997</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net decrease in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19,894</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(74,785</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>149,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>153,357</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>129,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>78,572</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest, net of amounts capitalized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,374</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash investing and financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclassification of investments in debt securities to short-term
    investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,344</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable issued under the aircraft purchase agreement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable cancelled under the aircraft purchase agreement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,500</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payment in kind notes issued, net of returns</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>379</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercise of warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of shares due to loan default</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes&nbsp;to Condensed Consolidated Financial
Statements.
</DIV>

<P align="center" style="font-size: 10pt;">4

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Corporation</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Notes to Condensed Consolidated Financial Statements</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>March&nbsp;31, 2005</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Basis of Presentation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited condensed consolidated financial statements
include the accounts of Holdings and its wholly owned
subsidiary, AWA. These statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange
Commission and, in accordance with those rules and regulations,
certain information and footnotes required by generally accepted
accounting principles have been omitted. In the opinion of
management, the condensed consolidated financial statements
reflect all adjustments, which are of a normal recurring nature,
necessary for a fair presentation. The accompanying condensed
consolidated financial statements should be read in conjunction
with the consolidated financial statements and related notes
thereto included in the Company&#146;s Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has a regional airline alliance agreement with Mesa
Airlines (&#147;Mesa&#148;). Mesa, operating as America West
Express (&#147;Express&#148;), provides regional feeder service
for AWA. Express operations have grown substantially and, as of
March&nbsp;31, 2005, comprise approximately 12% of the
Company&#146;s total capacity as measured by available seat
miles (&#147;ASMs&#148;). To improve the visibility of Express
operating results, effective with the first quarter of 2005, the
Company has changed its method of reporting for this agreement
to the gross basis of presentation. Previously, AWA used the net
basis of presentation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Using the gross basis of presentation, the passenger revenues
and operating expenses associated with the Express agreement are
reported gross (i.e.; as <I>&#147;Operating Revenues&nbsp;&#151;
Express&#148; </I>and <I>&#147;Operating Expenses&nbsp;&#151;
Express Expenses&#148;</I>) in the Condensed Consolidated
Statement of Operations. Under the net basis of presentation,
Express passenger revenues and the associated operating expenses
were netted and classified in <I>&#147;Operating
Revenues&nbsp;&#151; Other.&#148; </I>Prior period amounts have
been reclassified to be consistent with the first quarter 2005
presentation. These reclassifications did not impact our
operating income or net income (loss) for each period presented.
See Note&nbsp;7, <I>&#147;Change in Method of Reporting for
America West Express Results&#148; </I>for additional
information about this agreement and the reclassifications
related to the change in presentation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain other prior year amounts have been reclassified to
conform with current year presentation.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Stock Options</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company accounts for its stock option plans in accordance
with the provisions of Accounting Principles Board
(&#147;APB&#148;) Opinion No.&nbsp;25, <I>&#147;Accounting for
Stock Issued to Employees,&#148; </I>and related
interpretations. As such, compensation expense would be recorded
on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. The Company issues
its stock options at a price equal to fair market value on the
date of grant. Accordingly, no compensation cost has been
recognized for stock options in the accompanying condensed
consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for
its stock options under Statement of Financial Accounting
Standards (&#147;SFAS&#148;) No.&nbsp;123, <I>&#147;Accounting
for Stock-Based Compensation,&#148; </I>the
</DIV>

<P align="center" style="font-size: 10pt;">5

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
Company&#146;s net income (loss) and income (loss) per share
would have been decreased to the pro forma amounts indicated
below:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands except per</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss), as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,563</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock-based compensation expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,270</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,270</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,833</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) per share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic&nbsp;&#151; as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.04</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic&nbsp;&#151; pro forma</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.08</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted&nbsp;&#151; as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.04</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted&nbsp;&#151; pro forma</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.08</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Flight Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2005, the Company entered into an operating lease for
one new Airbus A320 aircraft with a lease term of 5&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2005, the Company completed a sale-leaseback
transaction on one Airbus A320 aircraft resulting in a loss of
$3.7&nbsp;million. This amount was recorded in
<I>&#147;Operating Expenses&nbsp;&#151; Other.&#148; </I>The
term of the leaseback is 12&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the first quarter of 2005, the Company returned one
Boeing 737-200 aircraft to the aircraft lessor in accordance
with the renegotiated lease term.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Special Charges</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first quarter of 2005, the Company recorded
$0.8&nbsp;million in special charges, of which $0.7&nbsp;million
is accrued at March&nbsp;31, 2005. This is related to continued
costs associated with the retirement of the 737-200 fleet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents the payments and other settlements
made during the three months ended March&nbsp;31, 2005 related
to the special charge accruals:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Contract</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Termination/</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fleet Restructuring</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other Costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>764</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>690</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(305</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(111</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(416</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revision of estimate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at March&nbsp;31, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,185</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company expects to make payments related to these special
charges through the fourth quarter of 2005.
</DIV>

<P align="center" style="font-size: 10pt;">6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Income (Loss) Per Share</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents the computation of basic and
diluted income (loss) per share (&#147;EPS&#148;).
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands except per</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    BASIC INCOME (LOSS) PER SHARE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) applicable to common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,563</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,851</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic income (loss) per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.04</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    DILUTED INCOME (LOSS)&nbsp;PER SHARE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,563</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense on 7.5%&nbsp;convertible senior notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense on 7.25%&nbsp;senior exchangeable notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) for purposes of computing diluted net income
    (loss) per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>38,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,563</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SHARE COMPUTATION</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,851</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed exercise of stock options and warrants</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed conversion of 7.5%&nbsp;convertible senior notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed conversion of 7.25%&nbsp;senior exchangeable notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares outstanding, as adjusted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,851</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted income (loss) per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.04</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the three months ended March&nbsp;31, 2005, 7,245,251
incremental shares from the assumed exercise of stock options
are not included in the computation of diluted EPS because the
option exercise prices were greater than the average market
price of the Company&#146;s Class&nbsp;B common stock for the
period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the three months ended March&nbsp;31, 2004, 2,711,887
incremental shares from the assumed exercise of stock options
and 14,400,403 warrants issued in conjunction with the
government guaranteed loan and related transactions are not
included in the computation of diluted EPS because of the
antidilutive effect on EPS. In addition, 8,694,000 and 8,095,842
incremental shares from assumed conversion of the
7.5%&nbsp;convertible senior notes due 2009 and the
7.25%&nbsp;senior exchangeable notes due 2023, respectively, are
not included in the computation of diluted EPS because of the
antidilutive effect on EPS.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Segment Disclosures</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings is one reportable operating segment. Accordingly, the
segment reporting financial data required by
SFAS&nbsp;No.&nbsp;131, <I>&#147;Disclosures About Segments of
an Enterprise and Related Information&#148; </I>is included in
the accompanying condensed consolidated balance sheets and
statements of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Change in Method of Reporting for America West Express
    Results</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has a regional airline alliance agreement (the
&#147;Agreement&#148;) with Mesa that commenced in February
2001. Pursuant to the Agreement, Mesa, using aircraft owned and
operated by Mesa under the name Express, provides feeder service
to destinations in the western United States, Canada and
northern Mexico. As of March&nbsp;31, 2005, the Express fleet
included 49 aircraft comprised of 27 86-seat CRJ 900s,
16&nbsp;50-seat CRJ 200s and six 37-seat Dash&nbsp;8 turbo prop
aircraft.
</DIV>

<P align="center" style="font-size: 10pt;">7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the Agreement, Mesa is required to fly the routes and
flights designated by AWA using Mesa&#146;s aircraft, flight
crews and other related services. Mesa maintains and operates
the aircraft, employs, trains, manages and compensates personnel
necessary to provide the flight services and provides related
passenger handling services for and on the flights. AWA is
responsible for establishing the routes, scheduling Express
flights, pricing of the tickets, marketing and selling the
tickets, collecting all sales amounts, paying all costs of sales
and marketing and taking inventory risk on the inventory of
seats for sale on Mesa. The ground handling of aircraft is
performed by either AWA or Mesa, depending upon the airport.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA collects the revenue and income generated from the services
provided by Mesa pursuant to the Agreement. In return, AWA:
(i)&nbsp;reimburses Mesa for actual non-controllable costs
incurred by Mesa such as fuel, insurance, taxes, fees and
security; (ii)&nbsp;pays Mesa for actual controllable
non-maintenance costs, subject to a cap, such as aircraft lease
expense and crew expense; (iii)&nbsp;pays Mesa for controllable
maintenance costs at fixed rates (subject to reimbursement of
excess costs if actual costs during term are less than fixed
amount paid by AWA); (iv)&nbsp;reimburses Mesa costs and
expenses incurred at stations maintained and operated by Mesa;
and (v)&nbsp;shares with Mesa a percentage of the revenue
allocated to the flight segments flown by Mesa on a pro rata
basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The agreement is anticipated to expire in June 2012.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in Note&nbsp;1, <I>&#147;Basis of
Presentation,&#148; </I>the Company is reporting the passenger
revenues and operating expenses associated with the Agreement on
a gross basis. Previously, these revenues and expenses were
reported net in <I>&#147;Operating Revenues&nbsp;&#151;
Other&#148; </I>in our Condensed Consolidated Statements of
Operations. The following table presents the effect of this
reclassification for the three months ended March&nbsp;31, 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As Reported</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As Reclassified</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>537,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>537,333</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Express</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,651</TD>
    <TD align="left" valign="bottom" nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,651</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cargo and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,343</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>576,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>72,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>649,327</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>561,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(519</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>560,936</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Express expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,302</TD>
    <TD align="left" valign="bottom" nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,302</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>561,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>72,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>634,238</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Reclassification of Express passenger revenues from
    <I>&#147;Operating Revenues&nbsp;&#151; Other.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Reclassification of $72.8&nbsp;million and $0.5&nbsp;million of
    Express operating expenses from <I>&#147;Operating
    Revenues&nbsp;&#151; Other&#148; </I>and <I>&#147;Operating
    Expenses&nbsp;&#151; Other,&#148; </I>respectively.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The operating margin that results from using the gross basis of
presentation for Express revenues and expenses does not include
any beyond contribution passenger revenue generated by feed into
AWA&#146;s mainline operations from Express flights. Overall,
the Mesa alliance agreement adds to the total profitability of
AWA.
</DIV>

<P align="center" style="font-size: 10pt;">8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;1B.&nbsp; </B></TD>
    <TD>
    <B>Condensed Financial Statements&nbsp;&#151; America West
    Airlines, Inc.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited condensed consolidated balance sheets of AWA, a
wholly-owned subsidiary of Holdings, as of March&nbsp;31, 2005
and December&nbsp;31, 2004, and the condensed consolidated
statements of operations and cash flows for the three months
ended March&nbsp;31, 2005 and 2004, together with the related
notes, are set forth on the following pages.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Condensed Consolidated Balance Sheets</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands except share data)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ASSETS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>108,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>128,497</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>126,651</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,264</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,837</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expendable spare parts and supplies, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,563</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>208,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>141,571</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>633,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>604,383</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Flight equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>914,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>926,930</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>295,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>289,279</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment purchase deposits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,450</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,281,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,279,659</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>606,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>624,193</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>674,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>655,466</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investments in debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,091</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Advances to parent company, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>259,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>258,777</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137,613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90,270</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>508,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>451,138</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,816,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,710,987</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="center" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LIABILITIES AND STOCKHOLDERS&#146; EQUITY</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current maturities of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>151,183</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current obligations under capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,475</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>183,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173,196</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Air traffic liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>276,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>194,718</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued compensation and vacation benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,699</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,651</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,958</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>752,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>651,880</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>588,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>635,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital leases, less current maturities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,061</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred credits and other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132,103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholder&#146;s equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Stock $.01&nbsp;par value. Authorized, issued and
    outstanding; 1,000&nbsp;shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>555,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>555,114</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(233,983</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(268,300</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholder&#146;s equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>321,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>286,814</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,816,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,710,987</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes&nbsp;to Condensed Consolidated Financial
Statements.
</DIV>

<P align="center" style="font-size: 10pt;">9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Condensed Consolidated Statements of Operations</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>575,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>537,333</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Express</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,651</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cargo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,903</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,270</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>722,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>649,157</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Salaries and related costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>165,929</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft rents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,185</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other rents and landing fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,241</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft fuel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,212</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Realized and unrealized gains on fuel hedging instruments, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(60,483</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(404</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agency commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft maintenance materials and repairs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,054</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,791</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges (credits), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(600</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Express expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,302</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93,812</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>671,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>633,272</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,885</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nonoperating income (expenses):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,201</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20,670</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,462</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,582</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total nonoperating expenses, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,628</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,679</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) before income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(794</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(794</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes&nbsp;to Condensed Consolidated Financial
Statements.
</DIV>

<P align="center" style="font-size: 10pt;">10

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Condensed Consolidated Statements of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(in thousands)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>113,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,079</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(56,613</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,979</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(99,650</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(164,565</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales of short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>131,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172,710</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of investments in debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales of investments in debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease (increase) in restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19,457</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,081</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from disposition of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,397</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(43,492</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26,356</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86,189</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47,370</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,250</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(90,439</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47,377</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net decrease in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20,125</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(74,812</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>134,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>108,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,338</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest, net of amounts capitalized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes paid (refunded)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>325</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash investing and financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reclassification of investments in debt securities to short-term
    investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,344</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable issued under the aircraft purchase agreement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable cancelled under the aircraft purchase agreement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,500</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payment in kind notes issued, net of returns</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>379</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying Notes&nbsp;to Condensed Consolidated Financial
Statements.
</DIV>

<P align="center" style="font-size: 10pt;">11

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Notes to Condensed Consolidated Financial Statements</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>March&nbsp;31, 2005</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Basis of Presentation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited condensed consolidated financial statements
included herein have been prepared by AWA, a wholly owned
subsidiary of Holdings, pursuant to the rules and regulations of
the Securities and Exchange Commission and, in accordance with
those rules and regulations, certain information and footnotes
required by generally accepted accounting principles have been
omitted. In the opinion of management, the condensed
consolidated financial statements reflect all adjustments, which
are of a normal recurring nature, necessary for a fair
presentation. The accompanying condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and related notes thereto included in
AWA&#146;s Annual Report on Form&nbsp;10-K for the year ended
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA has a regional airline alliance agreement with Mesa Airlines
(&#147;Mesa&#148;). Mesa, operating as America West Express
(&#147;Express&#148;), provides regional feeder service for AWA.
Express operations have grown substantially and, as of
March&nbsp;31, 2005, comprise approximately 12% of AWA&#146;s
total capacity as measured by available seat miles
(&#147;ASMs&#148;). To improve the visibility of Express
operating results, effective with the first quarter of 2005, AWA
has changed its method of reporting for this agreement to the
gross basis of presentation. Previously, AWA used the net basis
of presentation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Using the gross basis of presentation, the passenger revenues
and operating expenses associated with the Express agreement are
reported gross (i.e.; as <I>&#147;Operating Revenues&nbsp;&#151;
Express&#148; </I>and <I>&#147;Operating Expenses&nbsp;&#151;
Express Expenses&#148;</I>) in the Condensed Consolidated
Statement of Operations. Under the net basis of presentation,
Express passenger revenues and the associated operating expenses
were netted and classified in <I>&#147;Operating
Revenues&nbsp;&#151; Other.&#148; </I>Prior period amounts have
been reclassified to be consistent with the first quarter 2005
presentation. These reclassifications did not impact our
operating income or net income (loss) for each period presented.
See Note&nbsp;7, <I>&#147;Change in Method of Reporting for
America West Express Results&#148; </I>for additional
information about this agreement and the reclassifications
related to the change in presentation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain other prior year amounts have been reclassified to
conform with current year presentation.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Advances to Parent Company and Affiliate</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, AWA had net advances to Holdings of
$259.4&nbsp;million, which were classified in <I>&#147;Other
Assets&#148; </I>on AWA&#146;s condensed consolidated balance
sheet due to certain restrictions related to the timing of
repayment under the government guaranteed loan, of which
$300.3&nbsp;million remains outstanding.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Stock Options</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of AWA&#146;s employees are eligible to participate in
the stock option plans of Holdings. Holdings accounts for its
stock option plans in accordance with the provisions of APB
Opinion No.&nbsp;25, <I>&#147;Accounting for Stock Issued to
Employees,&#148; </I>and related interpretations. As such,
compensation expense would be recorded on the date of grant only
if the current market price of the underlying stock exceeded the
exercise price. Holdings issues its stock options at a price
equal to the fair market value on the date of grant.
Accordingly, no compensation cost has been recognized for stock
options in Holdings&#146; condensed consolidated financial
statements. Had Holdings determined compensation cost based on
the fair value at the grant date for its stock options under
SFAS&nbsp;No.&nbsp;123, <I>&#147;Accounting for Stock-Based
Compensation,&#148; </I>and
</DIV>

<P align="center" style="font-size: 10pt;">12

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<DIV align="left" style="font-size: 10pt;">
allocated the compensation expense to AWA for its employees
participating in the stock option plans, AWA&#146;s net income
(loss) would have been decreased to the pro forma amounts
indicated below:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss), as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(794</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stock-based compensation expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,270</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,270</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,064</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Flight Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2005, AWA entered into an operating lease for one new
Airbus A320 aircraft with a lease term of 5&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2005, AWA completed a sale-leaseback transaction on one
Airbus A320 aircraft resulting in a loss of $3.7&nbsp;million.
This amount was recorded in <I>&#147;Operating
Expenses&nbsp;&#151; Other.&#148; </I>The term of the leaseback
is 12&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the first quarter of 2005, AWA returned one Boeing
737-200 aircraft with the aircraft lessor in accordance with the
renegotiated lease term.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Special Charges</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first quarter of 2005, AWA recorded $0.8&nbsp;million in
special charges of which $0.7&nbsp;million is accrued at
March&nbsp;31, 2005. This is related to continued costs
associated with the retirement of the 737-200 fleet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents the payments and other settlements
made during the three months ended March&nbsp;31, 2005 related
to the special charge accruals:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fleet</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Contract Termination/</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Restructuring</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other Costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>764</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>690</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(305</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(111</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(416</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revision of estimate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at March&nbsp;31, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,185</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA expects to make payments related to these special charges
through the fourth quarter of 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Segment Disclosures</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA is one reportable operating segment. Accordingly, the
segment reporting financial data required by
SFAS&nbsp;No.&nbsp;131, <I>&#147;Disclosures About Segments of
an Enterprise and Related Information&#148; </I>is included in
the accompanying condensed balance sheets and statements of
operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Change in Method of Reporting for America West Express
    Results</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has a regional airline alliance agreement (the
&#147;Agreement&#148;) with Mesa that commenced in February
2001. Pursuant to the Agreement, Mesa, using aircraft owned and
operated by Mesa under the name Express, provides feeder service
to destinations in the western United States, Canada and
northern Mexico. As of March&nbsp;31, 2005, the Express fleet
included 49 aircraft comprised of 27 86-seat CRJ 900s,
16&nbsp;50-seat CRJ 200s and six&nbsp;37-seat Dash&nbsp;8 turbo
prop aircraft.
</DIV>

<P align="center" style="font-size: 10pt;">13

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the Agreement, Mesa is required to fly the routes and
flights designated by AWA using Mesa&#146;s aircraft, flight
crews and other related services. Mesa maintains and operates
the aircraft, employs, trains, manages and compensates personnel
necessary to provide the flight services and provides related
passenger handling services for and on the flights. AWA is
responsible for establishing the routes, scheduling Express
flights, pricing of the tickets, marketing and selling the
tickets, collecting all sales amounts, paying all costs of sales
and marketing and taking inventory risk on the inventory of
seats for sale on Mesa. The ground handling of aircraft is
performed by either AWA or Mesa, depending upon the airport.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA collects the revenue and income generated from the services
provided by Mesa pursuant to the Agreement. In return, AWA:
(i)&nbsp;reimburses Mesa for actual non-controllable costs
incurred by Mesa such as fuel, insurance, taxes, fees and
security; (ii)&nbsp;pays Mesa for actual controllable
non-maintenance costs, subject to a cap, such as aircraft lease
expense and crew expense; (iii)&nbsp;pays Mesa for controllable
maintenance costs at fixed rates (subject to reimbursement of
excess costs if actual costs during term are less than fixed
amount paid by AWA); (iv)&nbsp;reimburses Mesa costs and
expenses incurred at stations maintained and operated by Mesa;
and (v)&nbsp;shares with Mesa a percentage of the revenue
allocated to the flight segments flown by Mesa on a pro rata
basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Agreement is anticipated to expire in June 2012.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in Note&nbsp;1, <I>&#147;Basis of
Presentation,&#148; </I>AWA is reporting the passenger revenues
and operating expenses associated with the Agreement on a gross
basis. Previously, these revenues and expenses were reported net
in <I>&#147;Operating Revenues&nbsp;&#151; Other&#148; </I>in
our Condensed Consolidated Statements of Operations. The
following table presents the effect of this reclassification for
the three months ended March&nbsp;31, 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As Reported</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As Reclassified</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>537,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>537,333</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Express</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,651</TD>
    <TD align="left" valign="bottom" nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,651</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cargo and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,173</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>576,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>72,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>649,157</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>560,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(519</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>559,970</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Express expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,302</TD>
    <TD align="left" valign="bottom" nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,302</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>560,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>72,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>633,272</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Reclassification of Express passenger revenues from
    <I>&#147;Operating Revenues&nbsp;&#151; Other.&#148;</I></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Reclassification of $72.8&nbsp;million and $0.5&nbsp;million of
    Express operating expenses from <I>&#147;Operating
    Revenues&nbsp;&#151; Other&#148; </I>and <I>&#147;Operating
    Expenses&nbsp;&#151; Other,&#148; </I>respectively.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The operating margin that results from using the gross basis of
presentation for Express revenues and expenses does not include
any beyond contribution passenger revenue generated by feed into
AWA&#146;s mainline operations from Express flights. Overall,
the Mesa alliance agreement adds to the total profitability of
AWA.
</DIV>

<P align="center" style="font-size: 10pt;">14

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>America West Holdings Corporation and</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>America West Airlines, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>March&nbsp;31, 2005</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;2.&nbsp;</B></TD>
    <TD>
    <B>Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings is the parent company of AWA. AWA is the eighth largest
passenger airline and the second largest low cost carrier in the
United States operating through its hubs located in Phoenix,
Arizona and Las Vegas, Nevada. As of March&nbsp;31, 2005, AWA
served 63 destinations in North America, including eight
destinations in Mexico, three in Canada and one in Costa Rica.
Through its America West Vacations (&#147;AWV&#148;) division,
AWA also arranges and sells vacation packages primarily to Las
Vegas, Nevada that may include airfare, hotel accommodations and
ground transportation. Holdings&#146; primary business activity
is ownership of all the capital stock of AWA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the first quarter of 2005, our improved revenue
performance substantially offset the impact of record high jet
fuel prices as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Passenger revenues were $575.4&nbsp;million for the quarter, an
    increase of $38.1&nbsp;million from the first quarter of 2004.
    Passenger revenue per available seat mile (&#147;RASM&#148;) was
    7.88 cents for the first quarter of 2005, an increase of 7.8%
    versus the 2004 first quarter, driven by a 5.5&nbsp;point
    increase in load factor with no deterioration in yield. The
    Company&#146;s strong unit revenue improvement was due to more
    aggressive yield management in the 2005 first quarter and more
    balanced capacity in the markets served by AWA. Reductions in
    late 2004 of the Company&#146;s transcontinental flying, which
    yields were negatively impacted by competitive responses, also
    contributed to improved period-over-period RASM and yield
    performance.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    The airline industry and AWA incurred and continue to face an
    increase in costs resulting from record high jet fuel prices.
    The average price per gallon of fuel increased 34.6% from
    105.3&nbsp;cents in the first quarter of 2004 to 141.7 cents per
    gallon in the first quarter of 2005. As a result, aircraft fuel
    expense for the quarter was $151.9&nbsp;million, an increase of
    $37.7&nbsp;million, or 33.0% from the first quarter of 2004.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings realized a pretax and net profit of $33.6&nbsp;million,
or $0.62&nbsp;per diluted share, for the first quarter of 2005.
During the first quarter we benefited from a $60.5&nbsp;million
gain associated with the Company&#146;s fuel hedging
transactions. Of this amount, $11.6&nbsp;million was net
realized gains on settled hedge transactions. The remaining
$48.9&nbsp;million was unrealized gains resulting from the
application of mark-to-market accounting for changes in the fair
value of the Company&#146;s fuel hedging instruments. The
Company is required to use mark-to-market accounting as its fuel
hedging instruments do not meet the requirements for hedge
accounting as established by Statement of Financial Accounting
Standards No.&nbsp;133, <I>&#147;Accounting for Derivative
Instruments and Hedging Activities.&#148; </I>If these
instruments had qualified for hedge accounting treatment, any
unrealized gains or losses, including the $48.9&nbsp;million
discussed above, would be deferred in other comprehensive
income, a subset of stockholders&#146; equity until the jet fuel
is purchased and the underlying fuel hedging instrument is
settled. Given the market volatility of jet fuel, the fair value
of these fuel hedging instruments is expected to change until
settled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, Holdings unrestricted and restricted
cash, cash equivalents, short-term investments, and investments
in debt securities totaled $345.3&nbsp;million, of which
$253.7&nbsp;million was unrestricted. Although there can be no
assurances, we believe that cash flows from operating
activities, combined with these cash balances and our financing
commitments, will be adequate to fund our operating and capital
needs as well as enable us to maintain compliance with our
various debt agreements through at least December&nbsp;31, 2005.
</DIV>

<P align="center" style="font-size: 10pt;">15

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Airline Operations Update</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA reported the following operating statistics to the
U.S.&nbsp;Department of Transportation (&#147;DOT&#148;) for
aircraft operated by AWA (&#147;mainline&#148;) for the first
quarter of 2005 and 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Percent Change</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>2005&nbsp;- 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Jan</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Feb</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Mar</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Jan</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Feb</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Mar</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Jan</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Feb</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Mar</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    On-time performance(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5.9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Completion factor(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mishandled baggage(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Customer complaints(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.3</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    Percentage of reported flight operations arriving on time.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    Percentage of scheduled flight operations completed.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Rate of mishandled baggage reports per 1,000 passengers.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    Rate of customer complaints filed with the DOT per 100,000
    passengers.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All measures showed marked improvement throughout the quarter
and the key reliability measures, on-time performance and
completion factor, were much improved versus 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary of Holdings&#146; Financial Results</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings recorded consolidated net income of $33.6&nbsp;million
in the first quarter of 2005, or $0.62&nbsp;per diluted share.
This compares to a consolidated net loss of $1.6&nbsp;million,
or $0.04&nbsp;per diluted share, in the first quarter of 2004.
The 2005 results include $60.5&nbsp;million net gains associated
with the Company&#146;s fuel hedging transactions. Of this
amount, $48.9&nbsp;million resulted from mark-to-market
accounting for changes in the fair value of the Company&#146;s
fuel hedging instruments and $11.6&nbsp;million was net realized
gains on settled hedge transactions. The 2005 quarter also
includes $0.8&nbsp;million of special charges related to the
write-down of deferred aircraft rent payments associated with
the return of one Boeing 737-200 aircraft and a
$3.7&nbsp;million loss on the sale and leaseback of one new
Airbus A320 aircraft acquired during the period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 2004 results include $0.4&nbsp;million net gains associated
with the Company&#146;s fuel hedging transactions. Of this
amount $2.9&nbsp;million was net realized gains on settled hedge
transactions, which was offset in part by $2.5&nbsp;million of
losses resulting from mark-to-market accounting for changes in
the fair value of the Company&#146;s fuel hedging instruments.
The 2004 quarter also included a $2.5&nbsp;million credit to
other operating revenues related to the reduction of certain
obligations based upon a settlement with Mesa Airlines, a
$2.0&nbsp;million reduction in operating expenses resulting from
the settlement of a lawsuit related to certain computer hardware
and software that previously had been written off, a
$1.7&nbsp;million reduction in bad debt expense due to a
recovery of a previously reserved debt and a $0.6&nbsp;million
reduction in special charges due to a revision of the estimated
costs related to certain aircraft sale-leaseback transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company did not record income tax expense in the first
quarter as it currently expects to realize a loss for the full
year 2005. The Company did not record an income tax benefit in
the first quarter of 2004 as it continued to record a full
valuation allowance on any future tax benefits until it achieves
several quarters of profitable results coupled with an
expectation of continued profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Results of Operations</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following discussion provides an analysis of AWA&#146;s
results of operations for the first quarter of 2005 and material
changes compared to the first quarter of 2004.
</DIV>

<P align="center" style="font-size: 10pt;">16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below sets forth selected mainline operating data for
AWA.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Change</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005&nbsp;- 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenue passenger miles (in millions)(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Available seat miles (in millions)(b)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger load factor (percent)(c)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.5 pts</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Yield per revenue passenger mile (cents)(d)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger revenue per available seat mile (cents)(e)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenue per available seat mile (cents)(f)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Passenger enplanements (in thousands)(g)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft (end of period)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average daily aircraft utilization (hours)(h)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Block hours(i)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average stage length (miles)(j)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,022</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average passenger journey (miles)(k)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fuel consumption (gallons in millions)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average fuel price (cents per gallon)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>141.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of full-time equivalent employees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.8</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    Revenue passenger mile (&#147;RPM&#148;)&nbsp;&#151; A basic
    measure of sales volume. It is one passenger flown one mile.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    Available seat mile (&#147;ASM&#148;)&nbsp;&#151; A basic
    measure of production. It is one seat flown one mile.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    Load factor&nbsp;&#151; The percentage of available seats that
    are filled with revenue passengers.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    Yield&nbsp;&#151; A measure of airline revenue derived by
    dividing passenger revenue by revenue passenger miles and
    expressed in cents per mile.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    Passenger revenue per available seat mile
    (&#147;RASM&#148;)&nbsp;&#151; Total passenger revenues divided
    by total available seat miles.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (f)</TD>
    <TD></TD>
    <TD valign="top">
    Total revenue per available seat mile&nbsp;&#151; Total
    operating revenues divided by total available seat miles.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (g)</TD>
    <TD></TD>
    <TD valign="top">
    Passenger enplanements&nbsp;&#151; The number of passengers on
    board an aircraft including local, connecting and through
    passengers.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (h)</TD>
    <TD></TD>
    <TD valign="top">
    Average daily aircraft utilization&nbsp;&#151; The average
    number of block hours per day for all aircraft in service.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (i)</TD>
    <TD></TD>
    <TD valign="top">
    Block hours&nbsp;&#151; The hours measured from the moment an
    aircraft first moves under its own power, including taxi time,
    for the purposes of flight until the aircraft is docked at the
    next point of landing and its power is shut down.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (j)</TD>
    <TD></TD>
    <TD valign="top">
    Average stage length&nbsp;&#151; The average of the distances
    flown on each segment of every route.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (k)</TD>
    <TD></TD>
    <TD valign="top">
    Average passenger journey&nbsp;&#151; The average one-way trip
    measured in miles for one passenger origination.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Three Months Ended March&nbsp;31, 2005 and 2004</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the first quarter of 2005, AWA realized operating income of
$50.9&nbsp;million as compared to $15.9&nbsp;million in last
year&#146;s quarter. Operating income in the 2005 period
includes a $60.5&nbsp;million net gain associated with the
Company&#146;s fuel hedging transactions. Of this amount
$48.9&nbsp;million resulted from mark-to-market accounting for
changes in the fair value of the Company&#146;s fuel hedging
instruments and $11.6&nbsp;million was net realized gains on
settled hedge transactions. The 2004 period includes a
$0.4&nbsp;million net gain associated with the Company&#146;s
fuel hedging transactions. Of this amount $2.9&nbsp;million was
net realized gains on settled hedge transactions, which was
offset in part by $2.5&nbsp;million of losses resulting from
mark-to-market accounting for changes in the fair value of the
Company&#146;s fuel hedging instruments. Income before income
taxes for the first quarter of 2005 was $34.3&nbsp;million as
compared to a loss before income taxes of $0.8&nbsp;million for
the comparable 2004 period.
</DIV>

<P align="center" style="font-size: 10pt;">17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total operating revenues for the first quarter of 2005 were
$722.6&nbsp;million. Passenger revenues were $575.4&nbsp;million
for the first quarter of 2005, an increase of $38.1&nbsp;million
from the comparable 2004 quarter. RPMs increased 6.9% as ASMs
decreased 0.7%, resulting in a 5.5 point increase in load factor
to 77.7%. This increase in load factor was achieved with no
deterioration in yield, which was relatively flat
period-over-period. As a result, RASM increased 7.8% to 7.88
cents in the first quarter 2005 from 7.31 cents in the 2004
quarter. The Company&#146;s strong unit revenue improvement was
driven by more aggressive yield management in the 2005 first
quarter and more balanced capacity in the markets served by AWA.
Reductions in late 2004 of the Company&#146;s transcontinental
flying, which yields were negatively impacted by competitive
responses, also contributed to improved period-over-period RASM
and yield performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Express revenues were $103.4&nbsp;million for the first quarter
of 2005, an increase of $30.7&nbsp;million from the comparable
2004 quarter due to increased flying by Mesa Airlines under its
alliance agreement with AWA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cargo revenues increased 25.2% in the first quarter of 2005 to
$8.6&nbsp;million due to increased mail volume. Other revenues
increased 9.2% to $35.2&nbsp;million in the first quarter of
2005 from $32.3&nbsp;million in the first quarter of 2004 due
principally to an increase in ticket change and service fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below sets forth the mainline and Express operating
expenses for AWA.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Salaries and related costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>174,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>165,929</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft rents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,185</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other rents and landing fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,241</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft fuel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,212</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Realized and unrealized gains on fuel hedging instruments, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(60,483</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(404</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agency commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft maintenance materials and repairs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,054</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,791</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges (credits), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(600</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93,812</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total mainline operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>560,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>559,970</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Express expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,302</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>671,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>633,272</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total operating expenses in the first quarter of 2005 were
$671.7&nbsp;million, an increase of $38.4&nbsp;million or 6.1%,
compared to the 2004 quarter. Mainline operating expenses were
$560.9&nbsp;million in the first quarter of 2005, an increase of
$0.9&nbsp;million from the first quarter of 2004, while ASMs
decreased 0.7%. Mainline CASM increased 0.9% to 7.68 cents in
the first quarter of 2005 from 7.61 cents for the comparable
2004 period. The increase in CASM was driven by the decline in
capacity which was not met with a commensurate reduction in
costs and a 34.6% increase in the average fuel price per gallon
offset by a $60.5&nbsp;million gain associated with the fuel
hedging transaction discussed above.
</DIV>

<P align="center" style="font-size: 10pt;">18

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below sets forth the major components of mainline CASM
for AWA.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Three Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>March&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Change</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005&nbsp;- 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in cents)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Salaries and related costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft rents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other rents and landing fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft fuel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Realized and unrealized gains on fuel hedging instruments, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.83</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.01</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agency commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17.1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft maintenance materials and repairs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.01</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Significant changes in the components of mainline CASM are
explained as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Salaries and related costs per ASM increased 6.1% primarily due
    to an increase in benefit related expenses ($7.8&nbsp;million)
    including defined contribution plan payments which our pilots
    became eligible for on January&nbsp;1, 2005 ($3.2&nbsp;million),
    self-funded disability requirements ($2.1&nbsp;million) and
    workers compensation claim coverage ($1.1&nbsp;million).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Aircraft rent expense per ASM increased 2.9% due to mix as
    previously owned and leased Boeing 737-200 aircraft were retired
    or returned to aircraft lessors and replaced with leased Airbus
    A320 and A319 aircraft at higher monthly lease rates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Aircraft fuel expense per ASM increased 33.9% primarily due to a
    34.6% increase in the average price per gallon of fuel to 141.7
    cents in the first quarter of 2005 from 105.3 cents in the
    comparable 2004 quarter.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Agency commissions expense per ASM decreased 17.1% due to the
    continued shift in bookings to lower cost distribution channels
    and continued reductions in travel agency incentive programs.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Aircraft maintenance materials and repairs expense per ASM
    decreased 3.5% primarily due to decreases in aircraft C-Check
    ($1.3&nbsp;million), airframe maintenance ($1.2&nbsp;million),
    and other maintenance related expenses ($1.2&nbsp;million),
    which was offset in part by an increase in capitalized
    maintenance amortization ($1.6&nbsp;million). The decrease in
    other maintenance related expenses resulted from a reduction in
    the rates charged for the repair of certain rotable equipment
    under a power-by-the-hour agreement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Depreciation and amortization expense per ASM decreased 13.4%
    primarily due to lower amortization expense related to computer
    hardware and software ($1.1&nbsp;million) as a result of
    AWA&#146;s cash conservation program, which reduced capital
    expenditures. Aircraft depreciation expense was lower by
    $0.8&nbsp;million in the 2005 first quarter due primarily to the
    retirement of the Company&#146;s Boeing 737-200 fleet during
    2004.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    Other operating expenses per ASM increased 18.1% due primarily
    to a $3.7&nbsp;million loss related to an aircraft
    sale-leaseback transaction in the first quarter of 2005 and
    increases in property taxes ($2.1&nbsp;million), airport guard
    services ($2.0&nbsp;million), credit card fees
    ($1.0&nbsp;million), crew per diem ($1.3&nbsp;million) and
    ground handling services ($1.6&nbsp;million). The first quarter
    of 2004 included a $2.0&nbsp;million gain resulting from the
    settlement of a lawsuit</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">19

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    related to certain computer hardware and software that had
    previously been written off and a $1.7&nbsp;million reduction in
    bad debt expense due to a recovery of a previously reserved debt.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Express expenses increased 51.2% in the first quarter of 2005 to
$110.8&nbsp;million due to higher fuel and aircraft operating
expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA had net nonoperating expenses of $16.6&nbsp;million in the
first quarter of 2005 compared to $16.7&nbsp;million in the
first quarter of 2004 as interest income and interest expense
remained relatively flat.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Liquidity and Capital Resources</I></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Sources and Uses of Cash</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At of March&nbsp;31, 2005, Holdings and AWA&#146;s total cash,
cash equivalents, short-term investments, investments in debt
securities and restricted cash were $345.3&nbsp;million and
$324.4&nbsp;million, respectively. Net cash provided by
operating activities for Holdings and AWA was
$113.9&nbsp;million and $113.8&nbsp;million, respectively, for
the first three months of 2005. This compares to net cash used
by operating activities for Holdings and AWA of
$1.4&nbsp;million and $1.1&nbsp;million, respectively, for the
first three months of 2004. The year-over-year increase in net
cash provided by operating activities of $115.4&nbsp;million and
$114.9&nbsp;million for Holdings and AWA, respectively, was
primarily due to the net earnings in the 2005 period and the
period-over-period change in air traffic liability which grew by
41.8% in the 2005 period as compared to 25.4% in the 2004 period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first three months of 2005, net cash used in investing
activities was $43.5&nbsp;million for Holdings and AWA. This
compares to net cash used in investing activities of
$26.4&nbsp;million for Holdings and AWA in the first three
months of 2004. Principal investing activities during the first
three months of 2005 included purchases of property and
equipment totaling $56.6&nbsp;million, offset in part by net
sales of short-term investments totaling $32.0&nbsp;million.
Restricted cash increased by $19.5&nbsp;million during the 2005
period due to an increase in reserves required under an
agreement for processing the Company&#146;s Visa and MasterCard
credit card transactions. The first quarter of 2004 included
purchases of property and equipment totaling $37.0&nbsp;million,
offset in part by net sales of short-term investments totaling
$8.1&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first quarter of 2005, net cash used in financing
activities by Holdings and AWA was $90.3&nbsp;million and
$90.4&nbsp;million, respectively. Principal financing activities
in 2005 included a $42.9&nbsp;million payment for the government
guaranteed loan and redemption of $39.5&nbsp;million of the
Company&#146;s remaining outstanding 10.75%&nbsp;Senior Secured
Notes which was included in current restricted cash at
December&nbsp;31, 2004. This compares to $47.4&nbsp;million of
debt repayments during the comparable 2004 period, including the
first principal payment of $42.9&nbsp;million for the government
guaranteed loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Capital expenditures for the first quarter of 2005 were
approximately $56.6&nbsp;million for both Holdings and AWA as
compared to capital expenditures of approximately
$37.0&nbsp;million for both Holdings and AWA for the first
quarter of 2004. Included in these amounts are capital
expenditures for capitalized maintenance of approximately
$45.8&nbsp;million and $29.8&nbsp;million for both Holdings and
AWA for the first quarter of 2005 and 2004, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Off-Balance Sheet Arrangements</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>The Pass Through Trusts</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since AWA&#146;s restructuring in 1994, AWA has set up 19 pass
through trusts, which have issued over $1.4&nbsp;billion of pass
through trust certificates (also known as &#147;Enhanced
Equipment Trust&nbsp;Certificates&#148; or &#147;EETC&#148;)
covering the financing of 54 aircraft. These trusts are
off-balance sheet entities, the primary purpose of which is to
finance the acquisition of aircraft. Rather than finance each
aircraft separately when such aircraft is purchased or
delivered, these trusts allow the Company to raise the financing
for several aircraft at one time and place such funds in escrow
pending the purchase or delivery of the relevant aircraft. The
trusts also are structured to provide for certain credit
enhancements, such as liquidity facilities to cover
</DIV>

<P align="center" style="font-size: 10pt;">20

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<DIV align="left" style="font-size: 10pt;">
certain interest payments, that reduce the risks to the
purchasers of the trust certificates and, as a result, reduce
the cost of aircraft financing to AWA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each trust covered a set amount of aircraft scheduled to be
delivered within a specific period of time. At the time of each
covered aircraft financing, the relevant trust used the funds in
escrow to purchase equipment notes relating to the financed
aircraft. The equipment notes were issued, at AWA&#146;s
election, either by AWA in connection with a mortgage financing
of the aircraft or by a separate owner trust in connection with
a leveraged lease financing of the aircraft. In the case of a
leveraged lease financing, the owner trust then leased the
aircraft to AWA. In both cases, the equipment notes are secured
by a security interest in the aircraft. The pass through trust
certificates are not direct obligations of, nor guaranteed by,
Holdings or AWA. However, in the case of mortgage financings,
the equipment notes issued to the trusts are direct obligations
of AWA and in the case of leveraged lease financings, the leases
are direct obligations of AWA. In addition, neither Holdings nor
AWA guarantee or participate in any way in the residual value of
the leased aircraft. All aircraft financed by these trusts are
currently structured as leveraged lease financings, which are
not reflected as debt on the balance sheets of either AWA or
Holdings. In the first quarter of 2005, AWA made
$77.2&nbsp;million in lease payments in respect of the leveraged
lease financings under the pass through trusts.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Other Operating Leases</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the aircraft financed by the pass through trust
certificates, AWA has noncancelable operating leases covering 82
aircraft, of which three aircraft will be delivered in 2005, as
well as leases for certain terminal space, ground facilities and
computer and other equipment. In the first quarter of 2005, AWA
made $60.0&nbsp;million in lease payments related to these
operating leases.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Special Facility Revenue Bonds</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 1999, Series&nbsp;1999 special facility revenue bonds
(&#147;new bonds&#148;) were issued by a municipality to fund
the retirement of the Series&nbsp;1994A bonds (&#147;old
bonds&#148;) and the construction of a new concourse with 14
gates at Terminal 4 in Phoenix Sky Harbor International Airport
in support of AWA&#146;s strategic growth plan. The new bonds
are due June 2019 with interest accruing at 6.25%&nbsp;per annum
payable semiannually on June&nbsp;1 and December&nbsp;1,
commencing on December&nbsp;1, 1999. The new bonds are subject
to optional redemption prior to the maturity date on or after
June&nbsp;1, 2009 in whole or in part, on any interest payment
date at the following redemption prices: 101% on June&nbsp;1 or
December&nbsp;1, 2009; 100.5% on June&nbsp;1 or December&nbsp;1,
2010; and 100% on June&nbsp;1, 2011 and thereafter. In
accordance with Emerging Issues Task Force (&#147;EITF&#148;)
Issue No.&nbsp;97-10, <I>&#147;The Effect of Lessee Involvement
in Asset Construction,&#148; </I>the Company accounts for this
as an operating lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with these bonds, AWA entered into an Amended and
Restated Airport Use Agreement, pursuant to which AWA agreed to
make sufficient payments to the Industrial Development Authority
(&#147;IDA&#148;) to cover the principal and interest of the
bonds and to indemnify the IDA for any claims arising out of the
issuance and sale of the bonds and the use and occupancy of the
concourses financed by these bonds and the old bonds. At
March&nbsp;31, 2005, the outstanding principal amount of the
bonds was $21.8&nbsp;million. The Company estimates its
remaining payments to cover the principal and interest of these
bonds will be approximately $43.6&nbsp;million.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Commitments</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, we had $703.3&nbsp;million of
long-term debt (including current maturities). This amount
consisted primarily of the $300.3&nbsp;million government
guaranteed loan, a secured term loan financing with General
Electric Capital Corporation (&#147;GECC&#148;), of which
$110.6&nbsp;million remains outstanding, $36.0&nbsp;million
principal amount of senior secured discount notes,
$112.3&nbsp;million principal amount of 7.5%&nbsp;convertible
senior notes (including interest through December&nbsp;31, 2004
as a deemed loan added to the principal thereof) and
$252.7&nbsp;million issue price of 7.25%&nbsp;senior
exchangeable notes, of which $86.8&nbsp;million was received at
issuance.
</DIV>

<P align="center" style="font-size: 10pt;">21

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Government Guaranteed Loan</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2002, AWA closed a $429&nbsp;million loan supported
by a $380&nbsp;million guarantee provided by the Air
Transportation Stabilization Board (&#147;ATSB&#148;). Certain
third-party counter-guarantors have fully and unconditionally
guaranteed the payment of an aggregate of $45&nbsp;million of
the original principal amount under the government guaranteed
loan plus accrued and unpaid interest thereon. In addition,
Holdings has fully and unconditionally guaranteed the payment of
all principal, premium, interest and other obligations
outstanding under the government guaranteed loan and has pledged
the stock of AWA to secure its obligations under such guarantee.
Principal amounts under this loan become due in ten installments
of $42.9&nbsp;million on each March&nbsp;31 and
September&nbsp;30, which began on March&nbsp;31, 2004 and end on
September&nbsp;30, 2008. The Company has made the first three of
these payments as scheduled. Principal amounts outstanding under
the government guaranteed loan bear interest at a rate per annum
equal to LIBOR plus 40&nbsp;basis points. We also pay guarantees
fees of approximately 8% of the outstanding guaranteed principal
balance in 2005 through 2008 to the U.S.&nbsp;Treasury
Department and other loan participants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to certain exceptions, we are required to prepay the
government guaranteed loan with:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="5%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the net proceeds of all issuances of debt or equity by either
    Holdings or AWA after January 2002;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    proceeds from asset sales in excess of $20&nbsp;million in any
    fiscal year;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    insurance proceeds in excess of $2&nbsp;million to the extent
    such proceeds are not used to restore or replace the assets from
    which such proceeds are derived.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we are required to prepay the government guaranteed
loan upon a change in control and we may be required to prepay
portions of the loan if our employee compensation costs exceed a
certain threshold. We may, at our option, prepay the government
guaranteed loan without premium or penalty, subject to
reimbursement of the lenders&#146; breakage costs in the case of
prepayment of LIBOR loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The government guaranteed loan requires that AWA maintain a
minimum cash balance of $100&nbsp;million. In addition, the
government loan contains customary affirmative covenants and the
following negative covenants: restrictions on liens,
investments, restricted payments, fundamental changes, asset
sales and acquisitions, the creation of new subsidiaries, sale
and leasebacks, transactions with affiliates, the conduct of
business, mergers or consolidations, issuances and dispositions
of capital stock of subsidiaries, and amendments to other
indebtedness. The government guaranteed loan contains customary
events of default, including payment defaults, cross-defaults,
breach of covenants, bankruptcy and insolvency defaults and
judgment defaults.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>GECC Term Loan&nbsp;Financing</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September 2004, AWA entered into a term loan financing with
GECC providing for loans in an aggregate amount of
$110.6&nbsp;million. The term loan financing consists of two
secured term loan facilities: a $75.6&nbsp;million term loan
facility secured primarily by spare parts, rotables and
appliances (the &#147;Spare Parts Facility&#148;); and a
$35.0&nbsp;million term loan facility secured primarily by
aircraft engines and parts installed in such engines (the
&#147;Engine Facility&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The facilities are cross-collateralized on a subordinated basis
and the collateral securing the facilities also secures on a
subordinated basis certain of AWA&#146;s other existing debt and
lease obligations to GECC and its affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The loans under the Spare Parts Facility are payable in full at
maturity on September&nbsp;10, 2010. The loans under the Engine
Facility are payable in equal quarterly installments of
$1.3&nbsp;million beginning on March&nbsp;10, 2006 through
June&nbsp;10, 2010 with the remaining loan amount of
$11.8&nbsp;million payable at maturity on September&nbsp;10,
2010. The loans under each facility may be prepaid in an amount
not less than $5&nbsp;million at any time after the 30th monthly
anniversary of the funding date under such facility. If AWA
fails to maintain a certain ratio of rotables to loans under the
Spare Parts Facility, it may be required to pledge additional
rotables or cash as collateral, provide a letter of credit or
prepay some or all of the loans under the Spare Parts Facility.
In addition, the loans under the Engine Facility are subject to
mandatory prepayment
</DIV>

<P align="center" style="font-size: 10pt;">22

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<DIV align="left" style="font-size: 10pt;">
upon the occurrence of certain events of loss applicable to, or
certain dispositions of, aircraft engines securing the facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Principal amounts outstanding under the loans bear interest at a
rate per annum based on three-month LIBOR plus a margin. Both
facilities contain customary events of default, including
payment defaults, cross-defaults, breach of covenants,
bankruptcy and insolvency defaults and judgment defaults.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Senior Secured Discount Notes Due 2009</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, AWA raised additional capital by financing its
Phoenix maintenance facility and flight training center. Using
its leasehold interests in these two facilities as collateral,
AWA, through a wholly owned subsidiary named FTCHP LLC, raised
$30.8&nbsp;million through the issuance of senior secured
discount notes. The notes were issued by FTCHP at a discount
pursuant to the terms of a senior secured term loan agreement
among the Company, FTCHP, Heritage Bank, SSB, as administrative
agent, Citibank, N.A., as the initial lender, and the other
lenders from time to time party thereto. Citibank, N.A.
subsequently assigned all of its interests in the notes to third
party lenders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA has fully and unconditionally guaranteed the payment and
performance of FTCHP&#146;s obligations under the notes and the
loan agreement. The notes require aggregate principal payments
of $36.0&nbsp;million with principal payments of
$1.5&nbsp;million due on December&nbsp;27, 2005 and 2006 and the
remaining principal amount due on December&nbsp;27, 2009. The
notes may be prepaid in full at any time (subject to customary
LIBOR breakage costs) and in partial amounts of
$1.5&nbsp;million on December&nbsp;27, 2007 and 2008. The unpaid
principal amount of the notes bears interest based on LIBOR plus
a margin subject to adjustment based on a loan to collateral
value ratio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The loan agreement contains customary covenants applicable to
loans of this type, including obligations relating to the
preservation of the collateral and restrictions on the
activities of FTCHP. In addition, the loan agreement contains
events of default, including payment defaults, cross-defaults to
other debt of FTCHP, if any, breach of covenants, bankruptcy and
insolvency defaults and judgment defaults.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with this financing, AWA sold all of its leasehold
interests in the maintenance facility and flight training center
to FTCHP and entered into subleases for the facilities with
FTCHP at lease rates expected to approximate the interest
payments due under the notes. In addition, AWA agreed to make
future capital contributions to FTCHP in amounts sufficient to
cover principal payments and other amounts owing pursuant to the
notes and the loan agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The proceeds from this financing, together with
$10.5&nbsp;million from operating cash flow, were irrevocably
deposited with the trustee for AWA&#146;s
10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
unsecured notes due 2005 and subsequently redeemed on
January&nbsp;26, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;Senior
    Notes due 2005</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AWA had $39.5&nbsp;million principal amount of
10<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%&nbsp;senior
unsecured notes due 2005 outstanding at December&nbsp;31, 2004.
As discussed above, the senior notes were subsequently redeemed
in January 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>7.5%&nbsp;Convertible Senior Notes due 2009</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the closing of the government guaranteed loan
and the related transactions, Holdings issued
$104.5&nbsp;million of 7.5%&nbsp;convertible senior notes due
2009, of which approximately $112.3&nbsp;million remained
outstanding at March&nbsp;31, 2005 (including interest paid
through December&nbsp;31, 2004 as a deemed loan added to the
principal thereof). These notes are convertible into shares of
class&nbsp;B common stock, at the option of the holders, at an
initial conversion price of $12.00&nbsp;per share or a
conversion ratio of approximately 83.333&nbsp;shares per $1,000
principal amount of such notes, subject to standard
anti-dilution adjustments. Interest on the 7.5%&nbsp;convertible
senior notes is payable semiannually in arrears on June&nbsp;1
and December&nbsp;1 of each year. At Holdings&#146; option, the
first six interest payments were payable in the form of a deemed
loan added to the principal amount of these notes. The
7.5%&nbsp;convertible senior notes will mature on
January&nbsp;18,
</DIV>

<P align="center" style="font-size: 10pt;">23

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<DIV align="left" style="font-size: 10pt;">
2009 unless earlier converted or redeemed. The payment of
principal, premium and interest on the 7.5%&nbsp;convertible
senior notes is fully and unconditionally guaranteed by AWA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings may redeem 7.5%&nbsp;convertible senior notes, in whole
or in part, at the following redemption prices (expressed as
percentages of the principal amount thereof), if redeemed during
the twelve-month period commencing on January 18 of the years
set forth below, plus, in each case, accrued and unpaid
interest, if any, to the date of redemption:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Redemption Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103.75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101.25</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008 and thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>7.25%&nbsp;Senior Exchangeable Notes due 2023</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In July and August of 2003, AWA completed a private placement of
approximately $86.8&nbsp;million issue price of
7.25%&nbsp;Senior Exchangeable Notes due 2023. The notes bear
cash interest until July&nbsp;30, 2008. Thereafter, the notes
will cease bearing cash interest and begin accruing original
issue discount daily at a rate of 7.25%&nbsp;per year until
maturity. Each note was issued at a price of $343.61 and is
exchangeable for class&nbsp;B common stock of Holdings at an
exchange ratio of 32.038&nbsp;shares per $1,000 principal amount
at maturity of the notes (subject to adjustment in certain
circumstances). This represents an equivalent conversion price
of approximately $10.73&nbsp;per share. The aggregate amount due
at maturity, including accrued original issue discount from
July&nbsp;31, 2008, will be $252,695,000. The notes are
unconditionally guaranteed on a senior unsecured basis by
Holdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holders may exchange their notes for the shares of class&nbsp;B
common stock of Holdings in any fiscal quarter commencing after
September&nbsp;30, 2003, if, as of the last day of the preceding
fiscal quarter, the closing sale price of the class&nbsp;B
common stock for at least 20 trading days in a period of 30
consecutive trading days ending on the last trading day of such
preceding fiscal quarter is more than 110% of the accreted
exchange price per share of Class&nbsp;B common stock on the
last day of such preceding fiscal quarter. If the foregoing
condition is satisfied, then the notes will be exchangeable at
any time at the option of the holder through maturity. The
accreted exchange price per share as of any day will equal the
issue price of a note plus accrued original issue discount to
that day divided by 32.038, subject to any adjustments to the
exchange rate through that day.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On or before July&nbsp;30, 2018, a holder also may exchange its
notes for shares of the Class&nbsp;B common stock at any time
after a 10 consecutive trading-day period in which the average
of the trading prices for the notes for that 10 trading-day
period was less than 103% of the average exchange value for the
notes during that period. Exchange value is equal to the product
of the closing sale price for the shares of Class&nbsp;B common
stock on a given day multiplied by the then current exchange
rate, which is the number of shares of Class&nbsp;B common stock
for which each note is then exchangeable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the holders may exchange the notes if the notes
have been called for redemption or if certain specified
corporate transactions have occurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holders of the notes may require AWA to repurchase the notes at
a price equal to the original issue price plus accrued cash
interest and original issue discount, if any, on July&nbsp;30,
2008, 2013 and 2018. The purchase price of such notes may be
paid in cash or class&nbsp;B common stock of Holdings, subject
to certain restrictions. In addition, each holder may require
AWA to purchase all or a portion of such holder&#146;s notes
upon the occurrence of certain change of control events
concerning AWA or Holdings. AWA may redeem the notes, in whole
or in part, on or after July&nbsp;30, 2008 at a price equal to
the original issue price plus accrued cash interest and original
issue discount, if any.
</DIV>

<P align="center" style="font-size: 10pt;">24
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Other Indebtedness and Obligations</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the above described indebtedness, we had
$35.8&nbsp;million of secured equipment notes and
$47.6&nbsp;million of other unsecured indebtedness, including
$29.3&nbsp;million of industrial revenue bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our cash obligations as of
March&nbsp;31, 2005.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2006</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2007</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2008</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2009</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Beyond 2009</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment notes&nbsp;&#151; non-EETC(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35,845</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    GECC term loan(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110,564</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    7.5%&nbsp;convertible senior notes due 2009(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112,299</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    7.25%&nbsp;senior exchangeable notes due 2023(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,695</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Government guaranteed loan(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300,300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State loan(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Industrial development bonds(7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AVSA promissory notes(8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior Secured Discount Notes(9)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,988</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 9pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>371,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>895,241</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash aircraft rental payments(10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>217,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>323,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>305,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>255,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>229,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,703,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,036,193</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lease payments on equipment and facility operating leases(11)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137,586</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Special facility revenue bonds(12)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aircraft purchase commitments(13)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>223,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>464,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>735,991</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Engine maintenance commitments(14)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>533,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>926,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>477,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>382,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>394,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,164,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,878,836</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Includes approximately $35.8&nbsp;million of equipment notes
    with variable interest rates of 3.94% to 4.34%, averaging 4.00%
    at March&nbsp;31, 2005, installments due 2005 through 2008.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    The amount consists of the Spare Parts Facility and the Engine
    Facility with a variable interest rate of 6.92% at
    March&nbsp;31, 2005. See <I>&#147;&#151;&nbsp;GECC Term
    Loan&nbsp;Financing&#148; </I>above.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Includes $90.7&nbsp;million principal amount of
    7.5%&nbsp;convertible senior notes, due 2009, and
    $21.6&nbsp;million of interest paid in kind of issuance through
    December&nbsp;31, 2004. For financial reporting purposes, we
    initially recorded the convertible senior notes at their fair
    market value on the date of issuance. As of March&nbsp;31, 2005,
    the accreted balance of the convertible senior notes in the
    accompanying consolidated balance sheet is approximately
    $69.5&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Includes $252.7&nbsp;million principal amount of
    7.25%&nbsp;senior exchangeable notes due July 2023 with cash
    interest payable through July 2008 at a rate of 2.49% on the
    principal amount at maturity. Thereafter, the notes will cease
    bearing cash interest and begin accruing original issue discount
    at a rate of 7.25%</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">25

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    until maturity. The aggregate amount due at maturity, including
    accrued original issue discount from July&nbsp;31, 2008, will be
    $252.7&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Government guaranteed loan includes $300.3&nbsp;million with a
    variable interest rate of 2.96% at March&nbsp;31, 2005 and
    ratable principal payments due 2005 through 2008. Guarantee fees
    of approximately 8.0% of the outstanding guaranteed principal
    balance in 2005 through 2008 are payable to the
    U.S.&nbsp;Treasury Department and other loan participants.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Includes Arizona State loan of $0.8&nbsp;million due December
    2007 with a variable interest rate of 7.55% at March&nbsp;31,
    2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Includes $29.3&nbsp;million of 6.3% industrial development bonds
    due April 2023.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    Includes AVSA promissory notes of $17.5&nbsp;million due 2005
    with a variable interest rate of 4.05% at March&nbsp;31, 2005.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="3%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    Includes $36.0&nbsp;million of senior secured discount notes due
    2009 with a variable interest rate of 6.44% at March&nbsp;31,
    2005.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    Includes non-cancelable operating leases for 136 aircraft with
    remaining terms ranging from three months to approximately
    19&nbsp;years. Management estimates the debt equivalent value of
    these operating leases approximates $1.9&nbsp;billion using an
    interest rate of 10%.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)&nbsp;</TD>
    <TD align="left">
    Includes leases for terminal space, ground facilities, the
    flight training center and computer and other equipment under
    non-cancelable operating leases.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(12)&nbsp;</TD>
    <TD align="left">
    Includes Series&nbsp;1999 Terminal 4 Improvements Bonds, due
    2019.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(13)&nbsp;</TD>
    <TD align="left">
    Includes commitments to purchase a total of 19 Airbus aircraft
    and seven spare engines for delivery in 2005 through 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(14)&nbsp;</TD>
    <TD align="left">
    Includes minimum commitments under AWA&#146;s rate per engine
    hour agreement with General Electric Engine Services for
    overhaul maintenance services on CFM56-3B engines through April
    2008. Minimum monthly commitment amounts: for the period through
    and including April 2006&nbsp;&#151; $1.0&nbsp;million, for the
    period May 2006 through and including April 2008&nbsp;&#151;
    $250,000.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect to fund these cash obligations from funds provided by
operations and future financings, if necessary. The cash
available to us from these sources, however, may not be
sufficient to cover these cash obligations because economic
factors outside our control may reduce the amount of cash
generated by operations or increase our costs. For instance, an
economic downturn or general global instability caused by
military actions, terrorism, disease outbreaks and natural
disasters could reduce the demand for air travel, which would
reduce the amount of cash generated by operations. An increase
in our costs, either due to an increase in borrowing costs
caused by a reduction in our credit rating or a general increase
in interest rates or due to an increase in the cost of fuel,
maintenance, aircraft and aircraft engines and parts, could
decrease the amount of cash available to cover the cash
obligations. In addition, we may be required to prepay portions
of the government guaranteed loan if our employee compensation
costs exceed a certain threshold and we may be required to
prepay portions of the term loan to the extent the value of the
collateral securing the term loan decreases. In any of these
cases, our liquidity may be adversely affected and we may not
have sufficient cash to prepay the government loan and meet our
other obligations. Moreover, the government guaranteed loan
contains a $100&nbsp;million minimum cash balance requirement.
As a result, we cannot use all of our available cash to fund
operations, capital expenditures and cash obligations without
violating this requirement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although there can be no assurances, management believes that
cash flow from operating activities, coupled with existing cash
balances and financing commitments, will be adequate to fund the
Company&#146;s operating and capital needs as well as enable it
to maintain compliance with its various debt agreements at least
through December&nbsp;31, 2005.
</DIV>

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    <TD width="94%"></TD>
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    <TD></TD>
    <TD>
    <B><I>Financial Covenants and Credit Rating</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the minimum cash balance requirements, our
long-term debt agreements contain various negative covenants
that restrict our actions, including our ability to pay
dividends, or make other restricted payments. Finally, our
long-term debt agreements contain cross-default provisions,
which may be triggered by
</DIV>

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<DIV align="left" style="font-size: 10pt;">
defaults by us under other agreements relating to indebtedness.
See <I>&#147;Risk Factors Relating to the Company and Industry
Related Risks&nbsp;&#151; Our high level of fixed obligations
limits our ability to fund general corporate requirements and
obtain additional financing, limits our flexibility in
responding to competitive developments and increases our
vulnerability to adverse economic and industry conditions.&#148;
</I>As of March&nbsp;31, 2005, Holdings and AWA were in
compliance with the covenants in their long-term debt agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our credit ratings, like most airlines, are relatively low, with
Moody&#146;s assessment of AWA&#146;s senior implied rating and
senior unsecured debt rating at B3 and Caa2, respectively,
Standard&nbsp;&#38; Poor&#146;s assessment of AWA&#146;s and
Holdings&#146; corporate credit ratings at B- and AWA&#146;s
senior unsecured rating at CCC and Fitch Ratings&#146;
assessment of AWA&#146;s long-term and unsecured debt rating at
CCC. In addition, Standard&nbsp;&#38; Poor&#146;s recently
placed AWA&#146;s aircraft debt on CreditWatch with negative
implications as part of a broader review of aircraft-backed
debt. Low credit ratings could cause our borrowing costs to
increase, which would increase our interest expense and could
affect our net income and our credit ratings could adversely
affect our ability to obtain additional financing. The rating
agencies base their ratings on our financial performance and
operations, our cash flow and liquidity, the level of our
indebtedness and industry conditions in general. If our
financial performance or industry conditions do not improve, we
may face future downgrades, which could further negatively
impact our borrowing costs and the prices of our equity or debt
securities. In addition, any downgrade of our credit ratings may
indicate a decline in our business and in our ability to satisfy
our obligations under our indebtedness. See <I>&#147;Risk
Factors Relating to the Company and Industry Related
Risks&nbsp;&#151; Because of our relatively low credit ratings,
our borrowing costs may be high and our ability to incur
additional debt may be impaired.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Other Information</B>
</DIV>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <B><I>Labor Relations</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A large majority of the employees of the major airlines in the
United States are represented by labor unions. The majority of
AWA employees have selected union representation and have
negotiated or are in the process of negotiating collective
bargaining agreements with AWA. Although there are few remaining
employee groups who could engage in organization efforts, we
cannot predict the outcome of any future efforts to organize
those remaining employees or the terms of any future labor
agreements or the effect, if any, on the Company&#146;s or
AWA&#146;s operations or financial performance. For more
discussion, see <I>&#147;Risk Factors Relating to the Company
and Industry Related Risks&nbsp;&#151; Negotiations with labor
unions could divert management attention and disrupt operations
and new collective bargaining agreements or amendments to
existing collective bargaining agreements could increase our
labor costs and operating expenses.&#148;</I>
</DIV>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <B><I>Related Party Transactions</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Texas Pacific Group agreed to reimburse the Company
approximately $2.5&nbsp;million for expenses incurred by the
Company on its behalf. As a result, the Company recorded this as
a receivable as of December&nbsp;31, 2004. Subsequent to
December&nbsp;31, 2004, the Company received $2.4&nbsp;million
in such reimbursement and an additional $0.1&nbsp;million in
2005.
</DIV>

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    <TD>
    <B><I>Application of Critical Accounting Policies</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of our consolidated financial statements in
accordance with generally accepted accounting principles
requires that we make certain estimates and assumptions that
affect the reported amount of assets and liabilities, revenues
and expenses, and the disclosure of contingent assets and
liabilities at the date of our financial statements. We believe
our estimates and assumptions are reasonable; however, actual
results could differ from those estimates. We have identified
the following critical accounting policies that require the use
of significant judgments and estimates relating to matters that
are inherently uncertain and may result in materially different
results under different assumptions and conditions.
</DIV>

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    <TD width="5%"></TD>
    <TD width="92%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    <I>Passenger Revenue</I>&nbsp;&#151; Passenger revenue is
    recognized when transportation is provided. Ticket sales for
    transportation that has not yet been provided are recorded as
    air traffic liability. Passenger traffic commissions and related
    fees are expensed when the related revenue is recognized.
    Passenger traffic</TD>
</TR>

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    <TD></TD>
    <TD align="left">
    commissions and related fees not yet recognized are included as
    a prepaid expense. Due to complex pricing structures, refund and
    exchange policies, and interline agreements with other airlines,
    certain amounts are recognized in revenue using estimates
    regarding both the timing of the revenue recognition and the
    amount of revenue to be recognized. These estimates are
    generally based on the statistical analysis of our historical
    data. Any adjustments resulting from periodic evaluations of the
    estimated air traffic liability are included in results of
    operations during the period in which the evaluations are
    completed.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    <I>Accounting For Long-Lived Assets</I>&nbsp;&#151; Owned
    property and equipment are recorded at cost and depreciated to
    residual values over the estimated useful lives using the
    straight-line method. Leasehold improvements relating to flight
    equipment and other property on operating leases are amortized
    over the life of the lease, or the life of the asset, whichever
    is shorter. Interest on advance payments for aircraft
    acquisitions and on expenditures for aircraft improvements is
    capitalized and added to the cost of the asset. The estimated
    useful lives of our owned aircraft, jet engines, flight
    equipment and rotable parts range from five to 25&nbsp;years.
    The estimated useful lives of our technical support facility and
    flight training center in Phoenix, Arizona are 22&nbsp;years and
    30&nbsp;years, respectively. The estimated useful lives of our
    ground property and equipment range from three to 12&nbsp;years.
    We test for impairment losses on long-lived assets used in
    operations when events and circumstances indicate that the
    assets might be impaired as defined by SFAS&nbsp;No.&nbsp;144,
    <I>&#147;Accounting for the Impairment or Disposal of Long-Lived
    Assets.&#148; </I>An impairment loss is recognized if the
    carrying amount of the asset is not recoverable from its
    undiscounted cash flows and is measured as the difference
    between the carrying amount and fair value of the asset.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    <I>Frequent Flyer Accounting</I>&nbsp;&#151; We maintain a
    frequent travel award program known as &#147;FlightFund&#148;
    that provides a variety of awards to program members based on
    accumulated mileage. The estimated cost of providing the free
    travel is recognized as a liability and charged to operations as
    program members accumulate mileage. Travel awards are valued at
    the incremental cost of carrying one passenger, based on
    expected redemptions. Incremental costs are based on
    expectations of expenses to be incurred on a per passenger basis
    and include fuel, liability insurance, food, beverages, supplies
    and ticketing costs. We also sell mileage credits to companies
    participating in our FlightFund program, such as hotels, car
    rental agencies and credit card companies.
    Transportation-related revenue from the sale of mileage credits
    is deferred and recognized when transportation is provided. A
    change to the estimated cost per mile, minimum award level,
    percentage of revenue to be deferred or deferred recognition
    period could have a significant impact on our revenues or
    mileage liability accrual in the year of the change as well as
    future years.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    <I>Long-Term Maintenance Reserve</I>&nbsp;&#151; We record an
    accrual for the estimated cost of scheduled airframe and engine
    overhauls required to be performed on leased aircraft upon their
    return to the lessors. These estimates are based on historical
    costs and our assumptions regarding the renewal of aircraft
    leases. A significant change to AWA&#146;s fleet plan could have
    a material impact on our reserve requirements.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    <I>Deferred Tax Asset Valuation Allowance</I>&nbsp;&#151; The
    Company initially recorded a full valuation allowance relating
    to its net deferred tax assets at December&nbsp;31, 2001 and to
    tax benefits generated in 2002. In recording that valuation
    allowance, we considered whether it was more likely than not
    that all or a portion of the deferred tax assets will not be
    realized, in accordance with SFAS&nbsp;No.&nbsp;109,
    <I>&#147;Accounting for Income Taxes.&#148; </I>The Company was
    in a cumulative loss position three out of four years between
    December&nbsp;31, 2001 through December&nbsp;31, 2004, which
    weighed heavily in the overall determination that a valuation
    allowance was needed. As of March&nbsp;31, 2005, the Company had
    recorded a valuation allowance of $115.3&nbsp;million against
    its net deferred tax assets. The Company expects to continue to
    record a full valuation allowance on any future tax benefits
    until we have achieved several quarters of consecutive
    profitable results coupled with an expectation of continued
    profitability.</TD>
</TR>

</TABLE>

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    <TD></TD>
    <TD>
    <B><I>Recently Issued Accounting Pronouncements</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, the FASB issued Revised Statement
No.&nbsp;123, <I>&#147;Accounting for Share-Based Payment&#148;
</I>(&#147;SFAS&nbsp;No.&nbsp;123R&#148;). This statement
requires the Company to recognize the grant-date fair value of
stock options in its Statement of Operations. In addition, the
Company will be required to calculate this compensation using
the fair-value based method, versus the intrinsic value method
previously allowed under SFAS&nbsp;No.&nbsp;123. As issued, this
revision was effective for interim periods beginning after
June&nbsp;15, 2005. On April&nbsp;14, 2005, the Securities and
Exchange Commission amended the compliance date for
SFAS&nbsp;No.&nbsp;123R to the beginning of the next fiscal year
that begins after June&nbsp;15, 2005. Accordingly, the Company
will adopt this revised SFAS effective January&nbsp;1, 2006. The
Company is currently evaluating how it will adopt
SFAS&nbsp;No.&nbsp;123R and has not determined the method it
will use to value granted stock options. The adoption of
SFAS&nbsp;No.&nbsp;123R is expected to have a material effect on
the Company&#146;s results of operations.
</DIV>

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    <TD></TD>
    <TD>
    <B>Forward-Looking Information</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This quarterly report on Form&nbsp;10-Q contains various
forward-looking statements within the meaning of
Section&nbsp;21E of the Securities Exchange Act of 1934, as
amended (the &#147;Exchange Act&#148;). These statements are
based on management&#146;s beliefs as well as assumptions made
by and information currently available to management. When used
in this document, the words &#147;anticipate,&#148;
&#147;estimate,&#148; &#147;expect,&#148; &#147;project&#148;
and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those
anticipated, estimated, projected or expected. Among the key
factors that may have a direct bearing on our results are:
</DIV>

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    <TD width="92%"></TD>
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    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    general economic conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the impact of global instability caused by military actions,
    terrorism, disease outbreaks and natural disasters;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    limitations on our flexibility in responding to industry
    conditions due to high fixed costs and restrictions imposed by
    our debt instruments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    changes in federal and state laws and regulations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    changes in prevailing interest rates and the availability of and
    terms of financing to fund our business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the ability to attract and retain qualified personnel;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the cyclical nature of the airline industry;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    competitive practices in the airline industry;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    the impact of changes in fuel prices;&nbsp;and</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    relations with unionized employees generally and the impact and
    outcome of labor negotiations.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For additional discussion of these factors and other risks, see
<I>&#147;Business&nbsp;&#151; Risk Factors Relating to the
Company and Industry Related Risks&#148;</I> discussed below. In
light of these risks, uncertainties and assumptions, the
forward-looking events described in this quarterly report on
Form&nbsp;10-Q might not occur. Any forward-looking statements
speak only as of the date of this report.
</DIV>

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<B>Risk Factors Relating to America West and Industry Related
Risks</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We caution the reader that these risk factors may not be
exhaustive. We operate in a continually changing business
environment and new risk factors emerge from time to time.
Management cannot predict such new risk factors, nor can it
assess the impact, if any, of such new risk factors on our
business or the extent to which any factor or combination of
factors may impact our business.
</DIV>

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    <TD>
    <B><I>We have sustained, and may continue to sustain significant
    operating losses.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 2004, we incurred an
operating loss of $43.8&nbsp;million. In addition, we incurred
operating losses for the years ended December&nbsp;31, 2001 and
2002 resulting primarily from the decrease in revenue and
passenger demand and the increase in operating costs after the
terrorist attacks of September&nbsp;11, 2001. Recently, the
operating losses resulted primarily from a substantial increase
in the cost of jet fuel and excess domestic industry capacity
resulting in lower revenue per available seat mile. We expect
the threat of further terrorist attacks and continued
instability in oil producing regions to continue to negatively
impact our revenues and costs in the near-term. We may not be
able to effectively counteract increasing costs through our cost
reduction initiatives, customer service initiatives and revised
pricing structures. Moreover, our liquidity and borrowing
options are limited and we may not be able to survive a
prolonged economic downturn, decreases in demand for air travel
or further increases in jet fuel costs. The inability to sustain
profitability may impair our ability to satisfy our obligations
as they become due, obtain future equity or debt financing,
respond to competitive developments and otherwise sustain or
expand our business.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>Global instability, caused by events such as terrorism,
    has had and may in the future have a material impact on the
    airline industry and, as a result, our financial condition,
    operations and prospects.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Over the past several years, global instability, caused by
military action, terrorism, disease outbreaks and natural
disasters, has had a profound impact on the airline industry.
The terrorist attacks of September&nbsp;11, 2001 resulted in a
severe strain on our and the other airlines&#146; liquidity as
the government temporarily suspended all flights, passenger
demand dropped precipitously and financial institutions tried to
reduce their exposure by restricting the industry&#146;s access
to capital. In addition, the terrorist attacks led to a decrease
in the value of aircraft and aircraft-related equipment and
facilities and cost increases for enhanced security measures,
aviation insurance, airport rents and landing fees. Subsequent
to the terrorist attacks, other events, such as military action
in Iraq and Afghanistan, general political and economic
instability in oil producing regions, and the Severe Acute
Respiratory Syndrome (&#147;SARS&#148;) outbreak in Asia,
continued to adversely impact passenger demand and operating
costs, especially jet fuel costs. These kinds of events
(including natural disasters such as the recent tsunamis in the
Indian Ocean) are likely to continue to impact the airline
industry. Depending on the severity and geographical impact of
such events, they may have a substantial adverse impact on our
passenger demand, our costs, the value of our assets and our
access to, and cost of capital. We cannot predict whether we
will have sufficient liquidity or access to capital to withstand
the adverse impact of a prolonged decrease in passenger demand
or a substantial increase in costs caused by such global events.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>Increases in insurance costs or reductions in insurance
    coverage may adversely impact our operations and financial
    results.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The terrorist attacks of September&nbsp;11, 2001 led to a
significant increase in insurance premiums and a decrease in the
insurance coverage available to commercial airline carriers.
Accordingly, our insurance costs increased significantly and our
ability to continue to obtain insurance even at current prices
remains uncertain. In addition, AWA and other airlines have been
unable to obtain third party war risk (terrorism)&nbsp;insurance
at reasonable rates from the commercial insurance market and
have been obtaining this insurance through a special program
administered by the FAA. If the Federal insurance program
terminates, we would likely face a material increase in the cost
of war risk insurance. Because of competitive pressures in our
industry, our ability to pass additional insurance costs to
passengers is limited. As a result, further increases in
insurance costs or reductions in available insurance coverage
could harm our earnings.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>Our high level of fixed obligations limits our ability to
    fund general corporate requirements and obtain additional
    financing, limits our flexibility in responding to competitive
    developments and increases our vulnerability to adverse economic
    and industry conditions.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have a significant amount of fixed obligations, including
debt, aircraft leases and financings, aircraft purchase
commitments, leases of airport and other facilities and other
cash obligations. As of March&nbsp;31, 2005, we had
approximately $703.3&nbsp;million of outstanding debt, of which
$182.4&nbsp;million was secured. In addition, we had
$11.2&nbsp;million of payments to satisfy capital lease
obligations and $3.2&nbsp;billion of operating lease obligations
through lease expiration dates incurred primarily in connection
with off-balance sheet aircraft financings. See
<I>&#147;Managements&#146; Discussion and Analysis of Financial
Condition and Results of Operations&nbsp;&#151; Liquidity and
Capital Resources&nbsp;&#151; Off Balance Sheet
Arrangements.&#148; </I>We also have guaranteed costs associated
with our regional alliance with Mesa and commitments to purchase
aircraft from Airbus. As a result of the substantial fixed costs
associated with these obligations:
</DIV>

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    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    A decrease in revenues results in a disproportionately greater
    percentage decrease in earnings.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We may not have sufficient liquidity to fund all of these fixed
    costs if our revenues decline or costs increase.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We may have to use our working capital to fund these fixed costs
    instead of funding general corporate requirements, including
    capital expenditures.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    We may not have sufficient liquidity to respond to competitive
    developments and adverse economic conditions.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our obligations also impair our ability to obtain additional
financing, if needed, and our flexibility in the conduct of our
business. Our existing indebtedness is secured by substantially
all of our assets, leaving us with limited collateral for
additional financing. Moreover, the terms of the government
guaranteed loan restrict our ability to incur additional
indebtedness or issue equity unless we use the proceeds of those
transactions to repay the loan, require prepayment if our
employee compensation costs exceed a certain threshold, require
us to maintain a minimum cash balance of $100&nbsp;million, and
restrict our ability to take certain other actions, including
mergers and acquisitions, investments and asset sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our ability to pay the fixed costs associated with our
contractual obligations depends on our operating performance and
cash flow, which in turn depend on general economic and
political conditions. A failure to pay our fixed costs or breach
of the contractual obligations could result in a variety of
adverse consequences, including the acceleration of our
indebtedness, the withholding of credit card proceeds by the
credit card servicers and the exercise of remedies by our
creditors and lessors. In such a situation, it is unlikely that
we would be able to fulfill our obligations under or repay the
accelerated indebtedness, make required lease payments or
otherwise cover our fixed costs.
</DIV>

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    <TD>
    <B><I>Fluctuations in jet fuel costs could adversely affect our
    operating expenses and results.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The price and supply of jet fuel are unpredictable and fluctuate
based on events outside our control, including geopolitical
developments, supply interruptions, regional production patterns
and environmental concerns. Since jet fuel is the principal raw
material consumed by our business, accounting for 23% of our
total operating expenses in the first quarter of 2005 and 18% of
our total operating expenses in 2004, price escalations or
reductions in the supply of jet fuel will increase our operating
expenses and cause our operating results and net income to
decline. For example, based on our current level of fuel
consumption which includes our Mesa alliance, we estimate that a
one-cent per gallon increase in jet fuel prices will cause our
annual operating expense to increase by $5.7&nbsp;million.
</DIV>

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We have implemented a fuel-hedging program to manage the risk
and effect of fluctuating jet fuel prices on our business. Our
hedging program is intended to offset increases in jet fuel
costs by using fuel hedging instruments keyed to the future
price of heating oil, which is highly correlated to the price of
jet fuel delivered on the East Coast of the United States. Our
hedging program does not fully protect us against increasing jet
fuel costs because our hedging program does not cover all of our
projected jet fuel volumes for
</DIV>

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2005. Hedging transactions are in place with respect to
approximately 47% and 4% of remaining projected 2005 and 2006
jet fuel requirements, respectively. Furthermore, our ability to
effectively hedge jet fuel prices is limited because we purchase
a substantially larger portion of our jet fuel requirements on
the West Coast of the United States compared to our large
competitors and West Coast fuel prices are less correlated to
heating oil prices and other viable fuel hedging instruments
than East Coast fuel prices and, therefore, more difficult to
hedge. The effectiveness of our fuel-hedging program also may be
negatively impacted by continued instability in oil producing
regions such as the Middle East, Nigeria, Russia and Venezuela.
</DIV>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <B><I>Because of our relatively low credit ratings, our
    borrowing costs may be high and our ability to incur additional
    debt may be impaired.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our credit ratings are relatively low, with Moody&#146;s
assessment of AWA&#146;s senior implied rating and senior
unsecured debt rating at B3 and Caa2, respectively,
Standard&nbsp;&#38; Poor&#146;s assessment of AWA&#146;s and
Holdings&#146; corporate credit ratings at B- and AWA&#146;s
senior unsecured rating at CCC, and Fitch Ratings&#146;
assessment of AWA&#146;s long-term and senior unsecured debt
rating at CCC. In addition, Standard&nbsp;&#38; Poor&#146;s
recently placed AWA&#146;s aircraft debt on CreditWatch with
negative implications as part of a broader review of
aircraft-backed debt. Low credit ratings could cause our future
borrowing costs to increase, which would increase our interest
expense and could affect our earnings and our credit ratings
could adversely affect our ability to obtain additional
financing. The rating agencies base their ratings on our
financial performance and operations, our cash flow and
liquidity, the level of our indebtedness and industry conditions
in general. If our financial performance or industry conditions
do not improve, we may face future downgrades, which could
further negatively impact our borrowing costs and the prices of
our equity or debt securities. In addition, any downgrade of our
credit ratings may indicate a decline in our business and in our
ability to satisfy our obligations under our indebtedness.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>Negotiations with labor unions could divert management
    attention and disrupt operations and new collective bargaining
    agreements or amendments to existing collective bargaining
    agreements could increase our labor costs and operating
    expenses.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of our employees are represented by unions and other groups
of our employees may seek union representation in the future.
Negotiations with the IBT for a second collective bargaining
agreement covering the Airline&#146;s mechanics and related
employees commenced on October&nbsp;9, 2003 and are ongoing.
Negotiations with the AFA on a second contract covering the
Company&#146;s flight attendants commenced on February&nbsp;4,
2004 and are ongoing. Negotiations with the IBT for an initial
contract covering the Airline&#146;s passenger service employees
commenced on April&nbsp;5, 2005 and are ongoing. Negotiations
with the TWU for a second contract covering AWA&#146;s fleet
service employees are scheduled to commence on June&nbsp;15,
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We cannot predict the outcome of the negotiations with the IBT
or AFA or any future negotiations relating to union
representation or collective bargaining agreements. Agreements
reached in collective bargaining may increase operating expenses
and lower operating results and net income. This is particularly
significant because our current employee costs contribute
substantially to the low cost structure that we believe is one
of our competitive strengths and because we are required to
repay a portion of the government guaranteed loan if our labor
costs exceed a certain threshold. In addition, negotiations with
unions could divert management attention and disrupt operations,
which may result in increased operating expenses and lower net
income. If we are unable to negotiate acceptable collective
bargaining agreements, we might have to address the threat of,
or wait through, &#147;cooling off&#148; periods, which could be
followed by union-initiated work actions, including strikes.
Depending on the nature of the threat or the type and duration
of any work action, these actions could disrupt our operations
and, as a result, have a significant adverse affect on our
operating results.
</DIV>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <B><I>Fluctuations in interest rates could adversely affect our
    liquidity, operating expenses and results.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A substantial portion of our indebtedness bears interest at
fluctuating interest rates based on the London interbank offered
rate for deposits of U.S.&nbsp;dollars, or LIBOR. LIBOR tends to
fluctuate based on general economic conditions, general interest
rates, including the prime rate, and the supply of and demand
for credit
</DIV>

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in the London interbank market. We have not hedged our interest
rate exposure and, accordingly, our interest expense for any
particular period may fluctuate based on LIBOR. To the extent
LIBOR increases, our interest expense will increase, in which
event, we may have difficulties making interest payments and
funding our other fixed costs and our available cash flow for
general corporate requirements may be adversely affected.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>Our operating costs could increase as a result of past,
    current or new regulations that impose additional requirements
    and restrictions on airline operations.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The airline industry is heavily regulated. Both federal and
state governments from time to time propose new laws and
regulations that impose additional requirements and restrictions
on airline operations. Implementing these measures, such as
aviation ticket taxes and passenger safety measures, has
increased operating costs for us and the airline industry as a
whole. In addition, new security measures imposed by the ATSA,
or otherwise by Congress, the Department of Homeland Security or
the FAA as a result of concern over continuing terrorist threats
are expected to continue to increase costs for us and the
airline industry as a whole. Furthermore, certain governmental
agencies, such as the DOT and the FAA, have the authority to
impose mandatory orders, such as Airworthiness Directives in
connection with our aircraft and civil penalties for violations
of applicable laws and regulations, each of which can result in
material costs and adverse publicity. For example, the FAA from
time to time may require us to retrofit our aircraft to meet
enhanced safety standards. Depending on the implementation of
these laws, regulations and other measures, our operating costs
could increase significantly. We cannot predict which laws,
regulations and other measures will be adopted or what other
action regulators might take. Accordingly, we cannot guarantee
that future legislative and regulatory acts will not have a
material impact on our operating results.
</DIV>

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    <TD width="3%"></TD>
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<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Interruptions or disruptions in service at one our hub
    airports could have a material adverse impact on our
    operations.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We operate primarily through our hubs in Phoenix and Las Vegas.
A majority of our flights either originate or fly into one of
these hubs. A significant interruption or disruption in service
at one of our hubs could result in the cancellation or delay of
a significant portion of our flights and, as a result, could
have a severe impact on our business, operations and financial
performance.
</DIV>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <B><I>The airline industry and the markets we serve are highly
    competitive and we may be unable to compete effectively against
    carriers with substantially greater resources or lower cost
    structures.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The airline industry and most of the markets we serve are highly
competitive. We compete with other airlines on the basis of
pricing, scheduling (frequency and flight times), on-time
performance, type of equipment, cabin configuration, amenities
provided to passengers, frequent flyer programs, the automation
of travel agent reservation systems, on-board products and other
services. We compete with other low cost carriers primarily on
the basis of pricing. Price competition occurs on a
market-by-market basis through price discounts, changes in
pricing structures, fare matching, target promotions and
frequent flyer initiatives. Most airlines will quickly match
price reductions in a particular market and certain airlines
have in the past engaged in retaliatory activities, including
steep pricing discounts in certain markets and termination of
alliance agreements, in response to changes in our pricing
structure. Our ability to compete on the basis of price is
limited by our fixed costs and depends on our ability to
maintain low operating costs. Our principal competitor,
Southwest Airlines, and certain other low cost carriers have
lower operating cost structures than we do. We also compete
against the legacy carriers, many of which offer more extensive
routes, frequencies and customer loyalty, marketing and
advertising programs and have substantially greater resources
than we do. We may be unable to compete effectively against
carriers with substantially greater resources or lower cost
structures.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>Recent airline restructurings and bankruptcies could alter
    the competitive environment of the airline industry to our
    detriment.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The terrorist attacks of September&nbsp;11, 2001, the continued
military presence in Iraq and Afghanistan, increased competition
from low cost carriers and soft economic conditions have led to
the airline industry&#146;s
</DIV>

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significant losses since 2001. Largely as a result of these
losses, ATA Airlines, U.S.&nbsp;Airways, Aloha Airlines,
Hawaiian Airlines and United Airlines filed for bankruptcy
protection. Because bankruptcy protection may allow for greater
flexibility in reducing costs by voiding contracts and
renegotiating existing business obligations, current and future
airline bankruptcies could have a substantial impact on industry
competition. Continued weakness in the airline industry also may
result in additional industry consolidation, greater reliance on
industry alliances and increased price competition among the
existing airlines, each of which could dramatically alter
competitive environments in the markets we serve.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD></TD>
    <TD>
    <B><I>Our business is sensitive to general economic conditions,
    unforeseen events and seasonal fluctuations. As a result, our
    prior performance is not necessarily indicative of our future
    results.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The air travel business historically fluctuates on a seasonal
basis and in response to general economic conditions. Due to the
greater demand for air and leisure travel during the summer
months, revenues in the airline industry in the second and third
quarters of the year tend to be greater than revenues in the
first and fourth quarters of the year. In addition, the airline
industry is highly susceptible to unforeseen events that result
in declines in revenues or increased costs, such as political
instability, regional hostilities, terrorist attacks, recession,
fuel price escalation, inflation, infectious disease outbreaks,
adverse weather conditions, consumer preferences, labor
instability or regulatory oversight. Also, our results of
operations for interim periods are not necessarily indicative of
those for an entire year and our prior results are not
necessarily indicative of our future results.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>We depend on the expertise of our management team. If key
    individuals leave unexpectedly, our business and operations
    could suffer.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Many of our executive officers are key to the management of our
business and operations. Our future success depends on our
ability to retain these officers and other capable managers.
Although we believe we could replace key personnel given
adequate prior notice, the unexpected departure of key executive
officers could cause substantial disruption to our business and
operations. In addition, we may not be able to retain and
recruit talented personnel without incurring substantial costs.
Moreover, we must repay a portion of the government guaranteed
loan if our labor costs exceed a certain threshold. As a result,
our ability to spend additional amounts to retain and recruit
talented personnel is limited.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>The stockholders who effectively control the voting power
    of Holdings could take actions that would favor their own
    personal interests to the detriment of our interests.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Currently, two stockholders collectively control more than 50%
of the total voting power of Holdings. These stockholders, TPG
Partners, L.P. and TPG Parallel&nbsp;I, L.P, or collectively,
the TPG Stockholders, are controlled by the same company, TPG
Advisors, Inc. Since TPG Advisors, Inc. is an investment firm,
its strategic objectives may be different than both the
short-term or long-term objectives of our board of directors and
management. We cannot guarantee that the TPG Stockholders will
not try to influence Holdings&#146; business in a way that would
favor their own personal interests to the detriment of our
interests and those of our other stockholders.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>We are at risk of losses and adverse publicity stemming
    from any accident involving any of our aircraft.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If one of our aircraft were to crash or be involved in an
accident, we could be exposed to significant tort liability.
There can be no assurance that the insurance we carry to cover
damages arising from any future accidents will be adequate. In
the event that our insurance is not adequate, we may be forced
to bear substantial losses from an accident. Claims resulting
from an accident in excess of our insurance coverage would harm
our business and results of operations. Accidents could also
result in unforeseen mechanical and maintenance costs. In
addition, any accident involving an aircraft that we operate
could create a public perception that our aircraft are not safe
or reliable, which could harm our reputation, result in air
travelers being reluctant to fly on our aircraft and harm our
business.
</DIV>

<P align="center" style="font-size: 10pt;">34

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our operations are often affected by factors beyond our
    control, including traffic congestion at airports, weather
    conditions and increased security measures, any of which could
    harm our financial condition and results of operations.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Like other airlines, our operations are subject to delays caused
by factors beyond our control, including air traffic congestion
at airports, adverse weather conditions and increased security
measures, such as those required to be implemented under the
ATSA. During periods of fog, snow, rain, storms or other adverse
weather conditions, flights may be cancelled or significantly
delayed. Cancellations and delays frustrate passengers, reduce
aircraft utilization and increase costs, all of which in turn
affect profitability. As a result, cancellations or delays could
harm our financial condition and results of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We rely heavily on automated systems to operate our
    business and any failure of these systems could harm our
    business.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We depend on automated systems to operate our business,
including our computerized airline reservation system, our
telecommunication systems and our website. In 2004,
approximately 96% of our tickets were issued electronically. Our
website and reservation system must be able to accommodate a
high volume of traffic and deliver important flight information.
Substantial or repeated website, reservations system or
telecommunication systems failures could reduce the
attractiveness of our services and could cause our customers to
purchase tickets from another airline. Any disruption in these
systems could result in the loss of important data, increase our
expenses and generally harm our business.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Shares of our Class&nbsp;B common stock issuable upon
    exercise or conversion of outstanding securities could adversely
    affect our stock price and dilute the ownership interests of
    existing stockholders.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales and potential sales of substantial amounts of our
Class&nbsp;B common stock or securities exercisable for or into
our Class&nbsp;B common stock in the public market, or the
perception that these sales could occur, could adversely affect
the market price of our Class&nbsp;B common stock. A substantial
number of additional shares of our Class&nbsp;B common stock are
issuable upon the conversion or exercise of outstanding
securities. As of April&nbsp;25, 2005, the outstanding shares of
our Class&nbsp;B common stock were subject to dilution by:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    19,692,000&nbsp;shares of Class&nbsp;B common stock that are
    issuable upon the exercise, at a price of $3.00&nbsp;per share,
    of certain warrants issued in connection with the government
    guaranteed loan, including 18,754,000&nbsp;shares of
    Class&nbsp;B common stock issuable upon exercise of a warrant
    issued to the Air Transportation Stabilization Board, or
    ATSB;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    10,924,364&nbsp;shares of our Class&nbsp;B common stock that are
    issuable upon the exercise of outstanding options.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, 859,117&nbsp;shares of Class&nbsp;B common stock
are issuable upon conversion of the outstanding shares of
Holdings&#146; Class&nbsp;A common stock held by the TPG
Stockholders (but subject to certain contractual restrictions on
transfer), up to 8,095,842&nbsp;shares of Holdings&#146;
Class&nbsp;B common stock are issuable upon the exchange of
AWA&#146;s 7.25%&nbsp;senior exchangeable notes due 2023 (which
exchange may not occur until the trading price of Holdings&#146;
Class&nbsp;B common stock reaches certain thresholds, or other
triggering events occur) and up to approximately
9,400,000&nbsp;shares of Holdings&#146; Class&nbsp;B common
stock are issuable upon conversion of Holdings&#146;
7.5%&nbsp;convertible senior notes due 2009. Holdings has
registered either the issuance or resale of all of these shares,
meaning that upon exercise, exchange or conversion, as
applicable, such shares could be sold in the public market at
any time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The conversion or exercise of some or all of these notes,
warrants and options will dilute the ownership interests of
existing stockholders and any sales in the public market of our
Class&nbsp;B common stock issuable upon such conversion or
exercise could adversely affect prevailing market prices of our
Class&nbsp;B common stock. In addition, the existence of the
notes, warrants and options may encourage short selling by
market participants because conversion or exercise of the notes
or warrants could depress the price of our Class&nbsp;B common
stock.
</DIV>

<P align="center" style="font-size: 10pt;">35

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Provisions in our charter documents might deter
    acquisition bids for us.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings&#146; Certificate of Incorporation and Bylaws contain
provisions that, among other things:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    authorize Holdings&#146; board of directors to issue preferred
    stock ranking senior to our Class&nbsp;B common stock without
    any action on the part of the stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    establish advance notice procedures for stockholder proposals,
    including nominations of directors, to be considered at
    stockholders&#146; meetings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    authorize Holdings&#146; board of directors to fill vacancies on
    the board resulting from an increase in the authorized number of
    directors or any other cause;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    restrict the ability of stockholders to call special meetings of
    stockholders.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These provisions might make it more difficult for a third party
to acquire us, even if doing so would benefit the stockholders.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our stock price may continue to be volatile and could
    decline substantially.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The stock market has, from time to time, experienced extreme
price and volume fluctuations. Many factors may cause the market
price for the Class&nbsp;B common stock to decline including,
among others, the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    our operating results failing to meet the expectations of
    securities analysts or investors in any quarter;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    downward revisions in securities analysts&#146; estimates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    material announcements by us or our competitors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    public sales of a substantial number of shares of our
    Class&nbsp;B common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    governmental regulatory action;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD> &#149;</TD>
    <TD align="left">
    adverse changes in general market conditions or economic trends.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item 3.&nbsp;Quantitative and Qualitative Disclosures about
Market Risk.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Market Risk Sensitive Instruments</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="12%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>Commodity Price Risk</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, the Company had entered into costless
collar transactions, which establish an upper and lower limit on
heating oil futures prices. These transactions are in place with
respect to approximately 47% and 4% of remaining projected 2005
and 2006 fuel requirements, respectively, including 58% related
to the second quarter of 2005, 46% related to the third quarter
of 2005 and 38% related to the fourth quarter of 2005. See
<I>&#147;Risk Factors Relating to America West and Industry
Related Risks&nbsp;&#151; Fluctuations in fuel costs could
adversely affect our operating expenses and results.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The use of such hedging transactions in the Company&#146;s fuel
hedging program could result in the Company not fully benefiting
from certain declines in heating oil futures prices or certain
declines in the differential between jet fuel and heating oil
futures prices. At March&nbsp;31, 2004, the Company estimates
that a 10% increase in heating oil futures prices would increase
the fair value of the costless collar transactions by
approximately $29.7&nbsp;million. The Company estimates that a
10% decrease in heating oil futures prices would decrease the
fair value of the costless collar transactions by approximately
$26.3&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of April&nbsp;25, 2005, approximately 47% and 5% of
AWA&#146;s remaining 2005 and 2006 projected fuel requirements,
respectively, are hedged.
</DIV>

<P align="center" style="font-size: 10pt;">36

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="12%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Interest Rate Risk</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s exposure to interest rate risk relates
primarily to its variable rate long-term debt obligations. At
March&nbsp;31, 2005, the Company&#146;s variable-rate long-term
debt obligations of approximately $500.9&nbsp;million
represented approximately 71% of its total long-term debt. If
interest rates increased 10% in 2005, the impact on the
Company&#146;s results of operations would not be material.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;4.&nbsp;</B></TD>
    <TD>
    <B>Controls And Procedures.</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="12%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</B></TD>
    <TD>
    <B>Evaluation of disclosure controls and procedures.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An evaluation was performed under the supervision and with the
participation of Holdings&#146; and AWA&#146;s management,
including the Chief Executive Officer (the &#147;CEO&#148;) and
Chief Financial Officer (the &#147;CFO&#148;), of the
effectiveness of the design and operation of our disclosure
controls and procedures (as defined in the rules promulgated
under the Exchange Act) as of March&nbsp;31, 2005. Based on that
evaluation, our management, including the CEO and CFO, concluded
that our disclosure controls and procedures were effective as of
March&nbsp;31, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="12%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</B></TD>
    <TD>
    <B>Changes in internal control over financial reporting.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the preparation of our Annual Report on
Form&nbsp;10-K for the fiscal year ended December&nbsp;31, 2004,
our management, in consultation with the Audit Committee of
Holdings&#146; Board of Directors, identified a material
weakness in our disclosure controls and procedures associated
with the accounting for AWA&#146;s fuel hedging program that
resulted in a need to restate our financial statements for prior
periods, as described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2005, management undertook a review of AWA&#146;s
accounting for its fuel hedging transactions. As a result of
this review, management concluded that AWA&#146;s fuel hedging
transactions did not qualify for hedge accounting under
U.S.&nbsp;generally accepted accounting principles and that the
Company&#146;s financial statements for prior periods required
restatement to reflect the fair value of fuel hedging contracts
in the balance sheets and statements of stockholders equity and
comprehensive income of Holdings and AWA. The Company concluded
that these accounting errors were the result of deficiencies in
its internal control over financial reporting, from the lack of
effective reviews of hedge transaction documentation and of
quarterly mark-to-market accounting entries on open fuel hedging
contracts by personnel at an appropriate level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To correct this material weakness, we have implemented a review
process that verifies the quarterly mark-to-market adjustment on
open fuel hedging positions. In addition, the Company will
utilize the mark-to-market method of accounting for its fuel
hedging instruments going forward until such time it is able to
implement processes and controls necessary to ensure that
appropriate hedge documentation is obtained at hedge inception.
At that time, the Company will evaluate whether it will re-apply
hedge accounting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other than the actions mentioned above, there has been no change
to the Company&#146;s internal control over financial reporting
that occurred during the quarter ended March&nbsp;31, 2005 that
has materially affected, or is reasonably likely to materially
affect, the Company&#146;s internal control over financial
reporting.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</B></TD>
    <TD>
    <B>Limitation on the effectiveness of controls.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that a controls system, no matter how well designed
and operated, cannot provide absolute assurance that the
objectives of the controls system are met and no evaluation of
controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been
detected. Our disclosure controls and procedures are designed to
provide reasonable assurance of achieving their objectives, and,
following the changes in our internal controls implemented prior
to the filing of this report, the CEO and CFO believe that our
disclosure controls and procedures were effective at the
&#147;reasonable assurance&#148; level as of March&nbsp;31, 2005.
</DIV>

<P align="center" style="font-size: 10pt;">37

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;II&nbsp;&#151; OTHER INFORMATION</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;2.&nbsp;</B></TD>
    <TD>
    <B>Changes in Securities, Use of Proceeds and Issuer Purchases
    of Equity Securities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth all purchases made by us or any
&#147;affiliated purchaser&#148; as defined in
Rule&nbsp;10b-18(a)(3) of the Securities Exchange Act of 1934,
as amended, of our Class&nbsp;B common stock during each month
within the first quarter of 2005. No purchases were made
pursuant to a publicly announced repurchase plan or program.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(d)</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Maximum Number</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(c)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(or Approximate</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Dollar Value) of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(a)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares Purchased as</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares that May Yet</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(b)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Part of Publicly</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>be Purchased Under</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares Purchased</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Announced Plans or</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>the Plans or</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid per Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Programs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Programs</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    January&nbsp;1, 2005&nbsp;- January&nbsp;31, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    February&nbsp;1, 2005&nbsp;- February&nbsp;28, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    March&nbsp;1, 2005&nbsp;- March&nbsp;31, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Amounts consist of shares of our Class&nbsp;B common stock
    purchased on the open market by the America West Holdings
    Corporation Future Care 401(k) Plan.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item&nbsp;4.&nbsp;Submission of Matters to a Vote of Security
Holders.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;6.&nbsp;</B></TD>
    <TD>
    <B>Exhibits</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description and Method of Filing</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Annual Incentive Bonus Plan.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of Holdings&#146; Chief Executive Officer pursuant
    to Rule&nbsp;13a-14(a) under the Securities Exchange Act of
    1934, as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of Holdings&#146; Chief Financial Officer pursuant
    to Rule&nbsp;13a-14(a) under the Securities Exchange Act of
    1934, as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of AWA&#146;s Chief Executive Officer pursuant to
    Rule&nbsp;13a-14(a) under the Securities Exchange Act of 1934,
    as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of AWA&#146;s Chief Financial Officer pursuant to
    Rule&nbsp;13a-14(a) under the Securities Exchange Act of 1934,
    as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of Holdings&#146; Chief Executive Officer and
    Chief Financial Officer pursuant to Section&nbsp;906 of the
    Sarbanes-Oxley Act of 2002.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of AWA&#146;s Chief Executive Officer and Chief
    Financial Officer pursuant to Section&nbsp;906 of the
    Sarbanes-Oxley Act of 2002.</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(+)&nbsp;</TD>
    <TD align="left">
    Represents a management contract or compensatory plan or
    arrangement.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">38

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>AMERICA WEST HOLDINGS CORPORATION</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>March&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    AMERICA WEST HOLDINGS CORPORATION</TD>
</TR>

</TABLE>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By&nbsp;</TD>
    <TD align="left">
    /s/ <FONT style="font-variant:SMALL-CAPS">Derek J. Kerr
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Derek J. Kerr</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Senior Vice President and Chief Financial Officer</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
DATED: April&nbsp;25, 2005
</DIV>

<P align="center" style="font-size: 10pt;">39
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>AMERICA WEST AIRLINES, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>March&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>SIGNATURE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    AMERICA WEST AIRLINES, INC.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By&nbsp;</TD>
    <TD align="left">
    /s/ <FONT style="font-variant:SMALL-CAPS">Derek J. Kerr
    </FONT></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt;">

</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Derek J. Kerr</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Senior Vice President and Chief Financial Officer</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
DATED: April&nbsp;25, 2005
</DIV>

<P align="center" style="font-size: 10pt;">40

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Exhibit&nbsp;Index</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description and Method of Filing</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1+</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Annual Incentive Bonus Plan.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of Holdings&#146; Chief Executive Officer pursuant
    to Rule&nbsp;13a-14(a) under the Securities Exchange Act of
    1934, as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of Holdings&#146; Chief Financial Officer pursuant
    to Rule&nbsp;13a-14(a) under the Securities Exchange Act of
    1934, as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of AWA&#146;s Chief Executive Officer pursuant to
    Rule&nbsp;13a-14(a) under the Securities Exchange Act of 1934,
    as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of AWA&#146;s Chief Financial Officer pursuant to
    Rule&nbsp;13a-14(a) under the Securities Exchange Act of 1934,
    as amended.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of Holdings&#146; Chief Executive Officer and
    Chief Financial Officer pursuant to Section&nbsp;906 of the
    Sarbanes-Oxley Act of 2002.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certification of AWA&#146;s Chief Executive Officer and Chief
    Financial Officer pursuant to Section&nbsp;906 of the
    Sarbanes-Oxley Act of 2002.</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
(+) Represents a management contract or compensatory plan or
arrangement.
</DIV>

<P align="center" style="font-size: 10pt;">41
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<P><HR noshade><P>
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<DIV align="center" style="font-size: 2pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 7pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Through
and
including &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 (the 25th day after the date of this prospectus), all
dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers&#146; obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
</DIV>

<DIV align="center" style="font-size: 16pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rights Offering</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>US AIRWAYS GROUP, INC.</B>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>9,090,909&nbsp;Shares of Common Stock</B>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Issuable upon the</B>
</DIV>

<DIV align="center" style="font-size: 14pt;">
<B>Exercise of Rights</B>
</DIV>

<DIV align="center" style="font-size: 14pt;">
<B>to Subscribe for</B>
</DIV>

<DIV align="center" style="font-size: 14pt;">
<B>Such Shares</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 27%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Prospectus</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 27%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 16pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Merrill Lynch&nbsp;&#38; Co.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='149'></A>
</DIV>

<!-- link1 "PART II" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;II</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.&nbsp;</B></TD>
    <TD>
    <B>Other Expenses Of Issuance And Distribution.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table shows the costs and expenses, other than
dealer manager and structuring advisory fees, payable in
connection with the sale and distribution of the securities
being registered. Except as otherwise noted, the registrant will
pay all of these amounts. All amounts are estimated.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Securities and Exchange Commission Registration Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,655</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    National Association of Securities Dealers, Inc. Filing Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New York Stock Exchange Listing Fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Printing Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Legal Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounting Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfer Agent and Registrar Agent Fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>[&nbsp; ]</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    To be provided by amendment.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item&nbsp;14.&nbsp;Indemnification Of Directors And
Officers.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Section&nbsp;145 of the Delaware General Corporation Law
(the &#147;DGCL&#148;), a corporation may indemnify any person
in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative (other than a derivative action by or in the right
of such corporation) who is or was a director, officer, employee
or agent of such corporation, or serving at the request of such
corporation in such capacity for another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys&#146; fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in
connection with such action, suit or proceeding, if such person
acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of such
corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The DGCL also permits indemnification by a corporation under
similar circumstances for expenses (including attorneys&#146;
fees) actually and reasonably incurred by such persons in
connection with the defense or settlement of a derivative
action, except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have
been adjudged to be liable to such corporation unless the
Delaware Court of Chancery or the court in which such action or
suit was brought shall determine upon application that such
person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The DGCL provides that the indemnification described above shall
not be deemed exclusive of other indemnification that may be
granted by a corporation under its bylaws, disinterested
directors&#146; vote, stockholders&#146; vote, agreement or
otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The DGCL also provides corporations with the power to purchase
and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation in a similar
capacity for another corporation, partnership, joint venture,
trust or other enterprise, against any liability asserted
against him or her in any such capacity, or arising out of his
or her status as such, whether or not the corporation would have
the power to indemnify him or her against such liability as
described above.
</DIV>

<P align="center" style="font-size: 10pt;">II-1

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group&#146;s certificate of incorporation
provides that US&nbsp;Airways Group shall indemnify its officers
and directors to the full extent authorized or permitted by
applicable law. US&nbsp;Airways Group&#146;s certificate of
incorporation and bylaws provide that US&nbsp;Airways Group
shall also indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of US&nbsp;Airways Group), by reason of the fact that
such person is or was a director or officer of US&nbsp;Airways
Group, or is or was a director or officer of US&nbsp;Airways
Group serving at the request of US&nbsp;Airways Group as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys&#146; fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding
if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best
interests of US&nbsp;Airways Group, and, with respect to any
criminal action or proceeding, had no reasonable cause to
believe such person&#146;s conduct was unlawful.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
US&nbsp;Airways Group also maintains insurance for officers and
directors against certain liabilities, including liabilities
under the Securities Act. The effect of this insurance is to
indemnify any officer or director of US&nbsp;Airways Group
against expenses, including without limitation, attorneys&#146;
fees, judgments, fines and amounts paid in settlement, incurred
by an officer or director upon a determination that such person
acted in good faith. The premiums for such insurance are paid by
US&nbsp;Airways Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under separate indemnification agreements with US&nbsp;Airways
Group, each officer and director of US&nbsp;Airways Group is
indemnified against all liabilities relating to his or her
position as an officer or director of US&nbsp;Airways Group, to
the fullest extent permitted under applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The foregoing statements are subject to the detailed provisions
of Section&nbsp;145 of the DGCL.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.&nbsp;</B></TD>
    <TD>
    <B>Recent Sales of Unregistered Securities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Not applicable
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="7%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;16.&nbsp;</B></TD>
    <TD>
    <B>Exhibits&nbsp;And Financial Statement Schedules.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp;The following exhibits are filed herewith or
incorporated herein by reference:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Exhibits</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Exhibits required to be filed by Item&nbsp;601 of
Regulation&nbsp;S-K.</I></B> Where the amount of securities
authorized to be issued under any of US&nbsp;Airways
Group&#146;s long-term debt agreements does not exceed
10&nbsp;percent of the US&nbsp;Airways Group&#146;s assets,
under paragraph&nbsp;(b)(4)(iii) of Item&nbsp;601 of
Regulation&nbsp;S-K, in lieu of filing such as an exhibit, the
US&nbsp;Airways Group hereby agrees to furnish to the SEC upon
request a copy of any agreement with respect to such long-term
debt.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement and Plan of Merger, dated May&nbsp;19, 2005, by and
    among US&nbsp;Airways Group, Inc. and America West Holdings
    Corporation (incorporated by reference to Exhibit&nbsp;2.1 to
    US&nbsp;Airways&nbsp;Group&#146;s Registration Statement on
    Form&nbsp;S-4 filed on June&nbsp;28, 2005) (Pursuant to
    item&nbsp;601(b)(2) of Regulation&nbsp;S-K promulgated by the
    SEC, the exhibits and schedules to the Agreement and Plan of
    Merger have been omitted. Such exhibits and schedules are
    described in the Agreement and Plan of Merger. US&nbsp;Airways
    Group hereby agrees to furnish to the SEC, upon its request, any
    or all of such omitted exhibits or schedules)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Certificate of Incorporation of
    US&nbsp;Airways Group, Inc., effective as of March&nbsp;31, 2003
    (incorporated by reference to Exhibit&nbsp;3.1 to
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-2

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Bylaws of US&nbsp;Airways Group, Inc.,
    effective as of March&nbsp;31, 2003 (incorporated by reference
    to Exhibit&nbsp;3.2 to US&nbsp;Airways Group&#146;s Registration
    Statement on Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Second Amended and Restated Certificate of Incorporation
    of US&nbsp;Airways Group, Inc. (incorporated by reference to
    Exhibit 3.3 of US&nbsp;Airways Group&#146;s Registration
    Statement on Form&nbsp;S-4 filed on June&nbsp;28, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Second Amended and Restated Bylaws of US&nbsp;Airways
    Group, Inc. (incorporated by reference to Exhibit 3.4 of
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;S-4 filed on June&nbsp;28, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase
    shares of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003,
    issued to General Electric Capital Corporation (incorporated by
    reference to Exhibit&nbsp;4.1 to US&nbsp;Airways Group&#146;s
    Registration Statement on Form&nbsp;8-A filed on May&nbsp;14,
    2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase
    shares of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003,
    issued to Bank of America, N.A. (incorporated by reference to
    Exhibit&nbsp;4.2 to US&nbsp;Airways Group&#146;s Registration
    Statement on Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase
    shares of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003,
    issued to Retirement Systems of Alabama Holdings LLC
    (incorporated by reference to Exhibit&nbsp;4.3 to
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase
    shares of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003,
    issued to Retirement Systems of Alabama Holdings LLC
    (incorporated by reference to Exhibit&nbsp;4.4 to
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase
    shares of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003,
    issued to ATSB Securities Trust u/a/d March&nbsp;31, 2003
    (incorporated by reference to Exhibit&nbsp;4.5 to
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Class&nbsp;A-1 Warrants (incorporated by reference to
    Exhibit&nbsp;4.3 to US&nbsp;Airways Group&#146;s Registration
    Statement on Form&nbsp;S-8 filed on July&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.7***</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Rights Certificate</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1***</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Elizabeth K. Lanier, Executive Vice
    President&nbsp;&#151; Corporate Affairs and General Counsel of
    US&nbsp;Airways Group regarding legality of securities being
    registered</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement dated March&nbsp;31, 2003 among US&nbsp;Airways,
    Inc. and Phoenix American Financial Services, Inc., Bank of
    America, N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit&nbsp;10.5 to
    US&nbsp;Airways&#146; Quarterly Report on Form&nbsp;10-Q for the
    quarter ended March&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated December&nbsp;18, 2003 to Loan
    Agreement dated March&nbsp;31, 2003 among US&nbsp;Airways, Inc.
    and Phoenix American Financial Services, Inc., Bank of America,
    N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit&nbsp;10.1 to
    US&nbsp;Airways&#146; Quarterly Report on Form&nbsp;10-Q for the
    quarter ended March&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2 dated March&nbsp;12, 2004 to Loan Agreement
    dated March&nbsp;31, 2003 among US&nbsp;Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board. (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways&#146;
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    March&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3 dated May&nbsp;21, 2004 to Loan Agreement
    dated March&nbsp;31, 2004 among US&nbsp;Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways&#146;
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    June&nbsp;30, 2004)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4 dated July&nbsp;13, 2004 to Loan Agreement
    dated March&nbsp;31, 2004 among US&nbsp;Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways&#146;
    Quarterly Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;5 dated December&nbsp;28, 2004 to Loan
    Agreement dated March&nbsp;31, 2004 among US&nbsp;Airways, Inc.
    and Phoenix American Financial Services, Inc., Bank of America,
    N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit&nbsp;10.6 to
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;S-4 (File No.&nbsp;333-126162), filed with the SEC on
    June&nbsp;28, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Final Order (I)&nbsp;Authorizing Debtors&#146; Use of Cash
    Collateral and (II)&nbsp;Providing Adequate Protection Pursuant
    to Bankruptcy Rules&nbsp;4001(b) and 4001(d) (incorporated by
    reference to Exhibit&nbsp;99.1 to US&nbsp;Airways Group&#146;s
    Current Report on Form&nbsp;8-K dated October&nbsp;14, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Motion to Authorize and Approve (1)&nbsp;The Primary
    Tranche&nbsp;A Lender Assignment, (2)&nbsp;The Alternate
    Tranche&nbsp;A Lender Assignment, and (3)&nbsp;Amendment
    No.&nbsp;5 to the Loan Agreement pursuant to 11&nbsp;U.S.C.
    Sections 105, 363, 1108, and Bankruptcy Rules&nbsp;4001 and 6004
    (incorporated by reference to Exhibit&nbsp;99.1 to
    US&nbsp;Airways Group&#146;s Current Report on Form&nbsp;8-K
    dated December&nbsp;28, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Order Approving (1)&nbsp;The Primary Tranche&nbsp;A Lender
    Assignment, (2)&nbsp;The Alternate Tranche&nbsp;A Lender
    Assignment, and (3)&nbsp;Amendment No.&nbsp;5 to Loan Agreement
    pursuant to 11&nbsp;U.S.C. Sections&nbsp;105, 363, 1108, and
    Bankruptcy Rules&nbsp;4001 and 6004 (incorporated by reference
    to Exhibit&nbsp;99.2 to US&nbsp;Airways Group&#146;s Current
    Report on Form 8-K dated December&nbsp;28, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Master Memorandum of Understanding among US&nbsp;Airways Group,
    Inc., US&nbsp;Airways, Inc., and General Electric Capital
    Corporation acting through its agent GE&nbsp;Capital Aviation
    Services, Inc. and General Electric Company,
    GE&nbsp;Transportation Component (incorporated by reference to
    Exhibit&nbsp;10.9 to US&nbsp;Airways Groups&#146; Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    A319/A320/A321 Purchase Agreement dated as of October&nbsp;31,
    1997 between US&nbsp;Airways Group and AVSA, S.A.R.L.
    (&#147;AVSA&#148;), an affiliate of aircraft manufacturer Airbus
    Industrie G.I.E. (incorporated by reference to Exhibit&nbsp;10.1
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended September&nbsp;30, 1997)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of June&nbsp;10, 1998 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 1998)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2 dated as of January&nbsp;19, 1999 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.3 to US&nbsp;Airways Group&#146;s
    Annual Report on Form 10-K for the year ended December&nbsp;31,
    1998)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3 dated as of March&nbsp;31, 1999 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 1999)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4 dated as of August&nbsp;31, 1999 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 1999)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;5 dated as of October&nbsp;29, 1999 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.6 to US&nbsp;Airways Group&#146;s
    Annual Report on Form 10-K for the year ended December&nbsp;31,
    1999)*</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;6 dated as of April&nbsp;19, 2000 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    March&nbsp;31, 2000)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;7 dated as of June&nbsp;29, 2000 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    June&nbsp;30, 2000)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;8 dated as of November&nbsp;27, 2000 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.9 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2000)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;9 dated as of December&nbsp;29, 2000 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.10 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2000)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;10 dated as of April&nbsp;9, 2001 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    March&nbsp;31, 2001)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;11 dated as of July&nbsp;17, 2002 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit&nbsp;10.1 to US&nbsp;Airways
    Group&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended June&nbsp;30, 2002)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;12 dated as of March&nbsp;29, 2003 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit&nbsp;10.1 to US&nbsp;Airways
    Group&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended March&nbsp;31, 2003)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.24</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;13 dated August&nbsp;30, 2004 to the Airbus
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit&nbsp;10.2 to
    US&nbsp;Airways&#146; Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.25</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;14 dated December&nbsp;22, 2004 to the Airbus
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit&nbsp;10.4 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended March&nbsp;31, 2005)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.26</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;15 dated January&nbsp;17, 2005 to the Airbus
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit&nbsp;10.5 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended March&nbsp;31, 2005)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.27</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    A330/A340 Purchase Agreement dated as of November&nbsp;24, 1998
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.4 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 1998)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.28</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of March&nbsp;23, 2000 to
    A330/A340 Purchase Agreement dated November&nbsp;24, 1998
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    March&nbsp;31, 2000)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.29</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2 dated as of June&nbsp;29, 2000 to A330/A340
    Purchase Agreement dated November&nbsp;24, 1998 between
    US&nbsp;Airways Group and AVSA (incorporated by reference to
    Exhibit&nbsp;10.2 to US&nbsp;Airways Group&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended June&nbsp;30,
    2000)*</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.30</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3 dated as of November&nbsp;27, 2000 to
    A330/A340 Purchase Agreement dated November&nbsp;24, 1998
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.14 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2000)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.31</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4 dated as of September&nbsp;20, 2001 to
    A330/A340 Purchase Agreement dated November&nbsp;24, 1998
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.16 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2001)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.32</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;5 dated as of July&nbsp;17, 2002 to A330/A340
    Purchase Agreement dated November&nbsp;24, 1998 between
    US&nbsp;Airways Group and AVSA, S.A.R.L. (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    June&nbsp;30, 2002)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.33</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;6 dated as of March&nbsp;29, 2003 to
    A330/A340 Purchase Agreement dated November&nbsp;24, 1998
    between US&nbsp;Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit&nbsp;10.2 to US&nbsp;Airways
    Group&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended March&nbsp;31, 2003)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.34</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;7 dated August&nbsp;30, 2004 to the Airbus
    A330/A340 Purchase Agreement dated November&nbsp;24, 1998
    between US&nbsp;Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit&nbsp;10.3 to
    US&nbsp;Airways, Inc.&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended September&nbsp;30, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.35</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;8 dated December&nbsp;22, 2004 to the Airbus
    A330/A340 Purchase Agreement dated as of November&nbsp;24, 1998
    between US&nbsp;Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit&nbsp;10.6 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended March&nbsp;31, 2005)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.36</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;9 dated November&nbsp;24, 1998 to the Airbus
    A330/A340 Purchase Agreement between US&nbsp;Airways Group, Inc.
    and AVSA, S.A.R.L. (incorporated by reference to
    Exhibit&nbsp;10.7 to US&nbsp;Airways Group&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31,
    2005)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.37</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Agreement dated December&nbsp;17, 2004 between
    US&nbsp;Airways Group, Inc. and US&nbsp;Airways, Inc. and Airbus
    North America Sales Inc. (incorporated by reference to
    Exhibit&nbsp;99.2 to US&nbsp;Airways Group&#146;s Current Report
    on Form&nbsp;8-K dated February&nbsp;3, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.38</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.1
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended June&nbsp;30, 2003)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.39</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of November&nbsp;4, 2003 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to
    Exhibit&nbsp;10.22 to US&nbsp;Airways Group&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2003)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.40</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2 dated as of November&nbsp;21, 2003 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to
    Exhibit&nbsp;10.23 to US&nbsp;Airways Group&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2003)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.41</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3 dated as of February&nbsp;9, 2004 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.4
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.42</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4 dated as of August&nbsp;4, 2004 to Embraer
    Aircraft Purchase Agreement dated as of May&nbsp;9, 2003 between
    US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.4
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended September&nbsp;30, 2004)*</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.43</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;5 dated as of September&nbsp;3, 2004 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.5
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended September&nbsp;30, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.44</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;6 dated as of January&nbsp;25, 2005 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.9
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2005)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.45</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated January&nbsp;6, 2004 to the Letter
    Agreement DCT-022/03 dated May&nbsp;9, 2003 between
    US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.5
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.46</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Post-Petition Purchase Agreement Modification and Aircraft
    Financing Term Sheet between US&nbsp;Airways, Inc.,
    Embraer-Empresa Brasileira de Aeronautica S.A., dated
    December&nbsp;16, 2004 (incorporated by reference to
    Exhibit&nbsp;10.8 of US&nbsp;Airways Group&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31,
    2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.47</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May&nbsp;9, 2003 between US&nbsp;Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit&nbsp;10.2
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended June&nbsp;30, 2003)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.48</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Contract Change Order 1 dated January&nbsp;27, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May&nbsp;9, 2003 between US&nbsp;Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit&nbsp;10.6
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.49</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Contract Change Order 2 dated February&nbsp;9, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May&nbsp;9, 2003 between US&nbsp;Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit&nbsp;10.7
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.50</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Contract Change Order 3 dated February&nbsp;26, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May&nbsp;9, 2003 between US&nbsp;Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit&nbsp;10.8
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.51</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated as of September&nbsp;26, 2002, by
    and between the Retirement Systems of Alabama and
    US&nbsp;Airways Group, Inc. (incorporated by reference to
    Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2002)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.52</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of January&nbsp;17, 2003 to the
    Investment Agreement, entered into as of September&nbsp;26, 2002
    and amended and restated as of January&nbsp;17, 2003 by and
    between the Retirement Systems of Alabama and US&nbsp;Airways
    Group, Inc. (incorporated by reference to Exhibit&nbsp;10.37 to
    US&nbsp;Airways Group&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.53</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2, dated as of March&nbsp;30, 2003, to the
    Investment Agreement, dated as of September&nbsp;26, 2002, by
    and among The Retirement Systems of Alabama, Retirement Systems
    of Alabama Holdings, LLC and US&nbsp;Airways Group, Inc.
    (incorporated by reference to Exhibit&nbsp;10.1 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended September&nbsp;30, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.54</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and Retirement Systems of Alabama Holdings LLC (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s
    Registration Statement on Form&nbsp;8-A filed on May&nbsp;14,
    2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.55</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and ATSB Securities Trust u/a/d March&nbsp;31, 2003
    (incorporated by reference to Exhibit&nbsp;10.2 to
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.56</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment dated as of June&nbsp;25, 2003 to the
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and ATSB Securities Trust u/a/d March&nbsp;31, 2003
    (incorporated by reference to Exhibit&nbsp;10.6 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended June&nbsp;30, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.57</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and General Electric Capital Corporation (incorporated by
    reference to Exhibit&nbsp;10.3 to US&nbsp;Airways Group&#146;s
    Registration Statement on Form&nbsp;8-A filed on May&nbsp;14,
    2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.58</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and Bank of America, N.A. (incorporated by reference to
    Exhibit&nbsp;10.4 to US&nbsp;Airways Group&#146;s Registration
    Statement on Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.59&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2003 Stock Incentive Plan of US&nbsp;Airways Group, as amended
    and restated (incorporated by reference to Exhibit&nbsp;4.4 of
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;S-8 filed on June&nbsp;3, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.60&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. 2003 Nonemployee Director Stock
    Incentive Plan (incorporated by reference to Exhibit&nbsp;10.4
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended June&nbsp;30, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.61&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to the US&nbsp;Airways Group, Inc. 2003
    Nonemployee Director Stock Incentive Plan (incorporated by
    reference to Exhibit&nbsp;10.54 of US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.62&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. 2003 Nonemployee Director Deferred
    Stock Unit Plan (incorporated by reference to Exhibit&nbsp;10.5
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended June&nbsp;30, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.63&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to the US&nbsp;Airways Group, Inc. 2003
    Nonemployee Director Deferred Stock Unit Plan (incorporated by
    reference to Exhibit&nbsp;10.10 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.64&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to the US&nbsp;Airways Group, Inc. 2003
    Nonemployee Director Deferred Stock Unit Plan (incorporated by
    reference to Exhibit&nbsp;10.57 of US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.65&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Funded Executive Defined Contribution Plan
    (incorporated by reference to Exhibit&nbsp;10.1 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.66&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to the US&nbsp;Airways Funded Executive Defined
    Contribution Plan dated January&nbsp;26, 2004 (incorporated by
    reference to Exhibit&nbsp;10.4 to US&nbsp;Airways, Inc.&#146;s
    Quarterly Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.67&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to the US&nbsp;Airways Funded Executive Defined
    Contribution Plan (incorporated by reference to
    Exhibit&nbsp;10.5 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.68&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to the US&nbsp;Airways Funded Executive Defined
    Contribution Plan (incorporated by reference to
    Exhibit&nbsp;10.6 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.69&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Unfunded Executive Defined Contribution Plan
    (incorporated by reference to Exhibit&nbsp;10.2 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.70&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to the US&nbsp;Airways Unfunded Executive
    Defined Contribution Plan dated January&nbsp;26, 2004
    (incorporated by reference to Exhibit&nbsp;10.7 to
    US&nbsp;Airways, Inc.&#146;s Quarterly Report for the quarter
    ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.71&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to the US&nbsp;Airways Unfunded Executive
    Defined Contribution Plan (incorporated by reference to
    Exhibit&nbsp;10.8 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.72&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to the US&nbsp;Airways Unfunded Executive
    Defined Contribution Plan (incorporated by reference to
    Exhibit&nbsp;10.9 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.73&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement between US&nbsp;Airways Group, Inc. and
    US&nbsp;Airways, Inc. and its President and Chief Executive
    Officer effective May&nbsp;19, 2004 (incorporated by reference
    to Exhibit&nbsp;10.6 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended September&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.74&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement between US&nbsp;Airways, Inc. and
    David&nbsp;N. Siegel effective March&nbsp;11, 2002 (incorporated
    by reference to Exhibit&nbsp;10.41 to US&nbsp;Airways,
    Inc.&#146;s Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2001)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.75&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment effective March&nbsp;31, 2003 to the Employment
    Agreement dated March&nbsp;11, 2002 between US&nbsp;Airways,
    Inc. and David&nbsp;N. Siegel (incorporated by reference to
    Exhibit&nbsp;10.1 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31,
    2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.76&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Separation Agreement between US&nbsp;Airways Group, Inc.,
    US&nbsp;Airways, Inc. and David&nbsp;N. Siegel dated
    April&nbsp;23, 2004 (incorporated by reference to
    Exhibit&nbsp;10.10 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.77&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Supplemental Separation Agreement between US&nbsp;Airways Group,
    Inc., US&nbsp;Airways, Inc. and David&nbsp;N. Siegel dated
    May&nbsp;19, 2004 (incorporated by reference to
    Exhibit&nbsp;10.11 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.78&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement between US&nbsp;Airways, Inc. and its
    Executive Vice President&nbsp;&#151; Corporate Affairs and
    General Counsel effective March&nbsp;1, 2003 (incorporated by
    reference to Exhibit&nbsp;10.5 to US&nbsp;Airways, Inc.&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.79&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Severance Agreement between US&nbsp;Airways, Inc., and
    Neal&nbsp;S. Cohen effective April&nbsp;8, 2002 (incorporated by
    reference to Exhibit&nbsp;10.8 to US&nbsp;Airways, Inc.&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.80&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment effective March&nbsp;31, 2003 to the Severance
    Agreement dated April&nbsp;8, 2002 between US&nbsp;Airways, Inc.
    and Neal&nbsp;S. Cohen (incorporated by reference to
    Exhibit&nbsp;10.2 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31,
    2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.81&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Separation and Consulting Agreement between US&nbsp;Airways
    Group, Inc., US&nbsp;Airways, Inc. and Neal&nbsp;S. Cohen
    effective April&nbsp;30, 2004 (incorporated by reference to
    Exhibit&nbsp;10.12 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.82&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Severance Agreement between US&nbsp;Airways, Inc. and its
    Executive Vice President&nbsp;&#151; Operations effective
    July&nbsp;26, 2002 (incorporated by reference to
    Exhibit&nbsp;10.9 to US&nbsp;Airways, Inc.&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.83&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment effective March&nbsp;31, 2003 to the Severance
    Agreement dated June&nbsp;26, 2002 between US&nbsp;Airways, Inc.
    and the Executive Vice President&nbsp;&#151; Operations
    (incorporated by reference to Exhibit&nbsp;10.3 to
    US&nbsp;Airways, Inc.&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended March&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.84&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Severance Agreement between US&nbsp;Airways, Inc. and the Senior
    Vice President&nbsp;&#151; Marketing effective June&nbsp;26,
    2002 (incorporated by reference to Exhibit&nbsp;10.14 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.85&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment effective March&nbsp;31, 2003 to the Severance
    Agreement dated June&nbsp;26, 2002 between US&nbsp;Airways, Inc.
    and the Senior Vice President&nbsp;&#151; Marketing
    (incorporated by reference to Exhibit&nbsp;10.15 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.86&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and David N. Siegel with
    respect to certain employment arrangements effective
    March&nbsp;11, 2002 (incorporated by reference to
    Exhibit&nbsp;10.49 to US&nbsp;Airways, Inc.&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2001)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.87&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Severance Agreement between US&nbsp;Airways, Inc. and its Senior
    Vice President&nbsp;&#151; Employee Relations effective
    April&nbsp;8, 2002 (incorporated by reference to
    Exhibit&nbsp;10.10 to US&nbsp;Airways, Inc.&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.88&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment dated March&nbsp;31, 2003 to the Severance
    Agreement dated as April&nbsp;8, 2002 between US&nbsp;Airways,
    Inc. and its Senior Vice President&nbsp;&#151; Labor Relations
    (incorporated by reference to Exhibit&nbsp;10.33 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.89&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Senior Vice
    President&nbsp;&#151; Labor Relations with respect to certain
    employment arrangements effective July&nbsp;25, 2002
    (incorporated by reference to Exhibit&nbsp;10.18 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.90&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Senior Vice
    President&nbsp;&#151; Marketing with respect to certain
    employment arrangements effective July&nbsp;25, 2002
    (incorporated by reference to Exhibit&nbsp;10.18 to Amendment
    No.&nbsp;1 to US&nbsp;Airways, Inc.&#146;s Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.91&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Senior Vice
    President&nbsp;&#151; Marketing with respect to certain
    employment arrangements effective October&nbsp;20, 2004
    (incorporated by reference to Exhibit&nbsp;10.35 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.92&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Executive Vice
    President&nbsp;&#151; Operations with respect to certain
    employment arrangements effective July&nbsp;25, 2002
    (incorporated by reference to Exhibit&nbsp;10.17 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.93&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Executive Vice
    President&nbsp;&#151; Operations with respect to certain
    employment arrangements effective October&nbsp;20, 2004
    (incorporated by reference to Exhibit&nbsp;10.37 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.94&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Executive Vice
    President&nbsp;&#151; Corporate Affairs, General Counsel and
    Secretary with respect to certain employment arrangements
    effective October&nbsp;20, 2004 (incorporated by reference to
    Exhibit&nbsp;10.38 to US&nbsp;Airways, Inc.&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.95&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Senior Vice
    President&nbsp;&#151; Labor Relations with respect to certain
    employment arrangements effective October&nbsp;20, 2004
    (incorporated by reference to Exhibit&nbsp;10.40 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.96</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated as of March&nbsp;15, 2005 among
    Wexford Capital LLC, Republic Airways Holdings Inc.,
    US&nbsp;Airways Group, Inc. and US&nbsp;Airways, Inc.
    (incorporated by reference to Exhibit&nbsp;10.3 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended March&nbsp;31, 2005)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.97</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated as of May&nbsp;19, 2005, by and
    among Peninsula Investment Partners, L.P., US&nbsp;Airways,
    Group, Inc. and its successors and America West Holdings
    Corporation (incorporated by reference to Exhibit&nbsp;10.3 to
    the Current Report on Form&nbsp;8-K filed by America West
    Holdings Corporation on May&nbsp;25, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.98</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated as of May&nbsp;19, 2005, by and
    among ACE Aviation Holdings, Inc., US&nbsp;Airways, Group, Inc.
    and its successors and America West Holdings Corporation
    (incorporated by reference to Exhibit&nbsp;10.4 to the Current
    Report on Form&nbsp;8-K filed by America West Holdings
    Corporation on May&nbsp;25, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.99</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated as of May&nbsp;19, 2005, by and
    among Par Investment Partners, L.P., US&nbsp;Airways, Group,
    Inc. and its successors and America West Holdings Corporation
    (incorporated by reference to Exhibit&nbsp;10.2 to the Current
    Report on Form&nbsp;8-K filed by America West Holdings
    Corporation on May&nbsp;25, 2005)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-10

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Designation</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.100</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated as of May&nbsp;19, 2005, by and
    among Eastshore Aviation, LLC, US&nbsp;Airways, Group, Inc. and
    its successors and America West Holdings Corporation
    (incorporated by reference to Exhibit&nbsp;10.1 to the Current
    Report on Form&nbsp;8-K filed by America West Holdings
    Corporation on May&nbsp;25, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.101</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated May 27, 2005, by and among
    Wellington Investment Management Company, LLP, America West
    Holdings Corporation and US&nbsp;Airways Group, Inc.
    (incorporated by reference to Exhibit&nbsp;10.1 to the Current
    Report on Form&nbsp;8-K filed by America West Holdings
    Corporation on June&nbsp;2, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.102</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Voting Agreement, dated May&nbsp;19, 2005, among TPG Partners,
    L.P., TPG Parallel&nbsp;I, L.P., Air Partners&nbsp;II, L.P. and
    US&nbsp;Airways Group, Inc. (incorporated by reference to
    Exhibit&nbsp;2.1 to the Current Report on Form&nbsp;8-K filed by
    America West Holdings Corporation on May&nbsp;25, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.103</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Supplemental Order (I) Authorizing Debtors&#146; Use of
    Cash Collateral (II) Providing Adequate Protection Pursuant to
    Bankruptcy Rules&nbsp;4001(b) and 4001(d) (incorporated by
    reference to Exhibit&nbsp;99.1 to US&nbsp;Airways Group&#146;s
    Current Report on Form&nbsp;8-K dated January&nbsp;13, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.104</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Junior Secured Debtor-in-Possession Credit Facility Agreement
    dated as of February&nbsp;18, 2005 among US&nbsp;Airways, Inc.,
    as Debtor and Debtor-in-Possession under Chapter&nbsp;11 of the
    Bankruptcy Code as Borrower, US&nbsp;Airways Group, Inc., PSA
    Airlines, Inc., and Material Services, Inc., Debtors and
    Debtors-in-Possession under Chapter&nbsp;11 of the Bankruptcy
    Code as Guarantors, and Eastshore Aviation, LLC, as Lender
    (incorporated by reference to Exhibit&nbsp;99 to US&nbsp;Airways
    Group&#146;s Current Report on Form&nbsp;8-K dated
    February&nbsp;28, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.105</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of May&nbsp;19, 2005 to Junior
    Secured Debtor-in-Possession Credit Facility Agreement dated as
    of February&nbsp;18, 2005 among US&nbsp;Airways, Inc., as Debtor
    and Debtor-in-Possession under Chapter&nbsp;11 of the Bankruptcy
    Code as Borrower, US&nbsp;Airways Group, Inc., PSA Airlines,
    Inc., and Material Services, Inc., Debtors and
    Debtors-in-Possession under Chapter&nbsp;11 of the Bankruptcy
    Code as Guarantors, and Eastshore Aviation, LLC, as Lender
    (incorporated by reference to Exhibit 10.105 to US Airways
    Group&#146;s Registration Statement on Form&nbsp;S-4 (File
    No.&nbsp;333-126162), filed with the SEC on June&nbsp;28, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subsidiaries of US&nbsp;Airways Group (incorporated by reference
    to Exhibit&nbsp;21.1 to the Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2004 filed by US Airways Group
    on March&nbsp;1, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of KPMG LLP, Independent Registered Public Accounting
    Firm of US&nbsp;Airways Group</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of KPMG LLP, Independent Registered Public Accounting
    Firm of America West Holdings</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.3**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of PricewaterhouseCoopers LLP</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.4***</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Elizabeth K. Lanier (included in Exhibit&nbsp;5.1)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Powers of Attorney signed by the directors of US&nbsp;Airways
    Group, authorizing their signatures on this report (included on
    signature page)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Stockholders Agreement among ACE Aviation Holdings, PAR
    Investment Partners, L.P., Peninsula Investment Partners, L.P.,
    Eastshore Aviation, LLC and US&nbsp;Airways Group, Inc.
    (incorporated by reference to Exhibit&nbsp;99.2 to the Current
    Report on Form&nbsp;8-K filed by America West Holdings
    Corporation on May&nbsp;25, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.2***</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Instructions as to Use of US&nbsp;Airways Group, Inc.
    Subscription Rights Certificates</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;Portions of this exhibit have
been omitted under a request for confidential treatment and
filed separately with the United States Securities and Exchange
Commission.
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;**&nbsp;Filed herewith.
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
***&nbsp;To be filed by amendment.
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&#134;&nbsp;Management contract or
compensatory plan or arrangement.
</DIV>

<P align="center" style="font-size: 10pt;">II-11

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Item&nbsp;17.&nbsp;Undertakings.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned Registrant hereby undertakes:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>1)</TD>
    <TD align="left">
    To file, during any period in which offers or sales are being
    made, a post-effective amendment to this registration statement:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>a)</TD>
    <TD align="left">
    to include any prospectus required by Section&nbsp;10(a)(3) of
    the Securities Act of 1933;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>b)</TD>
    <TD align="left">
    to reflect in the prospectus any facts or events arising after
    the effective date of the registration statement (or the most
    recent post-effective amendment thereof) which, individually or
    in the aggregate, represent a fundamental change in the
    information set forth in the registration statement. To reflect
    in the prospectus any facts or events arising after the
    effective date of the registration statement (or the most recent
    post-effective amendment thereof) which, individually or in the
    aggregate, represents a fundamental change in the information
    set forth in the registration statement. Notwithstanding the
    foregoing, any increase or decrease in volume of securities
    offered (if the total dollar value of securities offered would
    not exceed that which was registered) and any deviation from the
    low or high end of the estimated maximum offering range may be
    reflected in the form of prospectus filed with the Commission
    pursuant to Rule&nbsp;424(b) if, in the aggregate, the changes
    in volume and price represent no more than a 20% change in the
    maximum aggregate offering price set forth in the
    &#147;Calculation of Registration Fee&#148; table in the
    effective registration statement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>c)</TD>
    <TD align="left">
    To include any material information with respect to the plan of
    distribution not previously disclosed in the registration
    statement or any material change to such information in the
    registration statement.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>2)</TD>
    <TD align="left">
    That, for the purpose of determining any liability under the
    Securities Act of 1933, each such post-effective amendment shall
    be deemed to be a new registration statement relating to the
    securities offered therein, and the offering of such securities
    at that time shall be deemed to be the initial bona fide
    offering thereof.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>3)</TD>
    <TD align="left">
    To remove from registration by means of a post-effective
    amendment any of the securities being registered which remain
    unsold at the termination of the offering.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>4)</TD>
    <TD align="left">
    That, for purposes of determining any liability under the
    Securities Act of 1933, each filing of the Registrant&#146;s
    annual report under Section&nbsp;13(a) or Section&nbsp;15(d) of
    the Securities Exchange Act of 1934 (and, where applicable, each
    filing of an employee benefit plan&#146;s annual report under
    Section&nbsp;15(d) of the Securities Exchange Act of 1934) that
    is incorporated by reference in this registration statement
    shall be deemed to be a new registration statement relating to
    the securities offered therein, and the offering of such
    securities at that time shall be deemed to be the initial bona
    fide offering thereof.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event a claim of indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the
Registrant in a successful defense of any action, suit or
proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by
the final adjudication of such issue.
</DIV>

<P align="center" style="font-size: 10pt;">II-12

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF ARLINGTON, COMMONWEALTH OF VIRGINIA,
ON JUNE&nbsp;29, 2005.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    US AIRWAYS GROUP, INC.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="center">
    /s/ Bruce R. Lakefield</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Name:&nbsp;Bruce R. Lakefield</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Title:&nbsp;President and Chief Executive Officer</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
KNOW ALL MEN BY THESE PRESENTS, that each individual whose
signature appears below constitutes and appoints Ronald E.
Stanley and Elizabeth K. Lanier and each of them, his true and
lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this
registration statement and to file the same with all exhibits
thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof. This power of attorney may
be executed in counterparts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>SIGNATURE</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>TITLE</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>DATE</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Bruce R. Lakefield<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Bruce
    R. Lakefield</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director, President and Chief Executive Officer (Principal
    Executive Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Ronald E. Stanley<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Ronald
    E. Stanley</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Executive Vice President&nbsp;&#151; Finance and Chief Financial
    Officer (Principal Financial Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Anita P. Beier<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Anita
    P. Beier</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Senior Vice President&nbsp;&#151; Finance and Controller
    (Principal Accounting Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Dr. David G. Bronner<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Dr.
    David G. Bronner</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director and Chairman</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Thomas R. Harter<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Thomas
    R. Harter</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Magdalena Jacobsen<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Magdalena
    Jacobsen</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-13
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>SIGNATURE</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>TITLE</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>DATE</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Robert L. Johnson<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Robert
    L. Johnson</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Cheryl G. Krongard<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Cheryl
    G. Krongard</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Joseph J. Mantineo<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Joseph
    J. Mantineo</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ John A. McKenna, Jr.<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>John
    A. McKenna,&nbsp;Jr.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Hans Mirka<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Hans
    Mirka</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ George M. Philip<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>George
    M. Philip</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ William D. Pollock<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>William
    D. Pollock</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ James M. Simon<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>James
    M. Simon</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ William T. Stephens<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>William
    T. Stephens</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    June&nbsp;29, 2005</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-14

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EXHIBIT INDEX</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement and Plan of Merger, dated May&nbsp;19, 2005, by and
    among US&nbsp;Airways Group, Inc. and America West Holdings
    Corporation (incorporated by reference to Exhibit&nbsp;2.1 to
    US&nbsp;Airways&nbsp;Group&#146;s Registration Statement on
    Form&nbsp;S-4 filed on June&nbsp;28, 2005) (Pursuant to
    item&nbsp;601(b)(2) of Regulation&nbsp;S-K promulgated by the
    SEC, the exhibits and schedules to the Agreement and Plan of
    Merger have been omitted. Such exhibits and schedules are
    described in the Agreement and Plan of Merger. US&nbsp;Airways
    Group hereby agrees to furnish to the SEC, upon its request, any
    or all of such omitted exhibits or schedules)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Certificate of Incorporation of
    US&nbsp;Airways Group, Inc., effective as of March&nbsp;31, 2003
    (incorporated by reference to Exhibit&nbsp;3.1 to
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Bylaws of US&nbsp;Airways Group, Inc.,
    effective as of March&nbsp;31, 2003 (incorporated by reference
    to Exhibit&nbsp;3.2 to US&nbsp;Airways Group&#146;s Registration
    Statement on Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Second Amended and Restated Certificate of Incorporation
    of US&nbsp;Airways Group, Inc. (incorporated by reference to
    Exhibit 3.3 of US&nbsp;Airways Group&#146;s Registration
    Statement on Form&nbsp;S-4 filed on June&nbsp;28, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Second Amended and Restated Bylaws of US&nbsp;Airways
    Group, Inc. (incorporated by reference to Exhibit 3.4 of
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;S-4 filed on June&nbsp;28, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase
    shares of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003,
    issued to General Electric Capital Corporation (incorporated by
    reference to Exhibit&nbsp;4.1 to US&nbsp;Airways Group&#146;s
    Registration Statement on Form&nbsp;8-A filed on May&nbsp;14,
    2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase
    shares of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003,
    issued to Bank of America, N.A. (incorporated by reference to
    Exhibit&nbsp;4.2 to US&nbsp;Airways Group&#146;s Registration
    Statement on Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase
    shares of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003,
    issued to Retirement Systems of Alabama Holdings LLC
    (incorporated by reference to Exhibit&nbsp;4.3 to
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase
    shares of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003,
    issued to Retirement Systems of Alabama Holdings LLC
    (incorporated by reference to Exhibit&nbsp;4.4 to
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. Class&nbsp;A-1 Warrant to purchase
    shares of Class&nbsp;A Common Stock, dated March&nbsp;31, 2003,
    issued to ATSB Securities Trust u/a/d March&nbsp;31, 2003
    (incorporated by reference to Exhibit&nbsp;4.5 to
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Class&nbsp;A-1 Warrants (incorporated by reference to
    Exhibit&nbsp;4.3 to US&nbsp;Airways Group&#146;s Registration
    Statement on Form&nbsp;S-8 filed on July&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.7***</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Rights Certificate</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1***</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Elizabeth K. Lanier, Executive Vice
    President&nbsp;&#151; Corporate Affairs and General Counsel of
    US&nbsp;Airways Group regarding legality of securities being
    registered</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement dated March&nbsp;31, 2003 among US&nbsp;Airways,
    Inc. and Phoenix American Financial Services, Inc., Bank of
    America, N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit&nbsp;10.5 to
    US&nbsp;Airways&#146; Quarterly Report on Form&nbsp;10-Q for the
    quarter ended March&nbsp;31, 2003)</TD>
</TR>

</TABLE>
</CENTER>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated December&nbsp;18, 2003 to Loan
    Agreement dated March&nbsp;31, 2003 among US&nbsp;Airways, Inc.
    and Phoenix American Financial Services, Inc., Bank of America,
    N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit&nbsp;10.1 to
    US&nbsp;Airways&#146; Quarterly Report on Form&nbsp;10-Q for the
    quarter ended March&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2 dated March&nbsp;12, 2004 to Loan Agreement
    dated March&nbsp;31, 2003 among US&nbsp;Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board. (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways&#146;
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    March&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3 dated May&nbsp;21, 2004 to Loan Agreement
    dated March&nbsp;31, 2004 among US&nbsp;Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways&#146;
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4 dated July&nbsp;13, 2004 to Loan Agreement
    dated March&nbsp;31, 2004 among US&nbsp;Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways&#146;
    Quarterly Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;5 dated December&nbsp;28, 2004 to Loan
    Agreement dated March&nbsp;31, 2004 among US&nbsp;Airways, Inc.
    and Phoenix American Financial Services, Inc., Bank of America,
    N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit&nbsp;10.6 to
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;S-4 (File No.&nbsp;333-126162), filed with the SEC on
    June&nbsp;28, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Final Order (I)&nbsp;Authorizing Debtors&#146; Use of Cash
    Collateral and (II)&nbsp;Providing Adequate Protection Pursuant
    to Bankruptcy Rules&nbsp;4001(b) and 4001(d) (incorporated by
    reference to Exhibit&nbsp;99.1 to US&nbsp;Airways Group&#146;s
    Current Report on Form&nbsp;8-K dated October&nbsp;14, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Motion to Authorize and Approve (1)&nbsp;The Primary
    Tranche&nbsp;A Lender Assignment, (2)&nbsp;The Alternate
    Tranche&nbsp;A Lender Assignment, and (3)&nbsp;Amendment
    No.&nbsp;5 to the Loan Agreement pursuant to 11&nbsp;U.S.C.
    Sections 105, 363, 1108, and Bankruptcy Rules&nbsp;4001 and 6004
    (incorporated by reference to Exhibit&nbsp;99.1 to
    US&nbsp;Airways Group&#146;s Current Report on Form&nbsp;8-K
    dated December&nbsp;28, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Order Approving (1)&nbsp;The Primary Tranche&nbsp;A Lender
    Assignment, (2)&nbsp;The Alternate Tranche&nbsp;A Lender
    Assignment, and (3)&nbsp;Amendment No.&nbsp;5 to Loan Agreement
    pursuant to 11&nbsp;U.S.C. Sections&nbsp;105, 363, 1108, and
    Bankruptcy Rules&nbsp;4001 and 6004 (incorporated by reference
    to Exhibit&nbsp;99.2 to US&nbsp;Airways Group&#146;s Current
    Report on Form 8-K dated December&nbsp;28, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Master Memorandum of Understanding among US&nbsp;Airways Group,
    Inc., US&nbsp;Airways, Inc., and General Electric Capital
    Corporation acting through its agent GE&nbsp;Capital Aviation
    Services, Inc. and General Electric Company,
    GE&nbsp;Transportation Component (incorporated by reference to
    Exhibit&nbsp;10.9 to US&nbsp;Airways Groups&#146; Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    A319/A320/A321 Purchase Agreement dated as of October&nbsp;31,
    1997 between US&nbsp;Airways Group and AVSA, S.A.R.L.
    (&#147;AVSA&#148;), an affiliate of aircraft manufacturer Airbus
    Industrie G.I.E. (incorporated by reference to Exhibit&nbsp;10.1
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended September&nbsp;30, 1997)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of June&nbsp;10, 1998 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 1998)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2 dated as of January&nbsp;19, 1999 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.3 to US&nbsp;Airways Group&#146;s
    Annual Report on Form 10-K for the year ended December&nbsp;31,
    1998)*</TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3 dated as of March&nbsp;31, 1999 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 1999)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4 dated as of August&nbsp;31, 1999 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 1999)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;5 dated as of October&nbsp;29, 1999 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.6 to US&nbsp;Airways Group&#146;s
    Annual Report on Form 10-K for the year ended December&nbsp;31,
    1999)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;6 dated as of April&nbsp;19, 2000 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    March&nbsp;31, 2000)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;7 dated as of June&nbsp;29, 2000 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    June&nbsp;30, 2000)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;8 dated as of November&nbsp;27, 2000 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.9 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2000)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;9 dated as of December&nbsp;29, 2000 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.10 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2000)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;10 dated as of April&nbsp;9, 2001 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    March&nbsp;31, 2001)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;11 dated as of July&nbsp;17, 2002 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit&nbsp;10.1 to US&nbsp;Airways
    Group&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended June&nbsp;30, 2002)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;12 dated as of March&nbsp;29, 2003 to
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit&nbsp;10.1 to US&nbsp;Airways
    Group&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended March&nbsp;31, 2003)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.24</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;13 dated August&nbsp;30, 2004 to the Airbus
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit&nbsp;10.2 to
    US&nbsp;Airways&#146; Quarterly Report on Form&nbsp;10-Q for the
    quarter ended September&nbsp;30, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.25</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;14 dated December&nbsp;22, 2004 to the Airbus
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit&nbsp;10.4 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended March&nbsp;31, 2005)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.26</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;15 dated January&nbsp;17, 2005 to the Airbus
    A319/A320/A321 Purchase Agreement dated October&nbsp;31, 1997
    between US&nbsp;Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit&nbsp;10.5 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended March&nbsp;31, 2005)*</TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.27</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    A330/A340 Purchase Agreement dated as of November&nbsp;24, 1998
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.4 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 1998)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.28</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of March&nbsp;23, 2000 to
    A330/A340 Purchase Agreement dated November&nbsp;24, 1998
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    March&nbsp;31, 2000)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.29</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2 dated as of June&nbsp;29, 2000 to A330/A340
    Purchase Agreement dated November&nbsp;24, 1998 between
    US&nbsp;Airways Group and AVSA (incorporated by reference to
    Exhibit&nbsp;10.2 to US&nbsp;Airways Group&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended June&nbsp;30,
    2000)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.30</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3 dated as of November&nbsp;27, 2000 to
    A330/A340 Purchase Agreement dated November&nbsp;24, 1998
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.14 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2000)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.31</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4 dated as of September&nbsp;20, 2001 to
    A330/A340 Purchase Agreement dated November&nbsp;24, 1998
    between US&nbsp;Airways Group and AVSA (incorporated by
    reference to Exhibit&nbsp;10.16 to US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2001)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.32</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;5 dated as of July&nbsp;17, 2002 to A330/A340
    Purchase Agreement dated November&nbsp;24, 1998 between
    US&nbsp;Airways Group and AVSA, S.A.R.L. (incorporated by
    reference to Exhibit&nbsp;10.2 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    June&nbsp;30, 2002)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.33</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;6 dated as of March&nbsp;29, 2003 to
    A330/A340 Purchase Agreement dated November&nbsp;24, 1998
    between US&nbsp;Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit&nbsp;10.2 to US&nbsp;Airways
    Group&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter
    ended March&nbsp;31, 2003)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.34</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;7 dated August&nbsp;30, 2004 to the Airbus
    A330/A340 Purchase Agreement dated November&nbsp;24, 1998
    between US&nbsp;Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit&nbsp;10.3 to
    US&nbsp;Airways, Inc.&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended September&nbsp;30, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.35</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;8 dated December&nbsp;22, 2004 to the Airbus
    A330/A340 Purchase Agreement dated as of November&nbsp;24, 1998
    between US&nbsp;Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit&nbsp;10.6 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended March&nbsp;31, 2005)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.36</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;9 dated November&nbsp;24, 1998 to the Airbus
    A330/A340 Purchase Agreement between US&nbsp;Airways Group, Inc.
    and AVSA, S.A.R.L. (incorporated by reference to
    Exhibit&nbsp;10.7 to US&nbsp;Airways Group&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31,
    2005)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.37</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Agreement dated December&nbsp;17, 2004 between
    US&nbsp;Airways Group, Inc. and US&nbsp;Airways, Inc. and Airbus
    North America Sales Inc. (incorporated by reference to
    Exhibit&nbsp;99.2 to US&nbsp;Airways Group&#146;s Current Report
    on Form&nbsp;8-K dated February&nbsp;3, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.38</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.1
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended June&nbsp;30, 2003)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.39</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of November&nbsp;4, 2003 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to
    Exhibit&nbsp;10.22 to US&nbsp;Airways Group&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2003)*</TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.40</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2 dated as of November&nbsp;21, 2003 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to
    Exhibit&nbsp;10.23 to US&nbsp;Airways Group&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2003)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.41</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;3 dated as of February&nbsp;9, 2004 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.4
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.42</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;4 dated as of August&nbsp;4, 2004 to Embraer
    Aircraft Purchase Agreement dated as of May&nbsp;9, 2003 between
    US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.4
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended September&nbsp;30, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.43</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;5 dated as of September&nbsp;3, 2004 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.5
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended September&nbsp;30, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.44</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;6 dated as of January&nbsp;25, 2005 to
    Embraer Aircraft Purchase Agreement dated as of May&nbsp;9, 2003
    between US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.9
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2005)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.45</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated January&nbsp;6, 2004 to the Letter
    Agreement DCT-022/03 dated May&nbsp;9, 2003 between
    US&nbsp;Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit&nbsp;10.5
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.46</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Post-Petition Purchase Agreement Modification and Aircraft
    Financing Term Sheet between US&nbsp;Airways, Inc.,
    Embraer-Empresa Brasileira de Aeronautica S.A., dated
    December&nbsp;16, 2004 (incorporated by reference to
    Exhibit&nbsp;10.8 of US&nbsp;Airways Group&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31,
    2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.47</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May&nbsp;9, 2003 between US&nbsp;Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit&nbsp;10.2
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended June&nbsp;30, 2003)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.48</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Contract Change Order 1 dated January&nbsp;27, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May&nbsp;9, 2003 between US&nbsp;Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit&nbsp;10.6
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.49</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Contract Change Order 2 dated February&nbsp;9, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May&nbsp;9, 2003 between US&nbsp;Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit&nbsp;10.7
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.50</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Contract Change Order 3 dated February&nbsp;26, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May&nbsp;9, 2003 between US&nbsp;Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit&nbsp;10.8
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2004)*</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.51</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated as of September&nbsp;26, 2002, by
    and between the Retirement Systems of Alabama and
    US&nbsp;Airways Group, Inc. (incorporated by reference to
    Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended
    September&nbsp;30, 2002)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.52</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of January&nbsp;17, 2003 to the
    Investment Agreement, entered into as of September&nbsp;26, 2002
    and amended and restated as of January&nbsp;17, 2003 by and
    between the Retirement Systems of Alabama and US&nbsp;Airways
    Group, Inc. (incorporated by reference to Exhibit&nbsp;10.37 to
    US&nbsp;Airways Group&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2002)</TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.53</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;2, dated as of March&nbsp;30, 2003, to the
    Investment Agreement, dated as of September&nbsp;26, 2002, by
    and among The Retirement Systems of Alabama, Retirement Systems
    of Alabama Holdings, LLC and US&nbsp;Airways Group, Inc.
    (incorporated by reference to Exhibit&nbsp;10.1 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended September&nbsp;30, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.54</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and Retirement Systems of Alabama Holdings LLC (incorporated by
    reference to Exhibit&nbsp;10.1 to US&nbsp;Airways Group&#146;s
    Registration Statement on Form&nbsp;8-A filed on May&nbsp;14,
    2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.55</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and ATSB Securities Trust u/a/d March&nbsp;31, 2003
    (incorporated by reference to Exhibit&nbsp;10.2 to
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.56</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment dated as of June&nbsp;25, 2003 to the
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and ATSB Securities Trust u/a/d March&nbsp;31, 2003
    (incorporated by reference to Exhibit&nbsp;10.6 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended June&nbsp;30, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.57</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and General Electric Capital Corporation (incorporated by
    reference to Exhibit&nbsp;10.3 to US&nbsp;Airways Group&#146;s
    Registration Statement on Form&nbsp;8-A filed on May&nbsp;14,
    2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.58</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Registration Rights Agreement made and entered into as of
    March&nbsp;31, 2003 by and between US&nbsp;Airways Group, Inc.
    and Bank of America, N.A. (incorporated by reference to
    Exhibit&nbsp;10.4 to US&nbsp;Airways Group&#146;s Registration
    Statement on Form&nbsp;8-A filed on May&nbsp;14, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.59&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2003 Stock Incentive Plan of US&nbsp;Airways Group, as amended
    and restated (incorporated by reference to Exhibit&nbsp;4.4 of
    US&nbsp;Airways Group&#146;s Registration Statement on
    Form&nbsp;S-8 filed on June&nbsp;3, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.60&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. 2003 Nonemployee Director Stock
    Incentive Plan (incorporated by reference to Exhibit&nbsp;10.4
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended June&nbsp;30, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.61&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to the US&nbsp;Airways Group, Inc. 2003
    Nonemployee Director Stock Incentive Plan (incorporated by
    reference to Exhibit&nbsp;10.54 of US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.62&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Group, Inc. 2003 Nonemployee Director Deferred
    Stock Unit Plan (incorporated by reference to Exhibit&nbsp;10.5
    to US&nbsp;Airways Group&#146;s Quarterly Report on
    Form&nbsp;10-Q for the quarter ended June&nbsp;30, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.63&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to the US&nbsp;Airways Group, Inc. 2003
    Nonemployee Director Deferred Stock Unit Plan (incorporated by
    reference to Exhibit&nbsp;10.10 to US&nbsp;Airways Group&#146;s
    Quarterly Report on Form&nbsp;10-Q for the quarter ended
    June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.64&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to the US&nbsp;Airways Group, Inc. 2003
    Nonemployee Director Deferred Stock Unit Plan (incorporated by
    reference to Exhibit&nbsp;10.57 of US&nbsp;Airways Group&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.65&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Funded Executive Defined Contribution Plan
    (incorporated by reference to Exhibit&nbsp;10.1 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.66&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to the US&nbsp;Airways Funded Executive Defined
    Contribution Plan dated January&nbsp;26, 2004 (incorporated by
    reference to Exhibit&nbsp;10.4 to US&nbsp;Airways, Inc.&#146;s
    Quarterly Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.67&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to the US&nbsp;Airways Funded Executive Defined
    Contribution Plan (incorporated by reference to
    Exhibit&nbsp;10.5 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.68&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to the US&nbsp;Airways Funded Executive Defined
    Contribution Plan (incorporated by reference to
    Exhibit&nbsp;10.6 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.69&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    US&nbsp;Airways Unfunded Executive Defined Contribution Plan
    (incorporated by reference to Exhibit&nbsp;10.2 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.70&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to the US&nbsp;Airways Unfunded Executive
    Defined Contribution Plan dated January&nbsp;26, 2004
    (incorporated by reference to Exhibit&nbsp;10.7 to
    US&nbsp;Airways, Inc.&#146;s Quarterly Report for the quarter
    ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.71&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Amendment to the US&nbsp;Airways Unfunded Executive
    Defined Contribution Plan (incorporated by reference to
    Exhibit&nbsp;10.8 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.72&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Third Amendment to the US&nbsp;Airways Unfunded Executive
    Defined Contribution Plan (incorporated by reference to
    Exhibit&nbsp;10.9 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.73&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement between US&nbsp;Airways Group, Inc. and
    US&nbsp;Airways, Inc. and its President and Chief Executive
    Officer effective May&nbsp;19, 2004 (incorporated by reference
    to Exhibit&nbsp;10.6 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended September&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.74&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement between US&nbsp;Airways, Inc. and
    David&nbsp;N. Siegel effective March&nbsp;11, 2002 (incorporated
    by reference to Exhibit&nbsp;10.41 to US&nbsp;Airways,
    Inc.&#146;s Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2001)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.75&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment effective March&nbsp;31, 2003 to the Employment
    Agreement dated March&nbsp;11, 2002 between US&nbsp;Airways,
    Inc. and David&nbsp;N. Siegel (incorporated by reference to
    Exhibit&nbsp;10.1 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31,
    2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.76&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Separation Agreement between US&nbsp;Airways Group, Inc.,
    US&nbsp;Airways, Inc. and David&nbsp;N. Siegel dated
    April&nbsp;23, 2004 (incorporated by reference to
    Exhibit&nbsp;10.10 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.77&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Supplemental Separation Agreement between US&nbsp;Airways Group,
    Inc., US&nbsp;Airways, Inc. and David&nbsp;N. Siegel dated
    May&nbsp;19, 2004 (incorporated by reference to
    Exhibit&nbsp;10.11 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.78&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement between US&nbsp;Airways, Inc. and its
    Executive Vice President&nbsp;&#151; Corporate Affairs and
    General Counsel effective March&nbsp;1, 2003 (incorporated by
    reference to Exhibit&nbsp;10.5 to US&nbsp;Airways, Inc.&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.79&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Severance Agreement between US&nbsp;Airways, Inc., and
    Neal&nbsp;S. Cohen effective April&nbsp;8, 2002 (incorporated by
    reference to Exhibit&nbsp;10.8 to US&nbsp;Airways, Inc.&#146;s
    Annual Report on Form&nbsp;10-K for the year ended
    December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.80&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment effective March&nbsp;31, 2003 to the Severance
    Agreement dated April&nbsp;8, 2002 between US&nbsp;Airways, Inc.
    and Neal&nbsp;S. Cohen (incorporated by reference to
    Exhibit&nbsp;10.2 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31,
    2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.81&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Separation and Consulting Agreement between US&nbsp;Airways
    Group, Inc., US&nbsp;Airways, Inc. and Neal&nbsp;S. Cohen
    effective April&nbsp;30, 2004 (incorporated by reference to
    Exhibit&nbsp;10.12 to US&nbsp;Airways, Inc.&#146;s Quarterly
    Report for the quarter ended June&nbsp;30, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.82&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Severance Agreement between US&nbsp;Airways, Inc. and its
    Executive Vice President&nbsp;&#151; Operations effective
    July&nbsp;26, 2002 (incorporated by reference to
    Exhibit&nbsp;10.9 to US&nbsp;Airways, Inc.&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.83&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment effective March&nbsp;31, 2003 to the Severance
    Agreement dated June&nbsp;26, 2002 between US&nbsp;Airways, Inc.
    and the Executive Vice President&nbsp;&#151; Operations
    (incorporated by reference to Exhibit&nbsp;10.3 to
    US&nbsp;Airways, Inc.&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended March&nbsp;31, 2003)</TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.84&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Severance Agreement between US&nbsp;Airways, Inc. and the Senior
    Vice President&nbsp;&#151; Marketing effective June&nbsp;26,
    2002 (incorporated by reference to Exhibit&nbsp;10.14 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.85&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment effective March&nbsp;31, 2003 to the Severance
    Agreement dated June&nbsp;26, 2002 between US&nbsp;Airways, Inc.
    and the Senior Vice President&nbsp;&#151; Marketing
    (incorporated by reference to Exhibit&nbsp;10.15 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.86&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and David N. Siegel with
    respect to certain employment arrangements effective
    March&nbsp;11, 2002 (incorporated by reference to
    Exhibit&nbsp;10.49 to US&nbsp;Airways, Inc.&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2001)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.87&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Severance Agreement between US&nbsp;Airways, Inc. and its Senior
    Vice President&nbsp;&#151; Employee Relations effective
    April&nbsp;8, 2002 (incorporated by reference to
    Exhibit&nbsp;10.10 to US&nbsp;Airways, Inc.&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.88&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment dated March&nbsp;31, 2003 to the Severance
    Agreement dated as April&nbsp;8, 2002 between US&nbsp;Airways,
    Inc. and its Senior Vice President&nbsp;&#151; Labor Relations
    (incorporated by reference to Exhibit&nbsp;10.33 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.89&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Senior Vice
    President&nbsp;&#151; Labor Relations with respect to certain
    employment arrangements effective July&nbsp;25, 2002
    (incorporated by reference to Exhibit&nbsp;10.18 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.90&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Senior Vice
    President&nbsp;&#151; Marketing with respect to certain
    employment arrangements effective July&nbsp;25, 2002
    (incorporated by reference to Exhibit&nbsp;10.18 to Amendment
    No.&nbsp;1 to US&nbsp;Airways, Inc.&#146;s Annual Report on
    Form&nbsp;10-K for the year ended December&nbsp;31, 2003)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.91&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Senior Vice
    President&nbsp;&#151; Marketing with respect to certain
    employment arrangements effective October&nbsp;20, 2004
    (incorporated by reference to Exhibit&nbsp;10.35 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.92&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Executive Vice
    President&nbsp;&#151; Operations with respect to certain
    employment arrangements effective July&nbsp;25, 2002
    (incorporated by reference to Exhibit&nbsp;10.17 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2002)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.93&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Executive Vice
    President&nbsp;&#151; Operations with respect to certain
    employment arrangements effective October&nbsp;20, 2004
    (incorporated by reference to Exhibit&nbsp;10.37 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.94&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Executive Vice
    President&nbsp;&#151; Corporate Affairs, General Counsel and
    Secretary with respect to certain employment arrangements
    effective October&nbsp;20, 2004 (incorporated by reference to
    Exhibit&nbsp;10.38 to US&nbsp;Airways, Inc.&#146;s Annual Report
    on Form&nbsp;10-K for the year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.95&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement between US&nbsp;Airways, Inc. and its Senior Vice
    President&nbsp;&#151; Labor Relations with respect to certain
    employment arrangements effective October&nbsp;20, 2004
    (incorporated by reference to Exhibit&nbsp;10.40 to
    US&nbsp;Airways, Inc.&#146;s Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2004)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.96</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated as of March&nbsp;15, 2005 among
    Wexford Capital LLC, Republic Airways Holdings Inc.,
    US&nbsp;Airways Group, Inc. and US&nbsp;Airways, Inc.
    (incorporated by reference to Exhibit&nbsp;10.3 to
    US&nbsp;Airways Group&#146;s Quarterly Report on Form&nbsp;10-Q
    for the quarter ended March&nbsp;31, 2005)*</TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.97</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated as of May&nbsp;19, 2005, by and
    among Peninsula Investment Partners, L.P., US&nbsp;Airways,
    Group, Inc. and its successors and America West Holdings
    Corporation (incorporated by reference to Exhibit&nbsp;10.3 to
    the Current Report on Form&nbsp;8-K filed by America West
    Holdings Corporation on May&nbsp;25, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.98</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated as of May&nbsp;19, 2005, by and
    among ACE Aviation Holdings, Inc., US&nbsp;Airways, Group, Inc.
    and its successors and America West Holdings Corporation
    (incorporated by reference to Exhibit&nbsp;10.4 to the Current
    Report on Form&nbsp;8-K filed by America West Holdings
    Corporation on May&nbsp;25, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.99</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated as of May&nbsp;19, 2005, by and
    among Par Investment Partners, L.P., US&nbsp;Airways, Group,
    Inc. and its successors and America West Holdings Corporation
    (incorporated by reference to Exhibit&nbsp;10.2 to the Current
    Report on Form&nbsp;8-K filed by America West Holdings
    Corporation on May&nbsp;25, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.100</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated as of May&nbsp;19, 2005, by and
    among Eastshore Aviation, LLC, US&nbsp;Airways, Group, Inc. and
    its successors and America West Holdings Corporation
    (incorporated by reference to Exhibit&nbsp;10.1 to the Current
    Report on Form&nbsp;8-K filed by America West Holdings
    Corporation on May&nbsp;25, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.101</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Investment Agreement, dated May 27, 2005, by and among
    Wellington Investment Management Company, LLP, America West
    Holdings Corporation and US&nbsp;Airways Group, Inc.
    (incorporated by reference to Exhibit&nbsp;10.1 to the Current
    Report on Form&nbsp;8-K filed by America West Holdings
    Corporation on June&nbsp;2, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.102</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Voting Agreement, dated May&nbsp;19, 2005, among TPG Partners,
    L.P., TPG Parallel&nbsp;I, L.P., Air Partners&nbsp;II, L.P. and
    US&nbsp;Airways Group, Inc. (incorporated by reference to
    Exhibit&nbsp;2.1 to the Current Report on Form&nbsp;8-K filed by
    America West Holdings Corporation on May&nbsp;25, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.103</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Supplemental Order (I) Authorizing Debtors&#146; Use of
    Cash Collateral (II) Providing Adequate Protection Pursuant to
    Bankruptcy Rules&nbsp;4001(b) and 4001(d) (incorporated by
    reference to Exhibit&nbsp;99.1 to US&nbsp;Airways Group&#146;s
    Current Report on Form&nbsp;8-K dated January&nbsp;13, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.104</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Junior Secured Debtor-in-Possession Credit Facility Agreement
    dated as of February&nbsp;18, 2005 among US&nbsp;Airways, Inc.,
    as Debtor and Debtor-in-Possession under Chapter&nbsp;11 of the
    Bankruptcy Code as Borrower, US&nbsp;Airways Group, Inc., PSA
    Airlines, Inc., and Material Services, Inc., Debtors and
    Debtors-in-Possession under Chapter&nbsp;11 of the Bankruptcy
    Code as Guarantors, and Eastshore Aviation, LLC, as Lender
    (incorporated by reference to Exhibit&nbsp;99 to US&nbsp;Airways
    Group&#146;s Current Report on Form&nbsp;8-K dated
    February&nbsp;28, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.105</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1 dated as of May&nbsp;19, 2005 to Junior
    Secured Debtor-in-Possession Credit Facility Agreement dated as
    of February&nbsp;18, 2005 among US&nbsp;Airways, Inc., as Debtor
    and Debtor-in-Possession under Chapter&nbsp;11 of the Bankruptcy
    Code as Borrower, US&nbsp;Airways Group, Inc., PSA Airlines,
    Inc., and Material Services, Inc., Debtors and
    Debtors-in-Possession under Chapter&nbsp;11 of the Bankruptcy
    Code as Guarantors, and Eastshore Aviation, LLC, as Lender
    (incorporated by reference to Exhibit 10.105 to US Airways
    Group&#146;s Registration Statement on Form&nbsp;S-4 (File
    No.&nbsp;333-126162), filed with the SEC on June&nbsp;28, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subsidiaries of US&nbsp;Airways Group (incorporated by reference
    to Exhibit&nbsp;21.1 to the Annual Report on Form&nbsp;10-K for
    the year ended December&nbsp;31, 2004 filed by US Airways Group
    on March&nbsp;1, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of KPMG LLP, Independent Registered Public Accounting
    Firm of US&nbsp;Airways Group</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of KPMG LLP, Independent Registered Public Accounting
    Firm of America West Holdings</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.3**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of PricewaterhouseCoopers LLP</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.4***</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Elizabeth K. Lanier (included in Exhibit&nbsp;5.1</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Powers of Attorney signed by the directors of US&nbsp;Airways
    Group, authorizing their signatures on this report (included on
    signature page)</TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Stockholders Agreement among ACE Aviation Holdings, PAR
    Investment Partners, L.P., Peninsula Investment Partners, L.P.,
    Eastshore Aviation, LLC and US&nbsp;Airways Group, Inc.
    (incorporated by reference to Exhibit&nbsp;99.2 to the Current
    Report on Form&nbsp;8-K filed by America West Holdings
    Corporation on May&nbsp;25, 2005)</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.2***</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Instructions as to Use of US&nbsp;Airways Group, Inc.
    Subscription Rights Certificates</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 22%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;Portions of this exhibit have
been omitted under a request for confidential treatment and
filed separately with the United States Securities and Exchange
Commission.
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;**&nbsp;Filed herewith.
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
***&nbsp;To be filed by amendment.
</DIV>

<DIV align="left" style="font-size: 8pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&#134;&nbsp;Management contract or
compensatory plan or arrangement.
</DIV>
</BODY>
</HTML>
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S-1
Table of Contents
As filed with the Securities and Exchange Commission on
June 29, 2005
Registration
No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
US AIRWAYS GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
4512
54-1194634
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer Identification No.)
2345 Crystal Drive
Alexandria, Virginia 22227
Telephone: (703) 872-7000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
Elizabeth K. Lanier, Esq.
Executive Vice President — Corporate Affairs and
General Counsel
2345 Crystal Drive
Arlington, Virginia 22227
(703) 872-7000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Kevin J. Lavin, Esq.
Brian P. Leitch, Esq.
Arnold & Porter
    llp
555 Twelfth Street, NW
Washington, DC 20004
Tel. No.: (202) 942-5000
Fax No.: (202) 942-5999
James E. Walsh III, Esq.
America West Holdings
Corporation
111 West Rio Salado Parkway
Tempe, AZ 85281
Tel. No.: (480) 693-0800
Fax No.: (480) 693-5155
Peter C. Krupp, Esq.
Timothy R. Pohl, Esq.
Skadden, Arps, Slate,
Meagher & Flom llp
333 West Wacker Drive
Chicago, IL 60606-1285
Tel. No.: (312) 407-0700
Fax No.: (312) 407-0411
Stephen A. Greene, Esq.
Ann S. Makich, Esq.
Cahill Gordon &
    Reindel llp
80 Pine Street
New York, NY 10005
Tel. No.: (212) 701-3000
Fax No.: (212) 269-5420
Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the date of this
Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, as amended (the
"Securities Act"), check the following
box.
x
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following
box.
o
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Proposed Maximum
Title of Each Class of
Amount to be
Offering
Aggregate
Amount of
Securities to be Registered
Registered
Price Per Share (1)
Offering Price
Registration Fee
Rights (2)
9,090,909
N/A
N/A
$0 (3)
Common Stock, $0.01 par value (4)
9,090,909
$16.50
$149,999,998.50 (5)
$17,655 (6)
(1)
Estimated solely for the purpose of calculating the registration
    fee in accordance with Rule 457(o) under the Securities Act.
(2)
This registration statement relates to (a) rights to
    purchase shares of common stock of new US Airways Group,
    Inc., which rights will be issued to holders of Class A and
    Class B common stock of America West Holdings Corporation
    and certain unsecured creditors of US Airways Group, Inc.
    and its domestic subsidiaries and (b) the shares of common
    stock deliverable upon exercise of the rights pursuant to the
    rights offering.
(3)
Pursuant to Rule 457(g), no registration fee is payable
    with respect to the rights since the rights are being registered
    in the same Registration Statement as the securities to be
    offered pursuant thereto.
(4)
Represents the shares of stock issuable upon the exercise of the
    rights.
(5)
Represents the gross proceeds from the assumed exercise of all
    rights issued.
(6)
Calculated by multiplying the proposed maximum aggregate
    offering price by 0.0001177.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
Table of Contents
The information in
this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state
where the offer or sale is not
permitted.
Subject to Completion
Preliminary Prospectus Dated
June 29, 2005
PROSPECTUS
9,090,909 Shares of Common Stock of
US AIRWAYS GROUP, INC.
Issuable upon Exercise of Rights to Subscribe for Such
Shares
US Airways Group, Inc. is distributing, at no charge, to
the holders of record of America West Holdings Corporation
Class A and Class B common stock as of the close of
business on [month, day], 2005, the record date for this rights
offering, and to certain unsecured creditors of US Airways
Group, Inc. and its domestic subsidiaries who will be entitled
to vote on the plan of reorganization of US Airways Group
and its domestic subsidiaries on the record date for this rights
offering, as part of their pending bankruptcy proceedings in the
United States Bankruptcy Court for the Eastern District of
Virginia, Alexandria Division, under Chapter 11 of the
bankruptcy code, rights to subscribe for an aggregate of
9,090,909 shares of new US Airways Group common stock,
par value $0.01 per share, following effectiveness of the
plan of reorganization and pending merger with America West
Holdings. We refer to the US Airways Group common stock after
these transactions as New US Airways Group common stock. Holders
of record of America West Holdings Class A and Class B
common stock will receive transferable subscription rights based
on the number of shares of America West Holdings Class A
and Class B common stock owned of record on the record
date. Certain unsecured creditors of US Airways Group and
its domestic subsidiaries will receive non-transferable
subscription rights based on the dollar amounts of claims that
will be allowed to vote on the plan of reorganization of
US Airways Group and its domestic subsidiaries.
Each subscription right entitles its holder to purchase
one share of New US Airways Group common stock for a
subscription price of $16.50. In addition, recipients who
exercise their rights will also have the opportunity to purchase
additional shares of New US Airways Group common stock for
a subscription price of $16.50 under an over-subscription
privilege. Once a right has been exercised, the exercise may not
be revoked by the holder. See the section entitled "The
Rights Offering."
The rights will expire at 5:00 p.m., New York City time, on
[month, day], 2005. Any rights unexercised at the end of the
exercise period will expire without any payment to the holders
of these unexercised rights. You should carefully consider
whether or not to exercise or sell your rights, to the extent
your rights are transferable, before the expiration of this
rights offering.
This offering is conditional, among other things, on the plan of
reorganization being confirmed by the bankruptcy court and the
completion of the pending merger with America West Holdings. If
either the plan of reorganization is not confirmed or the merger
is not completed, this offering will be deemed not to have been
made, no rights will be exercisable, no shares of New
US Airways Group common stock will be distributed under
this prospectus and any funds deposited under this rights
offering will be refunded.
We are applying to have the shares of New US Airways Group
common stock to be issued upon the exercise of rights in the
rights offering authorized for listing on the New York Stock
Exchange, or the NYSE, upon official notice of issuance under
the symbol "[    ]."
Investing in the common stock of New US Airways Group
involves risks that are described in the section entitled
"Risk Factors" beginning on page 21.
Dealer
Manager
Proceeds Before
Price to Public
Fee (1)
Expenses (2)
Per Share
$16.50
$
$
Total
$149,999,998.50
$
$
(1)
In connection with this rights offering, Merrill
    Lynch & Co. has been retained as dealer manager and
    structuring advisor.
(2)
Assumes all shares of New US Airways Group common stock are
    subscribed for.
Merrill Lynch is not underwriting the offering and has no
obligation to purchase or procure purchases of the common stock
offered hereby. See the section entitled "Dealer Manager
and Structuring Advisor Arrangements."
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
Merrill Lynch & Co.
The date of this prospectus is [month, day], 2005
Table of Contents
TABLE OF CONTENTS
Page
WHERE YOU CAN FIND MORE INFORMATION ABOUT
    US AIRWAYS GROUP AND AMERICA WEST HOLDINGS
i
QUESTIONS AND ANSWERS ABOUT THE RIGHTS
    OFFERING
ii
KEY DATES
x
SUMMARY
1
The Companies
1
The Merger
2
The Combined Company Following the
    Merger
2
Listing of New US Airways Group Common
    Stock
6
The Debtors' Plan of Reorganization
6
New Equity Investments
7
Accounting Treatment
8
Risk Factors
8
Rights Offering Summary
9
Summary Selected Financial Data
15
US Airways Group, Inc.
15
America West Holdings Corporation
18
Selected Unaudited Pro Forma Condensed
    Combined Financial Data
20
RISK FACTORS
21
CAUTIONARY STATEMENT CONCERNING
    FORWARD-LOOKING STATEMENTS
31
USE OF PROCEEDS
33
CAPITALIZATION
34
PRO FORMA FULLY DILUTED SECURITY OWNERSHIP
    BY ENTITY OF NEW US AIRWAYS GROUP AT CLOSING
38
PRO FORMA SECURITY OWNERSHIP OF CERTAIN
    BENEFICIAL OWNERS OF NEW US AIRWAYS GROUP
40
PER SHARE MARKET PRICE DATA
41
DIVIDEND POLICY
43
THE COMBINED COMPANY FOLLOWING THE
    MERGER
44
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
48
THE RIGHTS OFFERING
61
The Rights
61
Subscription Privileges
61
Subscription Price
62
Expiration Time and Date
62
Determination of Payment Amount Upon
    Exercise
62
Exercise of Rights
64
No Revocation
66
Method of Transferring Rights
66
Non-Transferability of US Airways Creditors Rights
67
Procedures for DTC Participants
67
Subscription Agent
67
Determination of Subscription Price
67
No Appraisal Rights
67
No Recommendation to Holders
67
Conditions to the Rights Offering
68
Regulatory Limitation
68
Foreign and Certain Other Holders
68
Withdrawal
69
Issuance of New US Airways Group Common
    Stock
69
THE MERGER
70
General
70
Background of the Merger
70
Bankruptcy Court Approvals
73
Regulatory Approvals Required for the
    Merger
73
Approvals of the Air Transportation
    Stabilization Board
74
Accounting Treatment
75
Table of Contents
Page
Listing of New US Airways Group Common Stock
75
Change of Control Put Option under America
    West Airlines, Inc.'s 7.25% Senior Exchangeable Notes
75
America West Holdings Warrants
75
THE MERGER AGREEMENT
76
Structure of the Merger
76
Closing and Effective Time of the Merger
76
Post-Merger America West Holdings Governing
    Documents, Officers and Directors; New US Airways Group
    Governing Documents and Directors
76
The Merger Consideration
77
Representations, Warranties and
    Covenants
78
Conditions to the Merger
78
Termination of the Merger Agreement
81
Effect of Termination
83
Amendment and Waiver
83
THE PLAN OF REORGANIZATION
84
THE NEW EQUITY INVESTMENTS
86
Summary of the Investments
86
Closing of the Investments
86
Commercial Agreements with ACE Aviation
    Holdings Inc.
86
Participation Agreements with Par
    Investment Partners, L.P. and Peninsula Investment Partners,
    L.P.
87
Transaction Documents
88
Representations, Warranties and
    Covenants
88
Conditions to the Investment Agreements
89
Termination
93
The Stockholders Agreement
93
DESCRIPTION OF CAPITAL STOCK OF NEW
    US AIRWAYS GROUP
95
SHARES ELIGIBLE FOR FUTURE SALE
100
DEALER MANAGER AND STRUCTURING ADVISOR
    ARRANGEMENTS
104
MATERIAL UNITED STATES FEDERAL INCOME TAX
    CONSEQUENCES
105
INFORMATION WITH RESPECT TO US AIRWAYS
    GROUP, INC. PRIOR TO THE MERGER
109
US AIRWAYS GROUP MANAGEMENT'S
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS
128
LEGAL MATTERS
160
EXPERTS
160
Annexes
ANNEX A-1
US Airways Group, Inc.'s Annual
    Report on Form 10-K for the year ended December 31,
    2004
A-1
ANNEX A-2
US Airways Group, Inc.'s
    Quarterly Report on Form 10-Q for the three months ended
    March 31, 2005
A-2
ANNEX B-1
America West Holdings Corporation's
    Annual Report on Form 10-K for the year ended
    December 31, 2004
B-1
ANNEX B-2
America West Holdings Corporation's
    Quarterly Report on Form 10-Q for the three months ended
    March 31, 2005
B-2
EX-23.1: CONSENT OF KPMG LLP
EX-23.2: CONSENT OF KPMG LLP
EX-23.3: CONSENT OF PRICEWATERHOUSECOOPERS LLP
Table of Contents
You should rely only on the information contained in this
prospectus for purposes of your decision to exercise your rights
to purchase these securities. We have not, and the dealer
manager and structuring advisor has not, authorized any other
person to provide you with different information for those
purposes. If anyone provides you with different or inconsistent
information, you should not rely on it for purposes of your
decision to exercise your rights to purchase these securities.
We are not, and the dealer manager and structuring advisor is
not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You
should assume that the information appearing in this prospectus
is accurate only as of the date on the front cover of this
prospectus. Our business, financial condition, results of
operations and prospects may have changed since that date. If
you are a creditor of US Airways Group or any of its
domestic subsidiaries, you are also receiving a disclosure
statement that provides the information on which you should rely
for purposes of determining how to vote on the plan of
reorganization. You should only rely on the disclosure statement
for that decision, and not on this prospectus.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US AIRWAYS
GROUP
AND AMERICA WEST HOLDINGS
The primary part of this document, which forms part of a
registration statement on Form S-1 filed with the SEC by US
Airways Group, constitutes a prospectus of US Airways Group
under Section 5 of the Securities Act with respect to the
rights and the shares of New US Airways Group common stock to be
issued in connection with this rights offering. The prospectus
contains information about this rights offering and the combined
company after completion of the plan of reorganization and the
pending merger transaction with America West Holdings. In
addition, we have included historical information regarding US
Airways Group and America West Holdings that is contained in
their respective filings with the SEC on Forms 10-K and
10-Q that are attached as annexes to this prospectus. The
registration statement contains more information than this
prospectus regarding US Airways Group and New
US Airways Group common stock, including certain exhibits.
You can obtain a copy of the registration statement from the SEC
at the address listed below or from the SEC's website.
US Airways Group, US Airways, Inc., America West Holdings
and America West Airlines, Inc. file annual, quarterly and
current reports, proxy statements and other information with the
SEC. You may read and copy these reports, statements or other
information at the SEC's Public Reference Room at
Room 1580, 100 F Street NE, Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. The SEC filings of US Airways Group,
US Airways, Inc., America West Holdings and America West
Airlines, Inc. are also available to the public from commercial
document retrieval services and at the website maintained by the
SEC at www.sec.gov. You can also find the SEC filings of US
Airways Group on its website, www.usairways.com, and of America
West Holdings on its website, www.americawest.com. Information
included on the identified websites is not incorporated by
reference in this prospectus. Documents of US Airways Group,
US Airways, Inc., America West Holdings and America West
Airlines, Inc. are also available from US Airways Group and
America West Holdings, respectively, without charge, excluding
any exhibits to those documents that are not specifically
incorporated by reference as an exhibit in this prospectus. You
may request a copy of these documents in writing or by telephone
by contacting the companies at:
US Airways Group, Inc.
America West Holdings Corporation
2345 Crystal Drive
111 West Rio Salado Parkway
Arlington, Virginia 22227
Tempe, Arizona 85281
Telephone number: (703) 872-7000
Telephone number: (480) 693-0800
Attn: Investor Relations
Attn: Investor Relations
In addition, for information regarding US Airways Group's
bankruptcy proceedings, you may access filings made in the
proceedings, including the plan of reorganization and disclosure
statement filed by US Airways Group and its domestic
subsidiaries in those proceedings, at www.donlinrecano.com.
Information on this website is not incorporated by reference in
this prospectus.
i
Table of Contents
Unless we specify otherwise, all references in this
prospectus to "New US Airways Group," the
"combined company" and "our company" refer
to US Airways Group following effectiveness of the
plan of reorganization of US Airways Group and its domestic
subsidiaries and the merger with America West Holdings. Unless
we specify otherwise, all references in this prospectus to
"US Airways Group" refer to
US Airways Group, Inc. prior to the effectiveness of
the merger, all references in this prospectus to "America
West Holdings" refer to America West Holdings Corporation,
and all references to "we" and "us" refer to
US Airways Group and America West Holdings together
before the merger as well as to New
US Airways Group.
QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING
The following are some questions that you, as a stockholder
of America West Holdings or an unsecured creditor of
US Airways Group and its domestic subsidiaries, may have
regarding the rights offering and brief answers to those
questions. You should carefully read the remainder of this
prospectus because the information in this section does not
provide all the information that might be important to you with
respect to this rights offering. Additional important
information is also contained in the annexes to this
prospectus.
Q:            What
is a right?
A:
Each basic right entitles its holder to purchase one share of
    New US Airways Group common stock at a purchase price of
    $16.50, which we refer to as the Subscription Price, as well as
    certain over-subscription privileges described below. America
    West Holders (as defined below) and US Airways Creditors
    (as defined below), which we refer to collectively as the
    Holders, will be issued basic rights.
Q:            When
do the rights expire?
A:
The rights expire at 5:00 p.m., New York City time, on
    [month, day], 2005, which we refer to as the Expiration Date.
    See the section entitled "The Rights Offering —
    Expiration Time and Date" for more information.
Q:            How
many rights will you be distributing?
A:
We will be distributing rights to purchase an aggregate of
    9,090,909 shares of New US Airways Group common stock.
    We will issue:
•
3,500,000 basic rights to the America West Holders, which we
    refer to as the America West Holders Pool; and
•
5,590,909 basic rights to the US Airways Creditors, which
    we refer to as the US Airways Creditors Pool.
We will not issue fractional rights or cash in lieu of
    fractional rights. We will round fractional rights up to the
    nearest whole number subject to any adjustments necessary to
    ensure that, assuming all rights are exercised, we will issue
    9,090,909 shares. See the section entitled "The Rights
    Offering — Subscription Privileges" for more
    information.
Q:            How
many rights will I be receiving?
A:                     •
If you are an America West Holder:
If you are a holder of record of Class A or Class B
    common stock of America West Holdings on [month, day], 2005, the
    record date for the rights offering, you will receive one basic
    right for every
    [          ] shares
    of America West Holdings Class A or Class B common
    stock that you hold on the record date, in addition to certain
    over-subscription privileges discussed below. We refer to
    holders of America West Holdings Class A or Class B
    common stock that are entitled to receive rights in the rights
    offering as America West Holders. The amount of your
    over-subscription privilege depends on the extent to which
    others exercise their basic rights and over-subscription
    privileges.
ii
Table of Contents
•
If you are a US Airways Creditor:
US Airways Group and its domestic subsidiaries, which we
    refer to as the debtors, will be filing a plan of reorganization
    in the bankruptcy court. The debtors' general unsecured
    creditors that, pursuant to the terms of the plan of
    reorganization, are entitled to receive rights pursuant to this
    rights offering, are referred to as US Airways Creditors.
    If you are a US Airways Creditor, you will receive basic
    rights, in addition to certain over-subscription privileges
    discussed below. The number of basic rights you will receive
    depends on the amount of your claim that is allowed for the
    purpose of voting on the plan of reorganization, as well as on
    the total amount of claims that are allowed for the purpose of
    voting on the plan of reorganization. The amount of your
    over-subscription privilege depends on these two amounts, as
    well as on the extent to which others exercise their basic
    rights and over-subscription privileges. See the questions
    "How are the basic rights of each US Airways Creditor
    ultimately determined?" and "What is the
    over-subscription privilege?" for more information.
Q:
Is there a difference between the amount of my claim as a US
    Airways Creditor that is allowed for purposes of voting on the
    plan of reorganization and the amount of my claim as ultimately
    determined through the bankruptcy process?
A:
There can be. The number of basic rights and the associated
    over-subscription privilege you receive is based on the allowed
    amount of your claim, if it is undisputed, or any amount of your
    claim temporarily allowed for these purposes if your claim is
    disputed. If your claim is disputed, your claim might ultimately
    be determined to have an equal, lesser or greater value.
    Whatever the ultimate value of your claim, it will have no
    effect on the number of rights to which you are entitled through
    the rights offering.
Q:
How are the basic rights of each America West Holder
    determined?
A:
For every
    [                    ] shares
    of Class A or Class B common stock of America West
    Holdings you own on the record date, you will be entitled to one
    basic right.
Q:
How are the basic rights of each US Airways Creditor
    ultimately determined?
A:
The number of basic rights issued to each US Airways
    Creditor is based on the amount of each US Airways
    Creditor's allowed voting claim, as well as the total
    amount of all US Airways Creditors' allowed voting
    claims. These amounts will be determined no later than the date
    that the confirmation order is entered by the bankruptcy court,
    referred to as the Confirmation Order Date. On a date that is
    within 3 business days after the Confirmation Order Date,
    which we refer to as the Allocation Date, the number of each
    US Airways Creditor's basic rights will be determined
    using the following formula, which we refer to as the
    US Airways Creditor Basic Right Calculation:
A
-
× C = D
B
Where:
A  =
The total allowed voting claim of the US Airways Creditor
B  =
The total amount of all allowed voting claims of all
    US Airways Creditors
C  =
5,590,909 basic rights, representing the US Airways
    Creditors Pool
D  =
The number of basic rights that the US Airways Creditor
    ultimately receives
For more information regarding the amount of payment you may
    submit for your rights, see the question "— How
    do I determine the amount to pay when I exercise my
    rights?".
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Q:            What
is the over-subscription privilege?
A:
The over-subscription privilege provides a way for America West
    Holders and US Airways Creditors to purchase any shares of
    New US Airways Group common stock that might be left over
    after all America West Holders and US Airways Creditors
    have had the opportunity to exercise their basic rights. There
    may be shares left over to the extent that not all America West
    Holders and US Airways Creditors choose to exercise all of
    their basic rights.
Q:            How
does the over-subscription privilege work?
A:                     •
If you are an America West Holder
:
The over-subscription privilege entitles you to elect to
    purchase additional shares of New US Airways Group common
    stock at the same purchase price per share you paid in
    exercising your basic subscription privilege. The number of
    additional shares you elect to purchase is at your discretion
    but cannot exceed
    [          ]x
    the number of shares you elected to purchase pursuant to the
    basic subscription. However, we give no assurance that you will
    be able to purchase any or all of the shares for which you make
    an over-subscription election. For example, if all of the basic
    subscription rights granted by us are exercised, no shares will
    be available to be issued pursuant to exercises of
    over-subscription privileges. See the question
    "— How will you allocate shares under the
    over-subscription privilege?" for more information.
You must pay for the shares you elect to purchase pursuant to
    the over-subscription privilege at the same time you pay for the
    shares you are purchasing pursuant to the basic subscription
    privilege. If we do not satisfy your over-subscription request
    in full, the Subscription Agent (as defined below) will return
    to you, within 5 business days of the Allocation Date (as
    defined below), without interest, any payment for shares not
    issued to you.
•
If you are a US Airways Creditor
:
The over-subscription privilege entitles you to elect to
    purchase additional shares of New US Airways Group common
    stock at the same purchase price per share you paid in
    exercising your basic subscription privilege. The number of
    additional shares you will ultimately receive under your
    over-subscription election cannot exceed
    [          ]x
    the number of shares you will ultimately receive in the basic
    subscription. See the question "How are the basic rights of
    each US Airways Creditor ultimately determined?" for
    more information. However, we give no assurance that you will
    receive any shares pursuant to the over-subscription privilege.
    For example, if all of the basic subscription rights granted by
    us are exercised, no shares will be available to be issued
    pursuant to exercises of the over-subscription privileges. See
    the question "How will you allocate shares under the
    over-subscription privilege?" for more information.
You must pay for the shares you elect to purchase pursuant to
    the over-subscription privilege at the same time you pay for the
    shares you are purchasing pursuant to the basic subscription
    privilege. The difference between your total subscription and
    the ultimate determination of your basic rights will determine
    the amount of your subscription eligible for your
    over-subscription privilege. If we do not satisfy your
    over-subscription request in full, the Subscription Agent will
    return to you, within 5 business days of the Allocation Date,
    without interest, any payment for shares not issued to you.
Q:
How will you allocate shares under the over-subscription
    privilege?
A:
If any shares being offered in this rights offering are
    available after satisfying all exercises of basic rights, we
    will allocate the over-subscription requests as follows:
•
If
you are an America West Holder:
You will have your over-subscription requests satisfied first
    out of any shares remaining in the America West Holders Pool
    after satisfying all exercises of the basic subscription rights
    by America West Holders and then out of any remaining shares in
    the US Airways Creditors Pool after satisfying
iv
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all exercises of the basic and over-subscription requests of
    US Airways Creditors. The number of additional shares we
    allocate to you pursuant to your over-subscription privilege
    will be calculated by adding the number of shares available for
    over-subscription in the America West Holders Pool and any
    remaining shares in the US Airways Creditor Pool, and
    multiplying the sum of those shares by a proration factor. The
    proration factor is determined by dividing the total number of
    shares that the America West Holder elected to purchase under
    the over-subscription privilege by the total number of shares
    all America West Holders elected to purchase pursuant to the
    over-subscription privilege. However, each basic right held by
    an America West Holder must be exercised for that Holder's
    associated over-subscription privilege to apply. The number of
    additional shares we allocate to you pursuant to the
    over-subscription privilege may be subject to certain reductions
    to ensure that the merger will qualify as a tax-free
    "reorganization" within the meaning of
    Section 368(a) of the Internal Revenue Code of 1986, as
    amended.
•
If you are a US Airways Creditor:
You will have your over-subscription requests satisfied first
    out of any shares remaining in the US Airways Creditors
    Pool after satisfying all exercises of the basic subscription
    rights of US Airways Creditors and then out of any
    remaining shares in the America West Holders Pool after
    satisfying all exercises of the basic subscription rights and
    over-subscription requests of America West Holders. The number
    of additional shares we allocate to you pursuant to your
    over-subscription privilege will be calculated by adding the
    number of shares available for over- subscription in the
    US Airways Creditors Pool and any remaining shares in the
    America West Holders Pool, and multiplying the sum of those
    shares by a proration factor. The proration factor is determined
    by dividing the total number of shares that the US Airways
    Creditor is ultimately determined to have elected to purchase
    pursuant to the over-subscription privilege by the total number
    of shares all US Airways Creditors are ultimately
    determined to have elected to purchase pursuant to the
    over-subscription privilege. However, each basic right that is
    ultimately deemed to be held by a US Airways Creditor must
    be exercised for that Holder's associated over-subscription
    privilege to apply.
Q:
How did you determine the Subscription Price for the shares
    of New US Airways Group common stock?
A:
The Subscription Price of $16.50 per share is the highest price
    committed to be paid by the new equity investors that have
    committed to purchase shares of New US Airways Group common
    stock in connection with the merger and the plan of
    reorganization. However, we cannot predict the price at which
    New US Airways Group common stock will trade following this
    rights offering.
Q:
How will you use the proceeds from this rights offering?
A:
We expect to use the net proceeds from this rights offering for
    general corporate purposes, including the possible redemption or
    repurchase of other securities of New US Airways Group.
Q:
How do I exercise my rights?
A:
You may exercise your rights by properly completing, signing and
    delivering your rights certificate. You must deliver your
    original completed rights certificate to
    [          ],
    which is acting as the subscription agent.
The subscription
    agent will not accept a facsimile transmission of your completed
    rights certificate.
This delivery must be accompanied by
    full payment of the purchase price for each share you wish to
    purchase under the basic rights, as well as for each share you
    wish to purchase pursuant to your over-subscription privilege.
    If you use the mail, we recommend that you use insured,
    registered mail, return receipt requested. If you cannot deliver
    your rights certificate to the Subscription Agent before the
    expiration of the rights offering, you may follow the guaranteed
    delivery procedures described under the section entitled
    "The Rights Offering — Exercise of Rights."
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Table of Contents
Q:
How do I determine the amount to pay when I exercise my
    rights?
A:                     •
If you are an America West Holder:
For every [     ] shares of
    America West Holdings Class A or Class B common stock
    you own on the record date, you will be entitled to one basic
    right. In addition, you may purchase up to
    [     ]x that basic subscription amount
    pursuant to your over-subscription privilege.
For example, assuming you will be entitled to 1 basic right
    for each 10 shares of Class A or Class B common
    stock you own, if you own 100 shares of common stock of
    America West Holdings on the record date, you would be entitled
    to 10 basic rights. To fully exercise your basic rights,
    you would then multiply the fixed Subscription Price of $16.50
    by your 10 basic rights, and submit a dollar amount of
    $165.00. If you wish to fully exercise your over-subscription
    privilege, assuming a 10x over-subscription option, you would
    multiply 10 x 10 x $16.50, and submit an additional $1,650.00 as
    payment for the full amount of the over-subscription privilege.
Therefore, you would submit a total payment to the Subscription
    Agent of $1,815.00 (the sum of $165.00 to exercise your basic
    rights and $1,650.00 to exercise your over-subscription
    privilege) for your full exercise of your basic and
    over-subscription privileges.
Notwithstanding the foregoing, you are in no way obligated to
    exercise either your basic or over-subscription privileges in
    full, and any lesser amount will be accepted. However, you must
    exercise each basic right to exercise any associated
    over-subscription privilege.
In the event that the total dollar amount you submit is greater
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, the surplus will be
    applied as an exercise of the over-subscription privilege
    discussed above.
In the event that the total dollar amount you submit is less
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, you will receive fewer
    shares than you estimated you would have been entitled to
    receive. In the case of an under-subscription, you will not have
    an opportunity to submit further payment for the exercise of any
    additional basic rights or over- subscription privileges.
In the event that the total dollar amount you submit is greater
    than the basic and over-subscription privileges you are
    ultimately entitled to, any excess funds will be returned to
    you, without interest, within 5 business days of the
    Allocation Date.
•
If
you are a US Airways Creditor
:
Your basic rights will ultimately be determined pursuant to the
    US Airways Creditor Basic Right Calculation on the
    Allocation Date. A determination may not be made on the exact
    amount of your allowed claim, or the total amount of all allowed
    claims, entitled to vote on the plan of reorganization until on
    or before the Confirmation Order Date. Solely for the purposes
    of estimating your basic rights, we have assumed
    $[               ] billion
    of total allowed voting claims. You may estimate you will
    receive one basic right for each
    $[               ]
    allowed voting claim amount. For example, a claim for
    $[               ]
    is estimated to receive
    [               ]
    basic rights. However, your basic rights will ultimately be
    determined pursuant to the US Airways Creditor Basic Right
    Calculation on the Allocation Date. See the question, "How
    are the basic rights of each US Airways Creditor ultimately
    determined?" for more information.
Once you have estimated your basic subscription, you may pay for
    your basic subscription and pay up to
    [          ]x
    that basic subscription price to participate in the associated
    over-subscription privilege.
You would multiply the Subscription Price of $16.50 by the
    estimated number of basic rights to which you estimate you are
    entitled, and submit a dollar amount in order to pay for the
    full amount of basic rights attributable to your estimated
    claim. If you hold a $100,000 claim and wish to fully exercise
    your over-subscription privilege, assuming a 10x
    over-subscription option, you would
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multiply
    [          ] x 10 x $16.50,
    and submit
    $[          ]
    as an additional payment for the full amount of the
    over-subscription privilege.
Therefore, you would submit a total payment to the Subscription
    Agent of
    $[          ]
    (the sum of
    $[          ]
    to exercise your basic rights and
    $[          ]
    to exercise your over-subscription privilege) for your full
    exercise of your basic and over-subscription privileges.
Notwithstanding the foregoing, you are in no way obligated to
    exercise either your basic or over-subscription privilege in
    full, and any lesser amount will be accepted. However, you must
    exercise each basic right to exercise any associated
    over-subscription privilege.
Although we have provided you with our best estimate of the
    amount of your basic rights and over-subscription privilege, it
    is likely that your final basic rights and over-subscription
    privilege will be different from our estimate, perhaps
    materially so. In the rights certificate, you must acknowledge
    that New US Airways Group is not liable for any damages
    resulting from your receiving a different number of rights and
    over-subscription privileges than you originally estimated you
    would be entitled to receive.
In the event that the total dollar amount you submit is greater
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, the surplus will be
    applied as an exercise of the over-subscription privilege
    discussed above.
In the event that the total dollar amount you submit is less
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, you will receive fewer
    shares than you estimated you would have been entitled to. In
    the case of an under-subscription, you will not have an
    opportunity to submit further payment for the exercise of any
    additional basic rights or over- subscription privileges.
In the event that the total dollar amount you submit is greater
    than the basic and over-subscription privileges you are
    ultimately entitled to, any excess funds will be returned to
    you, without interest, within 5 business days of the
    Allocation Date.
Q:
When will I receive the shares I am purchasing by exercising
    my rights?
A:
We will issue the shares as soon as practicable after the
    Closing Date, which is the date on which the merger will close.
    To the extent your request could not be satisfied, payment for
    the purchase price for the shares you elected to purchase will
    be returned to you within 5 business days following the
    Allocation Date, without interest.
In addition, the completion of this rights offering is subject
    to a number of conditions, including the confirmation of the
    plan of reorganization and the completion of the merger. In the
    event that this rights offering is terminated because the
    conditions precedent could not be met, your payment of the
    purchase price for the shares you elected to purchase will be
    returned to you, within 5 business days of that
    termination, with interest to accrue from the Expiration Date to
    the date of that termination. See the section entitled "The
    Rights Offering — Conditions to the Rights
    Offering" for more information.
Q:
Am I required to exercise my rights?
A:
No. However, if you choose not to fully exercise your
    rights, the relative percentage of New US Airways Group
    common stock that you own will decrease, and your voting and
    other rights will be diluted to the extent that other holders of
    rights exercise their rights. Also, holders who do not exercise
    their rights prior to the Expiration Date will lose any value
    represented by the rights.
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Q:
What happens if I do not exercise my rights?
A:
If you do not exercise your rights before the Expiration Date,
    your rights will expire.
Q:
May I transfer my rights through the Subscription Agent if I
    do not want to purchase any shares?
A:                     •
If you are an America West Holder:
You may transfer your rights through the Subscription Agent or
    otherwise. See the section entitled "The Rights
    Offering — Method of Transferring Rights" for
    more information.
•
If you are a US Airways Creditor:
Your rights are not transferable through the Subscription Agent.
Q:
If I am a US Airways Creditor, what happens to my rights
    if I transfer my claim?
A:
Rights may only be exercised by the holder of the claim on the
    record date. If you subsequently transfer your claim, we will
    not recognize the transferee as the holder of the rights.
Q:
If I exercise rights in this rights offering, may I cancel or
    change my decision?
A:
No. Once you have exercised your rights, you may not revoke
    your exercise even if we have not yet issued the associated
    shares to you.
Q:
Are there any limitations on the exercise of rights by
    foreign holders?
A:
We reserve the right to reject subscriptions by non-U.S. persons
    to the extent that acceptance of those subscriptions would cause
    the number of shares of New US Airways Group common stock held
    by non-U.S. persons to be entitled to more than 24.9% of the
    aggregate votes of all outstanding shares of common stock of New
    US Airways Group following the completion of the rights offering.
Q:
Can you terminate this rights offering?
A:
Yes. We may terminate this rights offering for any reason at any
    time prior to the Expiration Date. Although we have no current
    intention to terminate this rights offering, we are reserving
    the right to do so in the event that circumstances occur between
    the date of this prospectus and the Expiration Date that cause
    us to conclude that it should be withdrawn. In addition, this
    rights offering will be terminated following the Expiration Date
    in the event that any of the conditions to the completion of
    this rights offering have not been met. This rights offering
    will expire automatically if the merger does not occur by
    December 31, 2005. See the section entitled "The
    Rights Offering — Conditions to the Rights
    Offering" for more information.
Q:
If this rights offering is terminated or if my request is not
    satisfied in full, will my payment be refunded to me?
A:
Yes. If this rights offering is terminated, the Subscription
    Agent will return to you all payments for the shares not issued
    to you, within 5 business days of the date of termination. If
    the termination occurs after the Expiration Date, that payment
    will be made with interest, which will accrue from the
    Expiration Date to the date of termination. If this rights
    offering is completed and we do not satisfy your request in
    full, the Subscription Agent will return to you, within 5
    business days of the Allocation Date, without interest, all
    payments for the shares not issued to you. See the section
    entitled "The Rights Offering — Withdrawal"
    for more information.
Q:
When will the merger occur?
A:
We are planning to complete the merger as promptly as
    practicable. This rights offering will terminate automatically
    if the merger is not completed by December 31, 2005.
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Q:
What should I do if I want to participate in this rights
    offering but my rights are held in the name of my broker,
    dealer, commercial bank, trust company or other nominee?
A:
If you hold your rights through a broker, dealer, commercial
    bank, trust company or other nominee, you will need to have your
    broker, dealer, commercial bank, trust company or other nominee
    act for you if you wish to exercise or, in the case of America
    West Holders, sell your rights. To indicate your decision, you
    should complete and return to your broker, bank or other nominee
    the form entitled "Beneficial Owner Election Form."
    You should receive this form from your broker, bank or other
    nominee with the other rights offering materials. See the
    section entitled "The Rights Offering —
    Subscription Privileges" for more information.
Q:
Will I be charged a sales commission or a fee by
    US Airways Group if I exercise my rights?
A:
No. We will not charge a brokerage commission or a fee to
    rights holders for exercising their rights. However, if you
    exercise your rights through a broker, bank or other nominee,
    you will be responsible for any fees charged by your broker,
    bank or nominee.
Q:
Have US Airways Group, its board of directors, America
    West Holdings' board of directors or Merrill Lynch made a
    recommendation as to whether I should exercise, or, if I am an
    America West Holder, sell, my rights?
A:
No. Neither US Airways Group, its board of directors,
    America West Holdings' board of directors, nor Merrill
    Lynch has made any recommendation as to whether you should
    exercise or sell your rights. You should decide whether to
    purchase shares of New US Airways Group common stock
    pursuant to this rights offering based upon your own assessment
    of your best interests.
Q:
What are the United States federal income tax consequences of
    the rights offering to me?
A:
The tax consequences of the rights offering will depend, among
    other things, on your status as an America West Holder or a
    US Airways Creditor. The likely tax consequences of the
    rights offering are described under the section entitled
    "Material United States Federal Income Tax
    Consequences."
We strongly urge you to consult your own tax advisor as to the
    specific tax consequences to you of the rights offering,
    including the applicability and effect of federal, state, local
    and foreign income and other tax laws in your particular
    circumstances.
Q:
How many shares of New US Airways Group common stock
    will be outstanding upon completion of the merger?
A:
Effective upon completion of the merger, but not including the
    rights offering, we estimate that there will be outstanding
    approximately
    [                    ] shares
    of New US Airways Group common stock. This number includes
    shares that we are required to issue upon exercise of
    outstanding options, convertible debt and warrants. If all
    rights we are issuing in this rights offering are exercised, the
    number of outstanding shares of New US Airways Group common
    stock will increase by 9,090,909 shares.
Q:
What should I do if I have other questions?
A:
If you have any questions about the procedure for exercising
    your rights, including if you have lost your rights certificate,
    please contact
    [                    ],
    which is acting as our information agent, at
    [          ].
Banks and brokerage firms, please call
    [          ].
    All others, please call toll-free
    [          ].
If you have questions about whether your completed rights
    certificate or payment has been received, please contact
    [                    ],
    which is acting as our Subscription Agent, at
    [                    ].
For a more complete description of this rights offering, see the
section entitled "The Rights Offering."
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KEY DATES
Record Date
[month, day], 2005, which is the date used to determine which
    stockholders of America West Holdings are entitled to be granted
    rights.
Rights Distribution Date
[month, day], 2005.
Rights Exercise Period
[month, day], 2005 through and including [month, day], 2005.
Expiration Date
The rights will expire, if not previously exercised, at
    5:00 p.m., New York City time, on [month, day], 2005.
Confirmation Order Date
The date that the confirmation order for the plan of
    reorganization is entered by the bankruptcy court. No later than
    that date, the determination will be made as to the amount of
    each US Airways Creditor's claim allowed to vote on
    the plan of reorganization.
Allocation Date
The date which is 3 business days after the Confirmation
    Order Date. On that date, the ultimate determination of the
    rights allocation will be made.
Closing Date
The date when this rights offering is completed. On that date,
    the shares of New US Airways Group common stock will be
    issued pursuant to this rights offering.
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SUMMARY
The following is a summary that highlights information
contained in this prospectus. This summary may not contain all
of the information that may be important to you. For a more
complete description of the rights offering and the merger, as
well as the plan of reorganization of US Airways Group and
its domestic subsidiaries, we encourage you to read carefully
this entire prospectus. In addition, we encourage you to read
documents of US Airways Group and America West Holdings
that have been filed with the SEC, and the companies'
respective Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q attached to this prospectus. These documents include
important business and financial information about
US Airways Group and America West Holdings.
The Companies
US Airways Group, Inc.
2345 Crystal Drive
Arlington, Virginia 22224
(703) 872-7000
US Airways Group, Inc., a Delaware corporation, is a
holding company formed in 1983 whose origins trace back to the
formation of All American Aviation in 1937. US Airways
Group's primary business activity is the operation of a
major network air carrier through its ownership of the common
stock of US Airways, Inc., Piedmont Airlines, Inc., PSA
Airlines, Inc., Material Services Company, Inc. and Airways
Assurance Limited. US Airways, Inc., along with
US Airways Group's regional airline subsidiaries
and affiliated carriers flying as US Airways Express, is a
hub-and-spoke carrier with a substantial presence in the Eastern
United States and with service to Canada, the Caribbean, Latin
America and Europe. US Airways, Inc. had approximately
42 million passengers boarding its planes in 2004 and is
the seventh largest U.S. air carrier based on ASMs. As of
March 31, 2005, US Airways, Inc. operated 279 jet
aircraft and 25 regional jet aircraft and provided regularly
scheduled service at 101 airports in the continental United
States, Canada, the Caribbean, Latin America and Europe. As of
March 31, 2005, the US Airways Express network served
133 airports in the United States, Canada and the Bahamas,
including approximately 51 airports also served by
US Airways, Inc. During 2004, US Airways Express air
carriers had approximately 15.2 million passengers boarding
their planes.
As discussed in more detail below, on September 12, 2004,
US Airways Group and its domestic subsidiaries,
US Airways, Inc., Piedmont Airlines, Inc., PSA Airlines,
Inc. and Material Services Company, Inc., which account for
substantially all of the operations of
US Airways Group, filed voluntary petitions for relief
under Chapter 11 of the United States Bankruptcy Code in
the United States bankruptcy court for the Eastern District of
Virginia, Alexandria Division. US Airways Group and
its domestic subsidiaries are sometimes referred to in this
prospectus as the "debtors" because that is a common
term for companies in bankruptcy.
America West Holdings Corporation
111 West Rio Salado Parkway
Tempe, Arizona 85281
(480) 693-0800
America West Holdings Corporation, a Delaware corporation formed
in 1996, is a holding company that owns all of the stock of
America West Airlines, Inc., a Delaware corporation formed in
1981. America West Airlines, Inc. accounted for most of America
West Holdings' revenues and expenses in 2004. Based on 2004
operating revenues and available seat miles, or ASMs, America
West Airlines, Inc. is the eighth largest passenger airline and
the second largest low-cost carrier in the United States.
America West Airlines, Inc. is the largest low-cost carrier that
operates a hub-and-spoke network, with large hubs in both
Phoenix, Arizona and Las Vegas, Nevada. As of March 31,
2005, America West Airlines, Inc. operated a fleet of 138
aircraft with an average age of 11.0 years and served 63
destinations in North America, including eight in Mexico,
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three in Canada and one in Costa Rica. Through regional alliance
and code share arrangements with other airlines, America West
Airlines, Inc. served an additional 51 destinations in North
America. In 2004, America West Airlines, Inc. had approximately
21.1 million passengers boarding its planes and generated
revenues of approximately $2.3 billion.
The Merger (see page 70)
America West Holdings and US Airways Group have agreed to
the business combination of US Airways Group and America
West Holdings under the terms of the merger agreement that is
described in this prospectus. America West Holdings will merge
with Barbell Acquisition Corp., a wholly owned subsidiary of
US Airways Group. The rights offering is conditioned on the
completion of the merger. For more information relating to the
merger, see the section entitled "The Merger."
The Combined Company Following the Merger (see
page 44)
US Airways Group, Inc.
111 West Rio Salado Parkway
Tempe, Arizona 85281
(480) 693-0800
Following the implementation of the debtors' plan of
reorganization, including the merger and the new equity
investments and other related transactions described in this
prospectus, we will operate under the single brand name of
US Airways through our two principal operating subsidiaries
US Airways, Inc. and America West Airlines, Inc. We expect
to integrate the two operating subsidiaries into one operation
over the following 24 months. We expect that the merger
will create the fifth largest airline operating in the United
States as measured by domestic revenue passenger miles and by
ASMs. We expect to have primary hubs in Charlotte, Philadelphia
and Phoenix and secondary hubs/focus cities in Pittsburgh, Las
Vegas, New York, Washington, D.C. and Boston. After the
merger, New US Airways Group will be a low-cost carrier
offering scheduled passenger service on approximately 3,600
flights daily to 229 cities in the U.S., Canada, the
Caribbean, Latin America and Europe. New US Airways Group
will operate 361 mainline jets and will be supported by its
regional airline subsidiaries and affiliates operating as
US Airways Express, which will operate approximately 239
regional jets, of which 83 will be aircraft with 70 or more
seats, and approximately 57 turboprops.
We expect that New US Airways Group will have one of the
most competitive cost structures in the airline industry due to
cost cutting measures initiated by both companies over the last
three years. US Airways Group's restructuring
activities in the debtors' current and prior
Chapter 11 bankruptcy proceedings have specifically
targeted cost reductions in four main areas. First, it has
achieved important reductions in labor, pension and benefit
costs resulting in ratified collective bargaining agreements,
representing over $2 billion of annual cost savings.
Second, it has put restructuring initiatives in place to reduce
overhead, including reducing management payroll, and has
re-vamped its schedule to improve aircraft utilization. Third,
it has renegotiated various contractual obligations resulting in
lower costs, including those related to aircraft, real estate
and suppliers, and lowered catering costs. Lastly,
US Airways Group rationalized its fleet through the
elimination of older, less efficient aircraft, the introduction
of large regional jet aircraft with low trip costs to better
match capacity with demand, and the reduction of the number of
mainline aircraft types it operates in order to lower
maintenance, inventory and pilot training costs.
Separately, America West Holdings has also been able to greatly
reduce its operating expenses as a percentage of revenues since
2002. America West Holdings instituted programs to reduce
management payroll, clerical payroll, travel agency based
commissions, incentive programs and override commissions. It has
reduced capital expenditures and discretionary expenses, and
lowered catering costs. Other initiatives include increasing
point-to-point flying at minimal additional costs using aircraft
that would otherwise be parked at a gate, which increases daily
utilization of aircraft.
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In addition to the cost saving initiatives already undertaken at
the individual companies, we believe the combination of America
West Holdings and US Airways Group will result in
significant annual revenue and cost synergies of approximately
$600 million that would be unachievable without completing
the merger. These synergies derive from three principal sources.
In anticipation of the merger, US Airways Group has
negotiated a reduction in its existing fleet so that the fleet
of the combined company suits the expected network. New
US Airways Group will be able to schedule the combined
fleet to better match aircraft size with consumer demand. By
scheduling the reduced fleet more efficiently and by adding new,
low-fare service to Hawaii, we expect to create approximately
$175 million in annual operating synergies. We also expect
to realize annual cost synergies of approximately
$250 million by reducing administrative overhead,
consolidating our information technology systems and combining
facilities. Lastly, by becoming one nationwide, low-cost carrier
with a global reach that provides more choice for consumers and
an improved ability to connect, we expect to realize
approximately $175 million in additional annual revenue.
There can be no assurance that we will be able to achieve these
revenue, operating and cost synergies or that they can be
achieved in a timely manner.
US Airways Group and its subsidiaries currently employ
approximately 30,100 people, and America West Holdings and its
subsidiaries currently employ approximately 14,000 people. After
seniority lists have been integrated for each of the combined
airlines' unionized labor groups, we anticipate that a
single labor contract will be applied to each of those groups.
The combined airline is expected to operate a mainline fleet of
361 planes (supported by approximately 239 regional jets and
approximately 57 turboprops that provide passenger feed into the
mainline system), down from a total of 417 mainline aircraft
operated by the two airlines as of March 31, 2005.
US Airways Group has removed an additional 13 aircraft
from its fleet through May 31, 2005 and projects removing
an additional 35 aircraft by the end of 2006. The combined
airline is also expected to take delivery by the end of
February 2006 of seven Airbus A320 family aircraft
previously ordered by America West Airlines, Inc. Airbus has
also agreed to reconfirm 30 narrow body A320-family aircraft
deliveries and reschedule those deliveries from the 2006 to
2008 period to the 2009 to 2010 period. To rationalize
international flying, the merged company anticipates working
with Airbus to begin transitioning to an all-Airbus widebody
fleet of A350 aircraft in 2011.
We believe the merger will create one of the industry's
most financially stable airlines with approximately
$1.5 billion in new liquidity coming from equity
investments, this rights offering, new cash infusions from
commercial partners, asset sales and the release of currently
restricted cash.
The $500 million of new equity investments is expected to
be provided by several investors. This rights offering, if fully
subscribed, will provide an additional $150 million of
equity financing. In addition, the merged company will receive
approximately $550 million of cash infusions from
commercial partners, approximately $100 million from
asset-based financings or sales of aircraft and approximately
$170 million from release of certain cash reserves that are
currently restricted but that should be released as a part of
the plan of reorganization.
For more information on these matters, see the sections entitled
"The Plan of Reorganization" and "The New Equity
Investments."
Competitive Strengths of the Combined Company
We believe that we will have a number of competitive strengths
as a combined company, including:
Largest U.S. Low-Cost Carrier with Nationwide Route
Network.
We expect to be the first national full-service
low-cost carrier and the largest low-cost carrier by revenue
passenger miles (including international service). We anticipate
being the fifth largest airline operating in the United States
as measured by domestic revenue passenger miles and by ASMs,
with a national hub-and-spoke route network that will provide
our customers with nationwide reach. We believe New
US Airways Group will capture approximately
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10% of all domestic revenue passenger miles. The combined
company plans to continue as a member of the Star Alliance, the
world's largest airline alliance group.
With our simplified pricing structure and international scope,
we will offer competitive fare service to approximately
229 cities in the United States, Canada, the Caribbean,
Latin America and Europe, making us the only low-cost carrier
with a significant international route presence. Starting in
2006, we expect to expand our route network to include Hawaii.
We will be the only low-cost carrier with an established East
Coast route network, including the US Airways Shuttle
service, with substantial presence at capacity constrained
airports like New York's LaGuardia Airport and
Washington, D.C.'s Ronald Reagan Washington National
Airport.
Offer Services Not Typical of Low-Cost Carriers.
We believe that by delivering high-quality service, with greater
frequency of flight departures and by offering our customers
premium amenities not available on other low-cost carriers, we
will provide the best value in our markets and create increased
demand for our air travel services. We expect to be the only
national low-cost carrier offering a global frequent flyer
program, assigned seating, a First Class cabin, the
US Airways Shuttle, online service to approximately
44 international destinations, convenient access to over
700 global destinations through our membership in the Star
Alliance, and the convenience of our airport clubs. We expect
that these amenities will differentiate our service from other
low-cost carriers and will allow us to strengthen customer
loyalty and attract new air travelers. We believe that our
customers will continue to value our full service amenities and
flight frequency, and that will help us to compete effectively
with other low-cost carriers by providing our business oriented
passengers with a premium product at a competitive price.
Competitive Low-Cost Structure.
We believe that
the cost saving initiatives of both companies discussed above,
coupled with the significant cost synergies from the
combination, will allow us to have one of the most competitive
cost structures in the airline industry. On a pro forma basis,
once the anticipated merger synergies are realized, we expect
that the costs of New US Airways Group, on a unit
basis, after merger synergies will be approximately the same as
those of America West Holdings today. We believe that we will be
able to compete effectively and profitably with this cost
structure.
Improved Balance Sheet with Substantial New
Liquidity.
We believe that we will be one of the
industry's most financially stable airlines. We expect New
US Airways Group to realize approximately $10 billion
in annual revenues and have as of the completion of the merger a
strong balance sheet that includes an estimated $2 billion
in total cash, cash equivalents and short term investments. The
combined balance sheets will benefit from a cash infusion of
approximately $1.5 billion, which will include equity
investments aggregating $500 million, the proceeds raised
through this rights offering of approximately $150 million,
the release of certain cash reserves and other initiatives that
will provide New US Airways Group with substantial new
liquidity.
Experienced Management Team.
We will benefit from
an experienced, highly motivated combined management team. Our
team will be led by W. Douglas Parker, who has been the
chief executive officer of America West Holdings since 2001 and
prior to that served as chief operating officer from 2000 to
2001 and chief financial officer from 1995 to 2000. As chief
executive officer, Mr. Parker led America West
Holdings' transformation into a low-cost carrier.
Business Strategy
Our business strategy consists of the following:
Provide Excellent Value to Our Customers.
We plan
to standardize customer service initiatives system-wide and
provide a competitive, simplified pricing structure that we
believe will provide our customers with an excellent value when
compared to other low-cost carriers as well as legacy mainline
carriers. We are committed to building a successful airline by
taking care of our customers. We believe that our focus on
excellent customer service in every aspect of operations,
including personnel, flight equipment, in-flight and ancillary
amenities, on-time performance, flight completion ratios and
baggage handling, will strengthen
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customer loyalty, provide excellent value to our customers and
attract new customers. Further, we believe that the amenities we
provide our customers, such as a frequent flyer program, airport
clubs, assigned seating and a First Class cabin, differentiates
our product offering from other low-cost carriers.
Continue to Reduce Our Operating Costs.
After the
merger, New US Airways Group will focus on achieving cost
reduction synergies that it expects to realize from the merger.
Key areas where cost reductions can be achieved as a result of
the merger include overhead costs, in-sourcing of information
technology solutions where America West Holdings has existing
capabilities, airport savings through better use of gates and
employees in airports that both America West Holdings and
US Airways Group serve today, and eliminating redundant
facilities such as office space and hangars. We currently expect
these initiatives to achieve approximately $250 million in
annual savings once fully implemented. In addition, we also plan
to increase aircraft use to increase flying and reduce unit
costs.
Leverage Our Broader Route Network and Rationalize Our
Fleet.
We expect to achieve annual savings of
approximately $175 million from rationalizing our fleet,
rescheduling our operations, and adding new, low-fare service to
Hawaii. As a result of the merger, New US Airways Group
plans to combine the current regional strengths of both America
West Holdings on the West Coast and US Airways Group on the
East Coast to provide a comprehensive product offering more
attractive to customers. We also plan to make more efficient use
of our nationwide network as a combined entity. New
US Airways Group will be able to coordinate the schedules
to and from the hubs and secondary hubs/focus cities of both
airlines to create a significantly greater number of flight
connections across the route network. Similarly, we believe that
we will be able to optimize the utilization of our aircraft and
employees. For instance, aircraft of one airline that today
would have to sit idle awaiting the next scheduled departure
could be utilized after the merger along existing routes of the
other airline to increase daily utilization.
In anticipation of the merger, US Airways Group has
negotiated a reduction to its existing fleet so that the fleet
of the combined company suits the expected route network and so
that the introduction of new aircraft will be timed to coincide
with the expiration of existing aircraft leases. We believe that
we will also be able to reschedule the combined fleet to better
match aircraft size with consumer demand. For example, in some
markets that US Airways Group currently serves with a
Boeing 737 aircraft, we expect to replace that service with
a 90-seat regional jet that is currently operated in the America
West Holdings system. In addition, we expect to place America
West Holdings new aircraft into service on flights out of
current US Airways Group hubs. Furthermore, we plan to
initiate Boeing 757 aircraft service to Hawaii, which
neither of us currently serves. These changes are expected to
generate revenue benefits of approximately $175 million.
Prudent Integration of America West Airlines, Inc. and
US Airways, Inc. Operations.
While management will
move quickly to try to provide a seamless integration for
consumers, we currently expect to achieve full labor and
operational integration of America West Airlines, Inc. and
US Airways, Inc. over a 24 month period. We believe
that this timeframe will allow us to resolve the critical labor
and systems issues necessary to achieve full integration. We
plan to operate under a single brand name of US Airways
while maintaining separate operating certificates for this
24 month period. We believe that the majority of the
synergy value can be realized quickly through the rapid
integration of routes, schedules, pricing, other marketing
initiatives and overhead reductions.
Management of New US Airways Group
Following the merger, the board of directors of New
US Airways Group will consist of 13 members. Six of
these directors will be appointed by America West Holdings (five
of whom will be independent), four of these directors will be
appointed by US Airways Group (three of whom will be
independent) and up to three of these directors will be
appointed by certain new equity investors in New US Airways
Group. Except as described in the next paragraph, we have not
yet determined the identities of the new directors.
W. Douglas Parker, the current Chairman and Chief Executive
Officer of America West Holdings, will serve as Chairman and
Chief Executive Officer of New US Airways Group following
the merger. Bruce
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Lakefield, the current President and Chief Executive Officer of
US Airways Group and US Airways, Inc., will serve as
Vice Chairman of New US Airways Group following the merger.
See the section entitled "The Merger Agreement —
Post-Merger America West Holdings Governing Documents, Officers
and Directors; New US Airways Group Governing Documents and
Directors."
Listing of New US Airways Group Common Stock (see
page 75)
We are applying to have the shares of New US Airways Group
common stock to be issued in the rights offering authorized for
listing on the NYSE upon official notice of issuance under the
symbol
"[          ]."
The Debtors' Plan of Reorganization (see
page 84)
Federal bankruptcy law requires the debtors to complete a series
of tasks in order to emerge from bankruptcy and complete the
merger. The major tasks include filing with the court a
disclosure statement and a plan of reorganization that contain
detailed historical, financial and operational information about
the debtors and also explain how the business will be structured
following the bankruptcy and how claims will be treated. The
debtors will ask the bankruptcy court for approval of the
disclosure statement and, if it is approved, the plan of
reorganization will be submitted to certain creditors for a
vote. The plan of reorganization will then be submitted to the
bankruptcy court for confirmation. Assuming the bankruptcy court
approves the plan of reorganization, the debtors will have
permission and authority to enter into all of the transactions
necessary to emerge from bankruptcy, including the merger. The
date that all of these transactions are finalized is the
effective date of both the plan of reorganization and the merger.
On [month, day], 2005, the debtors submitted to the bankruptcy
court their proposed disclosure statement. On [month, day],
2005, the bankruptcy court issued an order approving the
disclosure statement and ordered that the disclosure statement
and proposed plan of reorganization be submitted to certain
creditors eligible to vote on the plan of reorganization. On
[month, day], 2005, the debtors mailed copies of the plan of
reorganization and disclosure statement to creditors and set
[month, day], 2005 as the voting deadline for those creditors
who could cast votes for or against the plan of reorganization.
Assuming that the plan of reorganization is confirmed by the
bankruptcy court and that the other conditions specified in the
plan of reorganization are satisfied or waived, the plan of
reorganization will become effective. US Airways Group
currently anticipates that the plan of reorganization will
become effective on or around [month, day], 2005.
Under the proposed plan of reorganization developed by the
debtors, the following events will occur on the effective date
of the plan of reorganization and the merger (percentages below
are based on certain assumptions contained in the section
entitled "Capitalization" and reflect the impact of
certain securities that are dilutive at the per share purchase
price paid by the equity investors):
•
America West Holdings will merge with Barbell Acquisition Corp.,
    which is a wholly owned subsidiary of US Airways Group, and
    will as a result itself become a wholly owned subsidiary of New
    US Airways Group;
•
The new equity investors ACE Aviation Holdings Inc., or ACE; Par
    Investment Partners, L.P., or Par; Peninsula Investment
    Partners, L.P., or Peninsula; a group of investors under the
    management of Wellington Management Company, LLP, or Wellington;
    and Eastshore Aviation, LLC, or Eastshore; will invest
    $500 million in consideration for the issuance of
    approximately 32.5 million shares of New
    US Airways Group common stock, representing approximately
    49% of New US Airways Group common stock outstanding as of
    the completion of the merger, as more fully described in the
    section entitled "The New Equity Investments."
•
The general unsecured creditors, including the Pension Benefit
    Guaranty Corporation, or the PBGC, and the Air Line Pilots
    Association, as their claims are allowed, will receive
    approximately
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8.2 million shares of New US Airways Group common
    stock, representing approximately 12% of New US Airways
    Group common stock outstanding as of the completion of the
    merger;
•
Under certain agreements among General Electric and certain of
    its affiliates, or GE, and US Airways Group, GE has agreed,
    in consideration for the early return of 51 aircraft and six
    engines, the assumption of certain modified leases and the
    issuance of convertible notes in the amount of
    $125 million, (1) in part to retire an existing bridge
    loan facility, (2) to complete a purchase by GE of 21
    aircraft and 28 engines with a simultaneous lease back of the
    equipment to US Airways, Inc. at market rates, (3) to
    allow US Airways Group to draw additional amounts under an
    existing credit facility, which will result in a total principal
    outstanding balance thereunder of approximately
    $28 million, (4) to restructure lease obligations of
    US Airways, Inc. relating to 59 aircraft to market rates,
    (5) to provide financing for current and growth aircraft,
    (6) to grant concessions regarding return condition
    obligations with respect to the return of aircraft and engines,
    and (7) to waive penalties for the removal of engines
    currently under GE engine agreements;
•
In consideration of (i) the assumption by US Airways
    Group of certain purchase agreements between US Airways
    Group and AVSA, S.A.R.L., an affiliate of Airbus Industrie
    G.I.E., referred to as Airbus, and (ii) the entry into
    certain new agreements between New US Airways Group,
    America West Holdings and Airbus which provide for (1) the
    purchase by US Airways Group and America West Holdings of
    up to 20 new A350 airplanes from Airbus, (2) the ability to
    convert orders for up to ten of the A350 aircraft to orders for
    A330 aircraft, (3) the ability to cancel up to ten of the
    A330 aircraft previously ordered upon the payment of certain
    predelivery payments for A350 aircraft, and (4) changes in
    the delivery schedule for existing orders of narrow-body
    aircraft, Airbus will provide New US Airways Group a
    $250 million line of credit to be used by New
    US Airways Group, of which $213 million can be used
    for general corporate purposes, together with additional
    backstop financing for the purchase of the A350 aircraft.
•
Affiliates of ACE will enter into a series of agreements with
    New US Airways Group, including maintenance and
    airport handling agreements; and
•
New US Airways Group's board of directors will be
    reconstituted to include 13 members as described in the
    section entitled "The Merger Agreement —
    Post-Merger America West Holdings Governing Documents, Officers
    and Directors; New US Airways Group Governing Documents and
    Directors."
In addition, the proposed plan of reorganization will provide
for the satisfaction of certain secured and unsecured
prepetition claims against the debtors. These include claims
related to the debtors' assumption or rejection of various
contracts and unexpired leases, the assumption of debtors'
existing collective bargaining agreements with their unions and
the termination of certain employee benefit plans with employees
and retirees, and other matters. The ultimate resolution of
certain of the claims asserted against the debtors in the
Chapter 11 cases will be subject to negotiations, elections
and bankruptcy court procedures that will occur after the date
of this prospectus and after the effective date, although
resolution of these claims will not affect the number of shares
of New US Airways Group common stock available to the
general unsecured creditors pursuant to this rights offering.
While a significant amount of the debtors' liabilities will
be extinguished as a result of the discharge granted upon
confirmation of the plan of reorganization, not all of the
debtors' liabilities will be subject to discharge. The
types of obligations that the debtors will remain responsible
for include those relating to their secured financings, aircraft
financings, certain environmental liabilities and the continuing
obligations arising under contracts and leases assumed by the
debtors.
New Equity Investments (see page 86)
US Airways Group and America West Holdings have entered
into agreements with equity investors which have agreed to
contribute a total of $500 million in new equity to New
US Airways Group, subject to a variety of conditions,
including completion of the merger.
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Accounting Treatment (see page 75)
For accounting purposes only, New US Airways Group
will account for the merger as a "reverse acquisition"
using the purchase method of accounting in conformity with
accounting principles generally accepted in the United States of
America. Although the merger is structured so that America West
Holdings will become a wholly owned subsidiary of New
US Airways Group at closing, America West Holdings
will be treated as the acquiring company for accounting purposes
in accordance with Statement of Financial Accounting Standards,
or SFAS, No. 141, "Business Combinations."
Risk Factors (see page 21)
In evaluating whether to purchase shares of New US Airways
Group common stock in this rights offering, you should carefully
read this prospectus and especially consider the factors
discussed in the section entitled "Risk Factors."
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Rights Offering Summary
The following is a summary that highlights information about
this rights offering. This summary might not contain all the
information that is important to you. For a more complete
description of this rights offering, please see the section
entitled "The Rights Offering."
Rights
Each basic right entitles its holder to purchase one share of
    New US Airways Group common stock.
•  Each America West Holder at the close of business
    on the record date will receive, at no charge, one transferable
    basic right for every
    [          ] shares
    of America West Holdings Class A or Class B common
    stock held of record on the record date. In addition, America
    West Holders will receive over-subscription privileges. The
    number of rights issued to each America West Holder will be
    rounded up to the nearest whole right, subject to any
    adjustments necessary to ensure that, if all rights are
    exercised, we will issue 9,090,909 shares.
•  Certain US Airways Creditors at the close of
    business on the record date will receive, at no charge,
    non-transferable basic rights. Since a determination will not be
    made on the exact amount of all US Airways Creditor's
    claims or the total amount of all claims allowed to vote on the
    plan of reorganization until the confirmation hearing,
    US Airways Creditors will need to estimate the amount of
    basic rights in order to estimate the required subscription
    payment. See "Determination of Payment when Exercising
    Rights" below. In addition, each US Airways Creditor
    will receive over-subscription privileges. The number of rights
    issued to each US Airways Creditor will be rounded up to
    the nearest whole right, subject to any adjustments necessary to
    ensure that, if all rights are exercised, we will issue
    9,090,909 shares.
Subscription Price
$16.50 per share.
Number of Rights
Holders will receive rights to purchase an aggregate of
    9,090,909 shares of New US Airways Group common stock.
    A total of 3,500,000 basic rights will be issued to America West
    Holders, and a total of 5,590,909 basic rights will be issued to
    US Airways Creditors.
Over-Subscription Privilege
Each America West Holder and US Airways Creditor who elects
    to exercise its basic subscription privilege may also subscribe
    at the Subscription Price for additional shares of New
    US Airways Group common stock, not to exceed
    [          ]x
    the number of shares that Holder elected to purchase pursuant to
    the basic subscription.
If any shares being offered in this rights offering are
    available after satisfying all exercises of basic rights, we
    will allocate the over-subscription requests as follows:
•  America West Holders will have their
    over-subscription requests satisfied first out of any shares
    remaining in the America West Holders Pool after satisfying all
    exercises of the basic subscription rights by America West
    Holders and then out of any remaining shares in the
    US Airways Creditors Pool after satisfying the basic and
    over-subscription requests of US Airways Creditors. The
    number of additional shares
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we allocate to each America West Holder pursuant to its
    over-subscription privilege will be calculated by adding the
    number of shares available for over-subscription in the America
    West Holders Pool and any remaining shares in the
    US Airways Creditor Pool, and multiplying the sum of those
    shares by a proration factor. The proration factor is determined
    by dividing the total number of shares that the America West
    Holder elected to purchase under the over-subscription privilege
    by the total number of shares all America West Holders elected
    to purchase pursuant to the over-subscription privilege.
    However, each basic right held by an American West Holder must
    be exercised for that Holder's associated over-subscription
    privilege to apply. The number of additional shares we allocate
    to you pursuant to the over-subscription privilege is subject to
    further adjustment to permit tax counsel to deliver opinions to
    the effect that the merger will qualify as a tax-free
    "reorganization" within the meaning of
    Section 368(a) of the Internal Revenue Code of 1986, as
    amended.
•  US Airways Creditors will have their
    over-subscription requests satisfied first out of any shares
    remaining in the US Airways Creditors Pool after satisfying
    all exercises of the basic subscription rights of
    US Airways Creditors and then out of any remaining shares
    in the America West Holders Pool after satisfying the basic and
    over- subscription requests of America West Holders. The number
    of additional shares we allocate to each US Airways
    Creditor pursuant to its over-subscription privilege will be
    calculated by adding the number of shares available for
    over-subscription in the US Airways Creditors Pool and any
    remaining shares in the America West Holders Pool, and
    multiplying the sum of those shares by a proration factor. The
    proration factor will be determined by dividing the total number
    of shares that the US Airways Creditor is ultimately
    determined to have elected to purchase pursuant to the
    over-subscription privilege by the total number of shares all
    US Airways Creditors are ultimately determined to have
    elected to purchase pursuant to the over-subscription privilege.
    However, each basic right that is ultimately determined to be
    held by a US Airways Creditor must be exercised for that
    Holder's associated over-subscription privilege to apply.
Record Date
[month, day], 2005, which is the date used to determine which
    (x) America West Holders and (y) US Airways
    Creditors are entitled to be granted rights.
Expiration Date
The rights will expire at 5:00 p.m., New York City time,
    on [month, day], 2005, which we refer to as the Expiration Date.
    Any rights that remain unexercised at the Expiration Date will
    expire and no longer be exercisable.
Transferability of Rights of America West Holders
America West Holders may transfer their rights through the
    Subscription Agent or otherwise. We cannot assure you, however,
    that any market for the rights will develop or, if a market
    develops, that the market will remain available throughout the
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period during which rights may be exercised. Each America West
    Holder may sell its rights through usual investment channels or
    request that the Subscription Agent endeavor to sell the rights
    for such America West Holders who have so requested and have
    delivered a certificate evidencing the rights, which we refer to
    as a rights certificate, with the instruction for sale properly
    executed, to the Subscription Agent at or prior to
    11:00 a.m., New York City time, on [month, day], 2005. We
    cannot assure you that the Subscription Agent will be able to
    sell any rights or as to the prices the Subscription Agent may
    be able to obtain in those sales. See the section entitled
    "The Rights Offering — Method of Transferring
    America West Holdings Rights" for more information.
Non-Transferability of US Airways Creditors Rights
US Airways Creditors' rights are not transferable
    through the Subscription Agent. A US Airways
    Creditor's rights may only be exercised by the holder of
    the claim on the record date. If a US Airways Creditor
    subsequently transfers its claim, we will not recognize the
    transferee as the holder of the rights.
Procedure for Exercising Rights
The rights may be exercised by properly completing the rights
    certificate and delivering it, or by following the Guaranteed
    Delivery Procedures as described in this prospectus, with
    payment of the Subscription Price for each share subscribed for,
    to the Subscription Agent. The Subscription Agent must receive
    your payment and your rights certificate, or a Notice of
    Guaranteed Delivery, prior to the Expiration Date. If you send
    your rights certificates by mail, we urge you to use insured,
    registered mail, return receipt requested.
Funds paid by uncertified personal checks may take at least five
    business days to clear. Accordingly, we urge Holders of rights
    who wish to pay the Subscription Price by means of uncertified
    personal checks to make payment sufficiently in advance of the
    Expiration Date to ensure that the payment is received and
    clears by the Expiration Date. We also urge you to consider, in
    the alternative, payment by means of certified or cashier's
    check, money order or wire transfer of funds.
ONCE A HOLDER HAS EXERCISED ITS RIGHTS, THE HOLDER MAY NOT
    REVOKE THAT EXERCISE. RIGHTS NOT EXERCISED PRIOR TO THE
    EXPIRATION DATE WILL EXPIRE AND WILL NO LONGER BE EXERCISABLE BY
    ANY HOLDER.
Determination of Payment when Exercising Rights
•
If
    you are an America West Holder:
For every
    [                    ]
    shares of America West Holdings Class A or Class B
    common stock you own on the record date, you will be entitled to
    one basic right. In addition, you may purchase up to
    [     ]x that basic subscription amount
    pursuant to your over-subscription privilege.
For example, assuming you will be entitled to 1 basic
    right for each 10 shares of America West Holdings
    Class A or Class B
11
Table of Contents
common stock you own, if you own 100 shares of common stock
    of America West Holdings on the record date, you would be
    entitled to 10 basic rights. To fully exercise your basic rights
    you would then multiply the Subscription Price of $16.50 by your
    10 basic rights, and submit a dollar amount of $165.00. If you
    wish to fully exercise your over-subscription privilege,
    assuming a 10x over-subscription option, you would multiply 10 x
    10 x $16.50, and submit an additional $1,650.00 as payment for
    the full amount of the over-subscription privilege.
Therefore, you would submit a total payment to the Subscription
    Agent of $1,815.00 (the sum of $165.00 to exercise your basic
    rights and $1,650.00 to exercise your over-subscription
    privilege) for your full exercise of your basic and
    over-subscription privileges.
Notwithstanding the foregoing, you are in no way obligated to
    exercise either your basic or over-subscription privileges in
    full, and any lesser amount will be accepted. However, you must
    exercise each basic right to exercise any associated
    over-subscription privilege.
In the event that the total dollar amount you submit is greater
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, the surplus will be
    applied as an exercise of the over-subscription privilege
    discussed above.
In the event that the total dollar amount you submit is less
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, you will receive fewer
    shares than you estimated you would have been entitled to
    receive. In the case of an under-subscription, you will not have
    an opportunity to submit further payment for any additional
    basic rights or over-subscription privileges.
In the event that the total dollar amount you submit is greater
    than the basic and over-subscription privileges you are
    ultimately entitled to, any excess funds will be returned to
    you, without interest, within 5 business days of the
    Allocation Date.
•
If
    you are a US Airways Creditor
:
Your basic rights will ultimately be determined pursuant to the
    US Airways Creditor Basic Right Calculation on the
    Allocation Date. A determination may not be made on the exact
    amount of your allowed claim, or the total amount of all allowed
    claims, entitled to vote on the plan of reorganization until on
    or before the Confirmation Order Date. Solely for the purposes
    of estimating your basic rights, we have assumed
    $[          ] billion
    of total allowed voting claims. You may estimate you will
    receive one basic right for each
    $[          ]
    allowed voting claim amount. For example, an allowed voting
    claim for
    $[          ]
    is estimated to receive
    [          ]
    basic rights. However, your basic rights will ultimately be
    determined pursuant to the US Airways Creditor Basic Right
    Calculation on the Allocation Date. See the question, "How
    are the basic rights of each US Airways Creditor ultimately
    determined?" for more information.
12
Table of Contents
Once you have estimated your basic subscription, you may pay
    for your basic subscription and pay up to
    [          ]x
    that basic subscription price to participate in the associated
    over-subscription privilege.
You would multiply the Subscription Price of $16.50 by the
    estimated number of basic rights to which you estimate you are
    entitled, and submit a dollar amount in order to pay for the
    full amount of basic rights attributable to your estimated
    claim. If you hold a $100,000 claim and wish to fully exercise
    your over-subscription privilege, assuming a 10x
    over-subscription option, you would multiply
    [          ] x 10 x $16.50,
    and submit
    $[          ]
    as an additional payment for the full amount of the
    over-subscription privilege.
Therefore, you would submit a total payment to the Subscription
    Agent of
    [          ]
    (the sum of
    [          ]
    to exercise your basic rights and
    $[               ]
    to exercise your over-subscription privilege) for your full
    exercise of your basic and over-subscription privileges.
Notwithstanding the foregoing, you are in no way obligated to
    exercise either your basic or over-subscription privilege in
    full, and any lesser amount will be accepted. However, you must
    exercise each basic right to exercise any associated
    over-subscription privilege.
Although we have provided you with our best estimate of the
    amount of your basic rights and over-subscription privilege, it
    is likely that your final basic rights and over-subscription
    privilege will be different from our estimate, perhaps
    materially so. In the rights certificate, you must acknowledge
    that New US Airways Group is not liable for any damages
    resulting from your receiving a different number of rights and
    over- subscription privileges than you originally estimated you
    would be entitled to receive.
In the event that the total dollar amount you submit is greater
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, the surplus will be
    applied as an exercise of the over-subscription privilege
    discussed above.
In the event that the total dollar amount you submit is less
    than the final dollar amount attributable to the basic rights
    you are ultimately entitled to receive, you will receive fewer
    shares than you estimated you would have been entitled to
    receive. In the case of an under-subscription, you will not have
    an opportunity to submit further payment for any additional
    basic rights or over-subscription privileges.
In the event that the total dollar amount you submit is greater
    than the basic and over-subscription privileges you are
    ultimately entitled to, any excess funds will be returned to
    you, without interest, within 5 business days of the
    Allocation Date.
13
Table of Contents
Persons Holding the Rights, or Wishing to Exercise Rights,
    through Others
Persons holding rights through a broker, dealer, commercial
    bank, trust company or other nominee, as well as persons holding
    certificates for the rights personally who would prefer to have
    those institutions effect transactions relating to the rights on
    their behalf, should contact the appropriate institution or
    nominee and request it to effect the transactions for them.
Conditions to the Rights Offering
The completion of this rights offering is subject to a number of
    conditions, including the confirmation of the plan of
    reorganization and completion of the merger. See the section
    entitled "The Rights Offering — Conditions to the
    Rights Offering" for more information.
Issuance of Common Stock
Certificates for shares of New US Airways Group common
    stock purchased under the rights will be delivered to
    subscribers as soon as practicable after the Closing Date. Funds
    delivered to the Subscription Agent in payment of the
    Subscription Price will be retained by the Subscription Agent
    until the completion of this rights offering and the issuance of
    those stock certificates. If this rights offering is terminated
    after the Expiration Date, interest will be paid to Holders
    (with that interest to accrue from the Expiration Date to the
    date of termination) on funds paid to the Subscription Agent and
    returned to the Holders.
Listing
We are applying to have the shares of New US Airways Group
    common stock authorized for listing on the NYSE upon official
    notice of issuance under the symbol
    "[     ]".
Use of Proceeds
The aggregate proceeds from this rights offering (estimated to
    be approximately $150 million assuming all the rights are
    exercised), after deducting offering expenses, will be used for
    general corporate purposes, including the possible redemption or
    repurchase of other securities of New US Airways Group.
Certain Federal Income Tax Consequences
The tax consequences of the rights offering will depend on your
    status as an America West Holder or a US Airways Creditor.
    The likely tax consequences of the rights offering are described
    under the section entitled "Material United States Federal
    Income Tax Consequences." The tax consequences to you will
    depend on your particular situation.
Tax matters are complicated and we strongly urge you to consult
    your own tax advisor for a fuller understanding of the tax
    consequences to you resulting from the rights offering.
Subscription Agent
[                              ],
    whom we refer to as the Subscription Agent.
14
Table of Contents
Summary Selected Financial Data
US Airways Group, Inc.
The selected consolidated financial data presented below is
derived from US Airways Group's consolidated financial
statements for each of the periods in the five years ended
December 31, 2004, 2003, 2002, 2001 and 2000 contained in
US Airways Group's Annual Reports on Form 10-K
for the years ended December 31, 2004, 2003, 2002 and 2001
and US Airways Group's unaudited consolidated
financial statements contained in the Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2005 and
2004. The selected consolidated financial data should be read in
conjunction with the consolidated financial statements for the
respective periods, the related notes and the related reports of
US Airways Group's independent registered public
accounting firm included elsewhere in this prospectus. See the
consolidated financial statements of US Airways Group
included in its Annual Report on Form 10-K for the year
ended December 31, 2004 and Quarterly Report on
Form 10-Q for the quarterly period ended March 31,
2005, which are attached as annexes to this prospectus.
Successor Company
Predecessor Company
Three Months Ended
Nine Months
Three Months
Year Ended
March 31,
Year Ended
Ended
Ended
December 31,
December 31,
December 31,
March 31,
2005
2004
2004
2003
2003
2002
2001
2000
(in millions, except per share amounts)
Consolidated statements of operations data:
Operating revenues
$
1,628
$
1,701
$
7,117
$
5,312
$
1,534
$
6,977
$
8,288
$
9,269
Operating expenses(b)
1,829
1,844
7,495
5,356
1,741
8,294
9,971
9,322
Operating loss
$
(201
)
$
(143
)
$
(378
)
$
(44
)
$
(207
)
$
(1,317
)
$
(1,683
)
$
(53
)
Income (loss) before cumulative effect of accounting change
$
(282
)
$
(177
)
$
(611
)
$
(174
)
$
1,635
$
(1,663
)
$
(2,124
)
$
(166
)
Cumulative effect of accounting change, net of applicable income
    taxes
—
—
—
—
—
17
7
(103
)
Net income (loss)(c)
$
(282
)
$
(177
)
$
(611
)
$
(174
)
$
1,635
$
(1,646
)
$
(2,117
)
$
(269
)
Earnings (loss) per common share before cumulative effect of
    accounting change:
Basic
$
(5.13
)
$
(3.28
)
$
(11.19
)
$
(3.25
)
$
24.02
$
(24.45
)
$
(31.59
)
$
(2.47
)
Diluted
$
(5.13
)
$
(3.28
)
$
(11.19
)
$
(3.25
)
$
24.02
$
(24.20
)
$
(31.48
)
$
(4.02
)
Net income (loss) per common share:
Basic
$
(5.13
)
$
(3.28
)
$
(11.19
)
$
(3.25
)
$
24.02
$
(24.45
)
$
(31.59
)
$
(2.47
)
Diluted
$
(5.13
)
$
(3.28
)
$
(11.19
)
$
(3.25
)
$
24.02
$
(24.20
)
$
(31.48
)
$
(4.02
)
Shares used in computation:
Basic
54.9
54.0
54.6
53.5
68.1
68.0
67.2
66.9
Diluted
54.9
54.0
54.6
53.5
68.1
68.0
67.2
66.9
Cash Dividends per common share
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Consolidated balance sheet data (at end of period):
Total Assets
$
8,427
$
8,550
$
8,422
$
8,555
$
—
$
6,543
$
8,025
$
9,127
Long-term obligations and redeemable preferred stock(a)
$
4,795
$
4,458
$
4,871
$
4,641
$
—
$
5,009
$
5,148
$
4,379
Total stockholders' equity (deficit)
$
(598
)
$
30
$
(434
)
$
172
$
—
$
(4,921
)
$
(2,615
)
$
(358
)
(a)
Includes debt, capital leases and postretirement benefits other
    than pensions (noncurrent). Also includes liabilities subject to
    compromise at March 31, 2005, December 31, 2004 and
    December 31, 2002.
15
Table of Contents
(b)
The operating results for the nine months ended
    December 31, 2003, the year ended December 31, 2002
    and the year ended December 31, 2001 include the following
    unusual items:
•
The nine months ended December 31, 2003 include:
•
A $214 million, net of amounts due to certain affiliates,
    reduction in operating expenses in connection with the
    reimbursement for certain aviation-related security expenses in
    connection with the Emergency Wartime Supplemental
    Appropriations Act.
•
A $35 million charge in connection with US Airways
    Group's intention not to take delivery of certain aircraft
    scheduled for future delivery.
•
The results for the year ended December 31, 2002 include:
•
A $392 million impairment charge as a result of an
    impairment analysis conducted on the B737-300, B737-400,
    B757-200 and B767-200 aircraft fleets as a result of changes to
    the aircraft's recoverability periods, the planned
    conversion of owned aircraft to leased aircraft and indications
    of possible material changes to the market values of these
    aircraft. The analysis revealed that estimated undiscounted
    future cash flows generated by these aircraft were less than
    their carrying values for four B737-300s, 15 B737-400s, 21
    B757-200s and three B767-200s. In accordance with Statement of
    Financial Accounting Standards, or SFAS, No. 144,
    "Accounting for the Impairment or Disposal of Long-Lived
    Assets," the carrying values were reduced to fair market
    value.
•
A curtailment credit of $120 million related to certain
    postretirement benefit plans and a $30 million curtailment
    charge related to certain defined benefit pension plans.
•
An impairment charge of $21 million related to capitalized
    gates at certain airports in accordance with
    SFAS No. 142, "Goodwill and Other Intangible
    Assets." The carrying values of the affected gates were
    reduced to fair value based on a third party appraisal.
•
The results for the year ended December 31, 2001 include:
•
An aircraft impairment and related charge of $787 million.
    During August 2001, US Airways Group conducted an
    impairment analysis in accordance with SFAS No. 121
    "Accounting for the Impairment of Long-Lived Assets and for
    Long-Lived Assets to Be Disposed Of," on its 36 F-100
    aircraft, 16 MD-80 aircraft and 39 B737-200 aircraft as a result
    of changes to the fleet plan as well as indications of possible
    material changes to the market values of these aircraft. The
    analysis revealed that estimated undiscounted future cash flows
    generated by these aircraft were less than their carrying
    values. In accordance with SFAS 121, the carrying values
    were reduced to fair market value. This analysis resulted in a
    pretax charge of $403 million. In the aftermath of
    September 11, 2001, US Airways Group elected to
    accelerate the retirement of the aforementioned aircraft. All
    B737-200 aircraft retirements were accelerated to the end of
    2001 while the F-100s and MD-80s were scheduled to be retired by
    April 2002. Based on this, US Airways Group conducted
    another impairment analysis which revealed that these aircraft
    were impaired. This culminated in an additional pretax charge of
    $173 million largely reflecting the further diminution in
    value of used aircraft arising from the events of
    September 11, 2001. Management estimated fair market value
    using third-party appraisals, published sources and recent sales
    and leasing transactions. As a result of the events of
    September 11, 2001, US Airways Group reviewed other
    aircraft-related assets which resulted in a pretax charge of
    $15 million as certain aircraft assets had carrying values
    in excess of their fair value less costs to sell. Management
    estimated fair value based on recent sales and leasing
    transactions. US Airways Group also recognized a pretax
    charge of $26 million in connection with the write-down to
    lower of cost or market of surplus parts for the F-100, B737-200
    and MD-80 fleets. Management estimated market value based on
    recent sales activity related to these parts. During the first
    quarter of 2002, US Airways, Inc. entered into agreements
    to sell 97 surplus aircraft and related spare engines and parts,
    including substantially all of its DC-9, MD-80 and B737-200
    aircraft. In connection with these agreements, US Airways
    Group reduced the carrying values of these assets resulting in a
    $148 million charge during the fourth quarter of 2001,
    including a $138 million impairment charge and a charge of
    $10 million to write down the related spare parts.
    Additionally, US Airways Group recognized a pretax
    impairment charge of $22 million in connection with the
    planned retirement of five B737-200 aircraft due to a
    third-party's early return of certain leased B737-200
    aircraft, and early retirement of certain other B737-200s during
    the first quarter of 2001.
•
A $83 million charge for employee severance and benefits.
    In September 2001, US Airways Group announced that in
    connection with its reduced flight schedule it would terminate
    or furlough approximately 11,000 employees across all employee
    groups. Approximately 10,200 of the affected employees were
    terminated or furloughed on or prior to January 1, 2002.
    Substantially all the remaining affected employees were
    terminated or furloughed by May 2002. US Airways
    Group's headcount reduction was largely accomplished
    through involuntary terminations/furloughs. In connection with
    this headcount reduction, US Airways Group offered a
    voluntary leave program to certain employee groups. Voluntary
    leave program participants generally received extended benefits
    (e.g. medical, dental, life insurance) but did not receive any
    furlough pay benefit. In the nine months ended December 31,
    2003 and the year ended December 31, 2002 include
    $1 million and $3 million, respectively, in reductions
    to severance pay and benefit accruals related to the involuntary
    termination or furlough of certain employees.
16
Table of Contents
•
Charges of $4 million and $66 million, respectively,
    representing the present value of the future minimum lease
    payments on three B737-200 aircraft and four F-100 aircraft,
    respectively, that were permanently removed from service.
•
A charge of $13 million representing the unamortized
    leasehold improvement balance for facilities to be abandoned and
    aircraft to be parked as of the facility abandonment date or
    aircraft park date. In addition, US Airways Group
    recognized a pretax charge of $3 million representing the
    present value of future noncancelable lease commitments beyond
    the facility abandonment date.
•
A $2 million curtailment charge related to a certain
    postretirement benefit plan.
(c)
Nonoperating income (expense) for the three months ended
    March 31, 2005 and the year ended December 31, 2004
    include reorganization items, net of $2 million and
    $35 million, respectively. The nine months ended
    December 31, 2003 includes a $30 million gain on the
    sale of US Airways Group's investment in Hotwire, Inc.
    In connection with the prior bankruptcy, a $1.92 billion
    gain and charges of $294 million of reorganization items,
    net, are included for the three months ended March 31, 2003
    and the year ended December 31, 2002, respectively.
17
Table of Contents
America West Holdings Corporation
The selected consolidated financial data presented below is
derived from America West Holdings' consolidated financial
statements for each of the five years ended December 31,
2004, 2003, 2002, 2001 and 2000 contained in America West
Holdings' Annual Reports on Form 10-K for the years
ended December 31, 2004, 2003, 2002 and 2001 and America
West Holdings' unaudited consolidated financial statements
contained in America West Holdings' Quarterly Reports on
Form 10-Q and Form 10-Q/ A for the quarters ended
March 31, 2005 and 2004, respectively. The selected
consolidated financial data should be read in conjunction with
the consolidated financial statements for the respective
periods, the related notes and the related reports of America
West Holdings' independent registered public accounting
firms. See the consolidated financial statements of
America West Holdings included in its Annual Report on
Form 10-K for the year ended December 31, 2004 and
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2005, which are attached as annexes to this
prospectus.
Three Months Ended
March 31,
Year Ended December 31,
2005
2004
2004
2003
2002
2001
2000
(in thousands except per share amounts)
Consolidated statements of operations data:
Operating revenues(a)
$
722,812
$
649,327
$
2,338,957
$
2,254,497
$
2,047,116
$
2,065,913
$
2,344,354
Operating expenses(a)(b)
672,734
634,238
2,382,728
2,232,362
2,206,540
2,476,594
2,356,991
Operating income (loss)
50,078
15,089
(43,771
)
22,135
(159,424
)
(410,681
)
(12,637
)
Income (loss) before income taxes (benefit) and cumulative
    effect of change in accounting principle(c)
33,576
(1,563
)
(88,993
)
57,534
(214,757
)
(324,387
)
24,743
Income taxes (benefit)
—
—
30
114
(35,071
)
(74,536
)
17,064
Income (loss) before cumulative effect of change in accounting
    principle
33,576
(1,563
)
(89,023
)
57,420
(179,686
)
(249,851
)
7,679
Net income (loss)
33,576
(1,563
)
(89,023
)
57,420
(387,909
)
(249,851
)
7,679
Earnings (loss) per share before cumulative effect of change in
    accounting principle:
Basic
0.93
(0.04
)
(2.47
)
1.66
(5.33
)
(7.42
)
0.22
Diluted
0.62
(0.04
)
(2.47
)
1.26
(5.33
)
(7.42
)
0.22
Net income (loss) per share:
Basic
0.93
(0.04
)
(2.47
)
1.66
(11.50
)
(7.42
)
0.22
Diluted(d)
0.62
(0.04
)
(2.47
)
1.26
(11.50
)
(7.42
)
0.22
Shares used for computation:
Basic
36,152
35,851
36,026
34,551
33,723
33,670
35,139
Diluted(d)
62,372
35,851
36,026
56,113
33,723
33,670
35,688
Consolidated balance sheet data (at end of period):
Total assets
$
1,580,400
$
1,598,172
$
1,475,264
$
1,614,385
$
1,438,953
$
1,469,218
$
1,568,515
18
Table of Contents
Three Months Ended
March 31,
Year Ended December 31,
2005
2004
2004
2003
2002
2001
2000
(in thousands except per share amounts)
Long-term debt, less current maturities
$
588,589
$
643,351
$
635,129
$
688,965
$
700,983
$
224,551
$
145,578
Total stockholders' equity
70,130
124,007
36,447
125,989
68,178
420,363
667,073
(a)
Effective with the first quarter of 2005, America West Holdings
    changed the presentation of its regional alliance agreement with
    Mesa Airlines to the gross basis of presentation. Previously,
    America West Holdings used the net basis of presentation. The
    amounts below depict total operating revenues and total
    operating expenses under the gross basis of presentation.
Year Ended December 31,
2004
2003
2002
2001
2000
(in thousands)
Operating revenues
$
2,711,530
$
2,541,471
$
2,309,162
$
2,273,339
$
2,522,553
Operating expenses
2,755,301
2,519,336
2,468,586
2,684,020
2,535,190
(b)
The 2004 results include a $16.3 million net credit
    associated with the termination of the rate per engine hour
    agreement with General Electric Engine Services for overhaul
    maintenance services on V2500-A1 engines, a $0.6 million
    credit related to the revision of the estimated costs associated
    with the sale and leaseback of certain aircraft recorded in the
    first quarter of 2002 and a $0.4 million credit related to
    the revision of estimated charges associated with the Columbus,
    Ohio hub closure originally recorded in the second quarter of
    2003. These credits were partially offset by $1.9 million
    of net charges related to the return of certain Boeing 737-200
    aircraft which includes termination payments of
    $2.1 million, the write-down of leasehold improvements and
    deferred rent of $2.8 million, offset by the net reversal
    of maintenance reserves of $3.0 million. The 2003 period
    includes $16.0 million of charges resulting from the
    elimination of America West Airlines, Inc.'s hub operations
    in Columbus, Ohio ($11.1 million), the reduction-in-force
    of certain management, professional and administrative employees
    ($2.3 million), and the impairment of certain owned Boeing
    737-200 aircraft that have been grounded ($2.6 million)
    offset by a $1.1 million reduction of charges due to a
    revision of the estimated costs related to the early termination
    of certain aircraft leases and a $0.5 million reduction
    related to the revision of estimated costs associated with the
    sale and leaseback of certain aircraft. The 2002 period includes
    $19.0 million of charges primarily related to the
    restructuring completed on January 18, 2002, resulting from
    the events of September 11, 2001. The 2001 period includes
    $141.6 million of special charges related to the impairment
    of reorganization value in excess of amounts allocable to
    identifiable assets and owned aircraft and engines, as well as
    the earlier-than-planned return of seven leased aircraft and
    severance expenses following a reduction-in-force in 2001.
    America West Holdings reclassified amounts related to settled
    fuel hedge transactions and mark-to-market adjustments on open
    hedge instruments from fuel expense to gain (loss) on derivative
    instruments, net. The amounts for the years ended
    December 31, 2004 and 2003 were an addition to fuel expense
    of $30.5 million and $10.7 million, respectively. For
    the years ended December 31, 2002 and 2001, the amounts
    reduced fuel expense by $0.7 million and $7.2 million,
    respectively.
(c)
Nonoperating income (expense) in the 2004 period includes a
    $30.5 million net gain on derivative instruments, which
    included mark-to-market changes and settled transactions, and
    $1.3 million for the write-off of debt issue costs in
    connection with the refinancing of a term loan issued by General
    Electric Capital Corporation with an aggregate amount of
    $110.6 million. The 2003 period includes federal government
    assistance of $81.3 million recognized as nonoperating
    income under the Emergency Wartime Supplemental Appropriations
    Act and $8.5 million and $108.2 million recognized in
    2002 and 2001, respectively, as nonoperating income under the
    Air Transportation Safety and System Stabilization Act. The
    2003, 2002 and 2001 periods include a $10.7 million net
    gain, $0.7 million net loss and $7.2 million net loss
    on derivative instruments, respectively, including
    mark-to-market changes and settled transactions.
(d)
America West Holdings diluted earnings per share for the year
    ended December 31, 2003 includes the impact related to the
    7.25% notes under the "if-converted" methodology.
    The impact reduced diluted earnings per share by $0.03 from
    $1.29 to $1.26.
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Selected Unaudited Pro Forma Condensed Combined Financial
Data
US Airways Group will account for the merger as a
"reverse acquisition" using the purchase method of
accounting in conformity with accounting principles generally
accepted in the United States of America. Although the merger is
structured such that America West Holdings will become a wholly
owned subsidiary of New US Airways Group at closing,
America West Holdings will be treated as the acquiring company
for accounting purposes in accordance with
SFAS No. 141, "Business Combinations," due
to the following factors: (1) America West Holdings
stockholders are expected to own approximately 39% of New
US Airways Group common stock outstanding immediately
following the merger as compared to certain former
US Airways Creditors who will hold approximately 12% (these
percentages reflect certain assumptions concerning the likely
exchange of certain convertible debt and the impact of certain
securities that are dilutive at the per share purchase price
paid by the equity investors), (2) America West Holdings
will receive a larger number of designees to the New
US Airways Group board of directors; and (3) America
West Holdings' current Chairman and Chief Executive Officer
will serve as Chairman and Chief Executive Officer of New
US Airways Group following the merger.
The following unaudited pro forma condensed combined balance
sheet as of March 31, 2005 and the unaudited pro forma
condensed combined statements of operations for the year ended
December 31, 2004 and quarter ended March 31, 2005 are
based on the historical consolidated financial statements of
US Airways Group and America West Holdings included in
their respective reports on Form 10-Q and Form 10-K
attached as annexes to this prospectus, giving effect to the
merger and other transactions that will be effective upon
completion of the merger. No effect has been given to the
proceeds received or the rights given in the rights offering.
The unaudited pro forma condensed combined statements of
operations give effect to the merger as if it had occurred on
January 1, 2004 and the unaudited pro forma condensed
combined balance sheet gives effect to the merger as if it had
occurred on March 31, 2005. The two major categories of
adjustments reflected in the pro forma condensed combined
financial statements are "Purchase Accounting
Adjustments" and "Other Merger Adjustments."
For more detailed information about the unaudited pro forma
condensed combined financial statements, see the section
entitled "Unaudited Pro Forma Condensed Combined Financial
Statements."
Three Months
Year Ended
Ended
December 31,
March 31, 2005
2004
(dollars in millions, except per
share data)
Statement of Operations Data:
Revenues
$
2,351
$
9,456
Total operating expenses
2,525
9,957
Operating loss
$
(174
)
$
(501
)
Net loss
$
(259
)
$
(717
)
Basic and diluted loss per share of common stock
$
(4.65
)
$
(12.87
)
As of
March 31, 2005
(dollars in
millions)
Balance Sheet Data:
Cash, cash equivalents and short term investments
$
1,360
Net property and equipment
$
3,212
Total assets
$
7,680
Long-term debt and capital lease obligations, including current
    maturities
$
3,520
Total stockholders' equity
$
385
20
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RISK FACTORS
In addition to the other information included in this
prospectus, including the matters addressed in "Cautionary
Statement Concerning Forward-Looking Statements," you
should carefully consider the following risks before deciding
whether to exercise the rights being issued to you in accordance
with this prospectus.
Risks Related to Our Business
Our business is dependent on the price and availability of
aircraft fuel. Continued periods of historically high fuel
costs, significant disruptions in the supply of aircraft fuel or
significant further increases in fuel costs could have a
significant negative impact on our operating results.
Our operating results are significantly impacted by changes in
the availability or price of aircraft fuel. Fuel prices
increased substantially in 2004 compared with 2003 and have
continued to increase in 2005. Due to the competitive nature of
the airline industry, we generally have not been able to
increase our fares when fuel prices have risen in the past and
we may not be able to do so in the future. Although we are
currently able to obtain adequate supplies of aircraft fuel, it
is impossible to predict the future availability or price of
aircraft fuel. In addition, from time to time we enter into
hedging arrangements to protect against rising fuel costs. Our
ability to hedge in the future, however, may be limited.
New US Airways Group may not perform as well financially
as we expect following the merger.
In deciding to enter into the merger agreement, US Airways
Group and America West Holdings considered the benefits of
operating as a combined company, including, among others: an
enhanced ability to compete in the airline industry and the fact
that the proprietary brands of the combined company would permit
New US Airways Group to further differentiate itself from
other airline companies. The success of the merger will depend,
in part, on our ability to realize the anticipated revenue
opportunities and cost savings from combining the businesses of
US Airways Group and America West Holdings. We have
estimated that the combined companies expect to realize
approximately $600 million in incremental operating cost
and revenue synergies. We cannot assure you, however, that these
synergies will be realized.
To realize the anticipated benefits from the merger, we must
successfully combine the businesses of US Airways Group and
America West Holdings in a manner that permits those costs
savings and other synergies to be realized in a timely fashion.
In addition, we must achieve these savings without adversely
affecting revenues or suffering a business interruption. If we
are not able to successfully achieve these objectives, the
anticipated benefits of the merger may not be realized fully or
at all or may take longer to realize than expected.
We cannot assure you that the merger, even if achieved in an
efficient, effective and timely manner, will result in combined
results of operations and financial condition consistent with
the pro forma condensed, combined financial data or superior to
what America West Holdings and US Airways Group could have
achieved independently.
The integration of US Airways Group and America West
Holdings following the merger will present significant
challenges.
US Airways Group and America West Holdings have operated
and, until the completion of the merger, will continue to
operate, independently. US Airways Group and America West
Holdings will face significant challenges in consolidating
functions, integrating their organizations, procedures and
operations in a timely and efficient manner and retaining key
US Airways Group and America West Holdings personnel. The
integration of US Airways Group and America West Holdings
will be costly, complex and time consuming, and the managements
of US Airways Group and America West Holdings will
have to devote substantial effort to such integration that could
otherwise be spent on operational matters or other strategic
opportunities.
We expect that the merger will result in certain synergies,
business opportunities and growth prospects. New US Airways
Group, however, may never realize these expected synergies,
business opportunities and growth
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prospects. New US Airways Group may experience increased
competition that limits its ability to expand its business. We
may not be able to capitalize on expected business
opportunities, including retaining current customers. In
addition, assumptions underlying estimates of expected cost
savings and expected revenue synergies may be inaccurate, or
general industry and business conditions may deteriorate.
Furthermore, integrating operations will require significant
efforts and expenses. New US Airways Group management may
have its attention diverted from ongoing operations while trying
to integrate.
US Airways Group continues to experience significant
operating losses.
Despite significant labor cost reductions and other cost savings
achieved in the prior bankruptcy, US Airways Group has
continued to experience significant operating losses. Since
early 2001, the U.S. airline industry's revenue
performance has fallen short of what would have been expected
based on historical growth trends. This shortfall has been
caused by a number of factors, including rising fuel costs, as
discussed above, and the factors discussed below.
The rapid growth of low-cost carriers has had a profound impact
on industry revenues. Using the advantage of low unit costs,
these carriers offer lower fares, particularly those targeted at
business passengers, in order to shift demand from larger,
more-established airlines. As a result of growth, these low-cost
carriers now transport nearly 30% of all domestic
U.S. passengers compared to less than 10% a decade ago.
They now compete for, and thus influence industry pricing on,
approximately 81% of all domestic U.S. passenger ticket
sales compared to less than 20% a decade ago. As a result of
their better financial performance they have access to capital
to fund fleet growth. Low-cost carriers are expected to continue
to increase their market share through pricing and growth.
The advent of Internet travel websites has lowered the cost to
airlines of selling tickets. However, it has also had a large
negative impact on airline revenues because travel consumers now
have access to nearly perfect pricing information and, as a
result, have become more efficient at finding lower fare
alternatives.
Union disputes, employee strikes and other labor-related
disruptions may adversely affect our operations.
The business plan of New US Airways Group includes
assumptions about labor costs going forward. Currently, the
labor costs of both America West Holdings and
US Airways Group are very competitive and very
similar; however, we cannot assure you that labor costs going
forward will remain competitive, either because New
US Airways Group agreements may become amendable or
because competitors may significantly reduce their labor costs.
Approximately 80% of the employees within
US Airways Group and approximately 81% of the
employees within America West Holdings are represented for
collective bargaining purposes by labor unions. In the United
States, these employees are organized into nine labor groups
represented by five different unions at US Airways, Inc.,
seven labor groups represented by four different unions at
America West Airlines, Inc., four labor groups represented by
four different unions at Piedmont Airlines, and four labor
groups represented by four different unions at PSA Airlines.
There are additional unionized groups of US Airways, Inc.
employees abroad.
Relations between air carriers and labor unions in the United
States are governed by the Railway Labor Act, or the RLA. Under
the RLA, collective bargaining agreements generally contain
"amendable dates" rather than expiration dates, and
the RLA requires that a carrier maintain the existing terms and
conditions of employment following the amendable date through a
multi-stage and usually lengthy series of bargaining processes
overseen by the National Mediation Board. This process continues
until either the parties have reached agreement on a new
collective bargaining agreement, or the parties have been
released to "self-help" by the National Mediation
Board. Although in most circumstances the RLA prohibits strikes,
after release by the National Mediation Board carriers and
unions are free to engage in self-help measures such as strikes
and lock-outs. None of the US Airways, Inc. labor
agreements becomes amendable until December 31, 2009. Of
the America West Holdings labor agreements, three are currently
amendable, a fourth becomes amendable soon and negotiations are
proceeding with a fifth group for an initial collective
bargaining agreement.
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There is the potential for litigation to arise in the context of
airline mergers. Unions may seek to delay or halt a transaction,
may seek monetary damages, either in court or in grievance
arbitration, may seek to compel airlines to engage in the
bargaining processes where the airline believes it has no such
obligation or may seek to assert rights to participate in
corporate governance, including through board representation.
There is a risk that one or more unions may pursue such judicial
or arbitral avenues in the context of the merger, and if
successful, could delay or block the merger or create additional
costs that we did not anticipate.
There is also a risk that disgruntled employees, either with or
without union involvement, could engage in illegal slow-downs,
work stoppages, partial work stoppages, sick-outs or other
action short of a full strike that could individually or
collectively harm the operation of the airline and impair its
financial performance.
Fluctuations in interest rates could adversely affect our
liquidity, operating expenses and results.
A substantial portion of our indebtedness bears interest at
fluctuating interest rates. These are primarily based on the
London interbank offered rate for deposits of U.S. dollars,
or LIBOR. LIBOR tends to fluctuate based on general economic
conditions, general interest rates, federal reserve rates and
the supply of and demand for credit in the London interbank
market. We have not hedged our interest rate exposure and,
accordingly, our interest expense for any particular period may
fluctuate based on LIBOR and other variable interest rates. To
the extent these interest rates increase, our interest expense
will increase, in which event, we may have difficulties making
interest payments and funding our other fixed costs and our
available cash flow for general corporate requirements may be
adversely affected.
We rely heavily on automated systems to operate our business
and any failure of these systems, or the failure to successfully
integrate them following the merger, could harm our business.
We depend on automated systems to operate our business,
including our computerized airline reservation systems, our
flight operations systems, our telecommunication systems and our
websites. Our website and reservation systems must be able to
accommodate a high volume of traffic and deliver important
flight information. Substantial or repeated website,
reservations systems or telecommunication systems failures could
reduce the attractiveness of our services and could cause our
customers to purchase tickets from another airline. Furthermore,
following the merger, we must integrate the automated systems of
America West Holdings and US Airways Group. Any disruption
in these systems could result in the loss of important data,
increase our expenses and generally harm our business.
If we incur problems with any of our third party service
providers, our operations could be adversely affected by a
resulting decline in revenue or negative public perception about
our services.
Our reliance upon others to provide essential services on behalf
of our operations may result in the relative inability to
control the efficiency and timeliness of contract services. We
have entered into agreements with contractors to provide various
facilities and services required for our operations, including
aircraft maintenance, ground facilities and baggage handling. It
is likely that similar agreements will be entered into in any
new markets we decide to serve. All of these agreements are
subject to termination after notice. Any material problems with
the efficiency and timeliness of contract services could have a
material adverse effect on our business, financial condition and
results of operations.
The travel industry, materially adversely affected by the
September 11, 2001 terrorist attacks, continues to face
on-going security concerns and cost burdens associated with
security.
The attacks of September 11, 2001 materially impacted and
continue to impact air travel. In November 2001, the
President signed into law the Aviation and Transportation
Security Act, or the Aviation Security Act. This law federalized
substantially all aspects of civil aviation security, creating a
new Transportation Security Administration, or TSA. Under the
Aviation Security Act, substantially all security screeners at
airports are now federal employees and significant other
elements of airline and airport security are now overseen and
performed by federal employees, including federal security
managers, federal law enforcement officers, federal air marshals
and federal security screeners. Among other matters, the law
mandates improved flight
23
Table of Contents
deck security, deployment of federal air marshals onboard
flights, improved airport perimeter access security, airline
crew security training, enhanced security screening of
passengers, baggage, cargo, mail, employees and vendors,
enhanced training and qualifications of security screening
personnel, additional provision of passenger data to
U.S. Customs and enhanced background checks. These
increased security procedures introduced at airports since the
attacks have increased costs to airlines. We would also be
materially impacted in the event of further terrorist attacks or
perceived terrorist threats.
Increases in insurance costs or reductions in insurance
coverage may adversely impact our operations and financial
results.
The terrorist attacks of September 11, 2001 led to a
significant increase in insurance premiums and a decrease in the
insurance coverage available to commercial airline carriers.
Accordingly, our insurance costs increased significantly and our
ability to continue to obtain insurance even at current prices
remains uncertain. In addition, we have obtained third party war
risk (terrorism) insurance through a special program
administered by the FAA resulting in lower premiums than if we
had obtained this insurance in the commercial insurance market.
If the federal insurance program terminates, we would likely
face a material increase in the cost of war risk insurance.
Because of competitive pressures in our industry, our ability to
pass additional insurance costs to passengers is limited. As a
result, further increases in insurance costs or reductions in
available insurance coverage could harm our earnings.
America West Holdings and US Airways Group may be
required to comply with material restrictions or conditions in
order to obtain the regulatory approvals to complete the merger
and any delays in obtaining regulatory approvals will delay and
may possibly prevent the merger.
The completion of the merger is conditioned upon receiving
approval from various federal, state and local regulatory
authorities, including the U.S. Department of
Transportation, Federal Aviation Administration, Federal
Communications Commission and Department of Homeland Security,
and certain foreign regulatory authorities. America West
Holdings and US Airways Group have not yet obtained all of
the regulatory approvals required to complete the merger.
While America West Holdings and US Airways Group have
received clearance from the Department of Justice and expect to
obtain the required regulatory approvals, America West Holdings
and US Airways Group cannot be certain that all of the
required air transportation and non-U.S. antitrust
approvals may be obtained, nor can they be certain that the
approvals will be obtained within the time contemplated by the
merger agreement. A delay in obtaining the required approvals
may delay and may possibly prevent the completion of the merger.
For a full description of the regulatory approvals required for
the merger see the section entitled "The Merger —
Regulatory Approvals Required for the Merger."
Changes in government regulation could increase our operating
costs and limit our ability to conduct our business.
Airlines are subject to extensive regulatory requirements. In
the last several years, Congress has passed laws and the
U.S. Federal Aviation Administration has issued a number of
maintenance directives and other regulations. These requirements
impose substantial costs on airlines.
Additional laws, regulations, taxes and airport rates and
charges have been proposed from time to time that could
significantly increase the cost of airline operations or reduce
revenues. The ability of U.S. carriers to operate
international routes is subject to change because the applicable
arrangements between the U.S. and foreign governments may be
amended from time to time, or because appropriate slots or
facilities may not be available. We cannot assure you that laws
or regulations enacted in the future will not adversely affect
our operating costs.
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Table of Contents
A small number of shareholders will beneficially own a
substantial amount of New US Airways Group common stock.
Immediately following the effectiveness of the merger and the
plan of reorganization, a significant portion of the New
US Airways Group common stock will be beneficially owned by
a relatively small number of equity investors. As a result,
until these stockholders sell a substantial portion of their
shares, they will have a greater percentage vote in matters that
may be presented for a vote to stockholders than most other
stockholders. This may make it more difficult for other
stockholders to influence votes on matters that may come before
stockholders of New US Airways Group.
The use of America West Holdings' and US Airways
Group's respective pre-merger NOLs and certain other tax
attributes may be limited following the merger.
Although New US Airways Group is the same legal entity as US
Airways Group and will continue as the publicly traded parent
entity, each of America West Holdings and US Airways Group
will undergo an "ownership change," as defined in
Internal Revenue Code Section 382, in connection with the
merger and the rights offering. When such an ownership change
occurs, Section 382 limits the companies' future
ability to utilize any net operating losses, or NOLs, generated
before the ownership change and certain subsequently recognized
"built-in" losses and deductions, if any, existing as
of the date of the ownership change. The companies' ability
to utilize new NOLs arising after the ownership change would not
be affected. An ownership change generally occurs if certain
persons or groups increase their aggregate ownership percentage
in a corporation's stock by more than 50 percentage
points in the shorter of any three-year period or the period
since the last ownership change.
The airline industry is intensely competitive.
Our competitors include other major domestic airlines as well as
foreign, regional and new entrant airlines, some of which have
more financial resources or lower cost structures than ours, and
other forms of transportation, including rail and private
automobiles. In most of our markets we compete with at least one
low-cost air carrier. Our revenues are sensitive to numerous
factors, and the actions of other carriers in the areas of
pricing, scheduling and promotions can have a substantial
adverse impact on overall industry revenues. These factors may
become even more significant in periods when the industry
experiences large losses, as airlines under financial stress, or
in bankruptcy, may institute pricing structures intended to
achieve near-term survival rather than long-term viability.
Certain US Airways Group liabilities will not be fully
extinguished as a result of confirmation of the plan of
reorganization.
While a significant amount of US Airways Group's
current liabilities will be subject to discharge as a result of
the debtors' bankruptcy proceedings, a large number of
US Airways Group obligations may remain in effect following
the merger. Various agreements and liabilities will remain in
place, including secured financings, aircraft agreements,
certain environmental liabilities, leases and other contracts
that, even if modified during the bankruptcy process, will still
subject New US Airways Group to substantial obligations and
liabilities. For more information regarding these liabilities,
refer to the section entitled "Where You Can Find More
Information About US Airways Group and America West
Holdings."
Our high level of fixed obligations limits our ability to
fund general corporate requirements and obtain additional
financing, limits our flexibility in responding to competitive
developments and increases our vulnerability to adverse economic
and industry conditions.
We have a significant amount of fixed obligations, including
debt, aircraft leases and financings, aircraft purchase
commitments, leases of airport and other facilities and other
cash obligations. As a result of the substantial fixed costs
associated with these obligations:
•
A decrease in revenues would result in a disproportionately
    greater percentage decrease in earnings.
25
Table of Contents
•
We may not have sufficient liquidity to fund all of these fixed
    costs if our revenues decline or costs increase.
•
We may have to use our working capital to fund these fixed costs
    instead of funding general corporate requirements, including
    capital expenditures.
•
We may not have sufficient liquidity to respond to competitive
    developments and adverse economic conditions.
Our obligations also impair our ability to obtain additional
financing, if needed, and our flexibility in the conduct of our
business. Our existing indebtedness is secured by substantially
all of our assets, leaving us with limited collateral for
additional financing.
Our ability to pay the fixed costs associated with our
contractual obligations depends on our operating performance and
cash flow, which in turn depend on general economic and
political conditions. A failure to pay our fixed costs or a
breach of our contractual obligations could result in a variety
of adverse consequences, including the acceleration of our
indebtedness, the withholding of credit card proceeds by the
credit card servicers and the exercise of remedies by our
creditors and lessors. In such a situation, it is unlikely that
we would be able to fulfill our obligations under or repay the
accelerated indebtedness, make required lease payments or
otherwise cover our fixed costs.
Interruptions or disruptions in service at one of our hub
airports could have a material adverse impact on our
operations.
We expect that New US Airways Group will operate primarily
through primary hubs in Charlotte, Philadelphia and Phoenix and
secondary hubs/focus cities in Pittsburgh, Las Vegas, New York,
Washington, D.C. and Boston. A majority of our flights will
either originate or fly into one of these hubs. A significant
interruption or disruption in service at one of our hubs could
result in the cancellation or delay of a significant portion of
our flights and, as a result, could have a severe impact on our
business, operations and financial performance.
We are at risk of losses and adverse publicity stemming from
any accident involving any of our aircraft.
If one of our aircraft were to be involved in an accident, we
could be exposed to significant tort liability. The insurance we
carry to cover damages arising from any future accidents may be
inadequate. In the event that New
US Airways Group's insurance is not adequate, we
may be forced to bear substantial losses from an accident. In
addition, any accident involving an aircraft that New
US Airways Group operates could create a public perception
that our aircraft are not safe or reliable, which could harm our
reputation, result in air travelers being reluctant to fly on
New US Airways Group's aircraft and adversely impact
our financial condition and operations.
Our business is subject to weather factors and seasonal
variations in airline travel, which cause our results to
fluctuate.
Our operations are vulnerable to severe weather conditions in
parts of our network that could disrupt service, create air
traffic control problems, decrease revenue, and increase costs,
such as during hurricane season in the Caribbean and Southeast
United States, and snow and severe winters in the Northeast
United States. In addition, the air travel business historically
fluctuates on a seasonal basis. Due to the greater demand for
air and leisure travel during the summer months, revenues in the
airline industry in the second and third quarters of the year
tend to be greater than revenues in the first and fourth
quarters of the year. The results of operations of the combined
company will likely reflect weather factors and seasonality, and
therefore quarterly results are not necessarily indicative of
those for an entire year and the prior results of America West
Holdings and US Airways Group are not necessarily
indicative of the combined company's future results.
Employee benefit plans represent significant continuing costs
to the sponsoring employers.
America West Holdings and the subsidiaries of US Airways
Group sponsor employee benefit plans and arrangements that
provide retirement, medical, disability, and other benefits to
our employees and participating
26
Table of Contents
retirees. Many of the benefits provided under these plans are
mandated under various collective bargaining agreements, while
others are provided on a voluntary basis as a means to recruit
and retain valuable employees.
While US Airways Group recently terminated certain defined
benefit pension plans, the benefit obligations associated with
the remaining employee benefit plans represent a substantial
continuing cost to the sponsors. In addition, many of these
employee benefit plans are subject to federal laws such as the
Employee Retirement Income Security Act of 1974 and the Internal
Revenue Code, and must be maintained accordingly. Continued
compliance with these rules is necessary, as even unintentional
failures to comply can result in significant fines and
penalties. Employee benefit plans in general also are
increasingly the subject of protracted litigation, especially
following significant plan design changes. Certain of the plans
sponsored by the subsidiaries of US Airways Group have
undergone several changes in connection with the Chapter 11
cases.
Certain provisions of the second amended and restated
certificate of incorporation and second and amended and restated
bylaws of New US Airways Group will make it difficult for
stockholders to change the composition of our board of directors
and may discourage takeover attempts that some of our
stockholders may consider beneficial.
Certain provisions of the second amended and restated
certificate of incorporation and second amended and restated
bylaws of New US Airways Group may have the effect of
delaying or preventing changes in control if our board of
directors determines that such changes in control are not in the
best interests of New US Airways Group and its
stockholders. These provisions include, among other things, the
following:
•
a classified board of directors with three-year staggered terms;
•
advance notice procedures for stockholder proposals to be
    considered at stockholders' meetings;
•
the ability of New US Airways Group's board of
    directors to fill vacancies on the board;
•
a prohibition against stockholders taking action by written
    consent;
•
a prohibition against stockholders calling special meetings of
    stockholders;
•
requiring the approval of holders of at least 80% of the voting
    power of the shares entitled to vote in the election of
    directors for the stockholders to amend the second amended and
    restated bylaws; and
•
super majority voting requirements to modify or amend specified
    provisions of New US Airways Group's second amended
    and restated certificate of incorporation.
These provisions are not intended to prevent a takeover, but are
intended to protect and maximize the value of New
US Airways Group's stockholders' interests. While
these provisions have the effect of encouraging persons seeking
to acquire control of our company to negotiate with our board of
directors, they could enable our board of directors to prevent a
transaction that some, or a majority, of our stockholders might
believe to be in their best interests and, in that case, may
prevent or discourage attempts to remove and replace incumbent
directors. In addition, New US Airways Group will be
subject to the provisions of Section 203 of the Delaware
General Corporation Law, which prohibits business combinations
with interested stockholders. Interested stockholders do not
include stockholders whose acquisition of New
US Airways Group's securities is pre-approved by
the board of directors under Section 203.
Risks Relating to the Rights Offering
The interest of America West Holders is likely to be diluted
relative to the US Airways Creditors as a result of this
rights offering.
America West Holders and US Airways Creditors are the only
two groups of participants in this rights offering who will be
stockholders of New US Airways Group upon completion of the
merger. Absent any rights offering, America West Holders and
US Airways Creditors would hold approximately 39% and 12% of
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New US Airways Group common stock, respectively, following
the merger assuming conversion of certain convertible debt and
certain securities that are dilutive at the per share purchase
price paid by the equity investors. However, pursuant to the
terms of this rights offering, America West Holders and
US Airways Creditors will be entitled to purchase 38.5% and
61.5%, respectively, of the rights offered hereby. Therefore,
assuming both groups participate fully in this rights offering,
the ownership interests of America West Holders will be diluted
relative to US Airways Creditors with respect to their
ownership of New US Airways Group common stock to 39% and
18%, respectively.
No prior market exists for either the common stock of New
US Airways Group or the rights.
When New US Airways Group emerges from bankruptcy, the New
US Airways Group common stock will be a new issue of
securities which we expect to trade on the NYSE. However, we
cannot assure you that the Subscription Price of $16.50 for
which you will be entitled to purchase shares of New
US Airways Group common stock pursuant to this rights
offering will have any relation to the actual trading price of
that common stock once trading actually begins on the NYSE. In
addition, the transferable basic and over-subscription rights to
be issued to America West Holders are a new issue of securities
with no established trading market. We cannot assure you that a
market for those rights will develop or, if a market does
develop, as to how long it will continue or at what prices the
rights will trade.
There is uncertainty with respect to the basic subscription
and over-subscription privileges for US Airways
Creditors.
The size of the basic subscription privilege of any
US Airways Creditor participating in this rights offering
is uncertain and, in certain circumstances, may be dependent
upon the ultimate resolution by the bankruptcy court as to the
amount of the unsecured claims that are eligible to vote on the
plan of reorganization. It will, therefore, not be possible for
US Airways Creditors to calculate with certainty their
basic subscription privilege, nor their over-subscription
privilege, as of the Expiration Date. Although we have estimated
that US Airways Creditors will receive one basic right for
each
$[          ]
of allowed voting claim, US Airways Creditors will need to
make their own estimate as of the Expiration Date of their basic
and over-subscription privileges. To the extent that any such
estimate is incorrect, a US Airways Creditor may have
under- or over-subscribed for the full allotment of rights to
which that US Airways Creditor is entitled. In the case of
an under-subscription, a US Airways Creditor will not have
the opportunity to submit further payment for the exercise of
additional basic rights or over-subscription privileges. In the
case of an over-subscription, a US Airways Creditor will
have its excess funds remitted, without interest, within
5 business days of the Allocation Date. In the rights
certificate, you must acknowledge that New US Airways Group
is not liable for any damages resulting from your receiving more
or less rights than you estimated you would be entitled to
receive based upon this initial estimate.
We may terminate this rights offering before the Expiration
Date.
We may in our sole discretion decide not to continue with this
rights offering or to terminate this rights offering prior to
the Expiration Date. This decision would be based upon various
factors, including market conditions. We have no current
intention to terminate this rights offering, but we are
reserving the right to do so in the event that circumstances
occur between the date of this prospectus and the Expiration
Date that cause us to conclude that it should be withdrawn. If
we terminate this rights offering, then you will lose any value
represented by the rights. In addition, this rights offering may
be terminated following the Expiration Date in the event that
any of the conditions to the completion of this rights offering
have not been met.
We may have to terminate this rights offering after the
Expiration Date if certain conditions are not met.
The completion of this rights offering is subject to certain
conditions precedent, including the completion of the merger,
which could delay the completion of this rights offering or
result in the termination of this rights offering after the
Expiration Date if those conditions are not met. This rights
offering will expire automatically if the merger does not occur
by December 31, 2005. See the section entitled "The
Rights Offering — Conditions to the Rights
Offering" for more information.
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If you are a non-U.S. person, your ability to vote the shares
of New US Airways Group common stock that you acquire upon
exercise of your rights may be limited.
In order to ensure that it is in compliance with U.S. law,
New US Airways Group's certificate of incorporation
contains provisions that limit the voting rights of
non-U.S. persons who hold shares of New US Airways
Group common stock, to the extent that the shares of common
stock held by those non-U.S. persons would otherwise be
entitled to more than 24.9% of the aggregate votes of all
outstanding equity securities of New US Airways Group.
Accordingly, if you are a non-U.S. person, your ability to
vote the shares of New US Airways Group common stock that
you acquire upon exercise of your rights may be limited.
In addition, we reserve the right to reject subscriptions by
non-U.S. persons to the extent that acceptance of those
subscriptions would cause the number of shares of New
US Airways Group common stock held by non-U.S. persons
to be entitled to more than 24.9% of the aggregate votes of all
outstanding shares of common stock of New US Airways Group
following the completion of this rights offering.
If you elect to exercise your over-subscription privilege,
you will have to make an advance deposit of the full amount of
the purchase price for all shares of New US Airways Group
common stock you request, without any assurance as to whether
you will receive any shares pursuant to your over-subscription
privilege.
The offering of New US Airways Group common stock upon
exercise of the basic subscription privilege and the
over-subscription privilege will be simultaneous. We may not be
in a position to make any announcements during the offering
period regarding the subscription requests received. Therefore,
if you wish to exercise an over-subscription privilege, you will
have to do so without any further information as to whether and
to what extent the offering will be fully subscribed. In that
case, you would be advancing funds, subject to refund, without
knowing whether you will receive all the shares you requested or
any shares at all under your over-subscription privilege.
Furthermore, if you do not receive all the shares you requested,
you will not receive interest on funds refunded to you.
You may experience a significant time delay between your
submission of funds for participation in this rights offering
and either your receipt of New US Airways Group common
stock or the return of all or a portion of those funds, as the
case may be.
First, we are unable to guarantee when the confirmation hearing
on the plan of reorganization will end and, therefore, we are
unable to predict when we will be able to determine the actual
number of shares of New US Airways Group common stock
issuable to each holder who submitted subscription requests.
Consequently, we cannot predict when those shares will
ultimately be issued to participants in this rights offering. In
addition, we cannot return any excess funds collected for
unfulfilled subscription requests until the end of the
confirmation hearing, after which those excess funds will be
returned without interest. Therefore, a significant period of
time may pass between your submission of funds for participation
in this rights offering, and the ultimate issuance of any shares
and the return of any excess payment, as the case may be, in
connection with this rights offering. During that time, you will
not be entitled to interest on your funds and you will forego
other investment opportunities for your funds.
Second, we are unable to determine how much time will pass
between the Expiration Date and the termination of this rights
offering due to the failure of a condition to this rights
offering to be satisfied, including the completion of the
merger. Therefore, we cannot predict when collected funds will
be returned, and although those funds will be returned with
interest, with that interest to accrue from the Expiration Date
to the date of termination, the interest may be minimal and may
be less than you could receive elsewhere. The termination of
this rights offering could be as late as December 31, 2005.
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Table of Contents
Once you exercise your rights, you may not revoke your
commitment.
Once you exercise your rights, you may not revoke your
commitment. Therefore, even if circumstances arise after you
have subscribed in this rights offering that cause you to change
your mind about investing in New US Airways Group common
stock, you will nonetheless be legally bound to proceed.
You must act promptly and follow instructions carefully if
you want to exercise your rights.
Eligible participants and, if applicable, brokers acting on
their behalf, who desire to purchase common stock in this rights
offering must act promptly to ensure that all required
certificates and payments are actually received by the
Subscription Agent,
[                    ],
before the Expiration Date.
The time period to exercise
rights is limited, and we do not anticipate extending the
Expiration Date.
See the section entitled "Key
Dates" for more information. If you or your broker fail to
complete and sign the required rights certificate, send an
incorrect payment amount, or otherwise fail to follow the
procedures that apply to the exercise of your rights, we may,
depending on the circumstances, reject your exercise of rights
or accept it to the extent of the payment received. Neither we
nor the Subscription Agent undertake to contact you concerning,
or to attempt to correct, an incomplete or incorrect rights
certificate or payment or contact you concerning whether a
broker holds rights on your behalf. We have the sole discretion
to determine whether an exercise properly follows the procedures
for exercise set forth in this prospectus.
30
Table of Contents
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained herein should be considered
"forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements may be identified by words such as
"may," "will," "expect,"
"intend," "anticipate," "believe,"
"estimate," "plan," "project,"
"could," "should," and "continue"
and similar terms used in connection with statements regarding
the companies' outlook, expected fuel costs, the revenue
environment, and the companies' respective expected 2005
financial performance. These statements include, but are not
limited to, statements about the benefits of the business
combination transaction involving America West Holdings and
US Airways Group, including future financial and
operating results, the companies' plans, objectives,
expectations and intentions and other statements that are not
historical facts. These statements are based upon the current
beliefs and expectations of America West Holdings and
US Airways Group's management and are subject to
significant risks and uncertainties that could cause the
companies' actual results and financial position to differ
materially from these statements. These risks and uncertainties
include, but are not limited to, those described above under the
heading "Risk Factors" and the following:
•
the ability of the companies to achieve the synergies
    anticipated as a result of combining the companies and to
    achieve such synergies in a timely manner;
•
the ability of the companies to obtain and maintain any
    necessary financing for operations and other purposes, whether
    debtor in possession financing, in the case of US Airways
    Group, during the pendency of the debtors' bankruptcy
    proceeding, or other financing;
•
the ability of the companies to maintain adequate liquidity;
•
the ability to achieve the asset sales contemplated but not yet
    completed in a timely manner;
•
the impact of global instability including the continuing impact
    of the continued military presence in Iraq and Afghanistan and
    the terrorist attacks of September 11, 2001 and the
    potential impact of future hostilities, terrorist attacks,
    infectious disease outbreaks or other global events;
•
changes in prevailing interest rates;
•
the ability to attract and retain qualified personnel;
•
the ability of the companies to attract and retain customers;
•
the cyclical nature of the airline industry;
•
competitive practices in the industry, including significant
    fare restructuring activities by major airlines;
•
the impact of historically high fuel prices;
•
economic conditions;
•
reliance on automated systems and the impact of any failure of
    these systems;
•
labor costs;
•
security-related and insurance costs;
•
weather conditions;
•
government legislation and regulation;
•
relations with unionized employees generally and the impact and
    outcome of the labor negotiations;
•
US Airways Group's ability to continue as a going
    concern;
31
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•
US Airways Group's ability to obtain court approval
    with respect to motions in the Chapter 11 proceedings
    prosecuted by it from time to time;
•
the ability of US Airways Group to develop, prosecute,
    confirm and complete a plan of reorganization with respect to
    the Chapter 11 proceedings;
•
risks associated with third parties seeking and obtaining court
    approval to terminate or shorten the exclusivity period for
    US Airways Group to propose and confirm one or more plans
    of reorganization, to appoint a Chapter 11 trustee or to
    convert the cases to Chapter 7 cases;
•
the ability of the companies to obtain and maintain normal terms
    with vendors and service providers;
•
the companies' ability to maintain contracts that are
    critical to their operations;
•
the potential adverse impact of the Chapter 11 proceedings
    on US Airways Group's liquidity or results of
    operations;
•
the ability of the companies to operate pursuant to the terms of
    their financing facilities (particularly the financial
    covenants);
•
the ability of US Airways Group to fund and execute its
    transformation plan during the Chapter 11 proceedings and
    in the context of a plan of reorganization and thereafter; and
•
other risks and uncertainties listed from time to time in the
    companies' reports to the SEC.
There may be other factors not identified above of which the
companies are not currently aware that may affect matters
discussed in the forward-looking statements, and may also cause
actual results to differ materially from those discussed. The
companies assume no obligation to publicly update any
forward-looking statement to reflect actual results, changes in
assumptions or changes in other factors affecting these
estimates other than as required by law. Similarly, these and
other factors, including the terms of any reorganization plan of
US Airways Group ultimately confirmed, can affect the value
of the US Airways Group's various prepetition
liabilities, common stock and/or other equity securities.
Accordingly, the companies urge that the appropriate caution be
exercised with respect to existing and future investments in any
of these liabilities and/or securities.
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Table of Contents
USE OF PROCEEDS
The aggregate proceeds from this rights offering (estimated to
be approximately $150 million assuming all of the rights
are exercised), after deducting offering expenses, will be used
for general corporate purposes, including the possible
redemption or repurchase of other securities of New
US Airways Group.
33
Table of Contents
CAPITALIZATION
The following table sets forth information regarding
(1) the historical capitalization of America West Holdings
and US Airways Group at March 31, 2005; (2) the
pro forma capitalization of New US Airways Group
immediately following the effective time of the merger; and
(3) the pro forma capitalization of New US Airways
Group immediately following the effective time of the merger as
adjusted to reflect the exercise of rights to subscribe for an
aggregate of 9,090,909 shares of New US Airways Group
common stock for a subscription price of $16.50 for each right,
for aggregate proceeds of approximately $150 million, based
upon certain assumptions that are more fully described in the
footnotes below and assuming that all of the holders of rights
exercise their basic rights in full.
As Adjusted
Pro Forma
Pro Forma
Historical
March 31,
March 31,
March 31, 2005
2005
2005(l)
(dollars in millions)
Indebtedness
Secured
US Airways Group
Equipment notes payable, net of discount of $107 million
    and $101 million on a historical and pro forma basis,
    respectively, installments due 2005 to 2022 (a)
$
1,875
$
1,738
$
1,738
ATSB guaranteed loan, net of discount of $15 million and $0
    on a historical and pro forma basis, respectively (b)
697
712
712
2001 GE credit facility, installments due 2005 to 2012 (c)
332
28
28
2003 GE liquidity facility, installments due 2010 to
    2012 (c)
158
—
—
Eastshore Aviation, LLC debtor in possession financing, due 2005
75
—
—
GE bridge facility due 2005 (c)
42
—
—
Airbus term loan, installments due 2008 to 2010 (d)
—
153
153
America West Holdings
GECC term loan, installments due 2006 to 2010 (c)
111
111
111
Senior secured discount notes, net of discount of
    $5 million, installments due 2005 to 2009 (e)
31
31
31
Equipment notes payable, installments due 2005 to 2008
36
36
36
3,357
2,809
2,809
Unsecured
US Airways Group
Class B mandatorily redeemable preferred stock, net of
    discount of $23 million, due 2011 (f)
52
—
—
GE convertible notes, due 2020 (c)
—
125
125
America West
ATSB guaranteed loan, installments due 2005 through 2008 (b)
300
300
300
7.25% senior exchangeable notes, net of discount of
    $166 million, due 2023 (g)
87
87
87
7.5% convertible senior notes, net of discount of
    $21 million, due in 2009 (h)
91
91
91
Industrial development bonds, due 2023 (i)
29
29
29
Promissory notes, due 2005 (j)
17
17
17
State loan, installments due 2005 through 2007
1
1
1
577
650
650
Total Debt
$
3,934
$
3,459
3,459
Stockholders' Equity (k)
Common stock
$
1
1
Additional paid-in capital
921
1,071
Accumulated deficit
(537
)
(537
)
Total Stockholders' Equity
$
385
$
535
34
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(a)
Equipment notes payable balances are as of March 31, 2005,
    bearing interest at rates of 4.17% to 9.01%. We expect to
    complete various sale and leaseback transactions on certain
    wide-body and regional jet aircraft prior to completion of the
    merger. In addition to the GE sale-leaseback transaction, these
    transactions should reduce the equipment notes balance by
    approximately $666 million not included in the table above
    if the contemplated transactions are completed as expected.
(b)
US Airways Group ATSB Guaranteed
    Loan
— As part of its reorganization under the
    prior bankruptcy, US Airways, Inc. received a $900 million
    loan guarantee under the Air Transportation Safety and System
    Stabilization Act from the ATSB in connection with a
    $1 billion term loan financing that was funded on
    March 31, 2003. The ATSB loan is secured by substantially
    all of the present and future assets of the
    US Airways Group not otherwise encumbered (including
    certain cash and investment accounts, previously unencumbered
    aircraft, aircraft engines, spare parts, flight simulators, real
    property, takeoff and landing slots, ground equipment and
    accounts receivable), other than certain specified assets,
    including assets which are subject to other financing
    agreements. As of March 31, 2005, $712 million was
    outstanding under the ATSB loan. The US Airways Group ATSB
    loan bears interest at an average variable interest rate on
    Tranche A (the guaranteed 90% of the loan balance) of
    4.79%, which includes a default rate of 200 basis points, plus
    guarantee fees of 4.1%, and on Tranche B (the remaining 10%
    of the loan balance) of 11.13%, which includes a default rate of
    400 basis points.
In connection with the ATSB guarantee, the ATSB received
    7,635,000 warrants that enable it to purchase shares of
    US Airways Group's Class A common stock at
    $7.42 per share. The value attributed to the warrants at
    issuance is being amortized over the term of the warrants. We
    expect that these warrants will be cancelled under the currently
    proposed plan of reorganization. US Airways Group reached
    agreement with the ATSB concerning an interim extension to the
    ATSB cash collateral agreement while US Airways Group and
    America West Holdings work to finalize the post-merger terms of
    both loans. The interim agreement will expire on July 29,
    2005 and will require US Airways Group, among other
    conditions, to maintain a weekly minimum unrestricted cash
    balance of $325 million.
For more information on US Airways Group's ATSB
    loan, see the section entitled "US Airways Group
    Management's Discussion and Analysis of Financial Condition
    and Results of Operations — Liquidity and Capital
    Resources."
America West Holdings ATSB Guaranteed Loan
— In
    January 2002, America West Airlines, Inc. closed a
    $429 million loan backed by a $380 million federal
    loan guarantee provided by the ATSB. Certain third-party
    counter-guarantors have fully and unconditionally guaranteed the
    payment of an aggregate of $45 million of the outstanding
    principal amount under the loan partially guaranteed by the ATSB
    plus accrued and unpaid interest thereon. In addition, America
    West Holdings has fully and unconditionally guaranteed the
    payment of all principal, premium, interest and other
    obligations outstanding under the loan partially guaranteed by
    the ATSB and has pledged the stock of America West Airlines,
    Inc. to secure its obligations under such guarantee. Principal
    amounts under this loan become due in ten installments of
    $43 million on each March 31 and September 30,
    which commenced on March 31, 2004 and end on
    September 30, 2008. Principal amounts outstanding under the
    loan partially guaranteed by the ATSB bear interest at a rate
    per annum equal to LIBOR plus 40 basis points plus
    guarantee fees of approximately 8.0%.
For more information about the America West Holdings ATSB
    guaranteed loan, see America West Holdings' filings on
    Form 10-Q and Form 10-K attached as Annexes B-1
    and B-2 to this prospectus.
(c)
US Airways Group and General
    Electric
— General Electric and its affiliates,
    referred to collectively as GE, is
    US Airways Group's largest aircraft creditor,
    having financed or leased a substantial portion of
    US Airways Group's aircraft prior to the current
    Chapter 11 filing. In addition, in November 2001, US
    Airways, Inc. obtained a $404 million credit facility from
    GE, which was secured by collateral including 11 A320-family
    aircraft and 28 spare engines. Borrowings under the 2001 GE
    credit facility bear interest at the rate of LIBOR plus 3.50%,
    and the term of the facility is 2012.
In connection with the prior bankruptcy,
    US Airways Group reached a settlement with GE that
    resolved substantially all aircraft, aircraft engine and
    loan-related issues, and provided US Airways Group
    with additional financing from GE in the form of a liquidity
    facility of up to $360 million that bears interest at rate
    of LIBOR plus 4.25%. Most obligations of
    US Airways Group to GE are cross-defaulted to the 2001
    GE credit facility, the 2003 GE liquidity facility, the GE
    regional jet leases and the GE regional jet mortgage financings.
In November 2004, US Airways Group reached a
    comprehensive agreement with GE and its affiliates, as described
    in a Master Memorandum of Understanding, or GE Master MOU, that
    was approved by the bankruptcy court on December 16, 2004.
    The GE Master MOU, together with the transactions contemplated
    by the term sheets attached to the GE Master MOU, will provide
    US Airways Group with short-term liquidity, reduced
    debt, lower aircraft ownership costs, enhanced engine
    maintenance services and operating leases for new regional jets,
    while preserving the vast majority of
    US Airways Group's mainline fleet owned or
    otherwise financed by GE. In connection with the merger,
    US Airways Group and America West Holdings have
    renegotiated certain of their respective existing agreements,
    and entered into new agreements, with GE. These agreements are
    set forth in a comprehensive agreement with GE and certain of
    its affiliates in a Master Merger Memorandum of Understanding,
    referred to as the GE Merger MOU, that was approved by the
    bankruptcy court in June 2005. In part, the GE Merger MOU
    modified and supplemented the agreements reached between
    US Airways Group and GE in the GE Master MOU.
The bridge facility entered into between
    US Airways Group and GE pursuant to the GE Master MOU
    on December 20, 2004 will continue in effect during the
    pendancy of the Chapter 11 cases. The bridge facility
    provides for a loan in the amount of up to approximately
    $56 million, which has been drawn down by
    US Airways Group ($42 million was drawn as of
    March 31, 2005). The bridge facility bears interest at the
    rate of LIBOR plus 4.25%, matures on the date
    US Airways Group emerges from the Chapter 11
    cases, and is payable in cash or, upon maturity, by issuance of
    the $125 million of convertible notes, as described below.
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Subject to certain conditions, GE will purchase the assets
    securing the 2001 credit facility in a sale-leaseback
    transaction. The sale proceeds realized from the sale-leaseback
    transaction will be applied to repay the 2003 GE liquidity
    facility, the mortgage financing associated with the CRJ
    aircraft and a portion of the 2001 GE credit facility. The
    balance of the 2001 credit facility will be amended to allow
    certain additional borrowings, which will result in a total
    principal balance outstanding thereunder of approximately
    $28 million. The operating leases will be cross-defaulted
    with all other GE obligations, other than excepted obligations,
    and will be subject to return conditions as agreed to by the
    parties.
Pursuant to the GE Master MOU, US Airways Group agreed
    that upon its emergence from the Chapter 11 cases, as
    partial consideration for conversion of the bridge facility,
    forgiveness and release of US Airways, Inc. from certain
    prepetition obligations, deferral of certain payment obligations
    and amendments to certain maintenance agreements, an affiliate
    of GE will receive convertible notes of the reorganized
    US Airways, Inc. in the aggregate principal amount of
    $125 million. The convertible notes will be convertible at
    any time, at the holders' election, into shares of common
    stock of the New US Airways Group at a conversion
    price equal to the product of (x) 140%-150% (at
    US Airways, Inc.'s option) and (y) the average
    closing price of New US Airways Group common stock for
    the sixty consecutive trading days following emergence from
    bankruptcy and the listing of US Airways Group common
    stock on Nasdaq or a national stock exchange. The convertible
    notes will bear interest at a rate to be determined no later
    than thirty days prior to the debtors' scheduled date of
    emergence from bankruptcy and interest will be payable
    semi-annually, in arrears, and will mature in 2020, with an
    option to put the notes back to US Airways, Inc. in 2010.
For more information about the agreements between
    US Airways Group and GE, see the section entitled
    "US Airways Group Management's Discussion
    and Analysis of Financial Condition and Results of
    Operations — Liquidity and Capital Resources."
America West Holdings and General Electric
— On
    September 10, 2004, America West Airlines, Inc. entered
    into a term loan financing with GECC providing for loans in an
    aggregate amount of $111 million. The new term loan
    financing consists of two secured term loan facilities:
    (1) a $76 million term loan facility secured primarily
    by spare parts, rotables and appliances; and (2) a
    $35 million term loan facility secured primarily by
    aircraft engines and parts installed in such engines. The
    facilities are cross-collateralized on a subordinated basis and
    the collateral securing the facilities also secures on a
    subordinated basis certain of America West Airlines, Inc.'s
    other existing debt and lease obligations to GECC and its
    affiliates. Principal amounts outstanding under the loans bear
    interest at a rate per annum based on three-month LIBOR plus a
    margin. Both facilities contain customary events of default,
    including payment defaults, cross-defaults, breach of covenants,
    bankruptcy and insolvency defaults and judgment defaults. The
    America West Holdings GE term loan bears interest at a rate
    of LIBOR plus 3.95%.
For more information on America West Holdings' arrangements
    with GE, see America West Holdings' filings on
    Form 10-Q and 10-K attached as Annexes B-1 and B-2 to this
    prospectus.
(d)
Airbus Term Loan
— In connection with the
    merger, a Memorandum of Understanding, which we refer to as the
    Airbus MOU, was executed between ASVA S.A.R.L., an affiliate of
    Airbus Industrie G.I.E., which we refer to as Airbus,
    US Airways Group, US Airways, Inc. and America
    West Airlines, Inc. A key aspect of the Airbus MOU is that
    Airbus will provide a $250 million financing commitment
    upon the satisfaction of various conditions precedent, including
    the completion of the merger and the emergence of
    US Airways, Inc. from bankruptcy, of which
    $153 million is available to be drawn upon completion of
    the merger and used for general corporate purposes. We expect to
    have approximately $175 million available upon completion
    of the merger and $250 million available by the end of
    2006. This term loan will bear interest at a floating rate of
    interest with a margin subject to resets based on the credit
    rating of New US Airways Group.
For more information on the Airbus MOU, see the sections
    entitled "Unaudited Pro Forma Condensed Combined Financial
    Statements" and "US Airways Group
    Management's Discussion and Analysis of Financial Condition
    and Results of Operations — Liquidity and Capital
    Resources."
(e)
Senior Secured Discount Notes
— On
    December 27, 2004, America West Airlines, Inc. raised
    additional capital by financing its Phoenix maintenance facility
    and flight training center. The flight training center was
    previously unencumbered, and the maintenance facility became
    unencumbered earlier in 2004 when America West Airlines, Inc.
    refinanced its term loan. Using its leasehold interest in these
    two facilities as collateral, America West Airlines, Inc.,
    through a wholly owned subsidiary named FTCHP LLC, raised
    $30.8 million through the issuance of senior secured
    discount notes. The notes bear interest at a rate of LIBOR plus
    3.89%.
(f)
The Class B preferred stock of US Airways Group
    issued to Retirement Systems of Alabama Holdings LLC is subject
    to mandatory redemption on its maturity date of March 31,
    2011 and is therefore classified as debt. The debtors' plan
    of reorganization contemplates the cancellation of these shares.
(g)
In July and August of 2003, America West Airlines, Inc.
    completed a private placement of approximately $87 million
    issue price of 7.25% Senior Exchangeable Notes due 2023.
    The notes bear cash interest at 2.49% per year until
    July 30, 2008. Thereafter, the notes will cease bearing
    cash interest and begin accruing original issue discount daily
    at a rate of 7.25% per year starting in July 2009, until
    maturity. Each note was issued at a price of $343.61 and is
    exchangeable for Class B common stock of America West
    Holdings at an exchange ratio of 32.038 shares per $1,000
    principal amount at maturity of the notes, subject to adjustment
    in certain circumstances. This represents an equivalent
    conversion price of approximately $10.73 per share. The
    aggregate amount due at maturity, including accrued original
    issue discount from July 31, 2008, will be
    $253 million. The notes are unconditionally guaranteed on a
    senior unsecured basis by America West Holdings.
(h)
In connection with the closing of the ATSB guaranteed loan and
    the related transactions, America West Holdings issued
    $104.5 million of 7.5% convertible senior notes due
    2009, of which approximately $112 million remained
    outstanding at March 31, 2005, including $22 million
    of interest paid through December 31, 2004 as a deemed loan
    added to the initial principal thereof. These notes are
    convertible into shares of Class B common stock of America
    West Holdings, at the option of the holders, at an
36
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initial conversion price of $12.00 per share or a
    conversion ratio of approximately 83.333 shares per $1,000
    principal amount of such notes, subject to standard
    anti-dilution adjustments. Interest on the 7.5% convertible
    senior notes is payable semiannually in arrears on June 1
    and December 1 of each year. At America West Holdings'
    option, the first six interest payments were payable in the form
    of a deemed loan added to the principal amount of these notes.
    The 7.5% convertible senior notes will mature on
    January 18, 2009 unless earlier converted or redeemed. The
    payment of principal, premium and interest on the
    7.5% convertible senior notes is fully and unconditionally
    guaranteed by America West Airlines, Inc.
(i)
The industrial development revenue bonds are due April 2023.
    Interest at 6.3% is payable semiannually on April 1 and
    October 1. The bonds are subject to optional redemption prior to
    the maturity date on or after April 1, 2008, in whole or in
    part, on any interest payment date at the following redemption
    prices: 102% on April 1 or October 1, 2008; 101% on
    April 1 or October 1, 2009; and 100% on April 1,
    2010 and thereafter.
(j)
Promissory notes are due in 2005 and bear interest at rates of
    3.81% to 4.16%.
(k)
The Stockholders' Equity for New US Airways Group
    includes the new equity investments and America West
    Holdings' current paid-in capital, partially offset by
    America West Holdings' accumulated deficit.
(l)
The "As Adjusted Pro Forma March 31, 2005"
    column reflects the exercise of rights to subscribe for an
    aggregate of 9,090,909 shares of New US Airways Group
    common stock for a subscription price of $16.50 for each right,
    for aggregate assumed proceeds of $150 million. For more
    information, see the section entitled "Unaudited Pro Forma
    Condensed Combined Financial Statements."
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PRO FORMA FULLY DILUTED SECURITY OWNERSHIP BY ENTITY
OF NEW US AIRWAYS GROUP AT CLOSING
The following table sets forth certain information regarding the
potential ownership of New US Airways Group common
stock following the merger and the rights offering. This table
assumes that all rights are exercised in the rights offering.
The table sets forth the potential ownership: (1) on a
primary basis, (2) reflecting the impact of certain
securities that are dilutive at the per share price paid by the
equity investors, and (3) on a fully diluted basis assuming
all equity securities are exercised or converted. We are
providing this information to give you information on what
security holders or groups of security holders may beneficially
own significant amounts of New US Airways Group common
stock. Because many of the variables underlying the assumptions
used to develop this table are out of the control of America
West Holdings and US Airways Group, it is impossible to
predict precisely what the ownership interest of any particular
security holder or group will be in New US Airways Group
common stock following the merger. You should read carefully the
footnotes to this table in order to understand the many
assumptions underlying the information in the table.
Reflecting Dilutive
Securities at the
Fully Diluted
Primary Shares
Per Share Price (1)
Shares (2)
US Airways Group
Shares
%
Shares
%
Shares
%
GE convertible notes (3)
—
—
—
—
5,224,660
6%
US Airways Group Creditors (4)
8,212,121
13%
8,212,121
11%
8,212,121
9%
US Airways Group Total
8,212,121
13%
8,212,121
11%
13,436,781
15%
America West Holdings
(5)
Class A common shares outstanding (6)
460,686
1%
460,686
1%
460,686
1%
Class B common shares outstanding (7)
14,504,339
22%
14,504,339
19%
14,504,339
16%
7.25% convertible notes (8)
—
—
5,606,196
7%
5,606,196
6%
Warrants (9)
—
—
4,542,319
6%
8,122,683
9%
Options (10)
—
—
741,646
1%
4,280,725
5%
7.5% convertible notes (11)
—
—
—
—
3,860,163
4%
America West Holdings Total
14,965,025
23%
25,855,186
34%
36,834,792
40%
Equity Investors
Eastshore
8,333,333
13%
8,333,333
11%
8,333,333
9%
Par (12)
6,768,485
10%
6,768,485
9%
6,768,485
7%
ACE
5,000,000
8%
5,000,000
7%
5,000,000
5%
Peninsula
3,333,333
5%
3,333,333
4%
3,333,333
4%
Wellington (13)
9,090,900
14%
9,090,900
12%
9,090,900
10%
Rights offering (14)
9,090,909
14%
9,090,909
12%
9,090,909
10%
Total Equity Investors
41,616,960
64%
41,616,960
55%
41,616,960
45%
Total
64,794,106
100%
75,684,267
100%
91,888,533
100%
Note: Percentages may not total 100% due to rounding.
(1)
This column includes the primary shares outstanding plus the
    dilutive impact of only those dilutive securities that are
    dilutive at the per share price paid by the equity investors,
    including the America West Holdings 7.25% convertible notes and
    America West Holdings warrants and exercisable options. America
    West Holdings dilutive securities represent fully diluted shares
    using the treasury method of accounting (i.e. assuming proceeds
    are used to repurchase outstanding shares) assuming a price of
    $16.50 per share of New US Airways Group common stock (the
    price paid by the most recent equity investor) and a conversion
    factor of 0.4125 of a share of New US Airways Group common
    stock for each share of America West Holdings Class B
    common stock.
(2)
Fully diluted shares represent primary shares outstanding plus
    additional shares assuming all convertible notes, options and
    warrants are converted or exercised for shares of New
    US Airways Group common stock. America West Holdings
    dilutive securities represent fully diluted gross shares and a
    conversion factor of 0.4125 of a share of New US Airways
    Group common stock for each share of America West Holdings
    Class B common stock.
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(3)
The $125 million GE convertible notes are convertible at a
    price that will be determined at a future date. The contractual
    conversion price will be at a 40 to 50% premium to the average
    of the closing price of New US Airways Group common stock
    for the first 60 days of trading following emergence from
    bankruptcy. Shares are estimated assuming conversion at a 45%
    premium and assuming a 60 day average price per share of
    New US Airways Group common stock of $16.50.
(4)
The total shares of New US Airways Group common stock shown
    in the table will not be issued as of completion of the merger,
    because not all of the creditors claims will be finally resolved
    at that time. While the total number of shares of common stock
    of New US Airways Group available to creditors will be
    fixed, it is impossible to determine when the claims process
    will be finalized. Shares allocated to certain US Airways Group
    creditors include an allotment of excess shares resulting from
    the $150 million Wellington investment at $16.50 per share
    of New US Airways Group common stock.
(5)
Share count of America West Holdings Class A and
    Class B common shares, warrants and options include a
    pro-rata allotment of 261,818 excess shares resulting from the
    $150 million Wellington investment at $16.50 per share of New
    US Airways Group common stock.
(6)
Class A common shares outstanding at closing is based on
    859,117 shares of America West Holdings Class A common
    stock outstanding and a conversion rate of 0.5362 of a share of
    New US Airways Group common stock per share of America West
    Holdings Class A common stock.
(7)
Class B common shares outstanding at closing is based on
    35,163,191 shares of America West Holdings Class B
    common stock outstanding and a conversion rate of
    0.4125 shares of New US Airways Group common
    stock per share of America West Holdings Class B common
    stock.
(8)
America West Holdings 7.25% convertible notes are
    convertible at $10.73 per share of America West Holdings
    Class B common stock and contain a change-of-control
    feature that allows the noteholders to put the notes to America
    West Airlines, Inc. for all outstanding principal and accrued
    interest, totaling $87.9 million based on an assumed
    closing date of September 30, 2005. America West Holdings
    may satisfy the put with equity at a price per share that is 95%
    of the market price of New US Airways Group common shares.
    This market price is assumed to be $16.50 per share of New
    US Airways Group common stock, which would result in
    5,606,196 shares being issued to the noteholders.
(9)
Assumes that America West Holdings warrants are exercised at a
    strike price of $7.27 per share of New US Airways
    Group common stock. At the assumed closing price of $16.50 per
    share of New US Airways Group common stock, under the
    treasury stock method of accounting, the warrants would be
    exercisable for 4,542,319 shares.
(10)
America West Holdings options are shown on a fully diluted basis
    assuming all options are exercised for shares of New
    US Airways Group common stock. At March 31, 2005,
    America West Holdings had 10,377,861 outstanding options with a
    weighted average exercise price of $9.54 per share of
    America West Holdings Class B common stock. At the assumed
    closing price of $16.50 per share of New US Airways
    Group common stock, under the treasury stock method of
    accounting, the options would be exercisable for
    741,646 shares.
(11)
Assumes conversion of the America West Holdings
    7.5% convertible notes at a conversion price of
    $29.09 per share of New US Airways Group common
    stock.
(12)
Assumes that 101,818 excess shares resulting from the Wellington
    per share price of $16.50 per share of New US Airways
    Group common stock are allocated to Par, per its investment
    agreement, in addition to the 6,666,667 shares allocated
    for Par's primary investment of $100 million at
    $15.00 per share of New US Airways Group common stock.
(13)
Represents a group of investors under the management of
    Wellington Management Company, LLP, a Boston-based investment
    firm.
(14)
Represents the exercise of the rights by the US Airways
    Creditors and America West Holders for 9,090,909 shares of
    New US Airways common stock at a price of $16.50 per share.
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Table of Contents
PRO FORMA SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS OF NEW US AIRWAYS GROUP
The following table sets forth certain information regarding the
projected ownership of New US Airways Group common
stock immediately following the merger and the exercise of
rights pursuant to this rights offering by all projected
beneficial owners of more than 5% of New US Airways Group
common stock, based upon certain assumptions described in the
notes below.
Percent of Class
Percent of Class
Number of
Excluding 7.25%
Including 7.25%
Beneficial Owner
Form of Security
Shares
Notes (1)(3)(7)
Notes (2)(3)(7)
Wellington Management Company, LLP (4)
Primary Shares
9,090,900
14.0%
12.9%
75 State Street
Boston, MA 02109
Eastshore Aviation, LLC
Primary Shares
8,333,333
12.9%
11.8%
W6390 Challenger Drive,
Suite 203
Appleton, WI 54924
Air Transportation Stabilization Board
Warrants
7,735,770
10.7%
9.9%
1120 Vermont Avenue
Suite 970
Washington, DC 20220
Par Investment Partners, L.P.
Primary Shares
6,768,485
10.4%
9.6%
One International Place
Suite 2401
Boston, MA 02109
General Electric Capital Corporation
Convertible Note
5,224,660
(5)
7.5%
6.9%
c/o GE Commercial Aviation Services LLC
201 High Ridge Road
Stamford, CT 06927-4900
ACE Aviation Holdings Inc.
Primary Shares
5,000,000
7.7%
7.1%
5100 de Maisonneuve Boulevard West
Montreal, Quebec, Canada H4A 3T2
Peninsula Investment Partners, L.P.
Primary Shares
3,333,333
5.1%
4.7%
404B East Main Street
Charlottesville, VA 22902
Pension Benefit Guaranty Corporation
Primary Shares
*
(6)
*
*
1200 K Street
Washington, DC 20005-4026
(1)
Calculation of percent of class assumes that America West
    Holdings 7.25% convertible notes are not converted to New
    US Airways Group common stock as a result of the merger.
(2)
Calculation of percent of class assumes dilution from the
    conversion of the America West Holdings 7.25% convertible
    notes at a New US Airways Group share price of $15.68
    (representing 5.61 million shares).
(3)
Calculated percentages are not additive. Percent of class
    ownership represented by holders of primary shares assumes no
    dilution when calculating the total shares. Calculation of
    percent of class ownership represented by holders of dilutive
    securities assumes that only the individual holder listed
    converts or exercises its option to purchase common stock of New
    US Airways Group; in these calculations, total shares used
    for the denominator includes only the sum of shares held by the
    individual holder after conversion plus all primary shares.
(4)
Holder represents a group of investors under the management of
    Wellington Management Company, LLP, a Boston-based investment
    firm.
(5)
Shares to GE are estimated assuming conversion of their
    $125 million loan at a 45% premium to the Wellington price
    per share of $16.50. The actual conversion price will be at a 40
    to 50% premium to the average of the closing price of New
    US Airways Group stock for the first 60 days of
    trading following New US Airways Group emergence from
    Chapter 11.
(6)
We currently estimate that the PBGC will own more than 5% of the
    outstanding primary shares of New US Airways Group. The
    PBGC's actual number of shares will be determined by its
    portion of the eventual allowed unsecured claims against the
    debtors.
(7)
Assumes the exercise of all rights pursuant to this rights
    offering.
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PER SHARE MARKET PRICE DATA
US Airways Group common stock currently trades on the
Nasdaq over-the-counter market under the Symbol
"UAIRQ." The table below sets forth, for the periods
indicated, the range of high and low per share sales prices for
US Airways Group common stock on the NYSE, Nasdaq national
market and Nasdaq over-the-counter market, as discussed in more
detail below. For current price information, you should consult
publicly available sources. US Airways Group did not pay
dividends during these periods.
The historical price information of US Airways Group common
stock does not reflect the price at which the New
US Airways Group common stock will trade following the
merger. The plan of reorganization contemplates the cancellation
of all currently outstanding equity securities of
US Airways Group. Therefore, it is not meaningful to
determine the value of one right or one share of New US Airways
Group common stock by reference to current trading values of
US Airways Group common stock. As also discussed in more
detail in this prospectus, various equity investors have entered
into agreements with US Airways Group and America West
Holdings. These agreements were negotiated at arm's length
and value a share of New US Airways Group common stock at
$15.00 or $16.50 per share, assuming completion of the
merger and the debtors' plan of reorganization. We cannot
anticipate the price at which the New US Airways Group
common stock will trade following the merger.
Prior to US Airways Group's 2002 bankruptcy
proceedings and continuing through September 24, 2002,
US Airways Group's common stock was traded on the NYSE
under the Symbol "U." On August 14, 2002, the
NYSE announced that it would suspend trading and move to delist
US Airways Group's common stock. The SEC approved the
delisting and the common stock was delisted effective
September 25, 2002. As a result, on September 25,
2002, the common stock began trading on the Nasdaq
over-the-counter market under the symbol "UAWGQ." On
March 31, 2003, in conjunction with the effective date of
the 2003 plan of reorganization, all then-outstanding equity
securities of the predecessor company were cancelled. The
"predecessor company" refers to US Airways Group
prior to March 31, 2003. On October 21, 2003,
US Airways Group's Class A common stock began
trading on the Nasdaq National Market under the symbol
"UAIR." Prior to listing on the Nasdaq National
Market, the Class A common stock had limited trading
activity on the Over-the-Counter Bulletin Board and in the Pink
Sheets, which provide trading for the over-the-counter
securities markets. On September 13, 2004, US Airways
Group received written notice from the Nasdaq Stock Market that
the Class A common stock would be delisted in accordance
with Marketplace Rules 4300 and 4450(f), effective with the
opening of business on September 22, 2004. Nasdaq indicated
in its letter that the delisting determination followed its
review of US Airways Group's press release announcing
that the company had filed for bankruptcy protection. As a
result of this notification, a fifth character "Q" was
added to the trading symbol, changing it from "UAIR"
to "UAIRQ" at the opening of business on
September 15, 2004. Shares are currently trading on the
Nasdaq over-the-counter market under the symbol
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Table of Contents
"UAIRQ." US Airways Group's Class B
common stock has no public trading market and is held by one
shareholder of record as of May 31, 2005.
US Airways Group
High
Low
Fiscal Year 2002
First Quarter
$
7.60
$
4.01
Second Quarter
6.76
2.20
Third Quarter
4.10
0.18
Fourth Quarter
0.69
0.10
Fiscal Year 2003
First Quarter
0.30
0.01
Second Quarter (1)
*
*
Third Quarter
32.00
4.00
Fourth Quarter
15.25
5.01
Fiscal Year 2004
First Quarter
6.77
4.11
Second Quarter
4.55
1.44
Third Quarter
3.16
0.58
Fourth Quarter
2.00
0.76
Fiscal Year 2005
First Quarter
1.31
0.69
Second Quarter (through June 22, 2005)
1.49
0.62
(1)
As a result of emergence from the prior bankruptcy, the
    predecessor company's common stock was cancelled effective
    March 31, 2003. An established public trading market,
    defined as more than limited or sporadic trading, did not exist
    for the successor company Class A common stock until
    September 8, 2003. The successor company refers to
    US Airways Group on and after March 31, 2003,
    after giving effect to the cancellation of then-existing common
    stock and the issuance of new securities under the 2003 plan of
    reorganization, and the application of fresh-start reporting.
The following table presents the last reported sale price of a
share of US Airways Group common stock, as reported on
the over-the-counter market on May 18, 2005, the last full
trading day prior to the public announcement of the proposed
merger, and on [month, day], 2005, the last practicable trading
day prior to the date of this prospectus.
US Airways Group
Date
Common Stock
May 18, 2005
$
0.77
[month, day], 2005
$
[  ]
As noted above, because the plan of reorganization contemplates
the cancellation of all currently outstanding securities of
US Airways Group, the historical price information of
US Airways Group common stock does not reflect the
price at which the New US Airways Group common stock
will trade following the merger and the completion of the rights
offering.
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DIVIDEND POLICY
US Airways Group has not paid any cash dividends on its
currently outstanding common stock. The plan of reorganization
contemplates the cancellation of all currently outstanding
equity securities of US Airways Group. US Airways
Group presently intends to retain any earnings for use in its
business and does not anticipate paying cash dividends on the
New US Airways Group common stock in the foreseeable
future. In addition, certain of US Airways Group's
debt agreements prohibit it from paying cash dividends.
43
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THE COMBINED COMPANY FOLLOWING THE MERGER
Following the implementation of the debtors' plan of
reorganization, including the merger and the new equity
investments and other related transactions described in this
prospectus, we will operate under the single brand name of
US Airways through our two principal operating subsidiaries
US Airways, Inc. and America West Airlines, Inc. We expect
to integrate the two operating subsidiaries into one operation
over the following 24 months. We expect that the merger
will create the fifth largest airline operating in the United
States as measured by domestic revenue passenger miles and by
ASMs. We expect to have primary hubs in Charlotte, Philadelphia
and Phoenix and secondary hubs/focus cities in Pittsburgh, Las
Vegas, New York, Washington, D.C., Boston and Pittsburgh.
After the merger, New US Airways Group will be a low-cost
carrier offering scheduled passenger service on approximately
3,600 flights daily to 229 cities in the U.S., Canada, the
Caribbean, Latin America and Europe. New US Airways Group
will operate 361 mainline jets and will be supported by its
regional airline subsidiaries and affiliates operating as
US Airways Express, which will operate approximately 239
regional jets, of which 83 will be aircraft with 70 or more
seats, and approximately 57 turboprops.
We expect that New US Airways Group will have one of the
most competitive cost structures in the airline industry due to
cost cutting measures initiated by both companies over the last
three years. US Airways Group's restructuring
activities in the debtors' current and prior
Chapter 11 bankruptcy proceedings have specifically
targeted cost reductions in four main areas. First, it has
achieved important reductions in labor, pension and benefit
costs resulting in ratified collective bargaining agreements,
representing over $2 billion of annual cost savings.
Second, it has put restructuring initiatives in place to reduce
overhead, including reducing management payroll, and has
re-vamped its schedule to improve aircraft utilization. Third,
it has renegotiated various contractual obligations resulting in
lower costs, including those related to aircraft, real estate
and suppliers, and lowered catering costs. Lastly,
US Airways Group rationalized its fleet through the
elimination of older, less efficient aircraft, the introduction
of large regional jet aircraft with low trip costs to better
match capacity with demand, and the reduction of the number of
mainline aircraft types it operates in order to lower
maintenance, inventory and pilot training costs.
Separately, America West Holdings has also been able to greatly
reduce its operating expenses as a percentage of revenues since
2002. America West Holdings instituted programs to reduce
management payroll, clerical payroll, travel agency based
commissions, incentive programs and override commissions. It has
reduced capital expenditures and discretionary expenses, and
lowered catering costs. Other initiatives include increasing
point-to-point flying at minimal additional costs using aircraft
that would otherwise be parked at a gate, which increases daily
utilization of aircraft.
In addition to the cost saving initiatives already undertaken at
the individual companies, we believe the combination of America
West Holdings and US Airways Group will result in
significant annual revenue and cost synergies of approximately
$600 million that would be unachievable without completing
the merger. These synergies derive from three principal sources.
In anticipation of the merger, US Airways Group has
negotiated a reduction in its existing fleet so that the fleet
of the combined company suits the expected network. New
US Airways Group will be able to schedule the combined
fleet to better match aircraft size with consumer demand. By
scheduling the reduced fleet more efficiently and by adding new,
low-fare service to Hawaii, we expect to create approximately
$175 million in annual operating synergies. We also expect
to realize annual cost synergies of approximately
$250 million by reducing administrative overhead,
consolidating our information technology systems and combining
facilities. Lastly, by becoming one nationwide, low-cost carrier
with a global reach that provides more choice for consumers and
an improved ability to connect, we expect to realize
approximately $175 million in additional annual revenue.
There can be no assurance that we will be able to achieve these
revenue, operating and cost synergies or that they can be
achieved in a timely manner.
US Airways Group and its subsidiaries currently employ
approximately 30,100 people and America West Holdings and its
subsidiaries employ approximately 14,000 people. After seniority
lists have been integrated for each of the combined
airlines' unionized labor groups, we anticipate that a
single labor contract will be applied to each of those groups.
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Table of Contents
The combined airline is expected to operate a mainline fleet of
361 planes (supported by approximately 239 regional jets and
approximately 57 turboprops that provide passenger feed into the
mainline system), down from a total of 417 mainline aircraft
operated by the two airlines as of March 31, 2005.
US Airways Group has removed an additional 13 aircraft
from its fleet through May 31, 2005 and projects removing
an additional 35 aircraft by the end of 2006. The combined
airline is also expected to take delivery by the end of
February 2006 of seven Airbus A320 family aircraft
previously ordered by America West Airlines, Inc. Airbus has
also agreed to reconfirm 30 narrow body A320-family aircraft
deliveries and reschedule those deliveries from the 2006 to
2008 period to the 2009 to 2010 period. To rationalize
international flying, the merged company anticipates working
with Airbus to begin transitioning to an all-Airbus widebody
fleet of A350 aircraft in 2011.
We believe the merger will create one of the industry's
most financially stable airlines with approximately
$1.5 billion in new liquidity coming from equity
investments, the rights offering, new cash infusions from
commercial partners, asset sales and the release of currently
restricted cash.
The $500 million of new equity investments is expected to
be provided by several investors. US Airways Group
also plans to conduct a rights offering that will provide up to
an additional $150 million of equity financing. In
addition, the merged company will receive approximately
$550 million of cash infusions from commercial partners,
approximately $100 million from asset-based financings or
sales of aircraft and approximately $170 million from
release of certain cash reserves that are currently restricted
but that should be released as a part of the plan of
reorganization.
For more information on these matters, see the sections entitled
"The Plan of Reorganization," and "The New Equity
Investments."
Competitive Strengths of the Combined Company
We believe that we will have a number of competitive strengths
as a combined company, including:
Largest U.S. Low-Cost Carrier with Nationwide Route
Network.
We expect to be the first national full-service
low-cost carrier and the largest low-cost carrier by revenue
passenger miles (including international service). We anticipate
being the fifth largest airline operating in the United States
as measured by domestic revenue passenger miles and by ASMs,
with a national hub-and-spoke route network that will provide
our customers with nationwide reach. We believe New
US Airways Group will capture approximately 10% of all
domestic revenue passenger miles. The combined company plans to
continue as a member of the Star Alliance, the world's
largest airline alliance group.
With our simplified pricing structure and international scope,
we will offer competitive fare service to approximately
229 cities in the United States, Canada, the Caribbean,
Latin America and Europe, making us the only low-cost carrier
with a significant international route presence. Starting in
2006, we expect to expand our route network to include Hawaii.
We will be the only low-cost carrier with an established East
Coast route network, including the US Airways Shuttle
service, with substantial presence at capacity constrained
airports like New York's LaGuardia Airport and
Washington, D.C.'s Ronald Reagan Washington National
Airport.
Offer Services Not Typical of Low-Cost Carriers.
We believe that by delivering high-quality service, with greater
frequency of flight departures and by offering our customers
premium amenities not available on other low-cost carriers, we
will provide the best value in our markets and create increased
demand for our air travel services. We expect to be the only
national low-cost carrier offering a global frequent flyer
program, assigned seating, a First Class cabin, the
US Airways Shuttle, online service to approximately 44
international destinations, convenient access to over 700 global
destinations through our membership in the Star Alliance, and
the convenience of our airport clubs. We expect that these
amenities will differentiate our service from other low-cost
carriers and will allow us to strengthen customer loyalty and
attract new air travelers. We believe that our customers will
continue to value our full service amenities and flight
frequency, and that will help us to compete effectively with
other low-cost carriers by providing our business oriented
passengers with a premium product at a competitive price.
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Competitive Low-Cost Structure.
We believe that
the cost saving initiatives of both companies discussed above,
coupled with the significant cost synergies from the
combination, will allow us to have one of the most competitive
cost structures in the airline industry. On a pro forma basis,
once the anticipated merger synergies are realized, we expect
that the costs of New US Airways Group, on a unit
basis, after merger synergies will be approximately the same as
those of America West Holdings today. We believe that we will be
able to compete effectively and profitably with this cost
structure.
Improved Balance Sheet with Substantial New
Liquidity.
We believe that we will be one of the
industry's most financially stable airlines. We expect New
US Airways Group to realize approximately $10 billion
in annual revenues and have as of the completion of the merger a
strong balance sheet that includes an estimated $2 billion
in total cash, cash equivalents and short term investments. The
combined balance sheets will benefit from a cash infusion of
approximately $1.5 billion, which will include equity
investments aggregating $500 million, the proceeds raised
through the rights offering of approximately $150 million,
the release of certain cash reserves and other initiatives that
will provide New US Airways Group with substantial new
liquidity.
Experienced Management Team.
We will benefit from
an experienced, highly motivated combined management team. Our
team will be led by W. Douglas Parker, who has been the chief
executive officer of America West Holdings since 2001 and prior
to that served as chief operating officer from 2000 to 2001 and
chief financial officer from 1995 to 2000. As chief executive
officer, Mr. Parker led America West Holdings'
transformation into a low-cost carrier.
Business Strategy
Our business strategy consists of the following:
Provide Excellent Value to Our Customers.
We plan
to standardize customer service initiatives system-wide and
provide a competitive, simplified pricing structure that we
believe will provide our customers with an excellent value when
compared to other low-cost carriers as well as legacy mainline
carriers. We are committed to building a successful airline by
taking care of our customers. We believe that our focus on
excellent customer service in every aspect of operations,
including personnel, flight equipment, in-flight and ancillary
amenities, on-time performance, flight completion ratios and
baggage handling, will strengthen customer loyalty, provide
excellent value to our customers and attract new customers.
Further, we believe that the amenities we provide our customers,
such as a frequent flyer program, airport clubs, assigned
seating and a First Class cabin, differentiates our product
offering from other low-cost carriers.
Continue to Reduce Our Operating Costs.
After the
merger, New US Airways Group will focus on achieving cost
reduction synergies that it expects to realize from the merger.
Key areas where cost reductions can be achieved as a result of
the merger include overhead costs, in-sourcing of information
technology solutions where America West Holdings has existing
capabilities, airport savings through better use of gates and
employees in airports that both America West Holdings and
US Airways Group serve today, and eliminating redundant
facilities such as office space and hangars. We currently expect
these initiatives to achieve approximately $250 million in
annual savings once fully implemented. In addition, we also plan
to increase aircraft use to increase flying and reduce unit
costs.
Leverage Our Broader Route Network and Rationalize Our
Fleet.
We expect to achieve annual savings of
approximately $175 million from rationalizing our fleet,
rescheduling our operations, and adding new, low-fare service to
Hawaii. As a result of the merger, New
US Airways Group plans to combine the current regional
strengths of both America West Holdings on the West Coast and
US Airways Group on the East Coast to provide a
comprehensive product offering more attractive to customers. We
also plan to make more efficient use of our nationwide network
as a combined entity. New US Airways Group will be able to
coordinate the schedules to and from the hubs and secondary
hubs/focus cities of both airlines to create a significantly
greater number of flight connections across the route network.
Similarly we believe that we will be able to optimize the
utilization of our aircraft and employees. For instance,
aircraft of one airline that today would have to sit idle
awaiting the next scheduled departure could be utilized after
the merger along existing routes of the other airline to
increase daily utilization.
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In anticipation of the merger, US Airways Group has
negotiated a reduction to its existing fleet so that the fleet
of the combined company suits the expected route network and so
that the introduction of new aircraft will be timed to coincide
with the expiration of existing aircraft leases. We believe that
we will also be able to reschedule the combined fleet to better
match aircraft size with consumer demand. For example, in some
markets that US Airways Group currently serves with a
Boeing 737 aircraft, we expect to replace that service with a
90-seat regional jet that is currently operated in the America
West Holdings' system. In addition, we expect to place
America West Holdings new aircraft into service on flights out
of current US Airways Group hubs. Furthermore, we plan
to initiate Boeing 757 aircraft service to Hawaii, which neither
of us currently serves. These changes are expected to generate
revenue benefits of approximately $175 million.
Prudent Integration of America West Airlines, Inc. and
US Airways, Inc. Operations.
While management will
move quickly to try to provide a seamless integration for
consumers, we currently expect to achieve full labor and
operational integration of America West Airlines, Inc. and
US Airways, Inc. over a 24 month period. We believe
that this timeframe will allow us to resolve the critical labor
and systems issues necessary to achieve full integration. We
plan to operate under a single brand name of US Airways
while maintaining separate operating certificates for this
24 month period. We believe that the majority of the
synergy value can be realized quickly through the rapid
integration of routes, schedules, pricing, other marketing
initiatives and overhead reductions.
Management of New US Airways Group
Following the merger, the board of directors of New
US Airways Group will consist of 13 members. Six of these
directors will be appointed by America West Holdings (five of
whom will be independent), four of these directors will be
appointed by US Airways Group (three of whom will be
independent) and up to three of these directors will be
appointed by certain new equity investors in New
US Airways Group. Except as described in the next
paragraph, we have not yet determined the identities of the new
directors.
W. Douglas Parker, the current Chairman and Chief Executive
Officer of America West Holdings, will serve as Chairman and
Chief Executive Officer of New US Airways Group following
the merger. Bruce Lakefield, the current President and Chief
Executive Officer of US Airways Group and US Airways,
Inc., will serve as Vice Chairman of New US Airways Group
following the merger. See the section entitled "The Merger
Agreement — Post-Merger America West Holdings
Governing Documents, Officers and Directors; New
US Airways Group Governing Documents and
Directors."
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
US Airways Group will account for the merger as a
"reverse acquisition" using the purchase method of
accounting in conformity with accounting principles generally
accepted in the United States of America. Although the merger is
structured such that America West Holdings will become a wholly
owned subsidiary of US Airways Group at closing, America
West Holdings will be treated as the acquiring company for
accounting purposes under SFAS No. 141, "Business
Combinations" due to the following factors:
(1) America West Holdings' stockholders are expected
to own approximately 39% of New US Airways Group
common stock outstanding immediately following the merger as
compared to certain former US Airways Group Creditors
who will hold approximately 12% (these percentages reflect
certain assumptions concerning the likely exchange of certain
convertible debt and the impact of certain securities that are
dilutive at the per share purchase price paid by the equity
investors); (2) America West Holdings will receive a larger
number of designees to the New US Airways Group board of
directors; and (3) America West Holdings' current
Chairman and Chief Executive Officer will serve as Chairman and
Chief Executive Officer of New US Airways Group following
the merger. The following unaudited pro forma condensed combined
balance sheet as of March 31, 2005 and the unaudited pro
forma condensed combined statements of operations for the year
ended December 31, 2004 and quarter ended March 31,
2005 are based on the historical consolidated financial
statements of US Airways Group and on the historical
consolidated financial statements of America West Holdings,
included in America West Holdings' Annual Report on
Form 10-K for the year ended December 31, 2005 and its
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2005, all of which are attached as annexes
to this prospectus, giving effect to the merger and the other
transactions that will be effective upon completion of the
merger. No effect has been given to the proceeds received or the
rights given in the rights offering.
The unaudited pro forma condensed combined statements of
operations give effect to the merger as if it had occurred on
January 1, 2004 and the unaudited pro forma condensed
combined balance sheet gives effect to the merger as if it had
occurred on March 31, 2005. The two major categories of
adjustments reflected in the pro forma condensed combined
financial statements are "Purchase Accounting
Adjustments" and "Other Merger Adjustments."
Purchase Accounting Adjustments
Purchase accounting adjustments include adjustments necessary to
(1) allocate the purchase price to the tangible and
intangible assets and liabilities of US Airways Group based
on their fair values; (2) reflect the expected disposition
of prepetition liabilities upon US Airways Group's
emergence from bankruptcy; (3) reflect the changes in
deferred taxes; and (4) conform the accounting policies of
US Airways Group and America West Holdings. A detailed
description of each of these purchase accounting adjustments
follows:
Fair Market Value Adjustments
— The pro
forma financial statements reflect the purchase price allocation
based on a preliminary assessment of fair market values and
lives assigned to the assets, liabilities and leases being
acquired. Fair market values in the pro forma financial
statements were determined based on preliminary consultation
with independent valuation consultants, industry trends and by
reference to market rates and transactions. After the closing of
the merger, New US Airways Group, with the assistance of
valuation consultants, will complete its evaluation of the fair
value and the lives of the assets, liabilities and leases
acquired. Fair market value adjustments reflected in the pro
forma financial statements may be subject to significant
revisions and adjustments pending finalization of those
valuation studies. Significant assets and liabilities adjusted
to fair market value which are subject to finalization of
valuation studies include expendable spare parts and supplies,
property and equipment, airport take-off and landing slots
(included in other intangibles in the pro forma balance sheet),
aircraft leases, deferred revenue and continuing debt
obligations of New US Airways Group.
US Airways Group's
Bankruptcy
— In connection with
US Airways Group's emergence from bankruptcy, the plan
of reorganization will provide for the disposition of
prepetition liabilities classified as "Liabilities Subject
to Compromise" on US Airways Group's historical
balance sheet. A portion of these liabilities classified as
subject to compromise will be restructured and continue to be
liabilities of New
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US Airways Group after the merger and a portion will be
discharged with creditors only entitled to receive such
distributions of cash and common stock in New US Airways
Group as provided under the plan of reorganization. The pro
forma accounting adjustments reflect a preliminary determination
of liabilities expected to continue, which have been
reclassified on the pro forma balance sheet, and those expected
to be discharged which have been eliminated from the pro forma
balance sheet. The ultimate resolution of certain of the claims
asserted against US Airways Group in the Chapter 11
cases will be subject to negotiations and bankruptcy court
procedures that will occur after the date of this prospectus.
Therefore the final determination of liabilities continuing or
being discharged upon emergence from bankruptcy may result in
significant further revisions and adjustments. Persons holding
equity in US Airways Group prior to emergence are not
expected to be entitled to any distribution and their stock is
expected to be cancelled. Reorganization costs associated with
the bankruptcy included in the US Airways Group historical
financial statements have also been eliminated from the pro
forma financial statements.
Purchase Price Allocation
— The value of
the merger consideration was determined based on America West
Holdings' traded market price per share due to
US Airways Group operating under bankruptcy protection. The
outstanding shares of America West Holdings at March 31,
2005 were valued at $4.82 per share, resulting in a value
assigned to the shares of $175 million. The $4.82 per
share value is based on the five-day average share price of
America West Holdings with May 19, 2005, the merger
announcement date, as the midpoint. The outstanding shares of
America West Holdings Class A and Class B common stock
were converted to New US Airways Group common stock at a
conversion rate of 0.5362 and 0.4125, respectively. Certain
unsecured creditors of US Airways Group will be issued
approximately 8.2 million shares of New US Airways
Group common stock in settlement of their claims. The fair value
of that common stock valued at an equivalent price based on the
$4.82 value of the America West Holdings stock is
$96 million. America West Holdings expects to incur direct
acquisition costs in connection with the merger of approximately
$19 million. The following table summarizes the estimated
purchase price (dollars in millions):
Fair value of common shares issued to US Airways
    Group's unsecured creditors
$
96
Estimated merger costs
19
Total purchase price
$
115
The following table summarizes the pro forma net assets acquired
and liabilities assumed in connection with the merger and the
preliminary allocation of the purchase price (dollars
in millions):
Current assets
$
1,451
Property plant and equipment, net
2,816
Other assets
1,305
Goodwill
385
Liabilities assumed
(5,842
)
Total purchase price
$
115
Income Taxes
— The pro forma balance
sheet reflects a pro forma adjustment to record a deferred tax
liability for US Airways Group, primarily due to the significant
discharge of prepetition liabilities in connection with the
emergence of US Airways Group from bankruptcy. Upon completion
of the merger, America West Holdings will evaluate whether there
is any reduction necessary of its deferred tax asset valuation
allowance. Any such reduction in the valuation allowance would
be recorded as a decrease to goodwill. Due to the change in
ownership upon completion of the merger, the annual usage of any
attributes that were generated prior to the merger may be
substantially limited.
Conforming Accounting Policies
— The pro
forma financial statements reflect the following adjustments to
conform the accounting policies of US Airways Group
with those of America West Holdings.
•
Share-based compensation
— US Airways
    Group is conforming its policy of accounting for share-based
    compensation under Statement of Financial Accounting Standards
    No. 123, "Accounting for Stock-Based
    Compensation," or SFAS 123, to America West
    Holdings' policy of accounting under Accounting Principles
    Board Opinion No. 25, "Accounting for Stock Issued to
    Employees," or APB No. 25.
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•
Passenger Transportation Revenues
—
    US Airways Group is conforming its passenger revenue
    recognition policy to America West Holdings' policy, which
    estimates and records at the time of sale a portion of passenger
    ticket revenue for those tickets expected to expire unused and
    defers costs such as credit card fees and computer reservation
    system fees until the related revenue is recognized.
Change in Accounting Policy
— The pro
forma balance sheet reflects the following adjustment to conform
the accounting policies of America West Holdings with that of
US Airways Group, the effect of which will be treated as a
cumulative effect of a change in accounting principle upon the
earlier of completion of the merger or January 1, 2006.
•
Aircraft Maintenance and Repairs
—
    US Airways Group charges maintenance and repair costs for
    owned and leased flight equipment to operating expense as
    incurred. America West Holdings records the cost of major
    scheduled airframe, engine and certain component overhauls as
    capitalized assets that are subsequently amortized over the
    periods benefited (deferral method). Upon the earlier of the
    completion of the merger or January 1, 2006, America West
    Holdings will change its accounting policy from the deferral
    method to the expense as incurred method. While the deferral
    method is permitted under accounting principles generally
    accepted in the United States of America, America West Holdings
    believes that the expense as incurred method is preferable and
    the predominant method used in the airline industry.
The historical financial statements of US Airways Group
reflect other reclassifications of certain balances to conform
with America West Holdings' financial statement
presentation. Additionally, the 2004 historical statement of
operations for America West Holdings does not reflect
reclassifications made by America West Holdings in its first
quarter 2005 financial statements as filed in its Form 10-Q.
Other Adjustments
Critical to US Airways Group's emergence from
bankruptcy and its merger with America West Holdings is
additional financing and liquidity to fund operations. Several
material agreements have been entered into that will be
effective either before or upon completion of the merger. The
unaudited pro forma condensed combined statements of operations
give effect to these material agreements as if they occurred on
January 1, 2004 and the unaudited pro forma condensed
combined balance sheet gives effect to the material agreements
as if they occurred on March 31, 2005.
The New Equity Investments
— The new
equity investors, ACE Aviation Holdings Inc., Par Investment
Partners L.P., Peninsula Investment Partners L.P., and certain
investors advised by Wellington Management Co. LLP, will invest
$375 million in consideration for the issuance of
24,192,727 shares of New US Airways Group common
stock. Eastshore Aviation, LLC will convert the outstanding
principal amount of its junior debtor in possession financing,
or the DIP facility, into approximately 8,333,333 shares of
New US Airways Group common stock. As of March 31,
2005, US Airways Group had drawn $75 million under the
DIP facility. The first of two additional $25 million draws
was made in April 2005 and the final $25 million is
scheduled to be drawn no later than September 30, 2005. The
pro forma adjustments reflect the $500 million of new
equity. See also the section entitled "The New Equity
Investments."
GE Merger MOU
— US Airways Group
and America West Holdings reached a comprehensive agreement with
General Electric Capital Corporation, or GECC, and its
affiliates as described in the Master Merger Memorandum of
Understanding, which we refer to as the GE Merger MOU. The key
aspects of the GE Merger MOU are as follows (See the section
entitled "US Airways Group Management's
Discussion and Analysis of Financial Condition and Results of
Operations — Liquidity and Capital Resources"):
•
The GE Merger MOU provides for continued use by US Airways
    Group of certain leased Airbus, Boeing and regional jet
    aircraft, the modification of monthly lease rates, and the
    return to GECC of certain other leased Airbus and Boeing
    aircraft. The pro forma adjustments reflect the modification of
    monthly lease rates.
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•
GECC has provided a bridge facility of approximately
    $56 million for use by the US Airways Group during the
    pendency of the Chapter 11 proceedings. As of
    March 31, 2005, $42 million was outstanding under the
    bridge facility. The remaining $14 million was drawn
    subsequent to March 31, 2005. Upon completion of the
    merger, convertible notes of US Airways, Inc. will be
    issued to GECC in the aggregate principal amount of
    $125 million in exchange for conversion of the bridge
    facility into the convertible notes, forgiveness and release of
    US Airways, Inc. from certain prepetition obligations,
    deferral of certain payment obligations, and amendments to
    future maintenance agreements. The convertible notes will be
    convertible at any time, at the holders' election, into
    shares of common stock of the New US Airways Group at a
    conversion price equal to the product of
    (x) 140% – 150% (at US Airways,
    Inc.'s option) and (y) the average closing price of
    New US Airways Group common stock for the sixty consecutive
    trading days following emergence from bankruptcy and the listing
    of New US Airways Group common stock on a national stock
    exchange. The pro forma adjustments reflect the additional cash
    received under the bridge facility, the issuance of the
    convertible notes, and the forgiveness of certain prepetition
    obligations.
•
GECC will purchase and immediately lease back to US Airways
    Group: (a) the assets securing the 2001 GE credit facility
    and the 2003 GE liquidity facility, and other GE obligations,
    consisting of 11 Airbus aircraft and 28 spare engines and engine
    stands, and (b) ten regional jet aircraft currently debt
    financed by GECC. The sale leaseback transaction is expected to
    close prior to July 1, 2005. The proceeds from the sale
    leaseback transaction of approximately $633 million are
    required to be used to pay down balances due GE by
    US Airways Group under the 2003 GE liquidity facility in
    full, the GECC mortgage-debt financed CRJ aircraft in full, and
    a portion of the 2001 GE credit facility. The 2001 GE credit
    facility will be amended to allow certain additional borrowings,
    which will result in a total principal balance outstanding
    thereunder of approximately $28 million.
The pro forma adjustments reflect the impact of the sale
    leaseback transaction, the pay down of debt with the sale
    leaseback proceeds, and additional borrowings under the GE
    credit facility after the sale leaseback.
Airbus MOU
— In connection with the
merger, a Memorandum of Understanding was executed between ASVA
S.A.R.L., an affiliate of Airbus Industrie, which we refer to as
Airbus, US Airways Group, US Airways, Inc. and America
West Airlines, Inc. which we refer to as the Airbus MOU. The key
aspects of the Airbus MOU are as follows (see also the section
entitled "US Airways Group Management's
Discussion and Analysis of Financial Condition and Results of
Operations — Liquidity and Capital Resources"):
•
Airbus will provide a $250 million financing commitment
    upon the satisfaction of various conditions precedent (including
    the completion of the merger and the emergence of
    US Airways, Inc. from bankruptcy) of which
    $153 million is available to be drawn upon completion of
    the merger and used for general corporate purposes.
•
Airbus has rescheduled US Airways Group's A320-family
    and A330-200 delivery commitments and has agreed to provide
    backstop financing for a substantial number of aircraft, subject
    to certain terms and conditions, on an order of 20 A350
    aircraft. US Airways Group's A320-family aircraft are
    now scheduled for delivery in 2009 and 2010. US Airways
    Group's A330-200 aircraft are scheduled for delivery in
    2009 and 2010 and A350 aircraft deliveries are currently
    scheduled to occur beginning in 2011. The Airbus MOU also
    eliminates cancellation penalties on
    US Airways Group's orders for the ten A330-200
    aircraft, provided that New US Airways Group has met
    certain predelivery payment obligations under the
    A350 order. In connection with the restructuring of
    aircraft firm orders, US Airways Group and America West
    Holdings will be required to pay an aggregate non-refundable
    restructuring fee which will be paid by means of set-off against
    existing equipment purchase deposits of US Airways Group
    and America West Holdings, Inc. held by Airbus. The
    US Airways Group restructuring fee is recorded as a
    reduction in the assets acquired by America West Holdings in
    purchase
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accounting. The America West Holdings restructuring fee will be
    recorded as a charge at the time of the merger, but has been
    excluded from the pro forma statement of operations as it is a
    non-recurring item directly related to the merger.
The pro forma adjustments reflect the initial draw of
$153 million immediately available upon closing of the
merger, the issuance of certain services credits and the
elimination of existing equipment purchase deposits used to
satisfy the restructuring fee. The pro forma adjustments also
reflect an adjustment to reverse a $33 million accrued
aircraft order cancellation penalty previously established by
US Airways Group in connection with its pre-merger
intention not to take delivery of the A330-200 aircraft
scheduled for future delivery.
Items Excluded From the Pro Forma Financial Statements
The Rights Offering
— US Airways Group
is distributing (i) transferable rights to purchase up to
3,500,000 shares of New US Airways Group common stock to
the holders of shares of America West Holdings Class A and
Class B common stock on the record date and
(ii) non-transferable rights to purchase up to
5,590,909 shares of New US Airways Group common stock to
certain unsecured creditors of the debtors entitled to vote on
the plan of reorganization, with certain exceptions as specified
in the plan of reorganization.
In addition, each holder of rights may also subscribe (with
certain exceptions) for additional shares at the same exercise
price per share, pursuant to an over-subscription privilege. The
rights will be exercisable for a subscription price of $16.50
per share. If exercised in full, this rights offering will
result in gross proceeds to New US Airways Group of
$150 million. The completion of this rights offering is
conditioned on completion of the merger and is not an
underwritten offering. See also the section entitled
"Capitalization" for the impact on New US Airways
Group Stockholders' Equity assuming the rights offering is
exercised in full.
Integration Activities
— The pro forma
financial statements do not include any adjustments for
liabilities that may result from integration activities, as
management is in the process of making these assessments, and
estimates of these costs are currently unknown. However,
significant liabilities ultimately may be recorded for
US Airways Group employee severance and/or relocation costs
of vacating some US Airways Group facilities, and costs
associated with other exit activities. Any such liabilities
would be recorded as an adjustment to the purchase price and an
increase in goodwill. In addition, significant restructuring
charges may be incurred upon completion of the merger or in
subsequent quarters for severance or relocation costs related to
America West Holdings employees, costs of vacating some
facilities of America West Holdings or other costs associated
with exit activities of America West Holdings. Any such
restructuring charges would be recorded as an expense in the
combined statement of operations in the period in which they
were incurred.
Conversion of America West Holdings' Convertible
Debt
— In July and August of 2003, America
West Holdings completed a private placement of approximately
$87 million issue price of 7.25% Senior Exchangeable
Notes due 2023. The notes bear cash interest until July 30,
2008. Thereafter, the notes will cease bearing cash interest and
begin accruing original issue discount daily at a rate of
7.25% per year until maturity. Each note was issued at a
price of $343.61 and is exchangeable for class B common
stock of America West Holdings at an exchange ratio of
32.038 shares per $1,000 principal amount at maturity of
the notes (subject to adjustment in certain circumstances). This
represents an equivalent conversion price of approximately
$10.73 per share. The aggregate amount due at maturity,
including accrued original issue discount from July 31,
2008, will be approximately $253 million. The notes are
unconditionally guaranteed on a senior unsecured basis by
America West Holdings.
As a result of the proposed merger, the holders of the notes
will have the option to require America West Holdings to
purchase the notes. Conversely, America West Holdings has the
option to redeem the notes in either cash or shares of America
West Holdings Class B common stock, which then would be
converted into New US Airways Group common stock in
connection with the merger. If it elects to pay in shares, the
number of shares to be issued will be equal to the change of
control purchase price divided by 95% of the market price of the
America West Holdings Class B common stock at or around the
time of the merger.
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The right to convert the notes is at the sole discretion of the
holders of the notes. As it is not currently known if the notes
will be converted, the pro forma financial statements do not
assume conversion. If all of the noteholders elect to require
America West Holdings to repurchase the notes and if America
West Holdings elects to use common shares to satisfy the
repurchase obligation, approximately 5.6 million shares of
New US Airways Group common stock would be issued, based on
an assumed market price of $16.50.
Restructuring of the ATSB
Loan Guarantees
— US Airways Group
and America West Holdings each have loans outstanding guaranteed
under the Air Transportation Safety and System Stabilization Act
by the ATSB. As of March 31, 2005, the amounts outstanding
under these loans for US Airways Group and America West
Holdings was approximately $712 million and
$300 million, respectively. US Airways Group reached
agreement with the ATSB concerning an interim extension to the
ATSB cash collateral agreement while US Airways Group and
America West Holdings work to finalize the post-merger terms of
both loans. The interim agreement will expire on July 29,
2005 and will require US Airways Group, among other conditions,
to maintain a weekly minimum unrestricted cash balance of
$325 million.
Synergies
— America West Holdings and
US Airways Group anticipate the combination of America West
Holdings and US Airways Group will result in significant
annual revenue, operating and cost synergies that would be
unachievable without completing the merger. We cannot assure you
that we will be able to achieve these revenue, operating and
cost synergies and the synergies have not been reflected in the
pro forma financial statements. See also the section entitled
"The Combined Company Following the Merger" for
further discussion of anticipated synergies.
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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 2005
(dollars in millions)
US Airways
America West
Purchase
Other
Pro Forma
Group
Holdings
Accounting
Merger
As
Historical
Historical
Adjustments
Adjustments
Adjusted
Current assets
Cash, cash equivalents and short-term investments
$
513
$
234
$
—
$
613
(a)
$
1,360
Restricted cash
130
—
—
—
130
Accounts receivable, net
318
156
—
—
474
Expendable spare parts and supplies, net
171
55
(49
) (b)
—
177
Prepaid expenses and other
179
209
—
1
(c)
389
Total current assets
1,311
654
(49
)
614
2,530
Property and equipment
Flight equipment
3,298
915
(595
) (d)
(562
) (e)
3,056
Other property and equipment
365
298
(96
) (f)
—
567
Equipment purchase deposits
76
70
—
(89
) (g)
57
3,739
1,283
(691
)
(651
)
3,680
Less accumulated depreciation and amortization
356
607
(463
) (h)
(32
) (i)
468
Net property and equipment
3,383
676
(228
)
(619
)
3,212
Other assets
Goodwill
2,490
—
(2,105
) (j)
—
385
Restricted cash
636
91
—
—
727
Other intangibles, net
524
—
70
(k)
—
594
Other assets, net
83
159
(9
) (l)
(1
) (m)
232
Total other assets
3,733
250
(2,044
)
(1
)
1,938
Total assets
$
8,427
$
1,580
$
(2,321
)
$
(6
)
$
7,680
Current liabilities
Current maturities of long-term debt and capital leases
$
820
$
118
$
163
(n)
$
(168
) (n)
$
933
Accounts payable
431
185
108
(o)
—
724
Air traffic liability
1,003
276
(164
) (p)
—
1,115
Accrued compensation and vacation benefits
224
51
—
—
275
Other accrued liabilities
361
136
175
(q)
(17
) (r)
655
Total current liabilities
2,839
766
282
(185
)
3,702
Non current liabilities and deferred credits
Long-term debt and capital leases, less current maturities
78
593
2,192
(n)
(276
) (n)
2,587
Deferred credits and other obligations
44
151
183
(s)
(103
) (t)
275
Employee benefit liabilities and other
250
—
481
(u)
—
731
Total non-current liabilities and deferred credits
372
744
2,856
(379
)
3,593
Liabilities subject to compromise
5,814
—
(5,814
) (v)
—
—
Commitments and contingencies
Stockholders' equity
Preferred stock
—
—
—
—
—
Common stock
—
—
1
(w)
—
1
Common stock, Class A
51
—
(51
) (x)
—
—
Common stock, Class B
5
1
(6
) (w)
—
—
Additional paid-in capital
410
632
(621
) (y)
500
(z)
921
Accumulated deficit
(1,067
)
(255
)
727
(aa)
58
(aa)
(537
)
Treasury stock, Series B Common stock
(3
)
(308
)
311
(ab)
—
—
Deferred compensation
(10
)
—
10
(ac)
—
—
Accumulated other comprehensive income
16
—
(16
) (ad)
—
—
Total stockholders' equity
(598
)
70
355
558
385
Total liabilities and stockholders' equity
$
8,427
$
1,580
$
(2,321
)
$
(6
)
$
7,680
See accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements.
54
Table of Contents
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
(a)
To reflect increases in cash, cash equivalents and short-term
    investments as described in the table below (dollars in
    millions):
Cash received from new equity investors
$
425
Initial draw on Airbus loan available at closing
153
Cash draws from GECC facilities available at or prior to closing
35
Total increase in cash, cash equivalents and short-term
    investments
$
613
(b)
Fair market value adjustment of US Airways Group's
    expendable spare parts and supplies in purchase accounting.
(c)
Adjustment to record the services credit to be received in
    connection with restructure of Airbus purchase agreements.
(d)
Adjustment to reflect the change in America West Holdings'
    method of accounting for aircraft maintenance and repairs of
    $361 million and the fair market value adjustment of
    US Airways Group flight equipment and elimination of
    accumulated depreciation, in purchase accounting of
    $234 million.
(e)
Adjustment to reflect the reduction in flight equipment related
    to the GECC sale-leaseback transaction of $554 million and
    the elimination of capitalized interest related to Airbus
    predelivery deposits of $8 million.
(f)
Elimination of US Airways Group accumulated depreciation in
    purchase accounting.
(g)
Adjustment to reflect the use of Airbus equipment purchase
    deposits to satisfy restructuring fees in connection with the
    amended Airbus purchase agreements.
(h)
Elimination of US Airways Group accumulated depreciation
    and amortization in purchase accounting of $324 million and
    adjustment to reflect the elimination of accumulated
    depreciation and amortization related to the change in America
    West Holdings' method of accounting for aircraft
    maintenance and repairs of $139 million.
(i)
Adjustment to reflect the reduction in accumulated depreciation
    and amortization related to the GECC sale-leaseback transaction.
(j)
Adjustment to reflect elimination of prior US Airways Group
    goodwill of $2.5 billion and the establishment of goodwill
    as part of purchase accounting of $385 million.
(k)
Purchase accounting adjustment to reflect US Airways Group
    take-off and landing slots at fair market value.
(l)
Adjustment to eliminate debt issuance costs in purchase
    accounting.
(m)
Elimination of deposits related to aircraft returned under the
    GECC transaction.
(n)
Adjustments to reflect changes in debt as summarized in the
    table below.
Short-term
Long-term
(dollars in millions)
Purchase accounting adjustments:
Prepetition debt previously classified as subject to compromise
    assumed to be a continuing obligation upon emergence from
    bankruptcy
$
163
$
2,192
Other merger adjustments:
Exchange of Eastshore debtor in possession financing for equity
$
(75
)
$
—
Initial draw on Airbus loan available at closing
—
153
Debt restructured under the GE Merger MOU
(93
)
(429
)
Total other merger adjustments
$
(168
)
$
(276
)
(o)
Adjustment to reflect an estimated $85 million of
    prepetition accounts payable previously classified as subject to
    compromise assumed to be a continuing obligation upon emergence
    from bankruptcy and the accrual of merger related expenses of
    $23 million.
(p)
Adjustment to conform to the acquirer's accounting policy
    for revenue recognition related to tickets that expire unused
    and fair value adjustment for US Airways Group deferred
    revenue.
(q)
Reclassification of prepetition obligations previously
    classified as subject to compromise assumed to be continuing
    obligations upon emergence from bankruptcy.
(r)
Adjustment to reflect the reduction of accrued interest and
    maintenance contract accruals related to the GECC debt
    restructuring.
(s)
Adjustments for deferred income taxes related to purchase
    accounting.
(t)
Reduction of other non-current liabilities related to
    restructuring of GE deferred maintenance payment obligations of
    $70 million and the elimination of Airbus penalties of
    $33 million.
55
Table of Contents
(u)
Reclassification of prepetition obligations previously
    classified as subject to compromise assumed to be continuing
    obligations upon emergence from bankruptcy.
(v)
Adjustment to reflect the elimination of liabilities subject to
    compromise upon emergence from bankruptcy.
(w)
Adjustment to eliminate US Airways Group common stock and
    the conversion of America West Holdings' Class B
    common stock for New US Airways Group common stock and the
    issuance of New US Airways Group common stock as part of
    purchase accounting.
(x)
Adjustment to reflect the elimination of Class A common
    stock as part of purchase accounting.
(y)
Change in additional paid-in capital as summarized below
    (dollars in millions):
Elimination of America West Holdings treasury stock
$
(307
)
Elimination of existing additional paid-in capital for
    US Airways Group
(410
)
Value of additional common stock issued to US Airways Group
    unsecured creditors
96
Total
$
(621
)
(z)
Change in additional paid-in capital reflects value contributed
    by new investors of $500 million including the exchange of
    Eastshore debtor in possession financing of $75 million to
    equity.
(aa)
Adjustment to reflect the elimination of US Airways Group
    accumulated deficit and the impact of other purchase accounting
    and merger related adjustments.
(ab)
Adjustment to reflect the elimination of both US Airways
    Group and America West Holdings' treasury stock.
(ac)
Adjustment to reflect the elimination of deferred compensation
    related to cancelled US Airways Group restricted stock.
(ad)
Adjustment to reflect the elimination of US Airways Group
    accumulated other comprehensive income as part of purchase
    accounting.
56
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2005
(in millions, except share and per share amounts)
US Airways
America West
Purchase
Pro Forma
Group
Holdings
Accounting
Other Merger
As
Historical
Historical
Adjustments
Adjustments
Adjusted
Operating revenues:
Passenger
$
1,447
$
679
$
—
$
—
$
2,126
Cargo
21
9
—
—
30
Other
160
35
—
—
195
Total operating revenues
1,628
723
—
—
2,351
Operating expenses:
Salaries and related costs
477
175
—
—
652
Aircraft rent
115
77
2
(a)
13
(b)
207
Other rent and landing fees
123
41
—
—
164
Aircraft fuel
374
152
—
—
526
Realized and unrealized gains on fuel hedging instruments,
    net
(6
)
(60
)
—
—
(66
)
Agency commissions
20
5
—
—
25
Aircraft maintenance materials and repairs
86
48
19
(c)
—
153
Depreciation and amortization
56
12
(2
) (d)
(5
) (e)
61
Special charges, net
—
1
—
—
1
Express capacity purchases
202
111
—
—
313
Other
382
111
(4
) (f)
—
489
Total operating expenses
1,829
673
15
8
2,525
Operating income (loss)
(201
)
50
(15
)
(8
)
(174
)
Nonoperating income (expenses):
Interest income
3
2
—
—
5
Interest expense, net
(78
)
(19
)
2
(g)
8
(h)
(87
)
Reorganization items, net
(2
)
—
2
(i)
—
—
Other, net
(4
)
1
—
—
(3
)
Total nonoperating income (expenses), net
(81
)
(16
)
4
8
(85
)
Income (loss) before income tax expense
(282
)
34
(11
)
—
(259
)
Income tax expense
—
—
—
—
—
Net income (loss)
$
(282
)
$
34
$
(11
)
$
—
$
(259
)
Income (loss) per share:
Basic
$
(5.13
)
$
0.93
$
(4.65
)(j)
Diluted
$
(5.13
)
$
0.62
$
(4.65
)(j)
Shares used for computation (in thousands):
Basic:
54,862
36,152
55,703
Diluted:
54,862
62,372
55,703
See accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements.
57
Table of Contents
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
For the three months ended March 31, 2005
(a)
Reflects increase in aircraft rent expense related to the fair
    market value adjustments in purchase accounting related to
    aircraft leases.
(b)
Reflects increased aircraft rent expense related to the GECC
    aircraft sale-leaseback transaction and lease rate restructuring.
(c)
Reflects America West Holdings' change in accounting method
    for aircraft maintenance and repairs.
(d)
Reflects change in depreciation related to fair market value
    adjustments in purchase accounting related to flight equipment.
(e)
Reflects reduction of depreciation expense related to the GECC
    aircraft sales leaseback transaction.
(f)
Adjustment to conform to America West Holdings' accounting
    policy to defer costs related to unused tickets until the
    revenue is recognized.
(g)
Reflects decrease in interest expense related to purchase
    accounting fair market value adjustments related to debt.
(h)
Reflects decrease in interest expense of $10 million
    related to the restructuring of GECC debt obligations and the
    elimination of interest expense of $1 million on debtor in
    possession financing that converts to equity upon the merger,
    offset by interest expense of $3 million on the new Airbus
    debt obligation assumed to be drawn down upon closing of the
    merger.
(i)
Reflects the elimination of reorganization costs.
(j)
Basic earnings (loss) per common share gives effect to the
    number of shares expected to be outstanding as a result of the
    merger; see the section entitled "Pro Forma Fully Diluted
    Security Ownership by Entity of New US Airways Group at
    Closing." As a result of the pro forma net loss, no effect
    has been given to potentially dilutive securities.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
(in millions, except share and per share amounts)
US Airways
America West
Purchase
Pro Forma
Group
Holdings
Accounting
Other Merger
As
Historical
Historical
Adjustments
Adjustments
Adjusted
Operating revenues:
Passenger
$
6,345
$
2,197
$
—
$
—
$
8,542
Cargo
132
28
—
—
160
Other
640
114
—
—
754
Total operating revenues
7,117
2,339
—
—
9,456
Operating expenses:
Salaries and related costs
2,439
656
(5
) (a)
—
3,090
Aircraft rent
449
304
8
(b)
52
(c)
813
Other rent and landing fees
419
168
—
—
587
Aircraft fuel
1,099
557
—
—
1,656
Agency commissions
100
25
—
—
125
Aircraft maintenance materials and repairs
361
206
54
(d)
—
621
Depreciation and amortization
248
54
(6
) (e)
(17
) (f)
279
Special credits, net
—
(15
)
—
—
(15
)
Express capacity purchases
801
—
—
—
801
Other
1,579
428
(7
) (g)
—
2,000
Total operating expenses
7,495
2,383
44
35
9,957
Operating loss
(378
)
(44
)
(44
)
(35
)
(501
)
Nonoperating income (expenses):
Interest income
12
8
—
—
20
Interest expense, net
(242
)
(80
)
8
(h)
19
(i)
(295
)
Reorganization items, net
(35
)
—
35
(j)
—
—
Other, net
22
27
—
—
49
Total nonoperating income (expenses), net
(243
)
(45
)
43
19
(226
)
Loss before income tax benefit
(621
)
(89
)
(1
)
(16
)
(727
)
Income tax benefit
10
—
—
—
10
Net loss
$
(611
)
$
(89
)
$
(1
)
$
(16
)
$
(717
)
Loss per share:
Basic
$
(11.19
)
$
(2.47
)
$
(12.87
)(k)
Diluted
$
(11.19
)
$
(2.47
)
$
(12.87
)(k)
Shares used for computation (in thousands):
Basic:
54,597
36,026
55,703
Diluted:
54,597
36,026
55,703
See accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements.
59
Table of Contents
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
For the year ended December 31, 2004
(a)
Reduction in salaries and related costs related to the change in
    US Airways Group accounting for share-based compensation from
    SFAS No. 123 to APB Opinion No. 25 to conform to
    accounting policy of America West Holdings.
(b)
Reflects increase in aircraft rent expense related to the fair
    market value adjustments in purchase accounting related to
    aircraft leases.
(c)
Reflects increased aircraft rent expense related to the GECC
    aircraft sale-leaseback transaction and lease rate restructuring.
(d)
Reflects America West Holdings' change in accounting method
    for aircraft maintenance and repairs.
(e)
Reflects changes in depreciation and amortization related to
    fair market value adjustments in purchase accounting related to
    flight equipment and slots of ($7) million and
    $1 million, respectively.
(f)
Reflects reduction of depreciation expense related to the GECC
    aircraft sale-leaseback transaction.
(g)
Reflects a reduction in expense for purchase accounting fair
    market value adjustments related to inventory of $3 million
    and a $4 million adjustment to conform to the America West
    Holdings' policy to defer costs related to unused tickets
    until the revenue is recognized.
(h)
Reflects decrease in interest expense related to purchase
    accounting fair market value adjustments related to debt.
(i)
Reflects the estimated reduction of interest expense of
    $28 million related to the restructuring of GECC debt
    obligations offset by interest expense of $9 million on the
    new Airbus debt obligation assumed to be drawn down upon closing
    of the merger.
(j)
Reflects the elimination of reorganization costs.
(k)
Basic earnings (loss) per common share gives effect to the
    number of shares expected to be outstanding as a result of the
    merger; see the section entitled "Pro Forma Fully Diluted
    Security Ownership by Entity of New US Airways Group at
    Closing." As a result of the pro forma net loss, no effect
    has been given to potentially dilutive securities.
60
Table of Contents
THE RIGHTS OFFERING
The Rights
We are issuing (i) an aggregate of 3,500,000 transferable
basic rights to America West Holders on a pro rata basis based
on the number of shares of America West Holdings common stock
held at the close of business on the record date, in addition to
certain over-subscription privileges discussed below, and
(ii) an aggregate of 5,590,909 non-transferable basic
rights to US Airways Creditors based on specified dollar
amounts of claims held at the close of business on the record
date entitling each such creditor to vote on the plan of
reorganization, in addition to certain over-subscription
privileges discussed below. The rights will be evidenced by
(x) transferable rights certificates distributed to each
America West Holder for basic subscription privileges and
over-subscription privileges and (y) non-transferable
rights certificates distributed to US Airways Creditors for
basic subscription privileges and over-subscription privileges.
Upon execution of a rights certificate, each Holder will agree
that the exercise of rights will be made on the terms and
subject to the conditions specified in this prospectus.
The number of rights issued to each Holder will be rounded up to
the nearest whole right, subject to any adjustments necessary to
ensure that, if all rights are exercised, 9,090,909 shares
will be issued. No fractional rights or cash in lieu thereof
will be issued or paid. No rights certificate may be divided in
such a way as to permit the Holder to receive a greater number
of rights than the number to which that rights certificate
entitles its Holder. However, a depository, bank, trust company
or securities broker or dealer holding shares of the common
stock of America West Holdings on the record date for more than
one beneficial owner may, upon proper showing to the
Subscription Agent, exchange its right certificate to obtain a
rights certificate for the number of rights to which all such
beneficial owners in the aggregate would have been entitled.
The time period to exercise rights expires on [month, day],
2005, and we may not extend the expiration date. You must act
promptly if you want to exercise your rights.
Subscription Privileges
Over-Subscription Privilege.
If any shares being
offered in this rights offering are available after satisfying
all exercises of basic rights, we will allocate the
over-subscription requests as follows:
If you are an America West Holder:
You will have your over-subscription requests satisfied first
out of any shares remaining in the America West Holders Pool
after satisfying all exercises of the basic subscription rights
by America West Holders and then out of any remaining shares in
the US Airways Creditors Pool after satisfying the basic
and over-subscription requests of US Airways Creditors. The
number of additional shares we allocate to you pursuant to your
over-subscription privilege will be calculated by adding the
number of shares available for over-subscription in the America
West Holders Pool and any remaining shares in the
US Airways Creditor Pool, and multiplying the sum of those
shares by a proration factor. The proration factor is determined
by dividing the total number of shares that the America West
Holder elected to purchase under the over-subscription privilege
by the total number of shares all America West Holders elected
to purchase pursuant to the over-subscription privilege.
However, each basic right held by an America West Holder must be
exercised for any associated over-subscription privilege to
apply. The number of additional shares we allocate to you
pursuant to the over-subscription privilege may be subject to
certain reductions to ensure that the merger will qualify as a
tax-free "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended.
If you are a US Airways Creditor:
You will have your over-subscription requests satisfied first
out of any shares remaining in the US Airways Creditors
Pool after satisfying all exercises of the basic subscription
rights of US Airways Creditors and then out of any
remaining shares in the America West Holders Pool after
satisfying the basic and over-subscription requests of America
West Holders. The number of additional shares we allocate to you
61
Table of Contents
pursuant to your over-subscription privilege will be calculated
by adding the number of shares available for over-subscription
in the US Airways Creditors Pool and any remaining shares
in the America West Holders Pool, and multiplying the sum of
those shares by a proration factor. The proration factor will be
determined by dividing the total number of shares that the
US Airways Creditor is ultimately determined to have
elected to purchase pursuant to the over-subscription privilege
by the total number of shares all US Airways Creditors are
ultimately determined to have elected to purchase pursuant to
the over-subscription privilege. However, each basic right
ultimately determined to be held by a US Airways Creditor
must be exercised for that Holder's associated
over-subscription privilege to apply.
A Holder's election to exercise the over-subscription
privilege must be made at the time that the Holder exercises the
basic subscription privilege.
In order to exercise the over-subscription privilege, commercial
banks, brokers, dealers, trust companies and other nominee
Holders who exercise the over-subscription privilege on behalf
of America West Holders that are beneficial owners of rights
will be required to certify to the Subscription Agent the number
of shares of America West Holdings common stock held on the
record date on behalf of each such beneficial owner of rights,
the number of rights as to which the basic subscription
privilege has been exercised on behalf of each such beneficial
owner, that each such beneficial owner's basic subscription
privilege held in the same capacity has been exercised and the
number of shares subscribed for under the over-subscription
privilege by each such beneficial owner, and to record certain
other information received from each such beneficial owner. We
refer to this certification as the Nominee Holder Certification.
Subscription Price
The Subscription Price is $16.50 per share of New
US Airways Group common stock.
Expiration Time and Date
The ability of Holders to exercise their rights will expire at
5:00 p.m., New York City time, on [month, day], 2005.
Rights not exercised prior to the Expiration Date will expire
and those rights will no longer be exercisable by any Holder. We
will not be obligated to honor any purported exercise of rights
by Holders received by the Subscription Agent after the
Expiration Date, regardless of when the documents relating to
that exercise were sent, except under the Guaranteed Delivery
Procedures described below.
Determination of Payment Amount Upon Exercise
If
you are an America West Holder:
For every
[          ] shares
of America West Holdings Class A or Class B common
stock you own on the record date, you will be entitled to
one basic right. In addition, you may purchase up to
[     ]x that basic subscription
pursuant to your over-subscription privilege.
For example, assuming you will be entitled to 1 basic
right, for each 10 shares of Class A or Class B common
stock you own, if you own 100 shares of common stock of
America West Holdings on the record date, you would be entitled
to 10 basic rights. To fully exercise your basic rights, you
would then multiply the Subscription Price of $16.50 by your 10
basic rights, and submit a dollar amount of $165.00. If you wish
to fully exercise your over-subscription privilege, assuming a
10x over-subscription option, you would multiply
10 x 10 x $16.50, and submit an additional
$1,650.00 as payment for the full amount of the
over-subscription privilege.
Therefore, you would submit a total payment to the Subscription
Agent of $1,815.00 (the sum of $165.00 to exercise your basic
rights and $1,650.00 to exercise your over-subscription
privilege) for your full exercise of your basic and
over-subscription privileges.
Notwithstanding the foregoing, you are in no way obligated to
exercise either your basic or over-subscription privileges in
full, and any lesser amount will be accepted. However, you must
exercise each basic right in full to exercise any associated
over-subscription privilege.
62
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In the event that the total dollar amount you submit is greater
than the final dollar amount attributable to the basic right you
are ultimately entitled to receive, the surplus will be applied
as an exercise of the over-subscription privilege discussed
above.
In the event that the total dollar amount you submit is less
than the final dollar amount attributable to the basic rights
you are ultimately entitled to receive, you will receive fewer
shares than you estimated you would have been entitled to
receive. In the case of an under-subscription, you will not have
an opportunity to submit further payment for any additional
basic rights or over-subscription privileges.
In the event that the total dollar amount you submit is greater
than the basic and over-subscription privileges you are
ultimately entitled to, any excess funds will be returned to
you, without interest, within 5 business days of the
Allocation Date.
If
you are a US Airways Creditor:
Your basic rights will ultimately be determined pursuant to the
US Airways Creditor Basic Right Calculation on the
Allocation Date. A determination may not be made on the exact
amount of your allowed claim, or the total amount of all allowed
claims, entitled to vote on the plan of reorganization until on
or before the Confirmation Order Date. Solely for the purposes
of estimating your basic rights, we have assumed
$[          ] billion
of total allowed voting claims. You may estimate you will
receive one basic right for each
$[          ]
allowed voting claim amount. For example, an allowed voting
claim for
$[          ]
is estimated to receive
[          ]
basic rights. However, your basic rights will ultimately be
determined pursuant to the US Airways Creditor Basic Right
Calculation on the Allocation Date.
Once you have estimated your basic subscription, you may pay for
your basic subscription and pay up to
[          ]x
that basic subscription price to participate in the associated
over-subscription privilege.
You would multiply the Subscription Price of $16.50 by the
estimated number of basic rights to which you estimate you are
entitled, and submit a dollar amount of
$[          ]
in order to pay for the full amount of basic rights attributable
to your estimated claim. If you hold a $100,000 claim and wish
to fully exercise your over-subscription privilege, assuming a
10x over-subscription option, you would multiply
[          ] x 10 x $16.50,
and submit
$[          ]
as an additional payment for the full amount of the
over-subscription privilege.
Therefore, you would submit a total payment to the Subscription
Agent of
$[          ]
(the sum of
$[          ]
to exercise your basic rights and
$[          ]
to exercise your over-subscription privilege) for your full
exercise of your basic and over-subscription privileges.
Notwithstanding the foregoing, you are in no way obligated to
exercise either your basic or over-subscription privilege in
full, and any lesser amount will be accepted. However, you must
exercise each basic right to exercise any associated
over-subscription privilege.
Although we have provided you with our best estimate of the
amount of your basic rights and over-subscription privilege, it
is likely that your final basic rights and over-subscription
privilege will be different from our estimate, perhaps
materially so. In the rights certificate, you must acknowledge
that New US Airways Group is not liable for any damages
resulting from your receiving a different number of rights or
over-subscription privileges than you originally estimated you
would be entitled to receive.
In the event that the total dollar amount you submit is greater
than the final dollar amount attributable to the basic rights
you are ultimately entitled to receive, the surplus will be
applied as an exercise of the over-subscription privilege
discussed above.
In the event that the total dollar amount you submit is less
than the final dollar amount attributable to the basic rights
you are ultimately entitled to receive, you will receive fewer
shares than you estimated you would have been entitled to
receive. In the case of an under-subscription, you will not have
an opportunity to submit further payment for any additional
basic rights or over-subscription privileges.
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In the event that the total dollar amount you submit is greater
than the basic and over-subscription privileges you are
ultimately entitled to, any excess funds will be returned to
you, without interest, within 5 business days of the
Allocation Date.
Exercise of Rights
A Holder may exercise its rights by delivering to the
Subscription Agent, at the address specified below, at or prior
to the Expiration Date, the properly completed and executed
rights certificate(s) evidencing those rights, with any
signatures guaranteed as required, together with payment in full
of the Subscription Price for each share subscribed for by that
Holder, as the case may be. Payment in full must be made by
(i) check or bank draft drawn upon a United States bank, or
postal, or express money order, payable to
[                    ],
as Subscription Agent, or (ii) wire transfer of funds to
the account maintained by the Subscription Agent for the purpose
of accepting subscriptions at
[                    ].
The Subscription Price will be deemed to have been received by
the Subscription Agent only upon (i) clearance of an
uncertified check, (ii) receipt by the Subscription Agent
of a certified or cashier's check or bank draft drawn upon
a United States bank or of a postal, telegraphic or express
money order or (iii) receipt of collected funds in the
Subscription Agent's account designated above.
Funds paid by uncertified personal check may take at least five
business days to clear. Accordingly, we urge Holders who wish to
pay the Subscription Price by means of uncertified personal
check to make payment sufficiently in advance of the Expiration
Date to ensure that the payment is received and clears by that
time. We also urge Holders to consider, in the alternative,
payment by means of certified or cashier's check, money
order or wire transfer of funds.
If a Holder wishes to exercise rights, but time will not permit
the Holder to cause the rights certificate(s) evidencing those
rights to reach the Subscription Agent prior to the Expiration
Date, the Holder may nevertheless exercise the rights if all of
the following conditions, which we refer to as the Guaranteed
Delivery Procedures, are met:
(i)            the
    Holder has caused payment in full of the Subscription Price for
    each share being subscribed for by that Holder to be received
    (in the manner set forth above) by the Subscription Agent at or
    prior to the Expiration Date;
(ii)            the
    Subscription Agent receives, at or prior to the Expiration Date,
    a guarantee notice, referred to as a Notice of Guaranteed
    Delivery, substantially in the form provided with the
    Instructions as to Use of Rights Certificates, distributed with
    the rights certificates, from a member firm of a registered
    national securities exchange or a member of the National
    Association of Securities Dealers, Inc., or from a commercial
    bank or trust company having an office or correspondent in the
    United States (each of which we refer to as an Eligible
    Institution) stating the name of the exercising Holder, the
    number of rights represented by the rights certificate(s) held
    by the exercising Holder, the number of shares being subscribed
    for by that Holder, and guaranteeing the delivery to the
    Subscription Agent of the rights certificate(s) evidencing those
    rights, and, if applicable for a nominee Holder, the related
    Nominee Holder Certification, within three NYSE trading days
    following the date of the Notice of Guaranteed Delivery; and
(iii)            the
    properly completed rights certificate(s), and, if applicable for
    a nominee Holder, the related Nominee Holder Certification, with
    any signatures guaranteed as required, is received by the
    Subscription Agent within three NYSE trading days following the
    date of the Notice of Guaranteed Delivery relating thereto. The
    Notice of Guaranteed Delivery may be delivered to the
    Subscription Agent in the same manner as rights certificates at
    the address set forth above, or may be delivered by telegram or
    facsimile transmission (facsimile no.
    [                    ]).
    To confirm facsimile deliveries, please call
    [                    ].
    Additional copies of the form of Notice of Guaranteed Delivery
    are available upon request from
    [                    ],
    whose address and telephone numbers are set forth below.
If an exercising Holder does not indicate the number of rights
being exercised, or does not forward full payment of the
aggregate Subscription Price for the number of rights that the
Holder indicates are being
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exercised, then the Holder will be deemed to have exercised
those rights with respect to the maximum number of rights that
may be exercised for the aggregate Subscription Price payment
delivered by the Holder, and, to the extent that the aggregate
Subscription Price payment delivered by the Holder exceeds the
product of the Subscription Price multiplied by the number of
rights evidenced by the rights certificates delivered by the
Holder, which excess is referred to as the Subscription Excess,
the Holder will be deemed to have exercised those rights to
purchase that number of whole shares equal to the quotient
obtained by dividing the Subscription Excess by the Subscription
Price, subject to proration, as described above. Any amount,
remaining after application of the foregoing procedures shall be
returned to the Holder, without interest, within 5 business
days of the Allocation Date.
An America West Holder who subscribes for fewer than all of the
shares represented by its rights certificate may, under certain
circumstances, (i) direct the Subscription Agent to attempt
to sell its remaining rights, or (ii) receive from the
Subscription Agent a new rights certificate representing the
unused rights. See "— Method of Transferring
America West Holdings Rights" below. A Holder's
election to exercise its over-subscription privilege must be
made at the time that the Holder exercises its basic
subscription privilege.
Unless a rights certificate (i) provides that the shares to
be issued under the exercise of the rights represented thereby
are to be issued to the registered Holder of those rights as
indicated in the rights certificate or (ii) is submitted
for the account of an Eligible Institution, signatures on each
rights certificate must be guaranteed by a bank, broker, dealer,
credit union, national securities exchange, registered
securities association, clearing agency or savings association.
America West Holders who hold shares of Class A or Class B
common stock of America West Holdings for the account of others,
such as brokers, trustees or depositories for securities, which
we refer to as Nominee Record Date Holders, should contact the
respective beneficial owners of such shares as soon as possible
to ascertain those beneficial owners' intentions and to
obtain instructions and certain beneficial owner certifications
with respect to their rights, all as included in the
Instructions distributed by Nominee Record Date Holders to
beneficial owners. If a beneficial owner so instructs, the
Nominee Record Date Holder should complete appropriate rights
certificates [and, in the case of any exercise of the
over-subscription privilege, the related Nominee Holder
Certification], and submit them to the Subscription Agent with
the proper payment. In addition, beneficial owners of the common
stock held through such a Nominee Record Date Holder should
contact the Nominee Record Date Holder and request the Nominee
Record Date Holder to effect transactions under the beneficial
owner's instructions.
You should read the Instructions accompanying the rights
certificates carefully and follow those instructions in detail.
Rights certificates should be sent with payment to the
Subscription Agent.
DO NOT SEND US AIRWAYS GROUP OR
AMERICA WEST HOLDINGS ANY RIGHTS CERTIFICATES.
The method of delivery of rights certificates and payment of the
Subscription Price to the Subscription Agent will be at the
election and risk of the Holder. If rights certificates and
payments are sent by mail, we urge Holders to send these
materials by registered mail, properly insured, with return
receipt requested. We also urge Holders to allow a sufficient
number of days to ensure delivery to the Subscription Agent and
clearance of payment prior to the Expiration Date. Because
uncertified personal checks may take at least five business days
to clear, we strongly urge Holders to pay, or arrange for
payment, by means of certified or cashier's check, money
order or wire transfer of funds.
All questions concerning the timeliness, validity, form and
eligibility of any exercise of rights will be determined by us,
and the determinations will be final and binding. We, in our
sole discretion, may waive any defect or irregularity, or permit
a defect or irregularity to be corrected within such time as we
may determine, or reject the purported exercise of any right
because of any defect or irregularity. Rights certificates will
not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as we
determine, in our sole discretion.
Neither we, nor the
Subscription Agent, will be under any duty to give notification
of any defect or irregularity in connection with the submission
of rights certificates or any other required document or incur
any liability for failure to give such notification. We reserve
the right to reject any exercise if that exercise is not
contemplated under the terms of the rights offering or not in
proper form or if the acceptance of that exercise or the
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issuance of shares of New US Airways Group common stock
pursuant to that exercise could be deemed unlawful or materially
burdensome.
See "— Regulatory
Limitation" below.
You should direct any questions or requests for assistance
concerning the method of exercising rights or requests for
additional copies of this prospectus, the Instructions or the
Notice of Guaranteed Delivery to
[                    ]
(telephone: banks and brokers
[                    ],
collect; all others
[                    ]).
No Revocation
Once a Holder has exercised its rights, the Holder may not
revoke that exercise.
Method of Transferring America West Holdings Rights
The rights issued to America West Holders will be transferable
and may be purchased or sold through the Subscription Agent.
There has, however, been no prior trading in the rights, and we
cannot assure you that a trading market will develop or, if a
market develops, that the market will remain available
throughout the subscription period.
An America West Holder may transfer the rights evidenced by a
single rights certificate in whole by endorsing the rights
certificate for transfer under the accompanying Instructions. An
America West Holder may transfer a portion of the rights
evidenced by a single rights certificate, but not fractional
rights, may be transferred by delivering to the Subscription
Agent a rights certificate properly endorsed for transfer, with
instructions to register that portion of the rights indicated
therein in the name of the transferee and to issue a new rights
certificate to the transferee evidencing the transferred rights.
In that event, a new rights certificate evidencing the balance
of the rights will be issued to the Holder or, if the Holder so
instructs, to an additional transferee, or will be sold by the
Subscription Agent in the manner described below upon
appropriate instruction from the Holder.
An America West Holder may also sell the rights evidenced by a
rights certificate, in whole or in part, through the
Subscription Agent by delivering to the Subscription Agent the
rights certificate properly executed for sale by the
Subscription Agent. If only a portion of rights evidenced by a
single rights certificate must be accompanied by instructions
setting forth the action to be taken with respect to the rights
that are not to be sold. Orders to sell rights must be received
by the Subscription Agent at or prior to 11:00 a.m., New
York City time, on [month, day], 2005. Promptly following the
Expiration Date, the Subscription Agent will send the Holder a
check for the net proceeds from the sale of any rights sold on
behalf of that Holder. If these rights can be sold, the sale
will be deemed to have been effected at the weighted average
sale price of all rights sold by the Subscription Agent at the
request of Holders, less the pro rata portion of any applicable
brokerage commissions, taxes and other expenses. We cannot
assure you, however, that a market will develop for the rights
or that the Subscription Agent will be able to sell any rights.
The Subscription Agent's obligation to execute orders is
subject to its ability to find buyers. If less than all sales
orders received by the Subscription Agent can be filled, sales
proceeds will be prorated among the Holders requesting these
sales based upon the number of rights each such Holder has
requested the Subscription Agent to sell, regardless of when
during the period ending [month, day], 2005 such requests are
received by the Subscription Agent. If the rights cannot be sold
by the Subscription Agent by 5:00 p.m., New York City time,
on [month, day], 2005, they will be returned promptly by mail to
the Holder.
America West Holders wishing to transfer all or a portion of
their rights, but not fractional rights, should allow a
sufficient amount of time prior to the Expiration Date for
(i) the transfer instructions to be received and processed
by the Subscription Agent, (ii) new rights certificates to
be issued and transmitted and (iii) the rights evidenced by
the new rights certificates to be exercised or sold by the
recipients thereof. This amount of time could range from two to
ten business days, depending upon the method by which delivery
of the rights certificates and payment is made and the number of
transactions which the Holder instructs the Subscription Agent
to effect. Neither we nor the Subscription Agent will have any
liability to a transferee or transferor of rights if rights
certificates or any other required documents are not received in
time for exercise or sale prior to the Expiration Date.
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A new rights certificate will be issued to a submitting Holder
upon the partial exercise or sale of rights only if the
Subscription Agent receives a properly endorsed rights
certificate no later than 5:00 p.m., New York City time, on
the fifth day prior to the Expiration Date. No new rights
certificates will be issued with respect to rights certificates
submitted after that time and date. Accordingly, after that time
and date a Holder exercising or selling less than all of its
rights will lose the power to sell or exercise its remaining
rights. Unless the submitting Holder makes other arrangements
with the Subscription Agent, a new rights certificate issued
after 5:00 p.m., New York City time, on the fifth business
day before the Expiration Date will be held for pick-up by the
submitting Holder at the Subscription Agent's hand delivery
address provided in this prospectus. All deliveries of newly
issued rights certificates will be at the risk of the submitting
Holder.
All commissions, fees and other expenses, including brokerage
commissions and transfer taxes, incurred in connection with the
purchase, sale or exercise of rights will be for the account of
the transferor of the rights, and none of these commissions,
fees or expenses will be paid by US Airways Group or the
Subscription Agent.
THOSE RIGHTS NOT EXERCISED BY A HOLDER PRIOR TO THE EXPIRATION
DATE WILL EXPIRE AND WILL NO LONGER BE EXERCISABLE.
Non-Transferability of US Airways Creditors Rights
Your rights are not transferable through the Subscription Agent.
A US Airways Creditor's rights may only be exercised
by the holder of the claim on the record date. If a
US Airways Creditor subsequently transfers its claim, we
will not recognize the transferee as the holder of the rights.
Procedures for DTC Participants
We will use our reasonable efforts to have the America West
Holders' rights eligible for transfer through, and the
exercise of the Holders' rights effected through, the
facilities of The Depository Trust Company.
Subscription Agent
The Subscription Agent is
[                    ].
The Subscription Agent's address, which is the address to
which the rights certificates and payment of the Subscription
Price must be delivered, is
[                    ]
Determination of Subscription Price
The Subscription Price of $16.50 per share is the highest price
committed to be paid by the new equity investors that have
committed to invest in shares of New US Airways Group
common stock in connection with the merger and the plan of
reorganization. We cannot assure you of the price at which New
US Airways Group common stock will trade following this
rights offering.
No Appraisal Rights
Holders will not have any appraisal rights in connection with
this rights offering.
No Recommendation to Holders
An investment in New US Airways Group common stock must be
made under each investor's evaluation of its, his or her
best interests. Accordingly, neither the board of directors of
US Airways Group, nor the board of directors of America
West Holdings, nor Merrill Lynch makes any recommendation to
Holders regarding whether they should exercise their rights.
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Conditions to the Rights Offering
Notwithstanding any other provisions of this rights offering, we
will not complete this rights offering if any of the following
has not occurred:
•
New US Airways Group must have received from the
    equity investors, on or before the effective time of the merger,
    cash equity investments of not less than $375 million on a
    pre-investment value of not less than $500 million, with
    those equity investments to be made substantially on the basis
    set forth in their financing commitments;
•
no law shall have been promulgated, enacted or entered that
    restrains, enjoins, prevents, materially delays, prohibits or
    otherwise makes illegal the performance of any of the terms of
    this rights offering;
•
no preliminary or permanent injunction or other order by any
    governmental authority that restrains, enjoins, prevents,
    delays, prohibits or otherwise makes illegal the performance of,
    or materially modifies, the terms of this rights offering shall
    have been issued and remain in effect, except for such
    injunctions that, if obtained, could not, individually or in the
    aggregate, reasonably be expected to have a material adverse
    effect on the ability of the Holders or New US Airways
    Group to complete this rights offering;
•
the plan of reorganization must have been confirmed by the
    bankruptcy court and an order confirming the plan of
    reorganization must have been entered and become a final order
    no later than December 31, 2005;
•
New US Airways Group alone, and not any affiliate of New
    US Airways Group, must have issued equity securities in
    connection with the completion of the plan of reorganization;
•
the merger shall have become effective substantially on the
    terms described in this prospectus, and must become effective
    prior to or concurrently with the closing of this rights
    offering; and
•
the shares of New US Airways Group common stock to be
    issued under this rights offering must have been authorized for
    listing on the NYSE upon official notice of issuance.
Regulatory Limitation
New US Airways Group will not be required to issue shares
under the rights offering to any Holders who, in the opinion of
New US Airways Group, would be required to obtain prior
clearance or approval from any state or federal regulatory
authorities to own or control those shares if, at the Expiration
Date, this clearance or approval has not been obtained.
Foreign and Certain Other Holders
Rights certificates will not be mailed to any Holder who might
be entitled to receive rights, whose address is outside the
United States or who has an APO or FPO address, because the
ability to exercise rights may be prohibited by the laws of the
country in which that person or entity resides. Such rights
certificates will be held by the Subscription Agent for these
persons' accounts. This rights offering is not being
offered to any person in any jurisdiction in which it is
unlawful to do so, nor will any offers to purchase any shares of
New US Airways Group common stock or, in the case of
America West Holders, transfer any rights, be accepted from any
person in any jurisdiction in which it is unlawful to do so.
However, such person may exercise or, in the case of America
West Holders, transfer rights, if, on or prior to [month, day],
2005, the Holders provide evidence that is satisfactory to us,
such as a legal opinion from local counsel, that it is otherwise
lawful for such person to receive, exercise or, in the case of
America West Holders, transfer rights without any requirement
being imposed on us to be registered or licensed. If the person
can provide this evidence, the Subscription Agent will mail a
rights certificate to that Holder.
In addition, we reserve the right to reject subscriptions by
non-U.S. persons to the extent that acceptance of those
subscriptions would cause the number of shares of New
US Airways Group common stock held by
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non-U.S. persons to be entitled to more than 24.9% of the
aggregate votes of all outstanding shares of common stock of New
US Airways Group following the completion of the rights offering.
If an America West Holder holds shares of America West Holdings
Class A or Class B common stock through a broker,
dealer, commercial bank, trust company or other nominee within
the United States and such Holder resides outside the United
States, neither such Holder nor such broker, bank or nominee may
attempt to exercise any rights unless such Holder provides
evidence that is satisfactory to us, such as a legal opinion
from local counsel, that it is not unlawful for such Holder to
receive, exercise or transfer rights without any requirement
being imposed on us to be registered or licensed.
Withdrawal
US Airways Group reserves the right to withdraw this rights
offering at any time prior to the Expiration Date for any
reason, in which event US Airways Group will have no
obligation to Holders other than to return all funds received
from Holders without interest.
Issuance of New US Airways Group Common Stock
Certificates representing shares of New US Airways Group
common stock purchased under this rights offering will be issued
to subscribers as soon as practicable after the Expiration Date.
Funds delivered to the Subscription Agent in payment of the
Subscription Price will be retained by the Subscription Agent,
and will not be delivered to New US Airways Group, until
the completion of this rights offering and the issuance of those
stock certificates. If a Holder exercising its rights is
allocated less than all of the shares which that Holder
subscribed for under its right, the excess funds paid by that
Holder will be returned to that Holder within
three business days after the Allocation Date. Interest
will not be paid to Holders on those funds.
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THE MERGER
The following is a description of the material aspects of the
merger. While we believe that the following description covers
the material terms of the merger, the description may not
contain all of the information that is important to you. We
encourage you to read carefully this entire prospectus and the
merger agreement, which is filed as an exhibit to the
registration statement of which this prospectus forms a part.
General
Each of the America West Holdings and US Airways Group
boards of directors has unanimously approved and declared
advisable the merger agreement and the merger. The merger
agreement provides that, upon the terms and subject to the
conditions set forth in the merger agreement, Barbell
Acquisition Corp., a wholly owned subsidiary of US Airways
Group, will merge with and into America West Holdings, with
America West Holdings continuing as a wholly owned subsidiary of
US Airways Group. At the effective time and as a result of
the merger, (i) each share of America West Holdings
Class A common stock will be converted into 0.5362 of a
share of common stock of New US Airways Group and
(ii) each share of America West Holdings Class B
common stock will be converted into 0.4125 of a share of New
US Airways Group common stock, on the terms and subject to
the adjustment as provided in the merger agreement and further
described below under the section entitled "The Merger
Agreement — The Merger Consideration."
Background of the Merger
US Airways Group was one of the airlines most affected by
the significant reductions in air travel post-September 11,
2001. With its concentration of routes in the eastern United
States, US Airways Group's average stage length, or
trip distance, is shorter than those of other major airlines. In
the post-September 11, 2001 environment, US Airways
Group was more susceptible than other major airlines to
competition from surface transportation, such as automobiles and
trains. In addition, the increased airport security charges and
procedures had a disproportionate impact on short-haul travel,
which constitutes a significant portion of flying for
US Airways Group's airline subsidiaries. On
August 11, 2002, the debtors filed voluntary petitions for
relief under Chapter 11 of the U.S. Bankruptcy Code.
In connection with the petition, the debtors developed a plan of
reorganization that became effective on March 31, 2003.
Although the plan included cost reductions, structural changes
and revenue initiatives intended to help the company return to
profitability, US Airways Group found itself facing two
factors not sufficiently anticipated in its forecasts. The first
was the decline in domestic passenger unit revenues. This
decline was due to the growth of low-cost carriers and the
impact of these carriers on the prices other carriers could
charge. The second was higher than predicted fuel costs.
When it became apparent that US Airways Group could not
survive under the business plan developed as part of the plan of
reorganization, US Airways Group developed a new business
plan, which it called its transformation plan. This plan
contained a number of initiatives, including significant
reductions in labor costs through changes to the company's
collective bargaining agreements. Although US Airways Group
hoped to achieve these reductions without the need for new
Chapter 11 protection, it could not do so. As a result of
recurring losses, declining available cash and the risk of
defaults or cross defaults, the debtors filed voluntary
petitions for relief under Chapter 11 on September 12,
2004.
Even before the petitions were filed in 2004, one of the
alternatives US Airways Group explored to address its
problems and return to profitability was a possible merger with
America West Holdings. The management of America West Holdings
believed that consolidation in the industry was inevitable, and
was interested in the potential benefits of combining the
airlines' complementary east-west route networks. The
parties held preliminary discussions about a possible
transaction and conducted due diligence during the period from
February through July 2004. Ultimately, these discussions ended
due to the parties' view that a number of issues, including
those related to labor, pension and benefit costs, made a merger
impracticable.
In December 2004, in anticipation of US Airways
Group's success in significantly restructuring its labor
costs, US Airways Group's investment advisor, The
Seabury Group LLC, began considering potential
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transactions involving the company and other entities. During
this period, executives of US Airways Group and America
West Holdings discussed the possibility of resuming discussions
concerning a business combination transaction. US Airways
Group considered the potential benefits that could be achieved
from joining two airlines with complementary networks and
similar labor costs as US Airways Group hoped to lower its
labor costs during its Chapter 11 proceedings. In addition,
the parties considered that, as part of the plan of
reorganization, US Airways Group would have greater
flexibility to combine its network with America West
Holdings' network in a more efficient and cost-effective
manner than it had prior to filing bankruptcy petitions in 2004.
The parties remained interested in combining the two
companies' complementary route networks. The parties also
believed that, as a result of US Airways Group's
improved cost structure and liquidity following a plan of
reorganization, a merger could create the nation's largest
low-cost carrier with better liquidity and more efficient
operations than either airline could achieve on its own.
Beginning in January 2005, US Airways Group and America
West Holdings resumed discussions. Both parties conducted due
diligence and each management group met separately and together.
On January 20, 2005, the board of directors of America West
Holdings discussed the renewed merger talks with US Airways
Group as part of a strategic overview presentation. In late
February 2005, US Airways Group management and its
outside financial advisor made a presentation regarding a
possible combination with America West Holdings to the Strategy
and Finance Committee of US Airways Group's board of
directors.
During March 2005, due diligence and discussions about the
structure of a possible transaction involving the companies and
their respective advisors continued. These discussions included
analysis of legal structuring issues and financial modeling. As
part of the modeling, potential synergies relating to a
combination of the two companies were the subject of extensive
review. The companies and their advisors also considered labor
contract and other integration issues. During the
Chapter 11 cases, US Airways Group had entered into
new agreements with its labor groups and had obtained
significant reductions in pension and retiree benefit costs,
with the result that these issues no longer made a merger
impracticable.
On March 4, 2005, there was a meeting of the Governance
Committee of the America West Holdings Board of Directors at
which the committee was updated on the status of discussions
with US Airways Group. On March 10, 2005, the America
West Holdings board of directors was updated on the proposed
structure of the transaction, ongoing due diligence and
discussions with US Airways Group.
On March 11, 2005, the Strategy and Finance Committee of
US Airways Group's board of directors again met and
received a presentation from senior management concerning the
status of the potential transaction.
On March 21, 2005, Seabury and Greenhill & Co.,
LLC, America West Holdings' financial advisor, met to
discuss the potential economic terms of a possible transaction.
Discussions relating to the economic terms continued after this
meeting. On March 24, 2005, at a special meeting of the
board of directors of America West Holdings, its management
presented a description of a proposed structure of the
transaction. Also on March 24, 2005, David Bronner,
Chairman of US Airways Group's board of directors, and
Bruce Lakefield, US Airways Group's Chief Executive
Officer, met with John Luth of Seabury and Douglas Parker, Chief
Executive Officer of America West Holdings to discuss a
potential merger.
On March 30, 2005, there was a further meeting of the
Strategy and Finance Committee of US Airways Group's
board of directors. The committee was updated on the proposed
structure of the transaction and the status of the diligence
effort and discussions with America West Holdings.
In April 2005, the parties and their advisors participated in
active negotiations regarding the merger agreement, including
with respect to the consideration to be paid to the holders of
America West Holdings Class A and Class B common
stock, respectively, in the merger. Beginning in early April,
representatives of the two companies and their advisors
participated in frequent meetings and teleconferences discussing
business and due diligence issues. Topics of negotiation
included the exchange ratio for the conversion of shares of
America West Holdings' common stock into shares of
US Airways Group, the need to attract additional equity
investment and the composition of the combined company's
board of directors after the
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merger. Also in April, the parties and their advisors made a
joint presentation regarding a possible merger to the ATSB. The
merger is subject to the approval of the ATSB under the terms of
loan guarantees issued to America West Holdings.
At the same time, US Airways Group and America West
Holdings participated in discussions and negotiations with
potential equity investors in the post-merger company. Prior to
the announcement of the proposed merger on May 19, 2005,
four investors committed to investing in New US Airways
Group. Those four investors are Eastshore Aviation, LLC, a
company owned by Air Wisconsin Airlines Corporation and its
shareholders; ACE Aviation Holdings Inc., the parent corporation
of Air Canada; and Par Investment Partners, L.P. and Peninsula
Investment Partners, L.P., two private investment firms.
Subsequent to the signing of the merger agreement and the
announcement of the proposed transaction, the parties commenced
discussions with Wellington Management Company, LLP.
On April 18 and 19, 2005, the board of directors of
US Airways Group convened in-person meetings at
US Airways Group's Crystal City headquarters. During
that two-day period, the Strategy and Finance Committee met
twice, and on both occasions reviewed the status of the
potential transaction with America West Holdings. During the
second meeting, US Airways Group's financial advisors
reviewed factors relating to valuation of the company, and
discussed the potential valuation of the company in combination
with America West Holdings. On April 19, 2005, the full
board of directors of US Airways Group met and reviewed the
potential transaction with America West Holdings.
On April 19, 2005, an article appeared on the Wall Street
Journal's website speculating that America West Holdings
and US Airways Group were involved in discussions regarding
a potential merger and it was followed the next day with a
lengthy story in the paper's print edition. Prior media
reports contained similar speculation, but not with the level of
specificity that appeared in the Wall Street Journal. On
April 22, 2005, each of America West Holdings and
US Airways Group issued a press release confirming the fact
that such discussions were occurring.
On April 29, 2005, the board of directors of America West
Holdings met to discuss the status of discussions.
Representatives of management of America West Holdings'
advisors updated the board of directors on the status of
negotiations, the terms of the merger agreement and the proposed
voting agreement.
In addition, during the course of these negotiations, TPG
Advisors, Inc., acting as a financial advisor to America West
Holdings, rendered advice and assistance to America West
Holdings, including assistance in negotiating certain governance
aspects of the transaction.
Negotiations over the merger agreement and ongoing due diligence
continued into May 2005. Also, negotiations with potential
investors continued during this period. Like the merger itself,
obtaining new equity financing is a central component of the
debtors' plan of reorganization. The receipt of at least
$375 million of new equity investment is a closing
condition in the merger agreement.
Negotiations over the merger agreement entered their final phase
in mid-May 2005 and US Airways Group and America West
Holdings reached agreement on exchange ratios with respect to
the America West Holdings Class A common stock and America
West Holdings Class B common stock. Final negotiations with
potential investors also were occurring at the same time.
US Airways Group's board of directors convened a
special meeting on May 18, 2005, to consider approval of
the merger agreement and related agreements. After presentations
by US Airways Group's outside legal and financial
advisors, the board of directors of US Airways Group
approved the merger agreement and related agreements. On
May 19, 2005, at a regularly scheduled meeting of the board
of directors of America West Holdings, America West
Holdings' management, together with America West
Holdings' legal and financial advisors reviewed the terms
of the merger agreement and related agreements. America West
Holdings' legal advisors reviewed with the board its
fiduciary duties and the board reviewed materials related to the
merger in detail. Greenhill made a financial presentation and
delivered its oral opinion, subsequently confirmed in writing,
that, as of that date of the opinion and based upon and subject
to the limitations and assumptions stated in its opinion, the
Class B merger consideration to be received by the holders
of Class B common stock of America West Holdings is fair,
from a financial point of view, to those stockholders.
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Following discussions, the board of directors determined that
the merger agreement and the merger were fair, from a financial
point of view, and in the best interests of America West
Holdings and its stockholders and unanimously approved the
merger agreement and the merger. Execution of the merger
agreement was announced after the close of the market on May 19.
Also on May 19, US Airways Group and America West
Holdings entered into agreements with Eastshore, Par, Peninsula
and ACE for equity investments in the merged company of
$125 million, $100 million, $50 million and
$75 million, respectively. These investments are
conditioned on the merger becoming effective.
As a condition to Par's and Peninsula's investment
agreements, on May 19, 2005, America West Holdings entered
into participation agreements with each of Par and Peninsula
pursuant to which, Par, and under certain circumstances,
Peninsula will be entitled to receive an aggregate of 11.2% of
any excess in the pre-investment equity value of US Airways
Group over $500 million. For further detail, see the
section entitled "The New Equity Investments —
Participation Agreements with Par Investment Partners, L.P. and
Peninsula Investment Partners, L.P."
On May 20, 2005, the debtors filed a motion in the
bankruptcy court seeking approval of a process for dealing with
any competing offers for US Airways Group or for
providing additional investment into the post-merger company
that might arise and also seeking approval of the termination
fee provisions of the merger agreement and the investment
agreements. On May 31, 2005, the bankruptcy court granted
the motion and approved the process for dealing with competing
offers, which we refer to as the "bidding procedures."
Shortly after execution of the merger agreement, US Airways
Group and America West Holdings began negotiating with
Wellington Management Company, LLP, a Boston-based investment
management firm acting on behalf of a group of potential
investors, about an equity investment in the merged company. On
May 27, 2005, US Airways Group and America West
Holdings entered into an investment agreement with Wellington
Management, on behalf of certain funds it manages, for a
$150 million equity investment. Like the other new equity
investments, Wellington's investment is conditioned on the
merger becoming effective. Because the Wellington investment is
at a per share price of $16.50 per share, as opposed to the
$15.00 per share price paid by the other new equity
investors, the exchange ratios for the America West Holdings
Class A and Class B common stock in the merger
agreement will be amended in accordance with its terms to adjust
the exchange ratios for America West Holdings Class A and
Class B common stock from 0.5306 and 0.4082 to 0.5362 and
0.4125, respectively.
Bankruptcy Court Approvals
The merger and its related transactions are conditioned upon
approval of the merger agreement and other related agreements by
the bankruptcy court overseeing the debtors'
Chapter 11 cases.
Regulatory Approvals Required for the Merger
America West Holdings and US Airways Group are
regulated by various federal, state, local and foreign
regulatory authorities that exercise broad powers, generally
governing activities such as operations, safety, financial
reporting, security and certain mergers, consolidations and
acquisitions. The airline industry is subject to possible
regulatory and legislative changes that may affect the economics
of the industry by requiring changes in operating practices or
by affecting the cost of providing services.
In addition to the antitrust related filings and approvals
discussed below, completion of the merger is conditioned on
America West Holdings and US Airways Group supplying
or obtaining certain notices, reports, filings, consents,
registrations, approvals, permits or authorizations with, from
or to the U.S. Department of Transportation, the FAA, the
Federal Communications Commission and the Department of Homeland
Security.
Antitrust
The merger is subject to review by the Antitrust Division, under
the HSR Act. Under the HSR Act, America West Holdings and
US Airways Group are required to make pre-merger
notification filings and to
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await the expiration or early termination of the statutory
waiting period prior to completing the merger. On May 23,
2005, America West Holdings and US Airways Group each
filed a Premerger Notification and Report Form with the
Antitrust Division and the FTC. On June 23, 2005, the
initial waiting period expired and the Antitrust Division
announced it had closed its investigation of the proposed merger
without issuing requests for additional information. The
Antitrust Division's announcement clears the way for the
merger to proceed without antitrust challenge by the federal
government.
We cannot assure you that other government agencies, including
state attorneys general, or a private party, will not also
initiate action to challenge the merger before or after it is
completed. Any such challenge to the merger could result in
restrictions or conditions that would have a material adverse
effect on the combined company if the merger is completed. These
restrictions and conditions could include operating
restrictions, or the divestiture, spin-off or the holding
separate of assets or businesses. Under the terms of the merger
agreement, each of America West Holdings and
US Airways Group, if requested by America West
Holdings, are each required to commit to any divestitures,
licenses or hold separate or similar arrangements with respect
to its assets or conduct of business arrangements if that
divestiture, license, holding separate or arrangement is a
condition to obtain any approval from any governmental entity in
order to complete the merger and would not have a material
adverse effect on the combined company.
US Airways Group may condition any divestiture,
license or hold separate or similar arrangement upon the
completion of the merger. No additional stockholder approval is
expected to be required or sought for any decision by America
West Holdings or US Airways Group, after the America
West Holdings special meeting, to agree to any terms and
conditions necessary to resolve any regulatory objections to the
merger.
America West Holdings and US Airways Group must also
either notify or obtain consent from certain foreign regulatory
agencies. US Airways Group, with the consent of
America West Holdings, has filed a notification with and
obtained approval of the merger from the German Federal Cartel
Office or Bundeskartellamt.
Certain of the equity investors are also required to file
notifications under the HSR Act and obtain regulatory approvals.
Because the receipt of at least $375 million of new equity
is a condition to completion of the merger, expiration of the
HSR waiting periods and obtaining other regulatory approvals for
the equity investors may affect the timing of the merger. These
waiting periods expired on June 27, 2005.
Approvals of the Air Transportation Stabilization Board
Pursuant to a loan agreement with the ATSB, America West
Holdings must obtain a waiver from the ATSB of a prepayment
obligation to complete the merger. On January 18, 2002,
America West Airlines, Inc. closed a $429 million loan
supported by a $380 million guarantee provided by the ATSB.
America West Holdings fully and unconditionally guaranteed the
payment of all principal, premium, interest and other
obligations outstanding under the loan partially guaranteed by
the ATSB and has pledged the stock of America West Airlines,
Inc. to secure its obligations under such guarantee. The loan
balance is currently approximately $300 million. Principal
amounts under this loan become due in ten installments of
$42.9 million on each March 31 and September 30,
commencing on March 31, 2004 and ending on
September 30, 2008. Principal amounts outstanding under the
loan partially guaranteed by the ATSB bear interest at a rate
per annum equal to LIBOR plus 40 basis points plus a
guarantee fee of 8% per year.
Subject to certain exceptions, America West Holdings is required
to prepay the loan partially guaranteed by the ATSB upon a
change in control and may be required to prepay portions of the
loan if America West Holdings' employee compensation costs
exceed a certain threshold.
The loan partially guaranteed by the ATSB requires that America
West Airlines, Inc. maintain a minimum unrestricted cash balance
of $100 million. In addition, the government loan contains
customary affirmative covenants and the following negative
covenants: restrictions on liens, investments, restricted
payments, fundamental changes, asset sales and acquisitions, the
creation of new subsidiaries, sale and leasebacks, transactions
with affiliates, the conduct of business, mergers or
consolidations, issuances and dispositions of capital stock of
subsidiaries, and amendments to other indebtedness. The loan
partially
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guaranteed by the ATSB contains customary events of default,
including payment defaults, cross-defaults, breach of covenants,
bankruptcy and insolvency defaults and judgment defaults.
Accounting Treatment
For accounting purposes only, US Airways Group will account
for the merger as a "reverse acquisition" using the
purchase method of accounting in conformity with accounting
principles generally accepted in the United States of America.
Although the merger is structured such that America West
Holdings will become a wholly owned subsidiary of
US Airways Group at closing, America West Holdings will be
treated as the acquiring company for accounting purposes in
accordance with SFAS No. 141, "Business
Combinations." Because America West Holdings'
stockholders are expected to own approximately 39% of the shares
of New US Airways Group after the merger as compared to the
former US Airways Group creditors who will own 12%, which
assumes the exchange of certain convertible debt and reflects
the impact of certain securities that are dilutive at the per
share price paid by the equity investors, America West Holdings
will receive a larger number of designees to the New
US Airways Group board of directors, and America West
Holdings' current Chairman and Chief Executive Officer will
serve as Chairman and Chief Executive Officer of New
US Airways Group after the merger, America West Holdings is
deemed to be the acquiring company for accounting purposes.
Listing of New US Airways Group Common Stock
Listing of New US Airways Group common stock on the NYSE or
Nasdaq Stock Market, subject to official notice of issuance, is
a condition to completion of the merger. We are applying to have
the shares of New US Airways Group common stock authorized for
listing on the NYSE upon official notice of issuance under the
symbol
"[                    ]."
Change of Control Put Option under America West Airlines,
Inc.'s 7.25% Senior Exchangeable Notes
Completion of the merger will constitute a "change of
control" under America West Airlines, Inc.'s
outstanding 7.25% Senior Exchangeable Notes due 2023 and
will require America West Holdings to make an offer to purchase
those notes within 30 days after the effective time of the
merger at a purchase price of $343.61 per $1,000 principal
amount at maturity. Under the terms of the notes and the related
guarantee and exchange agreement, America West Airlines,
Inc.'s obligation to purchase those notes may be satisfied
at America West Holdings' election by delivery of shares of
New US Airways Group common stock having a "fair
market value" of not less than $343.61 per $1,000
principal amount at maturity for a total of $86.8 million
plus an additional $1.1 million of accrued but unpaid
interest. For this purpose "fair market value" means
95% of the average market price of the New US Airways Group
common stock calculated over the 5 business days ending on
the third business day before the purchase date.
America West Holdings Warrants
As compensation for various elements of America West
Holdings' financial restructuring completed in January
2002, America West Holdings issued a warrant to
purchase 18.8 million shares of America West Holdings
Class B common stock to the ATSB and additional warrants to
purchase 3.8 million shares of its Class B common
stock to other loan participants, in each case at an exercise
price of $3 per share and a term of ten years. In the first
quarter of 2004 and the third quarter of 2003, approximately
220,000 and 2.6 million warrants, respectively, were
exercised at $3 per share. These warrant exercises were
cashless transactions resulting in the issuance of approximately
1.6 million shares of America West Holdings Class B
common stock. As of the date of this prospectus, warrants to
purchase 19.7 million shares of America West Holdings
Class B common stock remain outstanding. Upon completion of
the merger, the warrants will be converted into the right to
receive, upon exercise and payment of the adjusted exercise
price, in lieu of America West Holdings Class B common
stock, the Class B merger consideration that the holder of
such warrants would have received had the warrants been
exercised immediately prior to the merger.
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THE MERGER AGREEMENT
This section of the prospectus describes material aspects of
the merger agreement. This summary may not contain all of the
information that is important to you. You should carefully read
this entire prospectus, including the full text of the Agreement
and Plan of Merger, which is filed as an exhibit to the
registration statement of which this prospectus forms a part,
and the other documents to which we refer you for a more
complete understanding of the merger.
Structure of the Merger
Upon completion of the merger, Barbell Acquisition Corp., a
wholly owned subsidiary of US Airways Group, newly
organized to effect the merger will merge with and into America
West Holdings. America West Holdings will become a wholly owned
subsidiary of New US Airways Group.
Closing and Effective Time of the Merger
The closing of the merger will occur on the fifth business day
after the satisfaction or waiver of all of the closing
conditions provided in the merger agreement, except for those
conditions that, by their terms, are to be satisfied at the
closing (but subject to the satisfaction or waiver of those
conditions), or on such other date as America West Holdings and
US Airways Group may agree.
As soon as practicable following the closing, America West
Holdings and US Airways Group will deliver an executed
and acknowledged certificate of merger to the Secretary of State
of the State of Delaware. At that time, or at such later time as
may be agreed by the parties in writing and specified in the
certificate of merger, the merger will become effective.
Post-Merger America West Holdings Governing Documents,
Officers and Directors; New US Airways Group Governing
Documents and Directors
America West Holdings Governing Documents.
At the
effective time of the merger, the certificate of incorporation
of Barbell Acquisition Corp. in effect at the effective time of
the merger will be the certificate of incorporation of America
West Holdings and the bylaws of Barbell Acquisition Corp. in
effect at the effective time of the merger will be the bylaws of
America West Holdings, in each case until subsequently amended
as provided therein or by applicable laws. However, the
certificate of incorporation of America West Holdings will be
amended at the effective time of the merger to reflect the fact
that the corporation's name is "America West Holdings
Corporation."
America West Holdings Officers and Directors.
The
officers of America West Holdings at the effective time of the
merger will, from and after the effective time, be the officers
of post-merger America West Holdings until their successors will
have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with America
West Holdings' certificate of incorporation and bylaws. The
chief executive officer of US Airways Group immediately
prior to effective time of the merger and the chief executive
officer of America West Holdings immediately prior to effective
time of the merger will, from and after the effective time of
the merger, be the directors of post-merger America West
Holdings.
New US Airways Group Governing Documents.
At the
effective time of the merger, the certificate of incorporation
of New US Airways Group will be amended and restated in its
entirety and the bylaws of New US Airways Group will be
amended and restated in their entirety, in each case until
thereafter amended as provided therein or by applicable laws.
New US Airways Group Board of Directors.
The merger
agreement provides that at the effective time of the merger, the
board of directors of New US Airways Group will consist of
13 directors composed as follows: (i) two of the
directors will be designated by US Airways Group to an
initial one-year term, and each of them will be an independent
director, (ii) two of the directors will be designated by
America West
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Holdings to an initial one-year term, and each of them will be
an independent director, (iii) one of the directors will be
designated by US Airways Group to an initial two-year term,
and he or she will be an independent director, (iv) three
of the directors will be designated by America West Holdings to
an initial two-year term, and each of them will be independent
directors, (v) one of the directors will be W. Douglas
Parker, Chairman and Chief Executive Officer of America West
Holdings, who will also serve as Chairman of the Board, and will
be appointed to an initial three-year term, (vi) one of the
directors will be Bruce Lakefield, President and Chief Executive
Officer of US Airways Group and US Airways, Inc., who will
also serve as Vice Chairman of the Board, and will be appointed
to an initial three-year term and (vii) three of the
directors will be nominated by the equity investors to an
initial three-year term pursuant to the terms of their financing
commitments.
The Merger Consideration
US Airways Group Common Stock.
At the effective time
of the merger, the existing US Airways Group common stock
will be cancelled and shares of New US Airways Group
common stock will be issued in accordance with the merger
agreement and the investment agreements.
Conversion of America West Holdings Common Stock.
At the
effective time of the merger, each share of America West
Holdings Class A common stock issued and outstanding
immediately prior to the effective time (other than any shares
of America West Holdings Class A common stock owned by
US Airways Group, America West Holdings or any of their
respective subsidiaries, which shares are not beneficially owned
by third parties) will be converted into the right to receive
0.5362 of a share of New US Airways Group common stock,
together with the right, if any, to receive cash in lieu of
fractional shares of New US Airways Group common
stock. At the effective time of the merger, each share of
America West Holdings Class B common stock issued and
outstanding immediately prior to the effective time (other than
any shares of America West Holdings Class B common stock
owned by US Airways Group, America West Holdings or any of
their respective subsidiaries, which shares are not beneficially
owned by third parties) will be converted into the right to
receive 0.4125 of a share of New US Airways Group common
stock, together with the right, if any, to receive cash in lieu
of fractional shares of New US Airways Group common stock.
The exchange ratios above reflect the current Class A
merger consideration and Class B merger consideration as
adjusted pursuant to the merger agreement to reflect any
increase above $500 million of the pre-investment valuation
of US Airways Group.*
Cancellation of Other America West Holdings Common Stock.
At the effective time of the merger, shares of America West
Holdings common stock owned by US Airways Group, America
West Holdings or any of their respective subsidiaries, except
for shares that are beneficially owned by third parties, will be
cancelled and retired without payment of any consideration
therefor and will cease to exist.
Conversion of Barbell Acquisition Corp. Stock.
At the
effective time of the merger, each share of common stock of
Barbell Acquisition Corp. issued and outstanding immediately
prior to the effective time will be converted into one share of
common stock, par value $0.01 per share, of America West
Holdings.
* As a result of the new equity investment in New
US Airways Group by certain investors advised by Wellington
Management Company, LLP at a per share price of $16.50, as
opposed to the $15.00 per share price paid by the other new
equity investors, the merger agreement will be amended in
accordance with its terms to adjust the exchange ratios for
America West Holdings Class A and Class B common stock
to 0.5362 and 0.4125, respectively. In advance of this
amendment, we use these exchange ratios throughout this
prospectus.
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Representations, Warranties and Covenants
The merger agreement contains customary and substantially
reciprocal representations and warranties made by America West
Holdings to US Airways Group and Barbell Acquisition Corp.
and by US Airways Group and Barbell Acquisition Corp. to
America West Holdings.
The merger agreement contains customary covenants, including,
among others, covenants regarding the bankruptcy court
proceedings, and solicitation of alternative proposals.
In addition, America West Holdings and US Airways Group
agreed that if US Airways Group enters into any
reorganization, sale, merger, consolidation, joint venture,
recapitalization, stand-alone plan, sale of assets or equity
interests, or other combination or disposition or similar
transaction involving US Airways Group as part of the plan
of reorganization with respect to which the pre-money equity
valuation of US Airways Group exceeds $500 million,
the parties will amend the merger agreement to adjust the
applicable exchange ratios appropriately such that 40% of the
excess of the pre-investment equity valuation of US Airways
Group pursuant to such transaction over $500 million will,
in the aggregate, be allocated to the aggregate merger
consideration paid to holders of America West Holdings
Class A common stock, the aggregate merger consideration
paid to holders of America West Holdings Class B common
stock and the value of the equity participation, if any. The
equity participation, which will be delivered to such person or
persons as America West Holdings may designate in its sole
discretion, will be equal to the shares of New US Airways
Group common stock representing 28% of the 40% of the excess of
the pre-investment equity valuation of New US Airways Group
pursuant to a transaction described in the preceding sentence
over $500 million. The remaining 60% will be allocated to
certain US Airways Group creditors. Because the Wellington
investment is at a price of $16.50 per share, as opposed to
the $15.00 per share price paid by the other new equity
investors, the merger agreement will be amended in accordance
with its terms to adjust the exchange ratios for the America
West Holdings Class A and Class B common stock to
0.5362 and 0.4125, respectively.
Conditions to the Merger
Conditions to Each Party's Obligations to Effect the
Merger.
The respective obligations of each of US Airways
Group, Barbell Acquisition Corp. and America West Holdings to
complete the merger are conditioned upon the satisfaction or
waiver prior to the effective time of the merger of each of the
following conditions:
•
the merger agreement must have been duly adopted by holders of a
    majority of the outstanding shares of America West Holdings
    common stock entitled to vote on the matter in accordance with
    applicable law and America West Holdings' certificate of
    incorporation and bylaws;
•
the waiting period applicable to the completion of the merger
    under the HSR Act must have expired or been earlier terminated;
•
all approvals and authorizations required to be obtained from
    the ATSB, DOT and FAA for the completion of the merger must have
    been obtained;
•
all other governmental consents required to be obtained from any
    governmental entities for the completion of the merger must have
    been obtained, subject to certain exceptions;
•
all other governmental consents the failure of which to make or
    obtain would, individually or in the aggregate, provide a
    reasonable basis to conclude that America West Holdings or its
    directors or officers would be subject to the risk of criminal
    liability, must have been made or obtained;
•
no governmental entity of competent jurisdiction must have
    enacted, issued, promulgated, enforced or entered any order or
    law that is in effect and restrains, enjoins, makes illegal or
    otherwise prohibits completion of the merger or the other
    transactions contemplated by the merger agreement, except for
    orders of governmental entities outside the United States as
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would not, individually or in the aggregate, reasonably be
    expected to have a specified material adverse effect and which
    do not provide a reasonable basis to conclude that America West
    Holdings, US Airways Group or their respective directors or
    officers would be subject to the risk of criminal liability;
•
the registration statement filed with the SEC to register the
    shares of New US Airways Group common stock to be issued in
    connection with the merger must have been declared effective by
    the SEC under the Securities Act and no stop order suspending
    its effectiveness will have been issued by the SEC and no
    proceedings for that purpose will have been initiated or
    threatened by the SEC;
•
the debtors' plan of reorganization, in form and substance
    reasonably acceptable to each of US Airways Group and
    America West Holdings, must have been confirmed by the
    bankruptcy court pursuant to a confirmation order in form and
    substance reasonably acceptable to each of US Airways Group
    and America West Holdings, and that confirmation order must have
    become a final order;
•
in connection with the emergence of US Airways Group from
    bankruptcy and the completion of the plan of reorganization,
    US Airways Group must have received from the equity
    investors on or before the effective time of the merger, cash
    equity investments of not less than $375 million on a
    pre-investment value of not less than $500 million, with
    those equity investments to be made substantially on the basis
    set forth in their financing commitments;
•
all agreements and bankruptcy court orders entered into,
    modified or otherwise effected pursuant to or in connection with
    the merger agreement or the plan of reorganization must be in
    form and substance reasonably acceptable to each of
    US Airways Group and America West Holdings; and
•
the shares of New US Airways Group common stock to be
    issued in the merger must have been authorized for listing or
    quotation, as applicable, on the NYSE or Nasdaq Stock Market
    upon official notice of issuance.
Conditions to Obligations of US Airways Group and
Barbell Acquisition Corp.
The obligations of US Airways
Group and Barbell Acquisition Corp. to effect the merger are
subject to the satisfaction or waiver by US Airways Group
at or prior to the effective time of the merger of the following
conditions:
•
each of the representations and warranties made by America West
    Holdings in the merger agreement must be true and correct in all
    respects as of the date of the merger agreement and as of the
    closing date as though made on and as of the closing date
    (except to the extent any such representation and warranty
    expressly speaks as of an earlier date, in which case the
    representation and warranty will be true and correct as of such
    earlier date) except where the failure of that representation
    and warranty to be true and correct would not, individually or
    in the aggregate, reasonably be expected to have a specified
    material adverse effect on America West Holdings; and
    US Airways Group must have received a certificate as
    to the foregoing from the chief executive officer or chief
    financial officer of America West Holdings;
•
America West Holdings must have performed in all material
    respects all obligations required to be performed by it under
    the merger agreement at or prior to the closing date, and
    US Airways Group must have received a certificate to
    that effect from the chief executive officer or chief financial
    officer of America West Holdings;
•
no governmental entity of competent jurisdiction must have
    instituted (or if instituted, must have withdrawn) any suit,
    action or proceeding seeking any order which would, in the
    reasonable judgment of US Airways Group, individually or in
    the aggregate, be reasonably likely to result in the failure of
    the condition described in the sixth bullet point under
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"Conditions to the Merger — Conditions to Each
    Party's Obligation to Effect the Merger" above;
•
America West Holdings must have obtained the consent or approval
    of each person whose consent or approval will be required under
    any material contract to which America West Holdings or any of
    its subsidiaries is a party in connection with the transactions
    contemplated by the merger agreement, except where the failure
    to obtain that consent or approval, individually or in the
    aggregate, would not reasonably be expected to result in a
    specified material adverse effect on America West
    Holdings; and
•
US Airways Group must have received the opinion of
    Arnold & Porter LLP, counsel to US Airways Group,
    in form and substance reasonably satisfactory to US Airways
    Group, dated the closing date of the merger, substantially to
    the effect that the merger will be treated for federal income
    tax purposes as a reorganization within the meaning of
    Section 368(a) of the Internal Revenue Code.
Conditions to Obligations of America West Holdings.
The
obligation of America West Holdings to effect the merger is also
subject to the satisfaction or waiver by America West Holdings
at or prior to the effective time of the merger of the following
conditions:
•
each of the representations and warranties made by
    US Airways Group and Barbell Acquisition Corp. in the
    merger agreement must be true and correct in all respects as of
    the date of the merger agreement and as of the closing date as
    though made on and as of the closing date (except to the extent
    any such representation and warranty expressly speaks as of an
    earlier date, in which case such representation and warranty
    will be true and correct as of that earlier date) except where
    the failure of the representations and warranties to be true and
    correct would not, individually or in the aggregate, reasonably
    be expected to have a specified material adverse effect on
    US Airways Group; and America West Holdings must have
    received a certificate as to the foregoing from the chief
    executive officer or chief financial officer of US Airways
    Group;
•
each of US Airways Group and Barbell Acquisition Corp. must
    have performed in all material respects all obligations required
    to be performed by it under the merger agreement at or prior to
    the closing date, and America West Holdings must have received a
    certificate to that effect from the chief executive officer or
    chief financial officer of US Airways Group on behalf of
    US Airways Group and Barbell Acquisition Corp.;
•
no governmental entity of competent jurisdiction must have
    instituted (or if instituted, must have withdrawn) any suit,
    action or proceeding seeking any order which would, in the
    reasonable judgment of America West Holdings, individually or in
    the aggregate, be reasonably likely to result in the failure of
    the condition described in the sixth bullet point under
    "Conditions to the Merger — Conditions to Each
    Party's Obligation to Effect the Merger" above;
•
US Airways Group must have obtained the consent or approval
    of each person whose consent or approval will be required under
    any material contract to which US Airways Group or any of
    its subsidiaries is a party in connection with the transactions
    contemplated by the merger agreement, except where the failure
    to obtain that consent or approval, individually or in the
    aggregate, would not reasonably be expected to result in a
    specified material adverse effect on US Airways Group;
•
America West Holdings must have received the opinion of Skadden,
    Arps, Slate, Meagher & Flom LLP, counsel to America
    West Holdings, in form and substance reasonably satisfactory to
    America West Holdings, dated the closing date of the merger,
    substantially to the effect that the merger will be treated for
    federal income tax purposes as a reorganization within the
    meaning of Section 368(a) of the Internal Revenue Code; and
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•
immediately prior to the effective time of the merger, there
    must not exist more than $10 million of administrative
    claims, including contingent liabilities, arising out of or
    related to any US Airways Group compensation and benefit
    plan that is subject to Section 302 of ERISA or
    Section 412 of the Internal Revenue Code, other than any
    claims relating to amounts incurred in the ordinary course of
    US Airways Group's business, including, but not
    limited to, plan contributions or any US Airways Group
    compensation and benefit plan not listed in the US Airways
    Group disclosure letter.
Termination of the Merger Agreement
Termination by America West Holdings or US Airways
Group.
The merger agreement may be terminated and the
merger may be abandoned at any time prior to the effective time
of the merger by action taken by the board of directors of the
terminating party or parties:
•
by mutual written consent of America West Holdings and
    US Airways Group, whether before or after the adoption of
    the merger agreement by America West Holdings' stockholders
    or the entry of the order confirming the debtors' plan of
    reorganization; or
•
by either America West Holdings or US Airways Group if:
•
the merger is not completed by October 31, 2005, whether
    that date is before or after the adoption of the merger
    agreement by America West Holdings' stockholders or the
    entry of the order confirming the plan of reorganization, unless
    certain closing conditions have not been satisfied by
    October 31, 2005, in which case the termination date may be
    extended from time to time by either US Airways Group
    or America West Holdings one or more times to a date not beyond
    December 31, 2005;
•
the adoption of the merger agreement by America West Holdings
    stockholders is not obtained at the stockholders meeting or at
    any adjournment or postponement of that meeting;
•
any order of a governmental entity permanently restraining,
    enjoining or otherwise prohibiting the completion of the merger
    becomes final and non-appealable, except for any orders the
    existence of which would not result in the failure of the
    closing condition described in the sixth bullet point under
    "Conditions to the Merger — Conditions to Each
    Party's Obligations to Effect the Merger" above
    (whether before or after the adoption of the merger agreement by
    America West Holdings' stockholders);
•
the merger and the transactions contemplated under the merger
    agreement are not determined by the bankruptcy court to be the
    approved proposal within 45 days after the entry of the
    order approving the bidding procedures by the bankruptcy court,
    in which case each of US Airways Group and America West
    Holdings has five business days within which to terminate the
    merger agreement. If the merger agreement is not terminated
    within those five days, the time period with respect to the
    termination trigger is automatically extended for ten business
    days. After those ten business days, if the merger and the
    transactions contemplated under the merger agreement have not
    been determined by the bankruptcy court to be the approved
    proposal, then the merger agreement terminates automatically.
The foregoing rights to terminate the merger agreement will not
be available to any party that has breached its obligations
under the merger agreement in any manner that will have
proximately contributed to the occurrence of the failure of a
condition to the completion of the merger.
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Termination by America West Holdings.
The merger
agreement may be terminated and the merger may be abandoned at
any time prior to the effective time by America West Holdings
if, whether before or after the adoption of the merger agreement
by America West Holdings' stockholders:
•
without the consent of America West Holdings,
    US Airways Group enters into or seeks authority from
    the bankruptcy court to enter into (or does not object to
    efforts by any other party to have US Airways Group enter
    into) a binding written agreement concerning any qualified
    competing plan proposal;
•
the America West Holdings board of directors authorizes America
    West Holdings, subject to complying with the terms of the merger
    agreement, to enter into a binding written agreement concerning
    a transaction that constitutes a superior proposal;
•
there is a breach of any representation, warranty, covenant or
    agreement made by US Airways Group or Barbell
    Acquisition Corp. in the merger agreement, or any representation
    or warranty becomes untrue or incorrect after the execution of
    the merger agreement, such that closing conditions to America
    West Holdings' obligation to effect the merger would not be
    satisfied and such breach or failure to be true and correct is
    not curable within 60 days of America West Holdings
    providing notice of the breach or failure to US Airways
    Group;
•
US Airways Group knowingly and materially and not
    inadvertently breaches any of its obligations under the merger
    agreement relating to acquisition proposals; or
•
US Airways Group withdraws the plan of reorganization after
    it is filed with the bankruptcy court, US Airways Group
    ceases to seek actively to have the plan confirmed by the
    bankruptcy court (or does not actively contest efforts by
    another person to cause the plan not to be so confirmed) or
    20 days after the bankruptcy court enters an order denying
    confirmation of the plan.
Termination by US Airways Group.
The merger
agreement may be terminated and the merger may be abandoned at
any time prior to the effective time by
US Airways Group if, whether before or after the
adoption of the merger agreement by America West Holdings'
stockholders:
•
the board of directors of America West Holdings withdraws,
    modifies or qualifies, or agrees to withdraw, modify or qualify,
    in fact or in substance, its adoption of the merger agreement or
    its recommendation of the merger in a manner adverse to
    US Airways Group;
•
America West Holdings enters into a binding written agreement
    concerning a transaction that constitutes a superior proposal;
•
US Airways Group, by duly authorized action, is authorized
    to enter into a binding written agreement concerning a
    transaction that constitutes an approved proposal;
•
there is a breach of any representation, warranty, covenant or
    agreement made by America West Holdings, or any such
    representation or warranty becomes untrue or incorrect after the
    execution of the merger agreement, such that closing conditions
    to US Airways Group's obligation to effect the merger
    would not be satisfied and such breach or failure to be true or
    correct is not curable within 60 days of US Airways
    Group providing notice of the breach or failure to America West
    Holdings;
•
by the later of 120 days after the date of the merger
    agreement or 60 days after effectiveness of the
    registration statement registering the shares of New US Airways
    Group common stock to be issued in connection with the merger,
    America West Holdings' stockholders meeting is not held, or
    the vote of America West Holdings' stockholders is not
    taken, unless America West Holdings has used its reasonable best
    efforts to convene the stockholders meeting and hold that vote
    by the later of those dates; or
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•
America West Holdings knowingly and materially and not
    inadvertently breaches its obligations under the merger
    agreement relating to acquisition proposals.
Effect of Termination
If the merger agreement is terminated and the merger is
abandoned as described above, the merger agreement will be void
and of no effect, with no liability on the part of any party to
the merger agreement, except that certain designated provisions
of the merger agreement, including the payment of fees and
expenses, the confidential treatment of information and, if
applicable, the termination fee described below, will survive
the termination. Termination of the merger agreement does not
relieve or release either party from liabilities or damages
arising out of the party's willful breach of any provision
of the merger agreement.
Amendment and Waiver
At any time prior to the effective time of the merger, the
parties to the merger agreement may modify or amend the merger
agreement by written agreement executed and delivered by duly
authorized officers of the respective parties. The conditions to
each of the parties' obligations to complete the merger may
be waived by that party in whole or in part to the extent
permitted by applicable laws.
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THE PLAN OF REORGANIZATION
Federal bankruptcy law requires the debtors, to complete a
series of tasks in order to emerge from bankruptcy and complete
the merger. The major tasks include filing with the court a
disclosure statement and a plan of reorganization that contain
detailed historical, financial and operational information about
the debtors and also explain how the business will be structured
following the bankruptcy and how claims will be treated. The
debtors will ask the bankruptcy court for approval of the
disclosure statement and if it is approved, the plan of
reorganization will be submitted to certain creditors for a
vote. The plan of reorganization will then be submitted to the
bankruptcy court for confirmation. Assuming the bankruptcy court
confirms the plan of reorganization, the debtors will have
permission and authority to enter into all of the transactions
necessary to emerge from bankruptcy, including the merger
agreement. The date that all of these transactions are finalized
is the effective date of both the plan of reorganization and the
merger.
On [month, day], 2005, the debtors submitted to the bankruptcy
court their proposed disclosure statement. On [month, day] 2005,
the bankruptcy court issued an order approving the disclosure
statement and ordered that the disclosure statement and proposed
plan of reorganization be submitted to certain creditors
eligible to vote on the plan of reorganization. On [month, day],
2005, the debtors mailed copies of the plan of reorganization
and disclosure statement to creditors and set [month, day], 2005
as the voting deadline for those creditors who could cast votes
for or against the plan of reorganization. Assuming that the
plan of reorganization is confirmed by the bankruptcy court and
that the other conditions specified in the plan of
reorganization are satisfied or waived, the plan of
reorganization will become effective. US Airways Group
currently anticipates that the plan of reorganization will
become effective on or around [month, day], 2005.
Under the proposed plan of reorganization developed by the
debtors, the following events will occur on the effective date
of the plan of reorganization and the merger (percentages below
are based on certain assumptions contained in the section
entitled "Capitalization" and reflect the impact of
certain securities that are dilutive at the per share purchase
price paid by the equity investors):
•
America West Holdings will merge with Barbell Acquisition Corp.,
    which is a wholly owned subsidiary of
    US Airways Group, and will as a result itself become a
    wholly owned subsidiary of New US Airways Group;
•
The new equity investors ACE Aviation Holdings Inc., or ACE; Par
    Investment Partners, L.P., or Par; Peninsula Investment
    Partners, L.P., or Peninsula; the group of investors under the
    management of Wellington Management Company, LLP, or Wellington;
    and Eastshore Aviation, LLC, or Eastshore; will invest
    $500 million in consideration for the issuance of
    approximately 32.5 million shares of New
    US Airways Group common stock, representing approximately
    49% of New US Airways Group common stock outstanding
    as of the completion of the merger, as more fully described in
    the section entitled "The New Equity Investments";
•
The general unsecured creditors, including the Pension Benefit
    Guaranty Corporation, or the PBGC, and the Air Line Pilots
    Association, as their claims are allowed, will receive
    approximately 8.2 million shares of New
    US Airways Group common stock, representing approximately
    12% of New US Airways Group common stock outstanding
    as of the completion of the merger;
•
Under certain agreements among General Electric and certain
    affiliates, or GE, and US Airways Group, GE has agreed in
    consideration for the early return of 51 aircraft and six
    engines, the assumption of certain modified leases and the
    issuance of convertible notes in the amount of
    $125 million, (1) in part to retire an existing bridge
    loan facility, (2) to complete a purchase by GE of 21
    aircraft and 28 engines with a simultaneous lease back of the
    equipment to US Airways, Inc. at market rates, (3) to
    allow US Airways Group to draw additional amounts
    under an existing credit facility, which will result in a total
    principal outstanding balance thereunder of approximately
    $28 million, (4) to restructure lease obligations of
    US Airways, Inc. relating to 59 aircraft to market rates,
    (5) to provide financing for current
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and growth aircraft, (6) to grant concessions regarding
    return condition obligations with respect to the return of
    aircraft and engines, and (7) to waive penalties for the
    removal of engines currently under GE engine agreements;
•
In consideration of (i) the assumption by US Airways Group
    of certain purchase agreements between US Airways Group and
    AVSA, S.A.R.L., an affiliate of Airbus Industrie G.I.E.,
    referred to as Airbus, and (ii) the entry into certain new
    agreements between US Airways Group, America West Holdings
    and Airbus which provide for (1) the purchase by New
    US Airways Group and America West Holdings of up to 20 new
    A350 airplanes from Airbus, (2) the ability to convert
    orders for up to ten of the A350 aircraft to orders for A330
    aircraft, (3) the ability to cancel up to ten of the A330
    aircraft previously ordered upon the payment of certain
    predelivery payments for A350 aircraft, and (4) changes in
    the delivery schedule for existing orders of narrow-body
    aircraft, Airbus will provide New US Airways Group a
    $250 million line of credit to be used by New US Airways
    Group, of which $213 million can be used for general
    corporate purposes, together with additional backstop financing
    for the purchase of the A350 aircraft.
•
Affiliates of ACE will enter into a series of agreements with
    New US Airways Group, including maintenance and airport
    handling agreements; and
•
New US Airways Group's board of directors will be
    reconstituted to include 13 members as described in the section
    entitled "The Merger Agreement — Post-Merger
    America West Holdings Governing Documents, Officers and
    Directors; New US Airways Group Governing Documents and
    Directors."
In addition, the proposed plan of reorganization will provide
for the satisfaction of certain secured and unsecured
prepetition claims against the debtors. These include claims
related to the debtors' assumption or rejection of various
contracts and unexpired leases, the assumption of debtors'
existing collective bargaining agreements with their unions and
the termination of certain employee benefit plans with employees
and retirees, and other matters. The ultimate resolution of
certain of the claims asserted against the debtors in the
Chapter 11 cases will be subject to negotiations, elections
and bankruptcy court procedures that will occur after the date
of this prospectus and after the effective date, although
resolution of these claims will not affect the number of shares
of New US Airways Group common stock available to the general
unsecured creditors. While a significant amount of the
debtors' liabilities will be extinguished as a result of
the discharge granted upon confirmation of the plan of
reorganization, not all of the debtors' liabilities will be
subject to discharge. The types of obligations that the debtors
will remain responsible for include those relating to their
secured financings, aircraft financings, certain environmental
liabilities and the continuing obligations arising under
contracts and leases assumed by the debtors.
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THE NEW EQUITY INVESTMENTS
This section of the prospectus describes material aspects of
the investment agreements. This summary may not contain all of
the information that is important to you. You should carefully
read this entire prospectus, including the full text of the
investment agreements, which are filed as exhibits to the
registration statement of which this prospectus is a part, for a
more complete understanding of the investments.
Summary of the Investments
Various equity investors have agreed, pursuant to five separate
investment agreements entered into with US Airways Group
and America West Holdings, to provide $500 million of new
cash investments to New US Airways Group in exchange for
shares of New US Airways Group common stock. The new
investors, and the level of equity investment they are making,
are:
•
ACE Aviation Holdings Inc. ($75 million of equity
    investment at a per share purchase price of $15.00), a Canadian
    holding company that owns Air Canada, Canada's largest
    airline with over $7.5 billion in annual revenues;
•
Eastshore Aviation, LLC ($125 million of equity investment
    at a per share purchase price of $15.00), which is owned by Air
    Wisconsin Airlines Corporation and its stockholders and provides
    regional jet service under a US Airways Express code share
    arrangement;
•
Par Investment Partners, L.P. ($100,000,005 of equity investment
    at a per share purchase price of $15.00), a Boston-based
    investment firm;
•
Peninsula Investment Partners, L.P. ($49,999,995 of equity
    investment at a per share purchase price of $15.00), a
    Virginia-based investment firm; and
•
a group of investors under the management of Wellington
    Management Company, LLP, a Boston-based investment firm
    ($149,999,850 of equity investment at a per share purchase price
    of $16.50).
We refer to these investors as the equity investors.
Closing of the Investments
Subject to satisfaction or waiver of the closing conditions
contained in each investment agreement, the closing of each
investment will occur on the first business day following the
effective time of the merger agreement, or on such other date as
America West Holdings, US Airways Group and each
equity investor may agree. At the closing, each equity investor
will receive shares of New US Airways Group common stock in
exchange for their respective equity investment. The equity
investors will receive the following amounts of shares of New
US Airways Group common stock:
•
ACE Aviation Holdings Inc. will receive 5,000,000 shares,
•
Eastshore Aviation, LLC will receive 8,333,333 shares,
•
Par Investment Partners, L.P. will receive
    6,768,485 shares, including the shares received pursuant to
    participation agreements, as more fully described below,
•
Peninsula Investment Partners, L.P. will receive
    3,333,333 shares, and
•
the group of investors under the management of Wellington
    Management Company, LLP will receive a total of
    9,090,900 shares.
Commercial Agreements with ACE Aviation Holdings Inc.
In connection with ACE Aviation Holdings Inc.'s investment
in New US Airways Group, US Airways Group, America
West Holdings and ACE Aviation Holdings Inc. or subsidiaries
thereof as specified below entered into four separate memoranda
of understanding relating to definitive commercial agreements to
be
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entered into on market terms. The parties agreed to work in good
faith to negotiate and document the commercial agreements. These
memoranda of understanding are as follows:
•
A memorandum of understanding among Air Canada Technical
    Services, or ACTS, America West Airlines, Inc. and
    US Airways, Inc. in anticipation of definitive agreements
    under which ACTS will, consistent with prior existing
    constraints, have the opportunity to provide, for a term of five
    years, all aircraft engine, aircraft component, and aircraft
    heavy maintenance for America West Airlines, Inc. and
    US Airways, Inc. to the extent that it can do so on a
    competitive basis versus other providers taking into
    consideration price, terms and conditions. As part of these
    arrangements, ACTS will have right of first offer with respect
    to maintenance-related facilities or equipment to be sold by
    America West Airlines, Inc. and US Airways, Inc. The
    parties will also enter into an agreement under which ACTS will
    subcontract with America West Airlines, Inc. and
    US Airways, Inc. to provide on-call aircraft maintenance
    services to Air Canada in the United States and America West
    Airlines, Inc. and US Airways, Inc. will contract with ACTS
    to provide each of them with on-call aircraft maintenance
    services in Canada;
•
A memorandum of understanding among ACE Aviation Holdings Inc.,
    America West Holdings and US Airways Group under which, in
    the event that the merged entity plans to increase the number of
    70 or 90 seat regional jet U.S. — Canada
    trans-border flights operated as US Airways Express or
    America West Express, then Air Canada Jazz will have the right,
    for a period of five years from the date of the closing, to
    provide those flights using its 70 or 90 seat jet aircraft
    provided that Jazz is competitive on price, terms and conditions
    and subject to entry into a definitive agreement thereon
    comparable to those in effect with carriers operating as
    US Airways Express or America West Express as well as
    obtaining necessary regulatory and labor approvals;
•
A memorandum of understanding among Air Canada, America West
    Airlines, Inc., and US Airways, Inc. in anticipation of and
    subject to entry into definitive agreements for five year terms,
    but not beyond five years from the date of the closing, under
    which each of America West Airlines, Inc. and US Airways,
    Inc. may provide certain airport facilities and ground handling
    services in the United States to Air Canada and under which Air
    Canada may provide certain ground handling services in Canada to
    America West Airlines, Inc. and US Airways, Inc.; and
•
A memorandum of understanding among Air Canada, America West
    Airlines, Inc., and US Airways, Inc. in anticipation of a
    definitive agreement under which each will operate flights under
    the others' codes, commonly known as a "code share
    agreement."
Execution and delivery of definitive commercial agreements based
on the terms described above is a condition to each party's
obligations under the investment agreement with ACE.
Participation Agreements with Par Investment Partners, L.P.
and Peninsula Investment Partners, L.P.
As a condition to their willingness to enter into investment
agreements, America West Holdings entered into participation
agreements with each of Par Investment Partners, L.P. and
Peninsula Investment Partners, L.P. in connection with the
execution and delivery of their respective investment
agreements. The participation agreements provide that, unless
the merger agreement is terminated by US Airways Group or
America West Holdings because America West Holdings enters into
a superior alternative business combination transaction, neither
Par Investment Partners, L.P. nor Peninsula Investment Partners,
L.P. will make, directly or indirectly, any debt or equity
investment in US Airways Group or provide, directly or
indirectly, equity or debt financing; in either case for the
purposes of funding a reorganization, business combination
transaction or stand-alone plan of US Airways Group with
respect to which America West Holdings is not involved. The
participation agreements also provide that, subject to certain
limitations, in the event America West Holdings is a party to a
reorganization, business combination or similar transaction
involving US Airways Group as part of a plan of
reorganization with respect to which the pre-investment
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equity value of US Airways Group, taking into account
the merger, exceeds $500 million, America West Holdings
will cause that alternative transaction to provide for Par
Investment Partners, L.P. and, Peninsula Investment Partners,
L.P. to be issued New US Airways Group common stock in
the aggregate equal in value to 11.2% of the amount by which the
pre-investment equity value of US Airways Group in the
alternative transaction exceeds $500 million.
Transaction Documents
In this summary we refer to the transaction documents, which is
meant to include each investment agreement, the merger
agreement, the plan of reorganization, the stockholders
agreement, the order of the bankruptcy court confirming the plan
of reorganization and the order of the bankruptcy court
approving the bidding procedures as well as the commercial
agreements with respect to ACE Aviation Holdings Inc.
Representations, Warranties and Covenants
The investment agreements contain customary representations and
warranties made by US Airways Group and America West
Holdings to the equity investors and by the equity investors to
US Airways Group and America West Holdings. In
addition, each of the Investment Agreements contains customary
covenants, including, among others, covenants, limiting the
issuance of equity securities. US Airways Group has agreed
not to offer, issue or sell any New US Airways Group common
stock other than New US Airways Group common stock:
•
issued to the equity investors pursuant to the investment
    agreements;
•
issued to other persons pursuant to other investment agreements
    on no more favorable terms than those agreed to with the equity
    investors other than the group of investors under the management
    of Wellington Management Company, LLP (up to a maximum aggregate
    amount of new equity of $500 million);
•
issued to America West Holdings' equity holders or, at the
    request of America West Holdings, to Par Investment Partners,
    L.P. and Peninsula Investment Partners, L.P., pursuant to the
    merger agreement;
•
issued to the equity holders and certain creditors of
    US Airways Group as contemplated by the plan of
    reorganization;
•
issued in connection with the rights offering to certain
    existing US Airways Group unsecured creditors and to
    America West Holdings stockholders at a price per share no less
    than the price per share paid by the equity investors other than
    the group of investors under the management of Wellington
    Management Company, LLP which, when combined with the equity
    investments received by US Airways Group, may not exceed
    $650 million; and
•
issued by New US Airways Group at a price per share no less
    than that paid by the equity investors other than the group of
    investors under the management of Wellington Management Company,
    LLP for proceeds in excess of $650 million provided that
    the proceeds are used solely to redeem or repurchase equity
    securities from New US Airways Group stakeholders at a
    price that values the shares redeemed or repurchased at a price
    per share no more than the price per share paid by the equity
    investors other than the group of investors under the management
    of Wellington Management Company, LLP and provided that the
    aggregate value of the New US Airways Group common stock
    issued does not exceed $200 million and that the equity
    investors have a right to purchase, at their option, a pro rata
    portion of New US Airways Group common stock issued
    relative to their respective equity investment.
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Conditions to the Investment Agreements
Conditions to Obligations of the Equity Investors.
The
obligations of the equity investors to make the equity
investment are subject to the satisfaction or waiver of each of
the following conditions:
•
definitive transaction documents in form and substance
    reasonably satisfactory to the equity investors, must have been
    prepared, negotiated and, to the extent applicable, duly
    executed by the parties, and approval by the bankruptcy court of
    those documents pursuant to a final order, to the extent
    necessary, must have been obtained;
•
all of these transaction documents must have been executed by
    the parties to those agreements (other than the equity investors
    and their affiliates) on or prior to the effective date of the
    investment, must not have been modified, amended, waived or
    supplemented without the consent of the equity investors, must
    be in effect and the completion of the transactions contemplated
    by those agreements must not have been stayed, and all
    conditions to the obligations of the parties under such
    transaction documents must have been satisfied or waived (with
    limited exceptions with respect to ACE Aviation Holdings Inc.
    and the commercial agreements);
•
all corporate and other proceedings to be taken by
    US Airways Group, America West Holdings or any of their
    respective subsidiaries in connection with the transaction
    documents and the transactions contemplated by those documents
    to be completed at the closing of the investment and documents
    incident thereto must have been completed in form and substance
    reasonably satisfactory to the equity investors, and the equity
    investors must have received all such counterpart originals or
    certified or other copies of those transaction documents and
    such other documents as it may reasonably request;
•
US Airways Group and the equity investors must have entered
    into the stockholders agreement;
•
each of the representations and warranties made by
    US Airways Group and America West Holdings in the
    investment agreements must be true and correct in all respects
    as of the date of the investment agreement and as of the closing
    date as though made on and as of the closing date (except to the
    extent any such representation and warranty expressly speaks as
    of an earlier date, in which case the representation and
    warranty must be true and correct as of that earlier date)
    except where the failure of those representations and warranties
    to be true and correct would not, individually or in the
    aggregate, reasonably be expected to have a specified material
    adverse effect on US Airways Group or America West
    Holdings, as applicable; US Airways Group and America West
    Holdings must have performed in all material respects all
    obligations and complied in all material respects with all
    agreements, undertakings, covenants and conditions required to
    be performed by them under the investment agreements at or prior
    to the closing; and the equity investors must have received a
    certificate as to the foregoing from the chief executive officer
    or chief financial officer of each of US Airways Group and
    America West Holdings;
•
no law must have been promulgated, enacted or entered that
    restrains, enjoins, prevents, materially delays, prohibits or
    otherwise makes illegal the performance of any of the
    transaction documents;
•
no preliminary or permanent injunction or other order by any
    governmental authority that restrains, enjoins, prevents,
    delays, prohibits or otherwise makes illegal the performance of
    any of the transaction documents must have been issued and
    remain in effect, except for injunctions that, if obtained,
    could not, individually or in the aggregate, reasonably be
    expected to have a material adverse effect on the ability of the
    equity investors, US Airways Group or America West Holdings
    or their respective affiliates to complete the transactions;
•
no governmental authority must have instituted any legal
    proceeding that seeks to restrain, enjoin, prevent, delay,
    prohibit or otherwise make illegal the performance of any of the
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transaction documents, except for any legal proceedings which
    have a significant possibility of being brought to a conclusion
    which could not, individually or in the aggregate, reasonably be
    expected to have a material adverse effect on the ability of the
    equity investors, US Airways Group or America West
    Holdings or their respective affiliates to complete the
    transactions;
•
there is no pending or threatened investigation or litigation by
    any other person relating to the transactions which, if
    determined adversely to US Airways Group, America West
    Holdings or the equity investors, would materially impair or
    limit the rights and benefits of the equity investors under the
    transaction documents or the economic benefits to the equity
    investors of the transactions in the aggregate and which the
    equity investors reasonably believe, based on the advice of
    counsel, has a reasonable likelihood of success;
•
US Airways Group, the equity investors and America West
    Holdings must have received all material regulatory approvals
    and all other material approvals, permits, authorizations,
    exemptions, consents, licenses and agreements from other third
    parties that are necessary to permit the transactions to be
    completed or performed as contemplated by the transaction
    documents and to permit each of the equity investors and their
    affiliates and New US Airways Group and its
    subsidiaries (including America West Holdings and its
    subsidiaries) to carry on its business after those transactions
    in a manner not materially inconsistent with the manner in which
    it was carried on prior to the effective date, which approvals
    must not contain any condition or restriction that materially
    impairs the ability of the equity investors and their affiliates
    or the ability of New US Airways Group, including America
    West Holdings and its subsidiaries, to carry on its business;
•
all waiting periods imposed by applicable law, including,
    without limitation, under the HSR Act, in connection with the
    transactions must have expired or been terminated without any
    action having been taken by any court of competent jurisdiction
    restraining, preventing or imposing materially adverse
    conditions upon those transactions or upon the conduct of the
    business of the equity investors, US Airways Group, America
    West Holdings or their respective affiliates;
•
the plan of reorganization must be in a form reasonably
    acceptable to the equity investors, that plan of reorganization
    must have been confirmed by the bankruptcy court, and the plan
    of reorganization must not conflict with any material term of
    the investment agreements, the stockholders agreement or the
    other transaction documents, must be substantially consistent in
    all material respects with the terms of the financial plan and
    must reflect a corporate and capital structure, including
    liabilities, of New US Airways Group consistent with the
    financial plan; all conditions to the effectiveness of the plan
    of reorganization, other than the completion of the investment
    agreements, must have been satisfied, and an order confirming
    the plan of reorganization in a form reasonably acceptable to
    the equity investors must have been entered and become a final
    order no later than December 31, 2005;
•
US Airways Group must have received on the effective date
    cash equity investments aggregating not less than
    $375 million and not more than $500 million pursuant
    to the investment agreements and cash equity investments from
    other persons as permitted by the investment agreements, all on
    terms no more favorable than the terms of the investment
    agreements and the stockholders agreement are to the equity
    investors (other than the group of investors under the
    management of Wellington Management Company, LLP), which with
    all other equity capital of US Airways Group, will be
    invested only in a single class of New US Airways Group
    common stock, with all of that stock having the same voting
    rights, and New US Airways Group must have no other class
    of capital stock authorized in its charter other than the New
    US Airways Group common stock;
•
New US Airways Group alone, and not any affiliate of New
    US Airways Group, must have issued equity securities in
    connection with the completion of the plan of reorganization;
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•
all material executory contracts and unexpired leases, the
    assumption, assignment, rejection or renegotiation of which is
    necessary for the successful implementation of the plan of
    reorganization and the operation of New US Airways
    Group's business as that business is contemplated in the
    financial plan to be conducted, must have been assumed,
    assigned, rejected or renegotiated, as applicable;
•
the merger must have become effective, or must become effective
    concurrently with the closing of the investments, and the merger
    must have been, or will concurrently with the closing of the
    investments be, completed in accordance with the terms of the
    merger agreement without amendment or waiver other than as
    permitted under the investment agreements;
•
Eastshore Aviation LLC must have converted the existing debt
    owed to it by US Airways Group into New
    US Airways Group common stock in an amount not less than
    $125 million;
•
neither US Airways Group's nor its subsidiaries'
    Chapter 11 bankruptcy case must have been converted to a
    case under Chapter 7 of the bankruptcy code and no trustee
    must have been appointed under any chapter of the bankruptcy
    code in respect of any such case;
•
the certificate of incorporation and bylaws of New
    US Airways Group must have been filed with and
    accepted by the Secretary of State of the State of Delaware and
    must have become effective, copies of which must have been
    delivered to the equity investors;
•
New US Airways Group must have executed and delivered to
    the equity investors the shares of New US Airways Group
    common stock pursuant to and in accordance with the investment
    agreements;
•
the composition of the board of directors of New
    US Airways Group must be as set forth in the merger
    agreement and, as contemplated by the stockholders agreement,
    the investor directors designated by the equity investors, if so
    designated, must have been elected or appointed to the board of
    directors of New US Airways Group for an initial term of
    three years; provided, however, that ACE Aviation Holdings Inc.,
    must not be entitled to designate an investor director if any
    person other than the other equity investors has invested more
    than $75 million in New US Airways Group (other than
    by virtue of the merger), in which case this condition will be
    automatically waived; provided further, however, that the group
    of investors under the management of Wellington Management
    Company, LLP will not be entitled to designate an investor
    director;
•
US Airways Group must have procured and maintained in full
    force and effect directors' and officers' liability
    insurance with respect to members of the board of directors of
    New US Airways Group, which insurance must be at least
    $100 million;
•
from the date of the investment agreements through the closing
    date, there must not have occurred any change, event,
    occurrence, condition or development that has or could
    reasonably be expected to have a material adverse effect on the
    financial condition, assets, liabilities, business or results of
    operations of US Airways Group or America West Holdings or
    that would prevent, materially delay or materially impair the
    ability of US Airways Group, America West Holdings or the
    equity investors to complete the transactions contemplated by
    the investment agreements;
•
US Airways Group's financial and operational
    performance from the period from March 31, 2005 to the
    closing date must not have deviated materially and adversely
    from the performance indicated in the financial plan;
•
US Airways Group's employee profit sharing plan must
    have been amended in accordance with the terms of the investment
    agreements; and
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•
the shares of New US Airways Group common stock to be
    issued to the equity investors under the investment agreements
    must have been authorized for listing or quotation, as
    applicable, on the NYSE or Nasdaq Stock Market upon official
    notice of issuance.
A further condition to the ACE Aviation Holdings Inc. investment
agreement provides that US Airways Group and America
West Holdings must have not less than $280 million per year
of maintenance, repair and overhaul services work immediately
available to be outsourced to ACE Aviation Holdings Inc. or its
affiliates as of the closing date in accordance with the term
sheet governing those services. A further condition to the
Eastshore Aviation, LLC investment agreement provides that an
amendment to a currently outstanding Jet Service Agreement, in
form and substance reasonably satisfactory to Eastshore
Aviation, LLC, providing for a guarantee of payment by
US Airways Group with respect to the obligations of its
primary subsidiary under the Jet Services Agreement (excluding
any consequential damages), if the subsidiary is in breach of
the agreement, must be duly executed and delivered by
US Airways Group and its subsidiary.
Conditions to Obligations of US Airways Group.
The
obligation of US Airways Group to issue and sell the
New US Airways Group common stock at the closing is subject
to the satisfaction or waiver of each of the following
conditions:
•
definitive transaction documents in form and substance
    reasonably satisfactory to US Airways Group must have
    been prepared, negotiated and, to the extent applicable, duly
    executed by the parties, and approval by the bankruptcy court of
    those documents, to the extent necessary, must have been
    obtained; all such transaction documents must not have been
    modified, must be in effect and the completion of the
    transactions contemplated thereby must not be stayed, and all
    conditions to the obligations of the parties under those
    transaction documents must have been satisfied or waived, with
    limited exceptions with respect to ACE Aviation Holdings Inc.
    and the commercial agreements;
•
all corporate and other proceedings to be taken by the equity
    investors or any of their respective subsidiaries in connection
    with the transaction documents and the transactions contemplated
    by those documents to be completed at the closing of the
    investment and documents incident thereto must have been
    completed in form and substance reasonably satisfactory to
    US Airways Group, and US Airways Group must have
    received all counterpart originals or certified or other copies
    of those transaction documents and such other documents as it
    may reasonably request;
•
each of the representations and warranties made by the equity
    investors in the investment agreements must be true and correct
    in all respects as of the date of the investment agreement and
    as of the closing date as though made on and as of the closing
    date (except to the extent any such representation and warranty
    expressly speaks as of an earlier date, in which case the
    representation and warranty must be true and correct as of that
    earlier date) except where the failure of those representations
    and warranties to be true and correct would not, individually or
    in the aggregate, reasonably be expected to have a material
    adverse effect on the ability of the equity investors or their
    affiliates to complete the transactions; the equity investors
    must have performed in all material respects all obligations and
    complied in all material respects with all agreements,
    undertakings, covenants and conditions required to be performed
    by them under the investment agreements at or prior to the
    closing; and US Airways Group and America West Holdings
    must have received a certificate as to the foregoing from the
    equity investors;
•
no law must have been promulgated, enacted or entered that
    restrains, enjoins, prevents, materially delays, prohibits or
    otherwise makes illegal the performance of any of the
    transaction documents;
•
no preliminary or permanent injunction or other order by any
    governmental authority that restrains, enjoins, prevents,
    delays, prohibits or otherwise makes illegal the performance of
    any of the transaction documents must have been issued and
    remain in effect, except for injunctions
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that, if obtained, could not, individually or in the aggregate,
    reasonably be expected to have a material adverse effect on the
    ability of the equity investors, US Airways Group or
    America West Holdings or their respective affiliates to complete
    the transactions;
•
no governmental authority must have instituted any legal
    proceeding that seeks to restrain, enjoin, prevent, delay,
    prohibit or otherwise make illegal the performance of any of the
    transaction documents, except for any legal proceedings which
    have a significant possibility of being brought to a conclusion
    which could not, individually or in the aggregate, reasonably be
    expected to have a material adverse effect on the ability of the
    equity investors, US Airways Group or America West
    Holdings or their respective affiliates to complete the
    transactions;
•
US Airways Group and America West Holdings must have
    received all material regulatory approvals and all other
    material approvals, permits, authorizations, exemptions,
    consents, licenses and agreements from other third parties that
    are necessary to permit the transactions to be completed or
    performed as contemplated by the transaction documents and to
    permit each of the equity investors and their affiliates and
    US Airways Group and its subsidiaries, including America
    West Holdings and its subsidiaries, to carry on its business
    after such transactions in a manner not materially inconsistent
    with the manner in which it was carried on prior to the
    effective date, which approvals must not contain any condition
    or restriction that materially impairs the ability of New
    US Airways Group to carry on its business;
•
all waiting periods imposed by applicable law, including,
    without limitation, under the HSR Act, in connection with the
    transactions must have expired or been terminated without any
    action having been taken by any court of competent jurisdiction
    restraining, preventing or imposing materially adverse
    conditions upon those transactions;
•
an order confirming the plan of reorganization, satisfactory in
    form and substance in all respects to US Airways Group,
    must have been entered by the bankruptcy court and, once
    entered, must not have been modified without US Airways
    Group's and America West Holdings' prior written
    consent in any manner materially adverse to US Airways
    Group, must be in effect and must not have been stayed;
•
the effective date of the plan of reorganization and the
    satisfaction or waiver of all conditions to the closing of the
    merger must have occurred not later than the closing; and
•
each of US Airways Group and America West Holdings must
    have received reasonably satisfactory assurances as it may
    request that Par Investment Partners, L.P. and Eastshore
    Aviation LLC are citizens of the United States.
Termination
The investment agreements contain customary termination
provisions, including in the event that the merger is not
completed by December 31, 2005.
The Stockholders Agreement
The investment agreements contemplate that, at the closing of
the merger, each new equity investor and US Airways Group
will enter into a stockholders agreement. The stockholders
agreement will provide that, subject to certain exceptions, each
equity investor will agree not to transfer any of the shares of
New US Airways Group common stock acquired pursuant to the
investment agreements until six months following the closing
under the investment agreements and that New US Airways
Group will provide certain customary registration rights to the
equity investors. The stockholders agreement will also provide
for the appointment of up to three individuals designated by
certain of the equity investors to be appointed to the board of
directors of New US Airways Group as of the effective time
of the merger for a three-year term. In the case of ACE, the
stockholders agreement will provide that (i) for so long as
ACE holds at least 66.67% of the number of shares of New
US Airways Group common stock acquired pursuant to its
investment agreement, referred to
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as the ACE director threshold, ACE will be entitled to designate
a director nominee for successive three-year terms and
(ii) if ACE falls below the ACE director threshold, ACE
will cause its director designee to resign from the board of
directors. In the case of the equity investors other than ACE
which are entitled as of the effective time of the merger to
designate a director to the board of directors of New
US Airways Group, the stockholders agreement will provide
that (i) for so long as that investor holds at least 35% of
the number of shares of New US Airways Group common stock
acquired pursuant to its investment agreement, referred to as
the designating investor threshold, that equity investor will be
entitled to designate a director nominee for successive
three-year terms and (ii) if any such equity investor falls
below the designating director threshold, the designee of that
equity investor will serve the remainder of that designee's
term as a director, but that equity investor will no longer have
the right to designate a director nominee under the stockholders
agreement.
The form of stockholders agreement is attached as an exhibit to
the registration statement of which this prospectus forms a
part. The description of the stockholders agreement is qualified
in its entirety by reference to the full text of the
stockholders agreement.
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DESCRIPTION OF CAPITAL STOCK OF NEW US AIRWAYS GROUP
New US Airways Group authorized capital stock will
consist of 200,000,000 shares of common stock with a par
value of $0.01.
The following summary of certain provisions of the New
US Airways Group common stock is not intended to be
complete and is qualified by reference to the provisions of
applicable law and to the form of second amended and restated
certificate of incorporation and the form of second amended and
restated bylaws of New US Airways Group as exhibits to this
registration statement.
The holders of New US Airways Group common stock will
be entitled to one vote per share on all matters submitted to a
vote of common stockholders, except that voting rights of
non-U.S. citizens are limited to the extent that the shares
of common stock held by such non-U.S. persons would
otherwise be entitled to more than 24.9% of the aggregate votes
of all outstanding equity securities of New US Airways
Group. Holders of common stock have no right to cumulate their
votes. We anticipate that the common stock will be listed on the
NYSE. Holders of common stock participate equally as to any
dividends or distributions on the common stock.
Authorized Capital Stock
The authorized capital stock of New US Airways Group will
consist of 200 million shares of common stock, par value
$0.01 per share.
Number of Directors
New US Airways Group's certificate of incorporation
provides that the board of directors will consist of not less
than one nor more than 15 directors, the exact number of
which will be fixed from time to time by resolution adopted by a
majority of New US Airways Group's board of directors.
The merger agreement contemplates that New US Airways
Group's board of directors will consist of
13 directors following the completion of the merger.
Cumulative Voting
New US Airways Group's certificate of incorporation
does not provide for cumulative voting and, accordingly, holders
of New US Airways Group common stock will not have
cumulative voting rights.
Classification of Board of Directors
New US Airways Group's certificate of incorporation
classifies the board of directors into three separate classes,
consisting as nearly equal in number as may be possible of
one-third of the total number of directors constituting the
entire board of directors, with staggered three-year terms. If
the number of directors is changed, any increase or decrease
will be apportioned across classes in order for the classes to
remain as nearly equal as possible.
Removal of Directors
New US Airways Group's certificate of incorporation
provides that any director may be removed only "for
cause," and by the affirmative vote of the holders of at
least 80% of the voting power of the then issued and outstanding
capital stock entitled to vote for the election of directors.
Vacancies on the Board of Directors
New US Airways Group's certificate of incorporation
provides that any vacancy on the board of directors that results
from an increase in the number of directors may be filled by a
majority of the board of directors then in office, provided that
a quorum is present, and any other vacancy occurring on the
board of directors may be filled by a majority of the board then
in office, even if less than a quorum, or by a sole remaining
director. Any director of any class elected to fill a vacancy
resulting from an increase in the
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number of directors of that class will hold office for a term
that coincides with the remaining term of that class. Any
director elected to fill a vacancy not resulting from an
increase in the number of directors will have the same remaining
term as his or her predecessor.
Stockholder Action by Written Consent
New US Airways Group's certificate of incorporation
provides that no stockholder action may be taken except at an
annual or special meeting of stockholders and that stockholders
may not take any action by written consent.
Amendment to Certificate of Incorporation
New US Airways Group's certificate of incorporation
provides that New US Airways Group reserves the right to
amend, alter, change or repeal any provision contained in its
certificate of incorporation in a manner in keeping with the
certificate of incorporation or the Delaware General Corporation
Law, or DGCL, and that all rights conferred upon stockholders
are granted subject to that reservation.
New US Airways Group's certificate of incorporation
requires the affirmative vote of the holders of at least
two-thirds of the voting power of the shares entitled to vote
for the election of directors to amend, alter, change, repeal or
adopt any provision as part of the certificate of incorporation
inconsistent with the purpose and intent of Articles V
(Board of Directors), VIII (No Written Consent),
X (Amendment of Bylaws) or XI (Amendment of the
Certificate of Incorporation) of the certificate of
incorporation.
Amendment of Bylaws
New US Airways Group's certificate of incorporation
provides that an affirmative vote of at least a majority of the
board of directors or the affirmative vote of at least 80% of
the voting power of the shares entitled to vote for the election
of directors will be required to adopt, amend, alter or repeal
New US Airways Group's bylaws.
Special Meeting of Stockholders
New US Airways Group's certificate of incorporation
provides that special meetings of the stockholders may be called
by:
•
the chairman of the board of directors; or
•
the secretary, at the written request or by a resolution adopted
    by the affirmative vote of a majority of the board of directors.
Quorum
New US Airways Group's certificate of incorporation
and bylaws provide that the holders of a majority of the capital
stock issued, outstanding and entitled to vote at a meeting of
stockholders, present in person or represented by proxy, will
constitute a quorum at any meeting of the stockholders held for
the purpose of electing directors.
Notice of Stockholder Meeting
New US Airways Group's bylaws provide that written
notice of meetings of stockholders, stating the place, if any,
date and hour of the meeting, the means of remote
communications, if any, by which stockholders and proxyholders
may be deemed to be present in person and vote at that meeting,
and, in the case of a special meeting, the purpose(s) for which
the meeting is called, must be given to each stockholder of
record entitled to vote whenever stockholders are required or
permitted to take any action at any meeting. The secretary must
provide such notice not less than 10 nor more than 60 days
before the date of the meeting.
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Delivery & Notice Requirements of Stockholder
Nominations and Proposals
New US Airways Group's bylaws provide that at any
annual stockholders' meeting only such business may be
transacted as has been:
•
specified in the notice of meeting or any supplement thereto;
•
given by or at the direction of the board or any duly authorized
    committee thereof;
•
otherwise properly brought by or at the direction of the board
    of directors or any duly authorized committee thereof; or
•
otherwise properly brought by any stockholder of New
    US Airways Group (A) who is a stockholder of
    record on the date of the giving of the notice provided for in
    the bylaws and on the record date for the determination of
    stockholders entitled to notice of and to vote at such annual
    meeting, and (B) who complies with the notice procedures
    set forth in the bylaws.
For a proposal, other than nominations of persons for election
to the board of directors, to be properly brought before an
annual meeting by a stockholder, the stockholder must have given
timely written notice thereof to the secretary of New
US Airways Group and such business must be a proper matter
for stockholder action.
To be timely, a stockholder's written notice pertaining to
an annual meeting must be delivered to, or mailed to and
received by, the secretary at the principal executive offices of
New US Airways Group:
•
not less than 120 calendar days prior to the first anniversary
    of the date that New US Airways Group's proxy
    statement was released to stockholders in connection with the
    preceding year's annual meeting; except that
•
if no annual meeting was held in the preceding year, no proxy
    statement was released to stockholders in the preceding year, or
    if the date of the annual meeting has been changed by more than
    30 calendar days from the date contemplated at the time of
    the preceding year's proxy statement, the notice must be
    received not less than 150 calendar days prior to the date
    of the contemplated annual meeting or the date that is
    10 calendar days after the date of the first public
    announcement or other notification to stockholders of the date
    of the contemplated annual meeting, whichever occurs first.
New US Airways Group's bylaws also provide that, for
business to be properly brought before a special meeting of
stockholders, other than nominations of persons for election to
the board of directors, a stockholder must give timely written
notice thereof to the secretary of New US Airways Group.
To be timely, a stockholder's written notice must be
received by the secretary at the principal executive offices of
New US Airways Group at least 120 calendar days prior to
the date of the special meeting.
A stockholder's written notice to the secretary for either
an annual meeting or a special meeting must set forth:
•
a brief description of the business desired to be brought before
    the meeting and the reasons for conducting the business at the
    meeting;
•
the name and address of record of the stockholder proposing that
    business;
•
the class and number of shares of New US Airways Group
    which are beneficially owned by the stockholder;
•
the dates upon which the stockholder acquired those shares;
•
documentary support for any claim of beneficial ownership;
•
a description of all arrangements or understandings between the
    stockholder and any other person or persons (including their
    names) in connection with the proposal and any material interest
    of the stockholder in the business;
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•
a representation that the stockholder intends to appear in
    person or by proxy at the meeting to bring the business before
    the meeting;
•
a statement in support of the matter; and
•
for proposals sought to be included in the proxy statement, any
    other information required by Rule 14a-8 under the Exchange
    Act.
New US Airways Group's bylaws also provide that no
business may be conducted at any stockholders' meeting
except business brought before the meeting in accordance with
the procedures set forth in the bylaws. If the chairman of the
meeting determines that business was not properly brought before
the meeting, the chairman will declare that the business was not
properly brought and such business will not be considered or
transacted.
Preemptive Rights
New US Airways Group's certificate of incorporation
does not grant any preemptive rights.
Dividends
New US Airways Group's certificate of incorporation
provides that stockholders are entitled to receive such
dividends and other distributions in cash, stock or property of
New US Airways Group when, as and if declared thereon by
the board of directors from time to time out of assets or funds
legally available therefor.
New US Airways Group's bylaws provide that dividends,
if any, may be declared by the board of directors at any regular
or special meeting of the board (or any action by written
consent in lieu thereof) and may be paid in cash, property or
shares of New US Airways Group's capital stock. Before
payment of any dividend, the directors may set aside a portion
of the funds available for dividends such as the board of
directors, in its absolute discretion, deems proper as a reserve
fund. Also, the board of directors may modify or abolish any
such reserve.
Limitation of Personal Liability of Directors
New US Airways Group's certificate of
incorporation provides that no director will be personally
liable to New US Airways Group or any of its stockholders
for monetary damages for breach of fiduciary duty as a director,
except to the extent such exemption from liability or limitation
thereof is not permitted under the DGCL.
New US Airways Group's certificate of incorporation
further provides that if the DGCL is amended to authorize the
further elimination or limitation of the liability of directors,
then the liability of a director of the corporation will be
eliminated or limited to the fullest extent authorized by the
DGCL, as so amended.
Indemnification of Officers & Directors
New US Airways Group's certificate of incorporation
provides that New US Airways Group:
•
will indemnify its directors and officers to the fullest extent
    authorized or permitted by law. This right to indemnification
    continues even after a person has ceased to be a director or
    officer and inures to the benefit of his or her heirs, executors
    and personal and legal representatives. Subject to applicable
    law, the right to indemnification includes the right to be paid
    the expenses incurred in defending or otherwise participating in
    any proceeding in advance of its final disposition; and
•
may, to the extent authorized by the board of directors, provide
    rights to indemnification and to the advancement of expenses to
    employees and agents similar to those conferred on directors and
    officers.
Except for proceedings to enforce rights to indemnification, New
US Airways Group is not obligated to indemnify any director
or officer or his or her heirs, executors or personal or legal
representatives in
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connection with a proceeding or part thereof initiated by that
person unless the proceeding or part thereof was authorized or
consented to by the board of directors.
New US Airways Group's certificate of incorporation
also provides that the rights to indemnification and to the
advance of expenses are not exclusive of any other right which
any person may have or acquire under the certificate of
incorporation, the bylaws, any statute, agreement, vote of
stockholders or disinterested directors or otherwise.
Insofar as indemnification for liabilities under the Securities
Act may be permitted to directors, officers and controlling
persons of New US Airways Group under the foregoing
provisions, or otherwise, New US Airways Group has been
advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is
therefore unenforceable.
Stockholder Rights Plan
New US Airways Group will not have a stockholder rights
plan.
Business Combinations
Certain provisions of the second amended and restated
certificate of incorporation and second amended and restated
bylaws of New US Airways Group may have the effect of
delaying or preventing changes in control if our board of
directors determines that those changes in control are not in
the best interests of New US Airways Group and its
stockholders. These provisions include, among other things, the
following:
•
a classified board of directors with three-year staggered terms;
•
advance notice procedures for stockholder proposals to be
    considered at stockholders' meetings;
•
the ability of New US Airways Group's board of
    directors to fill vacancies on the board;
•
a prohibition against stockholders taking action by written
    consent;
•
a prohibition against stockholders calling special meetings of
    stockholders;
•
requiring the approval of holders of at least 80% of the voting
    power of the shares entitled to vote in the election of
    directors for the stockholders to amend the second amended and
    restated bylaws; and
•
super majority voting requirements to modify or amend specified
    provisions of New US Airways Group's second amended
    and restated certificate of incorporation.
These provisions are not intended to prevent a takeover, but are
intended to protect and maximize the value of New
US Airways Group's stockholders' interests. While
these provisions have the effect of encouraging persons seeking
to acquire control of our company to negotiate with our board of
directors, they could enable our board of directors to prevent a
transaction that some, or a majority, of our stockholders might
believe to be in their best interests and, in that case, may
prevent or discourage attempts to remove and replace incumbent
directors.
In addition, Section 203 of the DGCL protects
publicly-traded Delaware corporations, such as New
US Airways Group, from hostile takeovers, and from actions
following the takeover, by prohibiting some transactions once an
acquirer has gained a significant holding in the corporation.
A corporation may elect not to be governed by Section 203
of the DGCL. Neither New US Airways Group's
certificate of incorporation nor its bylaws contain this
election. Therefore, New US Airways Group is governed by
Section 203 of the DGCL.
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SHARES ELIGIBLE FOR FUTURE SALE
Because no shares of New US Airways Group will be issued
until the effectiveness of the plan of reorganization and the
completion of the merger and this rights offering, prior to this
offering, there has been no public market for New
US Airways Group common stock. We cannot assure you that a
significant public market for New US Airways Group common
stock will develop or be sustained after this offering. Future
sales of substantial amounts of New US Airways Group common
stock, including shares issued upon exercise of options or
warrants, in the public market after this offering, or the
perception that those sales could occur, could adversely affect
the prevailing market price of New US Airways Group common
stock.
Upon the completion of the rights offering and the merger and
after giving effect to the confirmation order and the plan of
reorganization, there will be approximately
[          ]
shares of New US Airways Group common stock outstanding.
Except as set forth below, all shares of New US Airways
Group common stock outstanding after this offering will be
freely tradeable without restriction or further registration
under the Securities Act unless held by one of our
"affiliates," as that term is defined in Rule 144
under the Securities Act. Unless otherwise registered under the
Securities Act, sales of shares of our common stock by
affiliates will be subject to the volume limitations and other
restrictions set forth in Rule 144.
America West Holdings Stockholders
At the effective time of the merger, subject to certain
conditions, each share of America West Holdings Class A
common stock issued and outstanding immediately prior to the
effective time will be converted into the right to receive
0.5362 of a share of New US Airways Group common stock. At
the effective time of the merger, each share of America West
Holdings Class B common stock issued and outstanding immediately
prior to the effective time will be converted into the right to
receive 0.4125 of a share of New US Airways Group common
stock. We expect that upon completion of the merger,
[                    ]
shares of New US Airways Group common stock will be issued
to the America West Holdings Class A and Class B
common stockholders.
The shares of New US Airways Group common stock to be
issued in connection with the merger will be registered under
the Securities Act and will be freely transferable, except for
shares of New US Airways Group common stock issued to any
person who is deemed to be an "affiliate" of America
West Holdings under the Securities Act prior to the completion
of the merger. Persons who may be deemed to be
"affiliates" of America West Holdings prior to the
completion of the merger include individuals or entities that
control, are controlled by, or are under common control with,
America West Holdings prior to the merger, and may include
officers and directors, as well as significant stockholders, of
America West Holdings prior to the merger. The same restrictions
apply to the spouses and certain relations of those persons and
any trusts, estates, corporations or other entities in which
those persons have a 10% or greater beneficial or equity
interest. Affiliates of America West Holdings prior to the
merger may not sell any of the shares of New US Airways
Group common stock received by them in connection with the
merger except pursuant to:
•
an effective registration statement under the Securities Act
    covering the resale of those shares;
•
an exemption under paragraph (d) of Rule 145 under the
    Securities Act; or
•
any other applicable exemption under the Securities Act.
Unsecured Creditors
Under the plan of reorganization,
[                    ]
shares of New US Airways Group common stock will be
distributed to certain holders of general unsecured claims that
are allowed by the confirmation order from the bankruptcy court.
We relied, based on the confirmation order we received from the
bankruptcy court, on Section 1145(a)(1) of the bankruptcy
code to exempt from the registration requirements of the
Securities Act the offer and sale of New US Airways Group
common stock to certain general unsecured creditors.
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Section 1145(a)(1) of the bankruptcy code exempts the offer
and sale of securities under a plan of reorganization from
registration under Section 5 of the Securities Act and
state laws if three principal requirements are satisfied:
•
the securities must be offered and sold under a plan of
    reorganization and must be securities of the debtor, of an
    affiliate participating in joint plan of reorganization with the
    debtor or of a successor to the debtor under the plan of
    reorganization;
•
the recipients of the securities must hold claims against or
    interests in the debtor; and
•
the securities must be issued in exchange, or principally in
    exchange, for the recipient's claim against or interest in
    the debtor.
The debtors believe that the offer and sale of New
US Airways Group common stock under the plan of
reorganization to holders of claims against the debtors
satisfies the requirements of Section 1145(a)(1) of the
bankruptcy code and is, therefore, exempt from registration
under the Securities Act and state securities laws.
To the extent that New US Airways Group common stock is
issued under the plan of reorganization and is covered by
Section 1145(a)(1) and (2) of the bankruptcy code, it may be
resold without registration unless, as more fully described
below, the holder is an "underwriter" with respect to
those securities. Generally, Section 1145(b)(1) of the
bankruptcy code defines an "underwriter" as any person
who:
•
purchases a claim against, an interest in, or a claim for an
    administrative expense against the debtor, if that purchase is
    with a view to distributing any security received in exchange
    for such a claim or interest;
•
offers to sell securities offered under a plan of reorganization
    for the holders of those securities;
•
offers to buy those securities from the holders of the
    securities, if the offer to buy is:
•
with a view to distributing those securities; and
•
under an agreement made in connection with the plan of
    reorganization, the completion of the plan of reorganization, or
    with the offer or sale of securities under the plan of
    reorganization; or
•
is an "issuer" with respect to the securities, as the
    term "issuer" is defined in Section 2(11) of the
    Securities Act.
Under Section 2(11) of the Securities Act, an
"issuer" includes any person directly or indirectly
controlling or controlled by the issuer, or any person under
direct or indirect common control of the issuer.
To the extent that persons who receive New US Airways Group
common stock pursuant to the plan of reorganization are deemed
to be "underwriters" as defined in
Section 1145(b) of the bankruptcy code, resales by those
persons would not be exempted by Section 1145 of the
bankruptcy code from registration under the Securities Act or
other applicable law. Those persons would, however, be permitted
to sell the New US Airways Group common stock or other
securities without registration if they are able to comply with
the provisions of Rule 144 under the Securities Act, as
described further below.
Whether or not any particular person would be deemed to be an
"underwriter" with respect to New US Airways
Group common stock or other security to be issued pursuant to
the plan of reorganization would depend on various facts and
circumstances applicable to that person. Accordingly, we express
no view as to whether any particular person receiving New
US Airways Group common stock or other securities under the
plan of reorganization would be an "underwriter" with
respect to the New US Airways Group common stock or other
securities.
Given the complex and subjective nature of the question of
whether a particular holder may be an underwriter, we make no
representation concerning the right of any person to trade in
New US Airways Group common stock or other securities. We
recommend that potential recipients of New US Airways Group
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common stock or other securities consult their own counsel
concerning whether they may freely trade New US Airways
Group common stock or other securities without compliance with
the Securities Act, the Exchange Act or similar state and
federal laws.
Equity Investors
Several equity investors have agreed, pursuant to separate
investment agreements entered into with US Airways Group
and America West Holdings, to provide $500 million of new
cash investments to New US Airways Group in exchange for
shares of New US Airways Group common stock. These
investments include the conversion of the $125 million
debtor in possession facility provided by Eastshore into shares
of New US Airways Group common stock at the effective time
of the plan of reorganization. The debtors believe that the
offer and sale of New US Airways Group common stock to the
new equity investors are exempt from registration requirements
pursuant to Section 4(2) of the Securities Act and, to the
extent that shares of New US Airways Group common stock are
issued in exchange for the conversion of the $125 million
debtor in possession facility provided by Eastshore, pursuant to
Section 1145(a)(1) of the bankruptcy code, as described
above. We expect that upon completion of the merger and the
effectiveness of the plan of reorganization, approximately
32.5 million shares of New US Airways Group common
stock will be issued to the equity investors.
In connection with the equity investments, each of the equity
investors will enter into a stockholders agreement that
prohibits the equity investors' sale of New US Airways
Group common stock for a period of six months following the
closing date of the investment. In addition, in accordance with
the terms of the stockholders agreement, within 45 days of the
closing date of the investment, we are required to file with the
SEC a shelf registration statement covering the resale of the
New US Airways Group common stock issued to the investors
in connection with their investment.
Rule 144
In general, under Rule 144 as currently in effect, a person
who has beneficially owned shares of New US Airways Group
common stock for at least one year from the later of the date
those shares of common stock were acquired from us or one of our
affiliates would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:
•
one percent of the number of shares of New US Airways Group
    common stock then outstanding, which will equal approximately
    [     ] shares immediately after
    this offering, assuming all rights are exercised; or
•
the average weekly trading volume of the New US Airways
    Group common stock during the four calendar weeks preceding the
    filing of a notice on Form 144 with respect to that sale.
Sales under Rule 144 are also subject to certain
manner-of-sale provisions and notice requirements, and to the
availability of current public information about us.
A person who is not deemed to have been our affiliate at any
time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least
two years (including the holding period of any prior owner
except an affiliate), would be entitled to sell those shares
under Rule 144(k) without complying with the volume
limitations, manner-of-sale provisions, public information or
notice requirements of Rule 144. Rule 144 also
provides that affiliates who are selling shares that are not
restricted securities must nonetheless comply with the same
volume limitations, manner-of-sale provisions, public
information or notice requirements applicable to the sale of
restricted securities described above in this paragraph.
Stock Options and Other Stock Awards
In connection with the merger, each outstanding America West
Holdings stock option will be converted into an option to
purchase the number of shares of New US Airways Group
common stock that is equal to the product of the number of
shares of America West Holdings Class B common stock that
could have been
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purchased before the merger upon the exercise of the option
multiplied by 0.4125 and rounded up to the nearest whole share.
Each America West Holdings stock option will continue to be
governed by the same terms and conditions as were applicable
under that America West Holdings stock option immediately prior
to the effective time of the merger, including its vesting
schedule, if any, and expiration date.
At the effective time of the merger, each right of any kind,
contingent or accrued, to acquire or receive shares of America
West Holdings Class B common stock or benefits measured by
the value of America West Holdings Class B common stock,
and each award of any kind consisting of shares of America West
Holdings Class B common stock that may be held, awarded,
outstanding, payable or reserved for issuance under any America
West Holdings stock plans or benefit plans, other than America
West Holdings stock options, will be deemed to be converted into
the right to acquire or receive benefits measured by the value
of (as the case may be) the number of shares of New
US Airways Group common stock obtained by multiplying the
number of America West Holdings Class B common stock
subject to that award immediately prior to the effective time of
the merger by the exchange ratio of 0.4125, and each such right
will otherwise be subject to the terms and conditions applicable
to that right under the relevant America West Holdings stock
plan or other benefit plan.
We expect that upon completion of the merger, options and other
rights exercisable for a total of
[                    ] shares
of New US Airways Group common stock will be outstanding.
In addition, the plan of reorganization contemplates the create
of a management compensation plan, under which shares of New
US Airways Group common stock, or options or other awards
to purchase shares of New US Airways Group common stock,
can be issued to management and other employees of New
US Airways Group. A total of
[                    ] shares
of New US Airways Group common stock are reserved for
issuance under the management compensation plan.
We expect to file registration statements on Form S-8
covering all of the shares of common stock issuable or reserved
for issuance under the stock plans. Upon filing of the
Forms S-8 applicable to each stock plan, the shares will be
freely tradeable in the public market, subject to Rule 144
limitations applicable to affiliates.
Warrants
In connection with the merger, each outstanding America West
Holdings warrant will be converted into a warrant to purchase
the number of shares of New US Airways Group common stock
that is equal to the product of the number of shares of America
West Holdings Class B common stock that could have been
purchased before the merger upon the exercise of the warrant
multiplied by 0.4125 and rounded up to the nearest whole share.
Each America West Holdings warrant will continue to be governed
by the same terms and conditions as were applicable under that
America West Holdings warrant immediately prior to the effective
time of the merger, including its vesting schedule, if any, and
expiration date.
We expect that upon completion of the merger, warrants
exercisable for a total of
[                    ] shares
of New US Airways Group common stock will be outstanding.
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DEALER MANAGER AND STRUCTURING ADVISOR ARRANGEMENTS
We are offering rights directly to the America West Holders and
US Airways Creditors. US Airways Group and America West Holdings
are retaining Merrill Lynch, Pierce, Fenner & Smith
Incorporated, to act as the dealer manager in connection with
this rights offering. America West Holdings has retained Merrill
Lynch as its structuring advisor to the rights offering. Merrill
Lynch will provide customary advisory and dealer manager
services in connection with this rights offering.
We will agree to pay Merrill Lynch a selling commission of
$               for
each share issued in connection with this rights offering. In
addition, we will agree to pay Merrill Lynch a structuring
advisory fee of
$          and
to reimburse certain of Merrill Lynch's expenses.
US Airways Group and America West Holdings will agree to
indemnify Merrill Lynch, in its capacity as dealer manager, with
respect to certain liabilities, including civil liabilities
under the Securities Act, or contribute to payments which
Merrill Lynch may be required to make in respect thereof.
America West Holdings has also agreed to indemnify Merrill Lynch
for certain liabilities arising out of Merrill Lynch's
engagement as structuring advisor.
Merrill Lynch has not prepared any report or opinion
constituting a recommendation or advice, nor has Merrill Lynch
prepared an opinion as to the fairness of the Subscription Price
or the terms of this rights offering. Merrill Lynch neither
expresses an opinion nor makes any recommendation to Holders as
to the purchase by any person of any shares. Merrill Lynch
expresses no opinion as to the prices at which shares to be
distributed in connection with this rights offering may trade if
and when they are issued or at any future time.
Other than Merrill Lynch, we have not employed any brokers,
dealers or underwriters in connection with this rights offering,
and, except as described in this prospectus, no other
commissions, fees or discounts will be paid in connection with
this rights offering.
Merrill Lynch may sell short shares of the New US Airways Group
common stock and cover such short sales by delivering shares
received upon exercise of rights purchased in the market. The
shares may be resold by Merrill Lynch in one or more
transactions, at a fixed price or prices, which may be changed,
or at market prices prevailing at the time of sale, or at prices
related to those prevailing prices, or at negotiated prices.
Merrill Lynch is not obligated to purchase rights or shares of
New US Airways Group common stock in connection with its role as
dealer manager or otherwise. Merrill Lynch may also engage in
stabilizing transactions in accordance with Regulation M
under the Exchange Act, but is not obligated to do so.
Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a
specified maximum. These stabilizing transactions may cause the
price of the securities to be higher than it would otherwise be
in the absence of these transactions. These transactions, if
commenced, may be discontinued at any time.
Merrill Lynch and its affiliates have engaged in, and in the
future may engage in, investment banking and other commercial
dealings in the ordinary course with US Airways Group, New
US Airways Group and America West Holdings. Merrill Lynch
has received customary fees and commissions for these
transactions.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal
income tax consequences of the receipt, ownership and exercise
of the subscription rights to an original holder of rights to
whom the rights were distributed in this rights offering. The
summary is based on the Internal Revenue Code of 1986, as
amended, which we refer to as the Internal Revenue Code,
Treasury regulations promulgated under the Internal Revenue
Code, published administrative rulings and pronouncements, and
court decisions in effect as of the date hereof, all of which
are subject to change, possibly with retroactive effect.
This discussion applies only to United States persons (as
defined in Section 7701(a)(30) of the Internal Revenue
Code) who hold the subscription rights, and New US Airways Group
common stock acquired upon the exercise of the rights, as
capital assets within the meaning of Section 1221 of the
Internal Revenue Code.
This summary is not a complete description of all the
consequences of the rights offering and, in particular, may not
address United States federal income tax considerations
applicable to Holders subject to special treatment under United
States federal income tax law (including, for example,
non-United States persons, banks and financial institutions,
dealers in securities, insurance companies or tax-exempt
entities, 401(k) plans, persons that are, or hold rights or New
US Airways Group common stock through, pass-through entities,
and Holders who hold the New US Airways Group common stock as
part of a hedge, straddle, conversion or constructive sale
transaction). This summary does not address the tax consequences
of any transaction other than this rights offering and the
related issuance of New US Airways Group common stock. This
summary does not address the tax consequences to any person who
actually or constructively owns 5% or more of America West
Holdings common stock or New US Airways Group common stock.
Also, this summary does not address United States federal income
tax considerations applicable to holders of options or warrants
to purchase America West Holdings or New US Airways Group common
stock, or holders of debt instruments convertible into America
West Holdings or New US Airways Group common stock. In addition,
no information is provided herein with respect to the tax
consequences of this rights offering under applicable state,
local or non-United States laws, or under any proposed Treasury
regulations that have not taken effect as of the date hereof.
No rulings or determinations of the Internal Revenue Service or
any other taxing authority have been sought or obtained with
respect to the tax consequences described in this prospectus,
and the discussion below is not binding on the Internal Revenue
Service or the courts. Accordingly, we cannot assure you that
the Internal Revenue Service will not assert, or that a court
will not sustain, a position different from any described herein.
HOLDERS OF RIGHTS OR NEW US AIRWAYS GROUP COMMON STOCK ARE URGED
TO CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX
CONSEQUENCES OF THIS RIGHTS OFFERING OR THE RELATED ISSUANCE OF
NEW US AIRWAYS GROUP COMMON STOCK TO THEM, INCLUDING THE EFFECTS
OF UNITED STATES FEDERAL, STATE AND LOCAL, FOREIGN AND OTHER TAX
LAWS.
Receipt of the Rights.
The United States federal
income tax characterization and consequences of the rights
offering are uncertain. Set forth below are possible alternative
characterizations and consequences that America West Holdings
and US Airways Group believe are most likely. The
consequences of the receipt of the rights will depend on the
nature of a Holder's interest in America West Holdings or
US Airways Group, which in either case is surrendered, in part,
in exchange for the rights. No assurances can be made, however,
that the IRS will not assert, or that a court will not sustain,
a treatment different from those discussed below.
The tax treatment of US Airways Creditors is as follows:
•
US Airways Creditors with claims against domestic corporate
    subsidiaries of US Airways Group, Inc. should be treated as
    having received the rights as part of a taxable exchange. Such a
    US Airways Creditor will recognize gain or loss equal to the
    difference between (i) the fair market value of the rights
    and any cash received and (ii) the US Airways
    Creditor's adjusted basis in its claims on the date of the
    exchange. The aggregate tax basis of the rights received by a US
    Airways Creditor in a taxable exchange will be the fair market
    value of the rights on the date of the exchange, and the holding
    period for the rights will begin on the day after the exchange.
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•
Likewise, US Airways Creditors with claims against US Airways
    Group that are not treated as "securities" for United
    States federal income tax purposes will be treated as having
    received the rights as part of a taxable exchange, with the same
    resulting tax treatment as described in the paragraph above. The
    term "security" is not defined in the Internal Revenue
    Code or the applicable Treasury regulations and has not been
    clearly defined by judicial decisions or administrative rulings.
    Whether a debt instrument constitutes a security is determined
    based on all the facts and circumstances, including the nature
    of the debt instrument, the holder's degree of
    participation in the affairs of the business and the extent of
    proprietary interest compared with the similarity of the debt
    instrument to a cash payment. One important factor is the term
    of the debt instrument. Generally, a debt instrument with an
    original maturity of ten years or more constitutes a security,
    while a debt instrument with an original maturity of less than
    five years or arising out of the extension of trade credit does
    not. Each US Airways Creditor with a claim against
    US Airways Group, as opposed to a domestic corporate
    subsidiary of US Airways Group, should consult with a tax
    advisor to determine whether the claim should be treated as a
    security for these purposes.
•
Although the matter is not entirely clear, US Airways Creditors
    with claims against US Airways Group that are treated as
    securities for United States federal income tax purposes should
    be treated as having received the rights in a
    "recapitalization" within the meaning of
    Section 368(a)(1)(E) of the Internal Revenue Code. If the
    exchange is treated as a recapitalization, the rights will be
    treated as securities with a zero principal amount and such US
    Airways Creditor will recognize gain, but not loss, in the
    exchange in an amount equal to the lesser of (i) the cash
    received by the US Airways Creditor in the US Airways
    bankruptcy reorganization and (ii) the amount of gain, if
    any, realized by the US Airways Creditor upon the exchange
    of its claim for cash and rights. Gain recognized under
    (ii) if any, will be equal to the excess of amount of cash
    and the fair market value of the rights received over the
    US Airways Creditor's tax basis in its claim at the
    time of the exchange. It is unclear whether the fair market
    value of the rights should be determined for these purposes as
    of the date on which the rights are received or the effective
    date of the merger. Any such gain will be capital gain and will
    be long-term capital gain if the US Airways Creditor's
    holding period for its claim was more than one year on the date
    of the exchange. The aggregate tax basis in the rights received
    by such a US Airways Creditor will equal the aggregate adjusted
    tax basis in the US Airways Group claims given up in the
    exchange, increased by the amount of gain recognized and reduced
    by the amount of any cash received in the exchange. The holding
    period for the rights will include the holding period of the US
    Airways Group claims given up in the exchange. Notwithstanding
    the foregoing, it is possible that such US Airways Creditors
    would be treated as having received the rights as part of a
    taxable exchange, with the same resulting tax treatment as
    described in the second preceding paragraph. Such
    US Airways Creditors are urged to consult with their tax
    advisor concerning the treatment of the rights received in this
    rights offering.
The tax treatment of America West Holders is as follows:
•
Although not free from doubt, America West Holdings and US
    Airways Group intend to take the position that the receipt of
    rights pursuant to the rights offering should be characterized
    as part of the merger consideration. Under this
    characterization, an America West Holder will not recognize any
    gain or loss as a result of receiving rights pursuant to this
    rights offering. The America West Holder's aggregate tax
    basis in the rights and New US Airways Group common stock
    received in the merger will be equal to its aggregate tax basis
    in its America West Holdings common stock surrendered in the
    merger (subject
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to the discussion below regarding exercise of rights and except
    for tax basis allocable to any fractional share for which cash
    is received). The tax basis of the rights and the tax basis of
    the New US Airways Group common stock will be determined by
    allocating the aggregate tax basis in the America West Holdings
    common stock surrendered (reduced by tax basis allocable to any
    fractional share for which cash is received) between the rights
    and New US Airways Group common stock received based on their
    relative fair market values. It is unclear when the fair market
    value of the rights should be determined for purposes of
    allocating basis. The appropriate date may be either the date on
    which the rights are received or the effective date of the
    merger. In either event, relative fair market values will not be
    known until the effective date of the merger.
•
Notwithstanding the intended position described in the paragraph
    above, it is possible that the receipt of rights in this rights
    offering may be characterized as a taxable payment by
    US Airways Group to an America West Holdings stockholder.
    Under this characterization, an America West Holdings
    stockholder receiving rights in this rights offering would
    recognize ordinary taxable income on the receipt of rights in an
    amount equal to their fair market value on the date of receipt,
    without reduction or offset for its tax basis in its America
    West Holdings common stock. Under this characterization,
    (i) no portion of the taxable income would be eligible for
    the reduced federal income tax rates applicable to long-term
    capital gains or "qualified dividend income" within
    the meaning of Section 1(h) of the Internal Revenue Code,
    (ii) an America West Holdings stockholder's tax basis
    in the rights received would be equal to their fair market value
    at the time of receipt, and (iii) the stockholder's
    tax basis in its America West Holdings common stock surrendered,
    or New US airways Group common stock received, in the merger
    would not be affected by the receipt of rights.
Disposition of the Rights.
An America West Holder
will recognize taxable gain or loss upon a sale, exchange or
other disposition of a right in an amount equal to the
difference, if any, between the amount received therefor and the
Holder's tax basis in the right (as determined above). This
gain or loss will be short-term capital gain or loss.
Exercise of the Rights.
A Holder will not
recognize gain or loss upon the exercise of the rights. The
basis of the New US Airways Group common stock acquired through
a Holder's exercise of the rights will be equal to the sum
of (i) the price paid for the New US Airways Group common
stock acquired by exercise of the rights and (ii) the
Holder's basis, if any, in the rights. The holding period
for the New US Airways Group common stock acquired through the
exercise of the rights will begin on the date the rights are
exercised.
Expiration of the Rights.
If a Holder receives the
rights and allows the rights to expire (i.e., the Holder does
not exercise the rights), then that Holder will recognize a
capital loss equal to the amount of the Holder's basis in
the rights.
Sale of the New US Airways Group Common Stock.
If
a Holder sells New US Airways Group common stock acquired
through the exercise of the rights, that Holder will recognize
capital gain or loss in an amount equal to the difference
between the amount realized on the sale and its tax basis in the
New US Airways Group common stock, which will include the
Subscription Price. Such capital gain or loss will be long-term
capital gain or loss if the Holder has held the shares for more
than one year beginning on the date of the exercise of the
rights.
Backup Withholding and Information Reporting.
A
Holder's receipt, sale, exchange or disposition of rights
or New US Airways Group common stock may, under certain
circumstances, be subject to information reporting and
"backup withholding" at a rate of 28 percent,
unless you provide proof of an applicable exemption or furnish
your taxpayer identification number, and otherwise comply with
all applicable requirements of the backup withholding rules. Any
amounts withheld under the backup withholding rules are not
additional tax and will be allowed as a refund or credit against
your federal income tax liability, provided the required
information is furnished to the Internal Revenue Service.
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THIS DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES THAT MAY VARY
WITH, OR ARE CONTINGENT ON, INDIVIDUAL CIRCUMSTANCES. MOREOVER,
IT DOES NOT ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE OR
LOCAL TAX CONSEQUENCES OF THIS RIGHTS OFFERING. TAX MATTERS ARE
VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THIS RIGHTS
OFFERING AND THE RELATED ISSUANCE OF NEW US AIRWAYS GROUP COMMON
STOCK TO YOU WILL DEPEND UPON THE FACTS OF YOUR PARTICULAR
SITUATION. ACCORDINGLY, WE STRONGLY URGE YOU TO CONSULT WITH A
TAX ADVISOR TO DETERMINE THE PARTICULAR UNITED STATES FEDERAL,
STATE, LOCAL, OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES TO YOU
OF THIS RIGHTS OFFERING AND THE RELATED ISSUANCE OF NEW US
AIRWAYS GROUP COMMON STOCK.
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INFORMATION WITH RESPECT TO US AIRWAYS GROUP, INC. PRIOR
TO THE MERGER
Business
Overview
US Airways Group is a corporation organized under the laws
of the State of Delaware. US Airways Group's
executive offices are located at 2345 Crystal Drive, Arlington,
Virginia 22227 (telephone number (703) 872-7000).
US Airways Group's internet address is
www.usairways.com.
US Airways Group's primary business activity is the
operation of a major network air carrier through its ownership
of the common stock of US Airways, Inc., Piedmont Airlines,
Inc., PSA Airlines, Inc., Material Services Company, Inc.,
Airways Assurance Limited, and, until July 1, 2004,
Allegheny Airlines, Inc. Effective July 1, 2004, Allegheny
Airlines merged with Piedmont Airlines, with Piedmont Airlines
as the surviving entity.
As discussed in more detail below, on September 12, 2004,
the debtors filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code in the
United States bankruptcy court for the Eastern District of
Virginia, Alexandria Division (Case Nos. 04-13819-SSM
through 04-13823-SSM).
US Airways, Inc., which is also a corporation organized
under the laws of the State of Delaware, is US Airways
Group's principal operating subsidiary. US Airways,
Inc. is a certificated air carrier engaged primarily in the
business of transporting passengers, property and mail.
US Airways, Inc. enplaned approximately 42 million
passengers in 2004 and was the seventh largest U.S. air
carrier, based on ASMs. As of March 31, 2005,
US Airways, Inc. operated 279 jet aircraft and 25 regional
jet aircraft (see the section entitled "Properties"
below for additional information related to aircraft operated by
US Airways, Inc.) and provided regularly scheduled service
at 101 airports in the continental United States, Canada, the
Caribbean, Latin America and Europe. For information concerning
operating revenue in US Airways Group's principal
geographic areas, see note 11 to the consolidated financial
statements of US Airways Group included in its Annual
Report on Form 10-K attached as an annex to this prospectus.
Certain air carriers have code share arrangements with
US Airways, Inc. to operate under the trade name
US Airways Express. Typically, under a code share
arrangement, one air carrier places its designator code and
sells tickets on the flights of another air carrier, referred to
as its code share partner. US Airways Express carriers are
an integral component of US Airways Group's operating
network. Due to the relatively small local traffic base at some
of its hubs, US Airways, Inc. has historically relied
heavily on feed traffic from its US Airways Express
affiliates, which carry passengers from low-density markets that
are uneconomical for US Airways, Inc. to serve with large
jets, to US Airways, Inc.'s hubs. As of March 31,
2005, the US Airways Express network operated 156 regional
jet aircraft and 107 turboprop aircraft and served 133 airports
in the continental United States, Canada and the Bahamas,
including 51 airports also served by US Airways, Inc.
During 2004, US Airways Express air carriers enplaned
approximately 15.2 million passengers, approximately 48% of
whom connected to US Airways Group's flights. Of these
15.2 million passengers, approximately 6.2 million
were enplaned by US Airways Group's wholly owned
regional airlines, PSA Airlines, Inc. and PSA Airlines, Inc.,
approximately 7.4 million were enplaned by third-party
carriers operating under capacity purchase agreements and
approximately 1.6 million were enplaned by carriers
operating under prorate agreements, as described below.
The US Airways Express code share arrangements are either
in the form of capacity purchase or prorate agreements. The two
wholly owned regional airlines and the regional jet affiliate
operators are capacity purchase relationships. The wholly owned
subsidiary PSA Airlines, Inc. operated 49 regional jets as of
March 31, 2005, while the wholly owned subsidiary Piedmont
Airlines, Inc. operated 57 turboprop aircraft as of
March 31, 2005. The regional jet affiliates with capacity
purchase agreements are Chautauqua Airlines, Inc., which
operated 35 regional jets as US Airways Express as of
March 31, 2005; Mesa Airlines, Inc., which operated 59
regional jets as US Airways Express as of March 31,
2005; and Trans States Airlines, Inc., which operated 13
regional jets as US Airways Express as of March 31,
2005. Air Wisconsin Airlines Corporation will also begin
operating 70 regional jets under a capacity purchase agreement
in August 2005.
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The capacity purchase agreements provide that all revenues,
including passenger, mail and freight revenues, go to
US Airways, Inc. In return, US Airways, Inc. agrees to
pay predetermined fees to these airlines for operating an agreed
upon number of aircraft, without regard to the number of
passengers on board. In addition, these agreements provide that
certain variable costs, such as fuel and airport landing fees,
will be reimbursed 100% by US Airways, Inc.
US Airways, Inc. controls marketing, scheduling, ticketing,
pricing and seat inventories. The regional jet capacity purchase
agreements have expiration dates between 2008 to 2013 and
provide for optional extensions at US Airways Inc.'s
discretion. Certain other regional jet agreements are expected
to be amended as a result of the Air Wisconsin agreement. The
carriers with prorate agreements are non-owned turboprop
operators and include all or a portion of the turboprop
operations of Colgan Airlines, Inc., which operated 28
turboprops as US Airways Express as of March 31, 2005;
Trans States Airlines, which operated 8 turboprops as
US Airways Express as of March 31, 2005; and Air
Midwest, Inc., which operated 14 turboprops as US Airways
Express as of March 31, 2005. Under the prorate agreements
the prorate carriers pay certain service fees to
US Airways, Inc. and to receive a prorated share of revenue
for connecting customers. US Airways, Inc. is responsible
for pricing and marketing of connecting services to and from the
prorate carrier. The prorate carrier is responsible for pricing
and marketing the local, point to point markets, and is
responsible for all costs incurred operating the aircraft. All
US Airways Express carriers use US Airways,
Inc.'s reservation systems, and have logos, service marks,
aircraft paint schemes and uniforms similar to those of
US Airways, Inc.
In April 2004, MidAtlantic Airways, US Airways, Inc.'s
new regional jet division, began operating as part of the
US Airways Express network. As of March 31, 2005,
MidAtlantic Airways operates 25 Embraer ERJ-170 regional jets
with 72 seats. MidAtlantic Airways served approximately one
million passengers in 2004. On June 23, 2005,
US Airways, Inc. exercised its option under its agreement
with Republic Airways Holdings, Inc. and Wexford Capital LLC to
sell the assets of MidAtlantic Airways, including the regional
jets, a flight simulator and certain commuter slots at Ronald
Reagan Washington National Airport and LaGuardia Airport. If the
sale is completed, Republic Airways Holdings will operate the
aircraft as a US Airways Express carrier under a capacity
purchase agreement and will lease the slots back to
US Airways, Inc.
US Airways Group's major connecting hubs are at
airports in Charlotte and Philadelphia.
US Airways Group also has substantial operations at
Boston's Logan International Airport, New York's
LaGuardia Airport, Pittsburgh International Airport, and
Washington D.C.'s Ronald Reagan Washington National
Airport. Measured by departures, US Airways, Inc. is among
the largest at each of the foregoing airports. US Airways,
Inc. is also a leading airline from the Northeast United States
to Florida. US Airways, Inc.'s East coast-based hubs,
combined with its strong presence at many East coast airports,
have made it among the largest intra-East coast carriers,
comprising approximately 30% of the industry's intra-East
coast revenues based on the most recent industry revenue data
available.
For the years ended December 31, 2004, 2003 and 2002,
passenger revenues accounted for approximately 89%, 90% and 90%,
respectively, of US Airways Group's consolidated
operating revenues. Cargo revenues and other sources accounted
for 11%, 10% and 10% of US Airways Group's
consolidated operating revenues in 2004, 2003 and 2002,
respectively. US Airways Group's results are seasonal
with operating results typically highest in the second and third
quarters due to US Airways, Inc.'s combination of
business traffic and North-South leisure traffic in the eastern
United States during those periods.
Material Services Company and Airways Assurance Limited operate
in support of US Airways Group's airline subsidiaries
in areas such as the procurement of aviation fuel and insurance.
Prior Bankruptcy
Each of the debtors in the current Chapter 11 cases had
previously filed a voluntary petition for relief under
Chapter 11 in the United States bankruptcy court for the
Eastern District of Virginia (Case Nos. 02-83984-SSM through
02-83991-SSM) on August 11, 2002, which we sometimes refer
to as the prior bankruptcy. The debtors emerged from the prior
bankruptcy under a plan of reorganization that was confirmed
pursuant to an order of the bankruptcy court on March 18,
2003 and became effective on
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March 31, 2003. The 2003 plan of reorganization constituted
a separate plan of reorganization for each of US Airways
Group and its domestic subsidiaries, who we sometimes refer to
as the filing entities. In accordance with the bankruptcy code,
the 2003 plan of reorganization divided claims against, and
interests in, each of the filing entities into classes according
to their relative seniority and other criteria and provided the
same treatment for each claim or interest of a particular class
unless the holder of a particular claim or interest agreed to a
less favorable treatment of its claim or interest. Among other
things, the 2003 plan of reorganization generally provided for
full payment of all allowed administrative and priority claims,
and the distribution of shares, or warrants to purchase shares,
of new equity in the reorganized US Airways Group, Inc. to
the ATSB, the Retirement Systems of Alabama Holdings LLC, or
RSA, US Airways Group's management and labor unions,
General Electric Capital Corporation and Bank of America, N.A.,
as well as to certain unsecured creditors of the filing
entities, including the Pension Benefit Guaranty Corporation, or
PBGC, in satisfaction of their allowed claims. Persons holding
equity in US Airways Group prior to March 31, 2003
were not entitled to any distribution for their equity holdings
under the 2003 plan of reorganization and their shares of common
stock were cancelled. For a complete discussion of the
distributions provided for under the 2003 plan of
reorganization, you should refer to the 2003 plan of
reorganization confirmed by the bankruptcy court on
March 18, 2003 and filed with the SEC on April 2, 2003
as an exhibit to US Airways Group's Current Report on
Form 8-K dated March 18, 2003.
On March 31, 2003, RSA invested $240 million in cash
in the reorganized US Airways Group pursuant to an
investment agreement, in exchange for approximately 36.2%, on a
fully diluted basis, of the equity in the reorganized
US Airways Group. As of March 31, 2003, in connection
with its investment, RSA was granted a voting interest of
approximately 71.6% in the reorganized
US Airways Group and became entitled to designate and
vote to elect eight of 15 directors to reorganized
US Airways Group's board of directors. See
notes 10 and 12(a) in the notes to US Airways
Group's consolidated financial statements included in this
prospectus for a summary of the equity structure following the
prior bankruptcy and related party transactions with RSA.
Chapter 11 Proceedings
In connection with and as a part of emergence from the prior
bankruptcy in 2003, US Airways Group undertook a thorough
review of its operations and significantly reduced its costs.
US Airways Group also reduced its mainline capacity,
realigned its network to maximize yield, initiated a business
plan to use more regional jets and procured financing for these
aircraft, and expanded its alliances with other carriers.
However, after emerging from the prior bankruptcy,
US Airways Group continued to incur substantial losses from
operations. The primary factors contributing to these losses
included the reduction in domestic industry unit revenue and
significant increases in fuel prices. The downward pressure on
domestic industry revenue is a result of the rapid growth of
low-fare, low-cost airlines, the increased transparency of fares
through Internet sources and other changes in fare structures
that have resulted in substantially lower fares for many
business and leisure travelers. The competitive environment
continued to intensify throughout 2004, particularly in key
markets such as Philadelphia, Washington, D.C., Boston and
New York.
Throughout the spring and summer of 2004, US Airways Group
communicated with key stakeholders and the public its plan to
transform US Airways, Inc. into a fully competitive and
profitable airline. US Airways Group referred to this plan
as the transformation plan. A key element of the transformation
plan was significant reductions in labor costs through changes
to US Airways Group's collective bargaining
agreements. US Airways Group aggressively sought the
necessary agreements to allow full implementation of the
transformation plan without the need for filing new
Chapter 11 cases but was unable to do so in a timely
manner. As a result of the recurring losses, declining available
cash and risk of defaults or cross defaults under certain key
financing and operating agreements, it was necessary for the
debtors to file voluntary petitions for reorganization under
Chapter 11 of the bankruptcy code on September 12,
2004.
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At hearings held on September 13, 2004, the bankruptcy
court granted US Airways Group's first day
motions for relief designed to stabilize its operations and
business relationships with customers, vendors, employees and
others, and entered orders granting permission to the debtors
to, among other things:
•
pay employee wages and continue certain benefits, such as
    medical and dental insurance;
•
honor prepetition obligations to customers and continue customer
    programs, including US Airways, Inc.'s Dividend Miles
    program;
•
pay for fuel under existing supply contracts, and honor existing
    fuel supply, distribution and storage agreements;
•
assume certain contracts related to interline agreements with
    other airlines;
•
pay prepetition obligations to certain foreign vendors, foreign
    service providers and foreign governments; and
•
continue maintenance of existing bank accounts and existing cash
    management systems.
The bankruptcy court also approved the interim agreement reached
between US Airways Group, the ATSB and the lenders under
the $1 billion loan, obtained upon emergence from the prior
bankruptcy and substantially guaranteed by the ATSB, to allow
US Airways Group continued use of the cash collateral
securing the loan. This agreement is discussed in more detail
below under "Financing during the Chapter 11
Proceedings."
Since filing for bankruptcy on September 12, 2004,
US Airways, Inc. has achieved cost-savings agreements with
all of its collective bargaining groups. Through a motion filed
under Section 1113(e) of the bankruptcy code on
September 24, 2004, US Airways, Inc. sought interim
relief from collective bargaining agreements with the Air Line
Pilots Association, or ALPA, the Association of Flight
Attendants-Communications Workers of America, or the AFA, the
Transport Workers Union, or the TWU, the Communications Workers
of America, or the CWA, and the International Association of
Machinists and Aerospace Workers, or the IAM. On
October 15, 2004, the bankruptcy court approved 21%
reductions to base rates of pay until February 15, 2005 or
until entry of an order approving a new collective bargaining
agreement or granting final relief under Section 1113(c) of
the bankruptcy code. The bankruptcy court also approved
reductions to pension contributions and certain work rule
changes. The interim relief order did not apply to TWU, whose
members reached and ratified collective bargaining agreements
that were approved by the bankruptcy court prior to the interim
relief going into effect. ALPA ratified its tentative agreement
with US Airways, Inc. in October 2004, and subsequent
bankruptcy court approval eliminated the need for interim relief
as to pilots. Tentative collective bargaining agreements with
the CWA and AFA were reached in December 2004 and were
subsequently ratified and approved by the bankruptcy court. On
January 6, 2005, the bankruptcy court approved
US Airways, Inc.'s request to reject all three IAM
collective bargaining agreements and approved the termination of
US Airways, Inc.'s three defined benefit plans. The
IAM subsequently ratified US Airways, Inc.'s
cost-savings proposals on January 21, 2005. As part of
these negotiations and subsequent ratifications, the two
remaining defined benefit pension plans for collectively
bargained groups were eliminated, and some groups had their
defined contribution pension plans reduced. In addition, the
bankruptcy court also approved a settlement agreement between
US Airways, Inc. and the court-appointed Section 1114
Committee, representing retirees other than those represented by
the IAM, for the significant curtailment of postretirement
medical benefits.
On November 12, 2004, US Airways, Inc. filed a motion
requesting a determination from the bankruptcy court that
US Airways, Inc. satisfied the financial requirements for a
"distress termination" of the Retirement Plan for
Flight Attendants in the Service of US Airways, Inc., or
the AFA pension plan, the Pension Plan for Employees of
US Airways, Inc. Who Are Represented by the International
Association of Machinists and Aerospace Workers, or the IAM
pension plan, and the Retirement Plan for Certain Employees of
US Airways, Inc., or the Certain Employees pension plan,
under section 4041(c)(2)(B)(ii)(IV) of the Employee
Retirement Income Security Act of 1974, as amended, or ERISA,
and approval of each such plan's termination. These plans
were projected to have benefit obligations aggregating
$2.7 billion and plan assets
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aggregating $1.7 billion as of September 30, 2004, the
most recent valuation date. On January 6, 2005, the
bankruptcy court entered an order (i) finding that the
financial requirements under section 4041(c)(2)(B)(ii)(IV)
of ERISA for a distress termination of the plans had been met
and (ii) approving termination of the plans. The AFA
pension plan and the IAM pension plan were terminated effective
January 10, 2005 by agreement between the PBGC and
US Airways Group. The Certain Employees pension plan
was terminated effective January 17, 2005 by agreement
between the PBGC and US Airways, Inc. Effective
February 1, 2005, the PBGC was appointed trustee for each
of the three plans.
Pursuant to the transformation plan and newly ratified
collective bargaining agreements, US Airways, Inc.
implemented voluntary furlough and termination programs across
several of its employee groups. In the first quarter of 2005,
US Airways Group recognized a $51 million charge
associated with termination payments and health care benefits
for approximately 2,300 employees participating in these
voluntary programs. The majority of employees expected to
participate in voluntary terminations notified US Airways,
Inc. by March 31, 2005.
In connection with the outsourcing of a portion of its aircraft
maintenance and certain fleet service operations, the closing of
its Pittsburgh reservation center, and the closing of certain
airport clubs and city ticket offices, US Airways, Inc.
involuntarily terminated or furloughed approximately 2,300
employees. In the first quarter of 2005, US Airways Group
recognized a $44 million charge associated with contractual
severance payments and healthcare benefits for those employees.
Notification for the majority of planned involuntary
terminations was completed in the first quarter of 2005.
In addition to the cost savings achieved with labor groups,
US Airways, Inc. also implemented pay and benefit
reductions for its current management and other non-union
employees, including reductions to base pay, elimination of jobs
and modifications to vacation and sick time accruals.
US Airways, Inc. also reduced the amount it contributes to
its defined contribution pension plans on behalf of employees
and implemented modifications to its retiree health benefits.
The pay rate and defined contribution plan reductions went into
effect October 11, 2004 and the reductions to retiree
medical benefits became effective March 1, 2005.
US Airways Group has reached agreements with certain of its
lessors and lenders restructuring existing aircraft lease and
debt financings. On December 17, 2004, the bankruptcy court
approved US Airways Group's agreements for the
continued use and operation of substantially all of its mainline
and Express fleet. US Airways Group reached a comprehensive
agreement with GE on aircraft leasing and financing and engine
services, which provided US Airways Group with short-term
liquidity, reduced debt, lower aircraft ownership costs,
enhanced engine maintenance services, and operating leases for
new regional jets. In June 2005, US Airways Group reached
an agreement with GE on the terms and conditions of an agreement
which amends and supplements certain provisions of the earlier
agreement and provides for additional agreements regarding rent
obligations under aircraft leases and the early redelivery of
certain aircraft. US Airways Group also reached agreements
with EMBRAER-Empresa Brasileira de Aeronautica SA and
Bombardier, Inc. providing for continued use and operation of
its aircraft, short term liquidity and new financing for
regional jets, which were approved by the bankruptcy court in
January 2005. Each of these agreements is discussed in detail
below in "US Airways Group Management's
Discussion and Analysis of Financial Condition and Results of
Operations — Liquidity and Capital Resources."
In connection with the merger, US Airways Group and America
West Holdings entered into a Memorandum of Understanding with
Airbus which includes, among other things, adjustments to the
delivery schedules for narrow-body and wide-body aircraft, a new
order for twenty A350 wide-body aircraft for which Airbus has
agreed to provide backstop financing for a substantial number of
aircraft, substantial elimination of cancellation penalties on
US Airways Group's existing order for ten A330-200
aircraft provided that New US Airways Group has met certain
predelivery payment obligations under the A350 order, and a term
loan of up to $250 million. Up to $175 million of the
term loan may be drawn down on US Airways Group's
emergence from bankruptcy, with the remainder expected to be
drawn down by June 30, 2006.
The debtors have notified all known potential creditors of the
Chapter 11 filing for the purposes of identifying and
quantifying all prepetition claims. Subject to certain
exceptions under the bankruptcy code, the Chapter 11 filing
automatically stayed the continuation of any judicial or
administrative proceedings or
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other actions against the debtors or their property to recover
on, collect or secure a claim arising prior to
September 12, 2004. The deadline for filing proofs of claim
with the bankruptcy court was February 3, 2005, with a
limited exception for governmental entities, which had until
March 11, 2005.
For the debtors to exit Chapter 11 successfully, the
bankruptcy court must issue an order confirming a plan of
reorganization. US Airways, Inc. filed a Chapter 11
plan of reorganization for each of the affiliated debtors on
[date], 2005, and as a result of this filing no other person or
party may file a different plan of reorganization prior to
October 31, 2005. This deadline could potentially be
extended. The plan of reorganization would, among other things,
establish a framework for the treatment of prepetition
obligations, contemplate the completion of the merger, set forth
a revised capital structure and establish the corporate
governance for US Airways Group following the merger and
subsequent to emergence from bankruptcy. US Airways Group
is currently working towards emerging from Chapter 11 no
later than October 31, 2005, but that timing is dependent
upon, among other things, the timely confirmation of a plan of
reorganization. The final amount of the total value used to pay
creditors will not be determined until confirmation of a plan of
reorganization. No assurance can be given as to what values, if
any, will be ascribed in the Chapter 11 cases to these
creditors or what type or amount of distributions, if any, they
would receive. The plan of reorganization is expected to result
in holders of US Airways Group's common stock
receiving no distribution on account of their interests as well
as cancellation of their existing stock.
Financing During the Chapter 11 Proceedings
As part of its reorganization under the prior bankruptcy,
US Airways, Inc. received a $900 million loan
guarantee under the Air Transportation Safety and System
Stabilization Act from the ATSB in connection with a
$1 billion term loan financing, which is sometimes referred
to in this prospectus as the ATSB loan. As of March 31,
2005, the outstanding principal amount of the ATSB loan was
$712 million. In connection with the September 12,
2004 Chapter 11 filing, the ATSB and the lenders under the
ATSB loan agreed to allow US Airways Group to continue to
use cash collateral securing the ATSB loan on an interim basis.
US Airways Group has access to the cash collateralizing the
ATSB loan as working capital, subject to certain on-going
conditions and limitations. As a result, US Airways Group
has been able to use this cash instead of obtaining debtor in
possession financing. This interim agreement was approved by the
bankruptcy court on September 13, 2004 as part of the first
day motions, and was scheduled to expire on October 15,
2004. The bankruptcy court approved two subsequent agreements
extending US Airways Group's ability to use the cash
collateral, including an agreement approved on January 13,
2005 extending US Airways Group's use of cash
collateral through June 30, 2005, subject to certain
conditions and limitations. Under the current agreement, which
is referred to in this prospectus as the ATSB cash collateral
agreement, US Airways Group may continue to access this
cash collateral to support daily operations so long as it
maintains an agreed upon minimum amount of cash on hand each
week. The amount declines from approximately $500 million
at the end of January to $341 million on June 30,
2005. US Airways Group reached agreement with the ATSB
concerning an interim extension to the ATSB cash collateral
agreement while US Airways Group and America West Holdings
work to finalize the post-merger terms of both loans. The
interim agreement will expire on July 29, 2005 and will
require US Airways Group, among other conditions, to
maintain a weekly minimum unrestricted cash balance of
$325 million. See the section entitled "Liquidity and
Capital Resources" in "US Airways Group
Management's Discussion and Analysis of Financial Condition
and Results of Operations" for a complete discussion on
US Airways Group's financing while in Chapter 11.
Efforts to Implement the Transformation Plan
US Airways Group undertook substantial efforts to implement
its transformation plan, which was built on several aspects of
proven success in the airline industry. Specifically,
US Airways Group has undertaken the following initiatives:
•
Lower labor costs. These include decreased rates of pay and
    benefits, increased productivity, as well as a narrowing of the
    scope of work that must be performed under union contracts.
    US Airways, Inc. has achieved significant productivity
    enhancements with its internal workforce, particularly its
    pilots and flight attendants, through significant changes to
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longstanding work rules. In addition, US Airways, Inc.
    obtained scope of work changes that allowed for significant
    outsourcing to competitive third party providers of work
    formerly performed internally, particularly in the areas of
    passenger reservations, aircraft cleaning and aircraft heavy
    maintenance.
•
Lower, simplified pricing and lower distribution costs.
    US Airways, Inc. has already taken steps to simplify its
    fares by introducing its GoFares pricing plan in many markets
    served from Philadelphia, Washington, D.C., and
    Fort Lauderdale, and has stated its intent to expand that
    pricing plan across its system in conjunction with achieving
    lower costs. A redesigned website and more airport technology
    will also lower distribution costs, enhance customer service and
    improve airport processing.
•
Enhanced low-cost product offering. US Airways Group
    customers will continue to benefit from a combination of product
    offerings that is unique among low-cost carriers, including
    two-class service, international flights to Canada, the
    Caribbean, Latin America and Europe, service to airports that
    business travelers prefer, access to a global network via the
    Star Alliance, a premium frequent flyer program and competitive
    onboard service.
•
Network enhancements. Leveraging its strong positions in major
    Northeast markets, US Airways, Inc. intends to use its
    airport slot and facilities assets to offer nonstop service to
    more major business and leisure destinations. Pittsburgh is no
    longer a hub and service has been reduced in accordance with
    previously announced operational changes. Fort Lauderdale
    is being expanded to handle additional Latin America service.
    Operations at Charlotte have been expanded, and new routes from
    Washington Ronald Reagan National Airport have been introduced.
    In addition, changes are being made to the scheduling practices
    at Philadelphia to improve reliability, adding new destinations
    in the Caribbean and Latin America as well as seasonal service
    to Barcelona, Spain and Venice, Italy introduced in May 2005.
•
Lower unit operating costs. In conjunction with more
    point-to-point flying, US Airways, Inc. is flying its fleet
    more hours per day than formerly as it decreases the time
    aircraft sit on the ground at hubs, waiting for connecting
    passengers. Productivity increases have been gained through this
    more efficient scheduling in conjunction with the contractual
    labor changes.
Airline Industry and US Airways Group's Position in
the Marketplace
Most of the markets in which US Airways Group's
airline subsidiaries and affiliates operate are highly
competitive. These airline subsidiaries and affiliates compete
to varying degrees with other air carriers and with other forms
of transportation. US Airways, Inc. competes with at least
one major airline on most of its routes between major cities.
Airlines, including US Airways Group, typically use
discount fares and other promotions to stimulate traffic during
normally slack travel periods to generate cash flow and to
maximize revenue per available seat mile. Discount and
promotional fares are often non-refundable and may be subject to
various restrictions such as minimum stay requirements, advance
ticketing, limited seating and change fees.
US Airways Group has often elected to match discount
or promotional fares initiated by other air carriers in certain
markets in order to compete in those markets. Competition
between air carriers also involves certain route structure
characteristics, such as flight frequencies, availability of
nonstop flights, markets served and the time certain flights are
operated. To a lesser extent, competition can involve other
products, such as frequent flyer programs and airport clubs.
US Airways Group considers the growth of low-fare low-cost
competition to be its foremost competitive threat. Recent years
have seen the entrance and growth of low-fare low-cost
competitors in many of the markets in which
US Airways Group's airline subsidiaries and
affiliates operate. These competitors, based on low costs of
operations and low-fare structures, include Southwest Airlines,
AirTran Airways and JetBlue Airways. Southwest Airlines has
steadily increased operations within the Eastern United States
since first offering service in this region in late 1993. In May
2004, Southwest began service at the Philadelphia International
Airport, a hub airport for US Airways, Inc. Southwest also
began service from Pittsburgh International Airport, a former
hub, in May 2005. AirTran and JetBlue also have growing
presences in the
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Eastern United States. In January 2005, Delta Air Lines, Inc.
announced a broad low-fare pricing scheme. US Airways Group
anticipates the continued growth of low-fare competition in the
industry in the future.
A substantial portion of the flights of US Airways
Group's airline subsidiaries and affiliates are to or from
cities in the Eastern United States. Accordingly, severe
weather, air traffic control problems and downturns in the
economy in the Eastern United States adversely affect
US Airways Group's results of operations and financial
condition. With their concentration in the Eastern United
States, the airline subsidiaries' and affiliates'
average stage length, or trip distance, is shorter than those of
other major airlines. This makes US Airways Group more
susceptible than other major airlines to competition from
surface transportation, such as automobiles and trains. The
increased airport security charges and procedures have also had
a disproportionate impact on short-haul travel, which
constitutes a significant portion of flying for US Airways
Group's airline subsidiaries and affiliates. Additional
terrorist attacks or fear of these attacks, even if not made
directly on the airline industry, including elevated national
threat warnings, negatively affect US Airways Group and the
airline industry.
In recent years, US Airways Group's profitability was
significantly eroded by competitive pressures, including the
incursion of regional jets, the expansion of low-fare low-cost
carriers and the entry of additional carriers into its operating
territories, including key focus cities and hubs; unfavorable
economic trends; and rising fuel and labor costs. The May 2000
proposed merger of United Airlines and US Airways Group was
designed to address this profitability erosion by adding
US Airways Group into a global network. During the period
in which the merger was pending, US Airways Group was
effectively precluded from restructuring its operations as a
stand-alone carrier. That period ended in the termination of the
merger agreement in late July 2001 after the merger failed to
receive approval from the U.S. Department of Justice.
Following the merger termination, US Airways Group embarked
on a phased, stand-alone restructuring plan to address the
problems facing its airline subsidiaries and affiliates;
however, this plan was preempted almost immediately by the
September 11th terrorist attacks, which were then followed
by the filing for Chapter 11 in the prior bankruptcy in
August 2002.
Marketing Agreements with Other Airlines
US Airways, Inc. has entered into a number of bilateral and
multilateral alliances with other airlines to provide customers
with more choices and to access markets worldwide that
US Airways Group does not serve directly. In May 2004,
US Airways, Inc. joined the Star Alliance, the world's
largest airline alliance, with 16 member airlines serving 795
destinations in 139 countries. Membership in the Star Alliance
further enhances the value of US Airways Group's
domestic and international route network by allowing customers
access to the global marketplace. Expanded benefits for
customers include network expansion through code share service,
benefits under US Airways Inc.'s frequent traveler
program, Dividend Miles, airport lounge access, convenient
single-ticket pricing, and one-stop check-in and coordinated
baggage handling.
US Airways, Inc. also has comprehensive marketing
agreements with United Airlines, a member of the Star Alliance,
which began in July 2002. United Airlines, as well as its parent
company, UAL Corporation, and certain of its affiliates, filed
for protection under Chapter 11 of the bankruptcy code on
December 9, 2002. United Airlines immediately requested
bankruptcy court authority to assume these agreements and the
court granted United Airlines' request. US Airways,
Inc. also has marketing agreements with Lufthansa, Spanair, bmi
and other Star Alliance carriers, as well as with several
smaller regional carriers in the Caribbean operating
collectively as the GoCaribbean Network.
Industry Regulation and Airport Access
US Airways Group's airline subsidiaries operate under
certificates of public convenience and necessity or commuter
authority issued by the U.S. Department of Transportation,
or the DOT. The DOT may alter, amend, modify or suspend these
certificates if the public convenience and necessity so require,
or may revoke the certificates for failure to comply with the
terms and conditions of the certificates. Airlines are also
regulated by the U.S. Federal Aviation Administration, or
the FAA, a division of the DOT, primarily in the areas of flight
operations, maintenance, ground facilities and other technical
matters. Pursuant to these
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regulations, US Airways Group's airline subsidiaries
have FAA-approved maintenance programs for each type of aircraft
they operate that provide for the ongoing maintenance of these
aircraft, ranging from periodic routine inspections to major
overhauls. From time to time, the FAA issues airworthiness
directives and other regulations affecting US Airways
Group's airline subsidiaries or one or more of the aircraft
types they operate. In recent years, for example, the FAA has
issued or proposed these mandates relating to, among other
things, enhanced ground proximity warning systems, fuselage
pressure bulkhead reinforcement, fuselage lap joint inspection
rework, increased inspections and maintenance procedures to be
conducted on certain aircraft, increased cockpit security, fuel
tank flammability reductions and domestic reduced vertical
separation.
The DOT allows local airport authorities to implement procedures
designed to abate special noise problems, provided that these
procedures do not unreasonably interfere with interstate or
foreign commerce or the national transportation system. Certain
locales, including Boston, Washington, D.C., Chicago,
San Diego and San Francisco, among others, have
established airport restrictions to limit noise, including
restrictions on aircraft types to be used and limits on the
number of hourly or daily operations or the time of these
operations. In some instances these restrictions have caused
curtailments in services or increases in operating costs and
these restrictions could limit the ability of US Airways,
Inc. to expand its operations at the affected airports.
Authorities at other airports may consider adopting similar
noise regulations.
The airline industry is also subject to increasingly stringent
federal, state and local laws protecting the environment. Future
regulatory developments and actions could affect operations and
increase operating costs for the airline industry, including
US Airways Group's airline subsidiaries.
US Airways Group's airline subsidiaries are obligated
to collect a federal excise tax on domestic and international
air transportation, commonly referred to as the ticket tax.
US Airways Group's airline subsidiaries collect these
taxes, along with certain other U.S. and foreign taxes and user
fees on air transportation, and pass through the collected
amounts to the appropriate governmental agencies. Although these
taxes are not operating expenses of US Airways Group,
they represent an additional cost to
US Airways Group's customers.
The Aviation Security Act was enacted in November 2001. Under
the Aviation and Transportation Security Act, substantially all
aspects of civil aviation passenger security screening were
federalized and a new TSA, under the DOT was created. TSA was
then transferred to the Department of Homeland Security pursuant
to the Homeland Security Act of 2002. The Aviation and
Transportation Security Act, among other matters, mandates:
•
improved flight deck security;
•
carriage at no charge of federal air marshals;
•
enhanced security screening of passengers, baggage, cargo, mail,
    employees and vendors;
•
enhanced security training;
•
fingerprint-based background checks of all employees and vendor
    employees with access to secure areas of airports pursuant to
    regulations issued in connection with the Aviation and
    Transportation Security Act; and
•
the provision of passenger data to U.S. Customs.
Funding for TSA is provided, in part, by a fee collected by air
carriers from their passengers of $2.50 per flight segment,
but not more than $10.00 per round trip. From time to time,
legislation is proposed to increase this fee. Implementation of
the requirements of the Aviation and Transportation Security Act
have resulted and will continue to result in increased costs for
US Airways Group and its passengers and has and will likely
continue to result in service disruptions and delays.
Most major U.S. airports impose passenger facility charges.
The ability of airlines to contest increases in these charges is
restricted by federal legislation, DOT regulations and judicial
decisions. Legislation enacted in 2000 permitted airports to
increase passenger facility charges effective April 1,
2001. With certain
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exceptions, air carriers pass these charges on to passengers.
However, the ability of US Airways Group to pass-through
security fees and passenger facility charges to its customers is
subject to various factors, including market conditions and
competitive factors.
The FAA has designated John F. Kennedy International Airport,
LaGuardia Airport and Ronald Reagan Washington National Airport
as "high-density traffic airports" and has limited the
number of departure and arrival slots available to air carriers
at those airports. In April 2000, legislation was enacted that
eliminates slot restrictions in 2007 at LaGuardia Airport and
Kennedy Airport. Among other things, the legislation encouraged
the development of air service to smaller communities from
slot-controlled airports. During the interim period while slot
restrictions remained in effect at LaGuardia Airport, airlines
could apply for slot exemptions to serve smaller communities
using aircraft with a maximum seating capacity of less than 71.
In connection with this legislation, US Airways Group and
several other airlines increased service from LaGuardia Airport,
which led to excessive flight delays. In response to these
delays, the FAA implemented a slot lottery system in December
2000 limiting the number of new flights at LaGuardia Airport. As
a result, several airlines, including US Airways Group,
were required to reduce the number of flights added at LaGuardia
Airport in connection with this legislation. The resulting
allocation of slots from the slot lottery system was initially
scheduled to expire on September 15, 2001, but on
August 3, 2001, the FAA announced an extension until
October 26, 2002. On July 8, 2002, the FAA announced
another extension until October 30, 2004, and subsequently
announced a further extension through October 30, 2005. As
a result of the 2007 slot elimination, the FAA has indicated an
intent to rethink its approach to regulating operations at
LaGuardia Airport. Several proposals, including auctions,
congestion pricing and other market-based solutions, are being
considered along with more traditional regulatory approaches.
At Washington Ronald Reagan National Airport an additional
eleven roundtrips were awarded by the DOT, pursuant to the
Vision 100–Century of Aviation Reauthorization Act, which
created additional slots for distribution by the DOT. Although
US Airways, Inc. participated in the proceeding and was
awarded slots, most of the slots were awarded to new entrant
carriers.
Where the FAA has seen congestion and delay increases, it has
stepped in and worked with the carriers to freeze operations at
current or somewhat reduced levels. Specifically, incumbent
carriers, including US Airways, Inc., are not permitted to
increase operations at Chicago O'Hare Airport as a result
of an agreement reached between the FAA and these airlines in
August 2004. This agreement has been extended through the Fall
2005. Currently, a rulemaking on extending the agreement with
some modifications is underway at the FAA. US Airways, Inc.
has actively participated in the rulemaking. A broader
rulemaking to address congestion at other crowded airports could
be forthcoming sometime in 2005 or 2006.
The availability of international routes to domestic air
carriers is regulated by agreements between the U.S. and foreign
governments. Changes in U.S. or foreign government aviation
policy could result in the alteration or termination of these
agreements and affect US Airways, Inc.'s international
operations.
Employees
As of March 31, 2005, US Airways Group and its
subsidiaries employed approximately 30,700 active employees, or
28,600 employees on a full-time equivalent basis.
US Airways, Inc. employed approximately 25,200 active
employees including approximately 8,000 station personnel, 5,300
flight attendants, 4,000 mechanics and related employees, 3,000
pilots, 1,500 reservations personnel and 3,400 personnel in
administrative and miscellaneous job categories. US Airways
Group's remaining subsidiaries employed 5,500 employees
including approximately 3,000 station personnel, 1,000 pilots,
550 flight attendants, 450 mechanics and related employees and
500 personnel in administrative and miscellaneous job categories.
As of March 31, 2005, approximately 80% of US Airways
Group's active employees were covered by collective
bargaining agreements with various labor unions.
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The status of US Airways, Inc.'s labor agreements with
its major employee groups as of March 31, 2005 is as
follows:
Union (1)
Class or Craft
Employees (2)
Date Contract Amendable
ALPA
Pilots
3,000
12/31/09
IAMAW
Mechanics and related employees
4,000
12/31/09
IAMAW
Fleet service employees
4,500
12/31/09
CWA
Passenger service employees
5,000
12/31/11
AFA
Flight attendants
5,300
12/21/11
TWU
Dispatchers and other
200
12/31/09 & 12/31/11
(1)
ALPA
Air Line Pilots Association
IAMAW
International Association of Machinists and Aerospace Workers
CWA
Communications Workers of America
AFA
Association of Flight Attendants-Communications Workers of
    America
TWU
Transport Workers Union
(2)
Approximate number of active employees covered by the contract.
Aviation Fuel
Aviation fuel is typically US Airways Group's second
largest expense. Because the operations of the airline are
dependent upon aviation fuel, increases in aviation fuel costs
could materially and adversely affect liquidity, results of
operations and financial condition. The following table shows
US Airways Group's aircraft fuel consumption and costs
for 2002-2004:
Average
Aviation fuel
Percentage of Total
Gallons
price
expense (1)
Operating
Year
(in millions)
per gallon (1)
(in millions)
Expenses
2004
973
$
1.129
$
1,099
14.7
%
2003
936
0.887
830
11.7
%
2002
1,047
0.747
782
9.4
%
(1)
Includes fuel taxes and the impact of fuel hedges.
For the first quarter of 2005, the average price per gallon
increased to $1.480, and aviation fuel as a percentage of total
operating expenses was 20.1%.
Prices and availability of all petroleum products are subject to
political, economic and market factors that are generally
outside of US Airways Group's control. Accordingly,
the price and availability of aviation fuel, as well as other
petroleum products, can be unpredictable. Prices may be affected
by many factors, including:
•
the impact of political instability on crude production,
    especially in Russia and OPEC countries;
•
unexpected changes to the availability of petroleum products due
    to disruptions in distribution systems or refineries;
•
unpredicted increases to oil demand due to weather or the pace
    of economic growth;
•
inventory levels of crude, refined products and natural
    gas; and
•
other factors, such as the relative fluctuation between the
    U.S. dollar and other major currencies and influence of
    speculative positions on the futures exchanges.
To reduce the exposure to changes in fuel prices,
US Airways Group periodically enters into certain fixed
price swaps, collar structures and other similar derivative
contracts. US Airways Group's current financial
position and credit rating negatively affect its ability to
hedge fuel in the future. See the section entitled
"US Airways Group Management's Discussion
and Analysis of Financial Condition and Results of
Operations — Selected Operating and Financial
Statistics" for additional information related to aviation
fuel.
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Airline Ticket Distribution
The now common usage of electronic tickets within North America,
and its rapid expansion in Europe and the rest of the world, has
allowed for the streamlining of processes and the increased
efficiency of customer servicing and support. US Airways
Group began to support the issuance of electronic tickets in
1996. During 2004, electronic tickets represented 96% of all
tickets issued to customers flying US Airways, Inc. The
addition of a $50 surcharge to most customers requiring paper
tickets has allowed US Airways Group to continue to
support the exceptional requests, while offsetting any cost
variance associated with the issuance and postal fulfillment of
paper tickets. Airlines based in North America have recently
proposed a requested mandate that airlines move to 100%
electronic ticketing over the next few years, which will only
serve to enhance customer service and control costs for
ticketing services supported by the airline and distribution
partners.
The shift of consumer bookings from traditional travel agents,
airline ticket offices and reservation centers to online travel
agent sites, such as Orbitz, Travelocity, Expedia and others, as
well as airline direct websites, such as usairways.com,
continues to grow within the industry. Historically, traditional
and online travel agencies used Global Distribution Systems, or
GDSs, such as Sabre, to obtain their fare and inventory data
from airlines. Bookings made through these agencies result in a
fee, referred to as the GDS fee, that is charged to the airline.
Bookings made directly with the airline, through its reservation
call centers or website, do not incur a GDS fee. The growth of
the airline direct websites and travel agent sites that connect
directly to airline host systems, effectively by-passing the
traditional connection via GDSs, helps US Airways Group
reduce distribution costs from the channels of distribution on
the internet. In the first quarter of 2005, US Airways,
Inc. received over 33% of its sales from internet sites.
US Airways, Inc.'s direct website, usairways.com,
comprised over 13% of its sales, while the rest of the internet
sites accounted for the remaining 20% of its sales.
Due to the continued pressure on legacy airlines to lower
distribution fees more aggressively than anytime in the past in
order to compete with low-cost airlines, many
"newcomers" have entered the distribution industry.
New low-cost GDSs, such as ITA Software, G2 Switchworks,
Navitaire and others, are providing airlines with alternative
economic models to do business with traditional travel agents.
These new low-cost GDSs substantially reduce the fees charged to
airlines by this distribution channel.
In an effort to further reduce distribution costs through
internal channels, US Airways, Inc. and other airlines have
instituted service fees for interaction in channels requiring
specialized service such as reservation call centers
($5.00 per ticket), Airline Ticket Offices ($10.00 per
ticket) and City Ticket Offices ($10.00 per ticket), while
continuing to offer free service via the airlines'
websites. The goals of these service fees are to reduce the cost
to provide customer service as required by the traveler and
promote the continued goal of shifting customers to
US Airways Inc.'s lowest cost distribution channel,
usairways.com. For the first quarter of 2005, internal channels
of distribution account for approximately 24% of all
US Airways Group sales.
In July 2004, the DOT eliminated most of its regulations
governing GDSs. Airlines and GDSs continue to have open dialogue
regarding possible cost savings.
Frequent Traveler Program
US Airways, Inc. operates a frequent traveler program known
as Dividend Miles under which participants earn mileage credits
for each paid flight segment on US Airways, Inc.,
US Airways Shuttle, US Airways Express, Star Alliance
carriers, and certain other airlines that participate in the
program. Participants flying on First Class or Envoy class
tickets receive additional mileage credits. Participants can
also receive mileage credits through special promotions
periodically offered by US Airways, Inc. and may also earn
mileage credits by utilizing certain credit cards and purchasing
services from various non-airline partners. Mileage credits can
be redeemed for various free, discounted, or upgraded travel
awards on US Airways, Inc., Star Alliance carriers or other
participating airlines.
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US Airways, Inc. and the other participating airline
partners limit the number of seats allocated per flight for
award recipients by using various inventory management
techniques. Award travel for all but the highest-level Dividend
Miles participants is generally not permitted on blackout dates,
which correspond to certain holiday periods or peak travel
dates. US Airways, Inc. reserves the right to terminate
Dividend Miles or portions of the program at any time. Program
rules, partners, special offers, blackout dates, awards and
requisite mileage levels for awards are subject to change.
Insurance
US Airways Group and its subsidiaries maintain
insurance of the types and in amounts deemed adequate to protect
themselves and their property. Principal coverage includes:
•
liability for injury to members of the public, including
    passengers;
•
damage to property of US Airways Group, its
    subsidiaries and others;
•
loss of or damage to flight equipment, whether on the ground or
    in flight;
•
fire and extended coverage;
•
directors and officers;
•
fiduciary; and
•
workers' compensation and employer's liability.
In addition to customary deductibles, US Airways Group
self-insures for all or a portion of its losses from claims
related to environmental liabilities and medical insurance for
employees.
Since September 11, 2001, US Airways Group and other
airlines have been unable to obtain coverage for liability to
persons other than employees and passengers for claims resulting
from acts of terrorism, war or similar events, referred to as
war risk coverage, at reasonable rates from the commercial
insurance market. US Airways, Inc. has, as have most other
U.S. airlines, therefore purchased its war risk coverage
through a special program administered by the FAA. The Emergency
Wartime Supplemental Appropriations Act extended this insurance
protection until August 2005. The Secretary of Transportation
may extend this policy until December 31, 2005. If the
federal insurance program terminates, US Airways Group
would likely face a material increase in the cost of war risk
coverage, and because of competitive pressures in the industry,
US Airways Group's ability to pass this additional
cost to passengers would be limited.
There can be no assurances that US Airways Group can
maintain insurance coverages and costs at its current levels.
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Properties
Flight Equipment
As of March 31, 2005, US Airways, Inc. operated the
following jet and regional jet aircraft:
Average Seat
Average
Type
Capacity
Age (years)
Owned (1)
Leased (2)
Total
Airbus A330
266
4.6
9
—
9
Boeing 767-200ER
203
15.8
4
6
10
Boeing 757-200
193
14.4
—
31
31
Airbus A321
169
3.8
20
8
28
Boeing 737-400
144
15.1
3
42
45
Airbus A320
142
5.4
11
13
24
Boeing 737-300
126
18.0
7
61
68
Airbus A319
120
5.2
15
49
64
11.2
69
210
279
EMB-170
72
0.7
10
15
25
(1)
All owned aircraft are pledged as collateral for various secured
    financing agreements.
(2)
The terms of the leases expire between 2005 and 2023.
As of March 31, 2005, US Airways Group's wholly
owned regional airline subsidiaries operated the following
turboprop and regional jet aircraft:
Average Seat
Average
Type
Capacity
Age (years)
Owned
Leased (1)
Total
CRJ-700
70
0.4
8
6
14
CRJ-200
50
1.0
21
14
35
De Havilland Dash 8-300
50
13.2
—
12
12
De Havilland Dash 8-100
37
14.8
30
9
39
De Havilland Dash 8-200
37
7.5
—
9
9
7.2
59
50
109
(1)
The terms of the leases expire between 2005 and 2021.
As of March 31, 2005, US Airways Group had 19
A320-family aircraft on firm order with Airbus scheduled for
delivery in the years 2008 through 2010. US Airways Group
also had ten A330-200 aircraft on firm order with Airbus
scheduled for delivery in the years 2008 and 2009. Subsequently,
a Memorandum of Understanding was executed on May 18, 2005
between Airbus, US Airways Group, US Airways, Inc. and
America West Airlines, Inc. which, in addition to providing for
a $250 million line of credit from Airbus upon the
satisfaction of various conditions precedent (including the
completion of the merger and the emergence of US Airways,
Inc. from bankruptcy), provides for the rescheduling of
US Airways Inc.'s A320-family and A330-200 delivery
commitments, and an order for 20 A350 aircraft, for which
Airbus has agreed to provide a backstop financing for a
substantial number of aircraft, subject to certain terms and
conditions. Under the Airbus Memorandum of Understanding,
US Airways Inc.'s A320-family aircraft will be
rescheduled for delivery in 2009 and 2010, with US Airways
Inc.'s A330-200 aircraft orders rescheduled for delivery in
2009 and 2010. The new A350 aircraft deliveries are currently
scheduled to occur during the period 2011 through 2013. The
Airbus MOU also eliminates cancellation penalties on US Airways
Group's orders for the ten A330-200 aircraft, provided that
New US Airways Group has met certain predelivery
payment obligations under the A350 order.
Pursuant to the regional jet leasing term sheet of the GE Master
Memorandum of Understanding approved by the bankruptcy court on
December 17, 2004, General Electric Capital Corporation,
referred to as GECC, or its affiliates agreed to provide lease
financing for up to 31 regional jet aircraft, consisting of 70-
to
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100-seat regional jet aircraft manufactured by Bombardier and/or
Embraer in a mix and subject to other terms to be agreed
mutually by GECC and US Airways, Inc. Under the Master
Memorandum of Understanding, GECC leased six Bombardier CRJ-700s
to US Airways, Inc. in the first quarter of 2005 with terms
expiring on the earlier of US Airways Group's
emergence from Chapter 11 and June 30, 2005, which
leases will be converted to long-term leases. Subsequent to
closing on the six Bombardier CRJ-700 aircraft, GECC and
US Airways Group agreed, pursuant to a Merger Memorandum of
Understanding approved by the bankruptcy court on June 23,
2005, to eliminate the obligation of GECC to provide the
remaining regional jet financing directly to US Airways
Group, although GE agreed to provide single investor and
operating lease financing to Republic Airways for the three
EMB-170 aircraft already on order, and for ten EMB-170/190/195
aircraft for delivery to acceptable third-party carriers, which
aircraft will be flown by those carriers for the benefit of
US Airways Group.
In December 2004, US Airways Group reached aircraft leasing
and financing agreements with Embraer and Bombardier, which were
approved by the bankruptcy court in January 2005. Pursuant to
the agreement reached with Embraer, US Airways, Inc.
purchased and took delivery of three EMB-170 aircraft in January
2005 and endeavored to purchase and take delivery of three
additional EMB-170 aircraft by March 31, 2005.
US Airways, Inc. did not take delivery of the second three
aircraft in March 2005. As a result, damages accrue from and
after April 1, 2005 until the delivery of the aircraft at
the rate of $162,795 per month per aircraft. If the
aircraft are not delivered by July 31, 2005, Embraer's
obligation to deliver these aircraft will terminate and its
damages with respect to the undelivered aircraft may be as much
as $10 million for all three aircraft (rather than at the
rate of $162,795 per month per aircraft), with Embraer
having the right to apply any remaining purchase deposits
against Embraer's aggregate damages. US Airways Group
is currently working to arrange financing for these aircraft,
and has secured GE's agreement to provide that financing
under the Merger Memorandum of Understanding.
Under the agreement reached with Bombardier, US Airways
Group acquired three new CRJ-700 aircraft in January 2005. The
purchase was financed through the application of
$28 million of existing purchase deposits held by
Bombardier, $2 million in cash and a financed lease
facility with DVB Bank AG. Additionally,
$4 million of existing purchase deposits held by Bombardier
were used to satisfy existing defaults and cure payments. So
long as US Airways Group continues to operate under the
protection of Chapter 11 in compliance with the bankruptcy
code, no obligations will arise on the part of
US Airways Group or Bombardier with respect to the
purchase and delivery of any aircraft.
US Airways Group maintains inventories of spare
engines, spare parts, accessories and other maintenance supplies
sufficient to meet its operating requirements.
As of March 31, 2005, US Airways Group owned or
leased the following aircraft that were not considered part of
its operating fleet presented in the tables above. These
aircraft were either parked at storage facilities or, as shown
in the far right column, leased or subleased to third parties or
related parties.
Average
Leased/
Type
Age (years)
Owned
Leased
Total
Subleased
De Havilland Dash 8
14.8
3
—
3
—
Douglas DC-9-30
24.3
6
—
6
6
9
—
9
6
As discussed in "Overview" above, US Airways Inc.
has code share agreements in the form of capacity purchase
agreements with certain US Airways Express regional jet
affiliate operators. Collectively, these regional jet affiliate
operators flew 107 50-seat regional jet aircraft as part of
US Airways Express as of March 31, 2005.
US Airways, Inc. is a participant in the Civil Reserve Air
Fleet, a voluntary program administered by the Air Mobility
Command. The General Services Administration of the
U.S. government requires that airlines participate in Civil
Reserve Air Fleet in order to receive U.S. government
business. US Airways, Inc.'s commitment under Civil
Reserve Air Fleet is to provide up to its entire widebody fleet
of ten 767-200ER aircraft and nine A330-300 aircraft in support
of military missions. US Airways, Inc. is reimbursed at
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compensatory rates when aircraft are activated under Civil
Reserve Air Fleet. US Airways, Inc. is reimbursed during
peacetime proportionally to its commitment.
US Airways Inc.'s 767-200ER aircraft are committed to
the Aeromed Program of the Civil Reserve Air Fleet. Under this
program, the aircraft are converted to flying hospitals for
transportation of injured troops. US Airways, Inc., Delta
Air Lines and United Airlines are participants in the Aeromed
Program. Participation in this program provides increased
U.S. government revenues for US Airways Inc. Since the
Civil Reserve Air Fleet activation of 2003, US Airways,
Inc. has not provided "voluntary" lift to Air Mobility
Command, due to operational limitations.
Ground Facilities
US Airways, Inc. leases the majority of its ground
facilities, including:
•
executive and administrative offices in Arlington, Virginia near
    Washington Ronald Reagan National Airport;
•
its principal operating, overhaul and maintenance bases at the
    Pittsburgh International Airport and Charlotte/ Douglas
    International Airports;
•
training facilities in Pittsburgh and Charlotte;
•
central reservations offices in Pittsburgh and Winston-Salem,
    North Carolina; and
•
line maintenance bases and local ticket, cargo and
    administrative offices throughout its system.
US Airways, Inc. owns a training facility in Winston-Salem
and previously owned a reservation facility in Orlando. The
Orlando facility was closed on January 10, 2003 and was
sold in May 2005. The Pittsburgh reservations call and service
center will be closed in 2005 and consolidated into one location
in Winston-Salem.
Terminal Construction Projects
US Airways Group uses public airports for its flight
operations under lease arrangements with the government entities
that own or control these airports. Airport authorities
frequently require airlines to execute long-term leases to
assist in obtaining financing for terminal and facility
construction. Any future requirements for new or improved
airport facilities and passenger terminals at airports at which
US Airways Group operates could result in additional
expenditures and long-term commitments.
In 1998, US Airways, Inc. reached an agreement with the
Philadelphia Authority for Industrial Development and the City
of Philadelphia to construct a new international terminal and a
new US Airways Express terminal at the Philadelphia
International Airport, one of US Airways Group's
connecting hubs and US Airways, Inc.'s principal
international gateway. The international terminal includes 12
gates for widebody aircraft and new federal customs and
immigration facilities. The international terminal gates were
put into operation in May 2003 and the ticket lobby opened in
September 2003. The US Airways Express facility, completed
in June 2001, can accommodate 38 regional aircraft.
Legal Proceedings
On September 12, 2004, the debtors filed voluntary
petitions for relief under Chapter 11 of the bankruptcy
code in the United States bankruptcy court for the Eastern
District of Virginia, Alexandria Division (Case Nos.
04-13819-SSM through 03-13823-SSM). Each of the debtors
continues to operate its business and manage its property as a
debtor in possession pursuant to Sections 1107 and 1108 of
the bankruptcy code. As a result of the current Chapter 11
filing, attempts to collect, secure or enforce remedies with
respect to prepetition claims against the debtors are subject to
the automatic stay provisions of Section 362(a) of the
bankruptcy code.
On February 26, 2004, a company called I.A.P. Intermodal,
LLC filed suit against US Airways Group and its wholly
owned airline subsidiaries in the United States District Court
for the Eastern District of Texas
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alleging that the defendants' computer scheduling system
infringes upon three patents held by plaintiffs, all of which
patents are entitled, "Method to Schedule a Vehicle in
Real-Time to Transport Freight and Passengers." Plaintiff
seeks various injunctive relief as well as costs, fees and
treble damages. US Airways Group and its subsidiaries were
formally served with the complaint on June 21, 2004.
US Airways Group is unable to ascertain at this time the
likelihood or potential scale of liability. On the same date,
the same plaintiff filed what US Airways Group
believes to be substantially similar cases against nine other
major airlines, including British Airways, Northwest Airlines
Corporation, Korean Airlines Co., Ltd., Deutsche Lufthansa AG,
Air France, Air Canada, Singapore Airlines Ltd., Delta Air Lines
and Continental Airlines, Inc., and had filed a suit against the
parent company of American Airlines in December 2003. This
action was stayed as to US Airways Group and its wholly
owned subsidiaries as a result of the bankruptcy filing on
September 12, 2004.
The Port Authority of New York and New Jersey, or the Port
Authority, filed a proof of claim against US Airways, Inc.
in the prior bankruptcy. The claim was in the amount of
$8.5 million and it alleged environmental contamination and
building deficiencies at LaGuardia Airport. US Airways,
Inc.'s liability and defenses to this liability were
unaffected by the prior bankruptcy. US Airways, Inc. has
received no notice, inquiry or other communication from the Port
Authority other than in connection with the proof of claim, and
therefore is unable to evaluate at this time the validity of the
underlying claim, the degree to which US Airways, Inc.
might share responsibility with other parties, or the cost of
cleanup or correction of the alleged building deficiencies. In
connection with the current bankruptcy, the Port Authority filed
a proof of claim in the amount of approximately $2 million
again alleging environmental contamination and building
deficiencies at LaGuardia Airport.
On January 7, 2003, the IRS, issued a notice of proposed
adjustment to US Airways Group proposing to disallow
$573 million of capital losses that
US Airways Group sustained in the tax year 1999 on the
sale of stock of USLM Corporation, referred to as the USLM
matter. On February 5, 2003, the IRS filed a proof of claim
with the bankruptcy court in connection with the prior
bankruptcy asserting the following claims against
US Airways, Inc. with respect to the USLM matter:
(1) secured claims for U.S. federal income tax and
interest of $1 million; (2) unsecured priority claims
for U.S. federal income tax of $68 million and
interest of $14 million; and (3) an unsecured general
claim for penalties of $25 million. On May 8, 2003,
US Airways Group reached a tentative agreement with the IRS
on the amount of U.S. federal income taxes, interest and
penalties due subject to final approval from the Joint Committee
on Taxation. By letter dated September 11, 2003,
US Airways Group was notified that the Joint Committee on
Taxation had accepted the tentative agreement with the IRS,
including a settlement of all federal income taxes through the
end of 2002. Due to the bankruptcy filing on September 12,
2004, which suspended payment of prepetition liabilities, final
payment terms under the agreement have not been submitted to the
bankruptcy court for approval. The IRS has submitted a proof of
claim relating to the USLM matter in the present bankruptcy in
the amount of approximately $31 million.
Williard, Inc., together with the joint venture of Williard,
Inc. and Len Parker Associates, was awarded construction
contracts with US Airways, Inc. for work to be performed at
the Philadelphia International Airport. On May 29, 2002,
US Airways, Inc. terminated the largest contract between
the parties. Williard, Inc. and the joint venture sued
US Airways, Inc. in Pennsylvania state court for over
$14 million in damages representing termination costs and
lost profits, along with other alleged contractual damage
claims. Subsequently, Limbach Company, LLC alleged that it
purchased the claims of Williard, Inc. After a trial, the
bankruptcy court, on June 7, 2004, determined the value of
the Limbach Company and the joint venture claims to be
approximately $3 million. Limbach Company and the joint
venture are challenging on appeal various rulings of the
bankruptcy court, including the amount of the claim and its
status as an unsecured claim. US Airways, Inc. has also
filed an appeal. Limbach Company and Limbach/ Parker have filed
an action in state court against the City of Philadelphia and
the Philadelphia Authority for Industrial Development and
received permission to include US Airways, Inc. as a
co-defendant, provided that Limbach Company and the joint
venture did not make any claims against US Airways, Inc. in
that action. In the lawsuit against the City of Philadelphia and
the Philadelphia Authority for Industrial Development, Limbach
Company and the joint venture are seeking the same sums as in
their earlier lawsuit and proofs of claim against
US Airways, Inc.,
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but this time under the equitable theories of third-party
beneficiary, quantum meruit and constructive trust. The court in
the Philadelphia action dismissed US Airways, Inc. from the
lawsuit and dismissed the third-party beneficiary claims against
the City of Philadelphia and the Philadelphia Authority for
Industrial Development. These rulings are subject to appeal at a
later date. On May 21, 2004, the City of Philadelphia and
the Philadelphia Authority for Industrial Development filed a
Motion for Summary Judgment seeking dismissal of the lawsuit.
Should Limbach Company and/or the joint venture recover in the
Philadelphia action against the City of Philadelphia and the
Philadelphia Authority for Industrial Development, that award
would be paid at 100 cents on the dollar. US Airways, Inc.
may have an obligation to indemnify the City of Philadelphia and
the Philadelphia Authority for Industrial Development under its
agreements related to the airport development, which
US Airways, Inc. assumed as part of the prior bankruptcy.
Therefore, any recovery by Limbach Company and/or the joint
venture against the City of Philadelphia and the Philadelphia
Authority for Industrial Development could result in an
indemnification claim that US Airways, Inc. may have to pay
at full value. Proceedings in the bankruptcy court were stayed
by the bankruptcy filing on September 12, 2004.
US Airways Group and US Airways, Inc. have been named
as defendants in two lawsuits filed in federal district court
for the Eastern District of Michigan. Delta Air Lines is also
named as a defendant in both actions, while Northwest Airlines
and the Airlines Reporting Corporation were sued separately in a
third action. The complaints were filed on behalf of a class of
airline passengers who originated or terminated their trips at
the defendant carriers' respective hubs. These passengers
allege that they paid excessive fares due to the respective
airlines' enforcement of ticketing rules that prohibit the
use of a connecting segment coupon that is part of a
through-fare ticket where the passenger does not fly or intend
to fly the entire ticketed itinerary. Plaintiffs allege
monopolization and restraint of trade in violation of federal
antitrust laws. They seek recovery of treble damages from all
named defendants in the amount of $390 million and an
injunction prohibiting future enforcement of the rules at issue.
On May 16, 2002, the court denied the defendant
airlines' Motion for Summary Judgment and granted the
plaintiffs' Motion for Class Certification in each of
the cases. On May 31, 2002, US Airways Group and
US Airways, Inc. filed a petition with the United States
Court of Appeals for the Sixth Circuit seeking a discretionary
review of the certification order. On November 21, 2002,
the petition for permission to appeal the class certification
decision was denied. On December 4, 2002, Delta Air Lines
and Northwest Airlines filed a rehearing petition seeking en
banc review of the initial Sixth Circuit denial. On
February 24, 2003, Northwest Airlines' and Delta Air
Lines' petition for rehearing en banc was denied.
Notwithstanding the district court's denial of summary
judgment and the petition, US Airways Group and
US Airways, Inc. believe the claims are without merit and
intend to pursue a vigorous defense. The automatic stay under
Section 362(a) of the bankruptcy code was lifted when
US Airways Group emerged from bankruptcy on March 31,
2003, but the action was subsequently stayed once more as a
result of the debtors' bankruptcy filing on
September 12, 2004. On April 29, 2005, Northwest
Airlines and Delta Air Lines filed a renewed motion for summary
judgment on all counts. That motion is now pending.
In May 1995, US Airways Group, US Airways, Inc. and
the Retirement Plan for Pilots of US Airways, Inc.,
referred to as the Pilot Retirement Plan, were sued in federal
district court for the District of Columbia by 481 active and
retired pilots, alleging that defendants had incorrectly
interpreted the plan provisions and erroneously calculated
benefits under the Pilot Retirement Plan. The plaintiffs sought
damages in excess of $70 million. In May 1996, the court
issued a decision granting US Airways, Inc.'s Motion
to Dismiss the majority of the complaint for lack of
jurisdiction, deciding that the dispute must be resolved through
the arbitration process under the Railway Labor Act because the
Pilot Retirement Plan was collectively bargained. The plaintiffs
appealed the district court's dismissal and in February
1999, the U.S. Court of Appeals upheld the district
court's decision originally granted in May 1996, in the
defendants' favor. In May 1999, the plaintiffs filed a
petition for certiorari with the U.S. Supreme Court. In
October 1999, the U.S. Supreme Court denied the
plaintiffs' petition for certiorari. The U.S. District
Court retained jurisdiction over one count of the complaint,
alleging violation of a disclosure requirement under ERISA. In
August 2000, the U.S. District Court dismissed the
remaining count without prejudice, giving plaintiffs the right
to reinstate their claims after completion of the arbitration.
Certain of the plaintiffs filed a claim before the
US Airways Pilot Retirement Board, requesting arbitration
of their claim for benefits that they believe were erroneously
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calculated, and the Pilot Retirement Board selected an
arbitrator to decide certain issues related to the
plaintiffs' claims for benefits. However, the Pilot
Retirement Plan was terminated on March 31, 2003, and on
April 1, 2003 the PBGC became trustee of the plan. Also,
claims related to this matter were expunged in the prior
bankruptcy. Accordingly, US Airways Group does not believe
there is any continuing risk of material liability associated
with this matter.
On September 29, 2000, US Airways, Inc. intervened in
a proceeding that was originally brought on January 26,
1998, by the Pennsylvania Department of Environment Protection
against Allegheny County, Pennsylvania, and the Allegheny County
Aviation Administration alleging that a variety of airfield and
aircraft de-icing activities at Pittsburgh International Airport
violated the requirements of (a) a 1994 Consent Order and
Adjudication issued to Allegheny County and air carrier tenants
at the Pittsburgh International Airport, (b) the Pittsburgh
International Airport's National Pollutant Discharge
Elimination System Permit, and (c) the Pennsylvania Clean
Streams Law. The action was brought before the Pennsylvania
Environmental Hearing Board. During March 2001, the
Environmental Hearing Board approved Allegheny County's
Motion to Withdraw the Appeal without Prejudice, thereby
terminating the appeal. However, during the course of settlement
discussions leading to the termination of the appeal, the
Pennsylvania Department of Environment Protection advised
Allegheny County and US Airways, Inc. that the Department
of Environment Protection will require additional measures to be
taken to control de-icing materials at the Pittsburgh
International Airport, and will assess a civil penalty against
Allegheny County and US Airways, Inc. for the alleged
violations described above. The Allegheny County Aviation
Administration, US Airways, Inc. and the Pennsylvania
Department of Environment Protection have continued to work
together with the goal of fashioning an ultimate resolution to
the de-icing issues. US Airways Group does not believe
that the settlement of this matter will have a material adverse
effect on its financial condition, results of operations or
liquidity.
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US AIRWAYS GROUP MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General Information
The following discussion and analysis presents factors that
had a material effect on US Airways Group's results of
operations during the three months ended March 31, 2005 and
2004 and the years ended December 31, 2004, 2003 and 2002.
Also discussed is US Airways Group's financial
position as of the end of those periods. You should read this
discussion in conjunction with US Airways Group's
consolidated financial statements and the notes to those
consolidated financial statements included in the annexes to
this prospectus. This discussion and analysis contains
forward-looking statements. Please refer to the section entitled
"Cautionary Statement Concerning Forward-Looking
Statements" for a discussion of the uncertainties, risks
and assumptions associated with these statements.
Overview
For the first quarter of 2005, US Airways Group's
operating revenues were $1.63 billion, operating loss was
$201 million and diluted loss per common share was $5.13 on
a net loss of $282 million. Operating revenues were
$1.70 billion, operating loss was $143 million and the
diluted loss per common share was $3.28 on a net loss of
$177 million for the same period in 2004. As discussed in
"Results of Operations" below, operating results for
the quarter reflect high fuel prices and the continued weak
revenue environment in US Airways Group's primary
operating region.
Operating revenues for 2004 were $7.12 billion, operating
loss was $378 million, and diluted loss per common share
was $11.19 on a net loss of $611 million. For 2003,
combining US Airways Group's results prior to
March 31, 2003, the date of emergence from the prior
bankruptcy, with US Airways Group's results after that
date for comparability with 2004, operating revenues were
$6.85 billion, operating loss was $251 million and net
income was $1.46 billion, driven by gains recognized in
connection with our emergence from the prior bankruptcy.
Chapter 11 Proceedings
On September 12, 2004, the debtors filed voluntary
petitions for relief under Chapter 11 of the bankruptcy
code in the United States bankruptcy court for the Eastern
District of Virginia, Alexandria Division (Case Nos.
04-13819-SSM through 04-13823-SSM). Each of the debtors in these
cases had previously filed a voluntary petition for relief under
Chapter 11 on August 11, 2002. The debtors emerged
from the prior bankruptcy under a plan of reorganization which
was confirmed pursuant to an order of the bankruptcy court on
March 18, 2003 and became effective on March 31, 2003.
In accordance with AICPA Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code," or SOP 90-7, US Airways
Group adopted fresh-start reporting on March 31, 2003.
References to predecessor company refer to
US Airways Group prior to March 31, 2003.
References to successor company refer to
US Airways Group on and after March 31, 2003,
after giving effect to the cancellation of the then-existing
common stock and the issuance of new securities in accordance
with the 2003 plan of reorganization and application of fresh
start reporting. As a result of the application of fresh-start
reporting, the successor company's financial statements are
not comparable with the predecessor company's financial
statements.
In connection with and as a part of its emergence from the prior
bankruptcy in 2003, US Airways Group undertook a thorough
review of its operations and significantly reduced its costs.
US Airways Group also reduced its mainline capacity,
realigned its network to maximize yield, initiated a business
plan to use more regional jets and procured financing for these
aircraft, and expanded its alliances with other carriers.
However, after emerging from the prior bankruptcy,
US Airways Group continued to incur substantial losses from
operations. The primary factors contributing to these losses
included the reduction in domestic industry unit revenue and
significant increases in fuel prices. The downward pressure on
domestic industry revenue is a result of the rapid growth of
low-fare, low-cost airlines, the increased transparency of fares
through Internet sources and other changes in fare structures
that have resulted in substantially lower fares for many business
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and leisure travelers. The competitive environment continued to
intensify throughout 2004, particularly in key markets such as
Philadelphia, Washington, D.C., Boston and New York.
Throughout the spring and summer of 2004, US Airways Group
communicated with key stakeholders and the public its plan to
transform US Airways, Inc. into a fully competitive and
profitable airline. A key element of the transformation plan was
significant reductions in labor costs through changes to
US Airways Group's collective bargaining
agreements. US Airways Group aggressively sought the
necessary agreements to allow full implementation of the
transformation plan without the need for filing new
Chapter 11 cases but was unable to do so in a timely
manner. As a result of the recurring losses, declining available
cash and risk of defaults or cross defaults under certain key
financing and operating agreements, it was necessary for the
debtors to file voluntary petitions for reorganization under
Chapter 11 of the bankruptcy code on September 12,
2004.
At hearings held on September 13, 2004, the bankruptcy
court granted US Airways Group's first day
motions for relief designed to stabilize its operations and
business relationships with customers, vendors, employees and
others and entered orders granting permission to the debtors to,
among other things:
•
pay employee wages and continue certain benefits, such as
    medical and dental insurance;
•
honor prepetition obligations to customers and continue customer
    programs, including US Airways, Inc.'s Dividend Miles
    program;
•
pay for fuel under existing supply contracts, and honor existing
    fuel supply, distribution and storage agreements;
•
assume certain contracts related to interline agreements with
    other airlines;
•
pay prepetition obligations to certain foreign vendors, foreign
    service providers and foreign governments; and
•
continue maintenance of existing bank accounts and existing cash
    management systems.
The bankruptcy court also approved the interim agreement reached
between US Airways Group, the ATSB and the lenders under
the $1 billion loan, obtained upon emergence from the prior
bankruptcy and substantially guaranteed by the ATSB, to allow
US Airways Group continued use of the cash collateral
securing the loan. The agreement is discussed in more detail
below under "Liquidity and Capital Resources."
Since filing for bankruptcy on September 12, 2004,
US Airways, Inc. has achieved cost-savings agreements with
all of its collective bargaining groups. Through a motion filed
under Section 1113(e) of the bankruptcy code on
September 24, 2004, US Airways, Inc. sought interim
relief from collective bargaining agreements with ALPA, the AFA,
the TWU, the CWA, and the IAM. On October 15, 2004, the
bankruptcy court approved 21% reductions to base rates of pay
until February 15, 2005 or until entry of an order
approving a new collective bargaining agreement or granting
final relief under Section 1113(c) of the bankruptcy code.
The bankruptcy court also approved reductions to pension
contributions and certain work rule changes. The interim relief
order did not apply to TWU, whose members reached and ratified
collective bargaining agreements that were approved by the
bankruptcy court prior to the interim relief going into effect.
ALPA ratified its tentative agreement with US Airways, Inc.
in October 2004, and subsequent bankruptcy court approval
eliminated the need for interim relief as to pilots. Tentative
collective bargaining agreements with the CWA and AFA were
reached in December 2004 and were subsequently ratified and
approved by the bankruptcy court. On January 6, 2005, the
bankruptcy court approved US Airways, Inc.'s request
to reject all three IAM collective bargaining agreements and
approved the termination of US Airways, Inc.'s three
defined benefit plans. The IAM subsequently ratified
US Airways, Inc.'s cost-savings proposals on
January 21, 2005. As part of these negotiations and
subsequent ratifications, the two remaining defined benefit
pension plans for collectively bargained groups were eliminated,
and some groups had their defined contribution pension plans
reduced. In addition, the bankruptcy court also approved a
settlement agreement between US Airways, Inc. and the
court-appointed Section 1114 Committee, representing
retirees other than those represented by the IAM, for the
significant curtailment of postretirement medical benefits.
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On November 12, 2004, US Airways, Inc. filed a motion
requesting a determination from the bankruptcy court that
US Airways, Inc. satisfied the financial requirements for a
distress termination of the AFA pension plan, the IAM pension
plan, and the Certain Employees pension plan under
section 4041(c)(2)(B)(ii)(IV) of ERISA, and approval of
each plan's termination. These plans were projected to have
benefit obligations aggregating $2.7 billion and plan
assets aggregating $1.7 billion as of September 30,
2004, the most recent valuation date. On January 6, 2005,
the bankruptcy court entered an order (i) finding that the
financial requirements under section 4041(c)(2)(B)(ii)(IV)
of ERISA for a distress termination of the plans had been met
and (ii) approving termination of the plans. The AFA
pension plan and the IAM pension plan were terminated effective
January 10, 2005, by agreement between the PBGC and
US Airways, Inc. The Certain Employees pension plan was
terminated effective January 17, 2005, by agreement between
the PBGC and US Airways, Inc. Effective February 1,
2005, the PBGC was appointed trustee for each of the three plans.
Pursuant to the transformation plan and newly ratified
collective bargaining agreements, US Airways, Inc.
implemented voluntary furlough and termination programs across
several of its employee groups. In the first quarter of 2005,
US Airways Group recognized a $51 million charge,
which is included in reorganization items in US Airways
Group's consolidated statement of operations, associated
with termination payments and health care benefits for
approximately 2,300 employees participating in these voluntary
programs. The majority of employees expected to participate in
voluntary terminations notified US Airways, Inc. by
March 31, 2005.
In connection with the outsourcing of a portion of its aircraft
maintenance and certain fleet service operations, the closing of
its Pittsburgh reservation center, and the closing of certain
airport clubs and city ticket offices, US Airways, Inc.
involuntarily terminated or furloughed approximately 2,300
employees. In the first quarter of 2005, US Airways Group
recognized a $44 million charge, which is included in
reorganization items in US Airways Group's
consolidated statement of operations, associated with
contractual severance payments and healthcare benefits for those
employees. Notification for the majority of planned involuntary
terminations was completed in the first quarter of 2005.
In addition to the cost savings achieved with labor groups,
US Airways, Inc. also implemented pay and benefit
reductions for its current management and other non-union
employees, including reductions to base pay, elimination of jobs
and modifications to vacation and sick time accruals.
US Airways, Inc. also reduced the amount it contributes to
its defined contribution pension plans on behalf of employees
and implemented modifications to its retiree health benefits.
The pay rate and defined contribution plan reductions went into
effect October 11, 2004 and the reductions to retiree
medical benefits became effective March 1, 2005.
US Airways Group has reached agreements with certain of its
lessors and lenders restructuring existing aircraft lease and
debt financings. On December 17, 2004, the bankruptcy court
approved US Airways Group's agreements for the
continued use and operation of substantially all of its mainline
and Express fleet. US Airways Group reached a comprehensive
agreement with GE on aircraft leasing and financing and engine
services, which provided US Airways Group with short-term
liquidity, reduced debt, lower aircraft ownership costs,
enhanced engine maintenance services, and operating leases for
new regional jets. In June 2005, US Airways Group reached
an agreement with GE on the terms and conditions of an agreement
which amends and supplements certain provisions of the earlier
agreement and provides for additional agreements regarding rent
obligations under aircraft leases and the early redelivery of
certain aircraft. US Airways Group also reached agreements
with EMBRAER — Empresa Brasileria de Aeronautica SA
and Bombardier, Inc. providing for continued use and operation
of its aircraft, short term liquidity and new financing for
regional jets, which were approved by the bankruptcy court in
January 2005. Each of these agreements are discussed in more
detail below in "Liquidity and Capital Resources."
In connection with the merger, US Airways Group and America
West Holdings entered into a Memorandum of Understanding with
Airbus which includes, among other things, adjustments to the
delivery schedules for narrow-body and wide-body aircraft, a new
order for 20 A350 wide-body aircraft for which Airbus has agreed
to provide backstop financing for a substantial number of
aircraft, substantial elimination of cancellation penalties on
US Airways Group's existing order for ten A330-200
aircraft provided that New US Airways Group has met certain
predelivery payment obligations under the A350 order. Up to
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$175 million of the term loan may be drawn down on
US Airways Group's emergence from bankruptcy, with the
remainder expected to be drawn down by June 30, 2006.
The debtors have notified all known potential creditors of the
Chapter 11 filing for the purposes of identifying and
quantifying all prepetition claims. The Chapter 11 filing
triggered defaults on substantially all debt and lease
obligations. Subject to certain exceptions under the bankruptcy
code, the Chapter 11 filing automatically stayed the
continuation of any judicial or administrative proceedings or
other actions against the debtors or their property to recover
on, collect or secure a claim arising prior to
September 12, 2004. The deadline for filing proofs of claim
with the bankruptcy court was February 3, 2005, with a
limited exception for governmental entities, which had until
March 11, 2005. The debtors' claims agent received
approximately 4,800 timely-filed proofs of claims as of
February 3, 2005 totaling approximately $26.0 billion
in the aggregate, and approximately 350 proofs of claims
timely-filed by governmental entities totaling approximately
$13.4 billion in the aggregate. As is typical in
reorganization cases, differences between amounts scheduled by
the debtors and claims by creditors are being investigated and
resolved in connection with the claims resolution process. The
aggregate amount of claims filed with the bankruptcy court far
exceeds the debtors' estimate of their liability. The
debtors believe that many of these claims are duplicative,
including those filed alleging joint and several liability
against each of the debtors, based upon contingencies that have
not occurred, or otherwise are overstated, and are therefore
invalid. In light of the number of creditors of the debtors, the
claims resolution process may take considerable time to
complete. Accordingly, the ultimate number and amount of allowed
claims is not presently known.
For the debtors to exit Chapter 11 successfully, the
bankruptcy court must issue an order confirming a plan of
reorganization. US Airways, Inc. filed a Chapter 11
plan of reorganization for each of the affiliated debtors on
[date], 2005, and as a result of this filing, no other person or
party may file a different plan of reorganization prior to
October 31, 2005. This deadline could potentially be
extended. The plan of reorganization would, among other things,
establish a framework for the treatment of prepetition
obligations, contemplate the completion of the merger, set forth
a revised capital structure and establish the corporate
governance for US Airways Group following the merger and
subsequent to emergence from bankruptcy. US Airways Group
is currently working towards emerging from Chapter 11 no
later than October 31, 2005, but that timing is dependent
upon, among other things, the timely confirmation of a plan of
reorganization.
On September 13, 2004, US Airways Group received
written notice from the Nasdaq Stock Market that its
Class A common stock would be delisted in accordance with
Marketplace Rules 4300 and 4450(f), effective with the
opening of business on September 22, 2004. Nasdaq indicated
in its letter that the delisting determination followed its
review of US Airways Group's press release announcing
that US Airways Group had filed for bankruptcy
protection. As a result of this notification, a fifth character
"Q" was added to the trading symbol, changing it from
"UAIR" to "UAIRQ" at the opening of business
on September 15, 2004. Shares of the Class A common
stock are currently trading on the Nasdaq over-the-counter
market under the symbol as changed above. The plan of
reorganization contemplates that the existing
US Airways Group common stock will be cancelled and
that new common stock will be issued in connection with the
merger.
Prior Bankruptcy Information
As discussed above, US Airways Group emerged from the prior
bankruptcy under the 2003 plan of reorganization. The 2003 plan
of reorganization constituted a separate plan of reorganization
for each of US Airways Group and its domestic subsidiaries,
which we sometimes refer to as the filing entities. In
accordance with the bankruptcy code, the 2003 plan of
reorganization divided claims against, and interests in, each of
the filing entities into classes according to their relative
seniority and other criteria and provided the same treatment for
each claim or interest of a particular class unless the holder
of a particular claim or interest agreed to a less favorable
treatment of its claim or interest. Among other things, the 2003
plan of reorganization generally provided for full payment of
all allowed administrative and priority claims, and the
distribution of shares, or warrants to purchase shares, of new
equity in the reorganized US Airways Group, Inc. to the
ATSB, RSA, US Airways Group's management and labor
unions, General Electric Capital Corporation and Bank of
America, N.A., as well as to certain unsecured creditors of the
filing entities, including the PBGC, in satisfaction of their
allowed claims. Persons holding equity in US Airways Group
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Table of Contents
prior to March 31, 2003 were not entitled to any
distribution under the 2003 plan of reorganization and their
shares of common stock were cancelled.
On March 31, 2003, RSA invested $240 million in cash
in the reorganized US Airways Group pursuant to an
investment agreement, in exchange for approximately 36.2%, on a
fully diluted basis, of the equity in the reorganized
US Airways Group. As of March 31, 2003, in
connection with its investment, RSA was granted a voting
interest of approximately 71.6% in the reorganized
US Airways Group and became entitled to designate and
vote to elect eight of 15 directors to
US Airways Group's board of directors. See
notes 10 and 12(a) in the notes to
US Airways Group's consolidated financial
statements for a summary of the equity structure following the
prior bankruptcy and related party transactions with RSA.
Results of Operations
As discussed above, US Airways Group emerged from the
prior bankruptcy and adopted fresh-start reporting on
March 31, 2003. As a result of the application of
fresh-start reporting, the successor company's financial
statements are not comparable with the predecessor
company's financial statements. However, for purposes of
discussion of the results of operations, 2004 has been compared
to the full year 2003 and full year 2003 has been compared to
2002, as included, in part, in US Airways Group's
consolidated statements of operations, which are included in
this prospectus and in "Selected Operating and Financial
Statistics" below. Except where noted, operating statistics
referred to below are for scheduled service only.
Three Months Ended March 31, 2005
Compared with the
Three Months Ended March 31, 2004
Operating Revenues
—
Passenger
transportation
revenues decreased $66 million, or 4.4%.
This was due to a 12.7% decrease in yield, which reduced revenue
by $211 million, partially offset by a 9.6% increase in
revenue passenger miles, or RPMs, which increased revenue by
$145 million.
Cargo and freight
revenue decreased
$13 million, or 38.2%, due to the temporary suspension of
mail delivery and lower volume of transatlantic freight during
the first quarter of 2005.
Other
operating revenues
increased 3.9% primarily due to revenue generated through
airline partner travel after US Airways Group joined
the Star Alliance in May 2004.
Operating Expenses
— Operating expenses
decreased $15 million, or 0.8%, on a capacity increase of
5.1%, as measured by available seat miles, or ASMs.
Personnel
costs
decreased 25.6% primarily due to lower wage and
benefits rates as a result of the implementation of the
cost-savings agreements achieved with each of the collective
bargaining groups, including the termination of US Airways,
Inc.'s defined benefit plans and the curtailment of
postretirement benefits, as well as lower headcount as compared
to the period in 2004. These reductions were partially offset by
increases to the workers compensation and pilots' long-term
disability liabilities.
Aviation fuel
increased 57.9% due
primarily to a 48.1% increase in average fuel prices and a small
increase in consumption.
US Airways Express capacity
purchases
increased 7.4% due to higher fuel prices that are
paid by US Airways, Inc. on capacity purchases, partially
offset by a decrease in purchased ASMs.
Aircraft rent
increased 5.5% due to new aircraft leases for regional jets
delivered throughout 2004 and the first quarter of 2005.
Selling expenses
decreased 1.0% due to decreases in
commissions and computer reservation fees offset by increases in
advertising expense.
Depreciation and amortization
increased slightly due to depreciation associated with new
regional jets offset by reduced amortization associated with
capitalized software costs.
Other
operating expenses
increased $2 million, or less than 1%, due to increases in
expenses associated with the redemption of Dividend Miles on
partner airlines and passenger compensation expense partially
offset by decreases in expense related to outside services,
ordinary course legal fees and general insurance expense.
Other Income (Expense)
— Other Income
(Expense), net increased by $47 million. See note 1 to
US Airways Group's condensed consolidated
financial statements for additional information on the
components of
Reorganization items, net. Interest income
was flat due to higher average interest rates, offset by the
classification of $2 million of interest income as a
reorganization item.
Interest expense, net
increased
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Table of Contents
34.5% as a result of interest associated with new regional jets
and increased interest expense on the ATSB loan, including
penalty interest incurred as a result of the current
Chapter 11 proceedings.
Other, net
for the three
months ended March 31, 2005 decreased as compared to the
same period in 2004 as a result of mark-to-market adjustments on
certain stock options held by US Airways Group.
Other, net
for the three month period ended
March 31, 2004 included a credit of $13 million
related to a business interruption insurance recovery.
Provision for Income Taxes
—
US Airways Group recorded no income tax provision for
the first quarter of 2005 or 2004 and continues to record a full
valuation allowance against its net deferred tax asset.
Selected Operating and Financial Statistics (1)
Three Months Ended
March 31,
2005
2004
Revenue passenger miles (millions):*
System
11,048
10,079
Mainline
9,645
9,119
Available seat miles (millions):*
System
15,519
14,769
Mainline
13,185
12,988
Total available seat miles (millions):
System
15,520
14,771
Mainline
13,186
12,990
Passenger load factor (2):*
System
71.2
%
68.2
%
Mainline
73.2
%
70.2
%
Yield (3):*
System
13.10
¢
15.01
¢
Mainline (4)
11.74
¢
13.27
¢
Passenger revenue per available seat mile (5):*
System
9.32
¢
10.24
¢
Mainline (4)
8.59
¢
9.32
¢
Revenue passengers (thousands):*
System
14,068
12,700
Mainline
10,252
9,851
Mainline revenue per available seat mile (6)
9.91
¢
10.62
¢
Mainline cost per available seat mile (Mainline CASM) (7)
10.89
¢
11.68
¢
Mainline average stage length (miles)*
768
773
Mainline cost of aviation fuel per gallon (8)
$
1.472
$
0.994
Mainline cost of aviation fuel per gallon (excluding fuel taxes)
$
1.417
$
0.938
Mainline gallons of aviation fuel consumed (millions)
218
216
Mainline number of aircraft in operating fleet at period-end
279
283
Mainline full-time equivalent employees at period end
23,696
26,854
*
Scheduled service only (excludes charter service).
(1)
Operating statistics include free frequent travelers and the
    related miles flown. System statistics encompass all wholly
    owned airline subsidiaries of US Airways Group, including
    US Airways, Inc., Allegheny Airlines (through June 2004),
    Piedmont Airlines and PSA Airlines as well as operating and
    financial results from capacity purchase agreements with Mesa
    Airlines, Chautauqua Airlines and Trans States Airlines. For
    purposes of mainline statistical calculations and to provide
    better comparability between periods, mainline statistics
    exclude revenue and expenses associated with US Airways,
    Inc. capacity purchase arrangements with certain affiliated
    airlines and US Airways, Inc.'s regional jet division,
    MidAtlantic Airways.
(2)
Percentage of aircraft seating capacity that is actually
    utilized (RPMs/ ASMs).
(3)
Passenger transportation revenue divided by RPMs.
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Table of Contents
(4)
Mainline passenger revenue excludes US Airways Express and
    MidAtlantic Airways passenger revenue of $314 million and
    $303 million for the three months ended March 31, 2005
    and 2004, respectively.
(5)
Passenger transportation revenue divided by ASMs (a measure of
    unit revenue).
(6)
Mainline operating revenues divided by ASMs (a measure of unit
    revenue). Mainline operating revenues exclude US Airways
    Express and MidAtlantic Airways operating revenues of
    $315 million and $304 million for the three months
    ended March 31, 2005 and 2004, respectively.
(7)
Mainline operating expenses divided by mainline ASMs (a measure
    of unit cost). Mainline operating expenses exclude
    US Airways, Inc. capacity purchases of $327 million
    and $313 million for the three months ended March 31,
    2005 and 2004, respectively, and MidAtlantic Airways operating
    expenses of $41 million for the three months ended
    March 31, 2005.
(8)
Includes fuel taxes and transportation charges and excludes
    service fees.
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2004 Compared With 2003
Operating Revenues
— Operating revenues
increased $271 million, or 4.0%.
Passenger
transportation
revenues increased $212 million or 3.5%.
RPMs were up 8.7%, which increased revenues by
$536 million, partially offset by a 4.9% decrease in yield,
which decreased revenues by $324 million. Passenger
transportation revenues were negatively impacted by the
debtors' bankruptcy proceedings. Passenger transportation
revenue in 2003 included a favorable $34 million adjustment
to the traffic balances payable account for unused and now
expired tickets.
Cargo and freight
revenue was flat.
Other
operating revenue increased as a result of
increased third party fuel sales due to higher fuel prices and
revenue associated with certain marketing arrangements.
Operating Expenses
— Operating expenses
increased by $398 million, or 5.6%. Operating expenses
excluding
Government compensation
and
Special items
increased 3.0% on a capacity increase, as measured by ASMs,
of 5.8%. Personnel costs decreased 8.4% due to lower employee
pension, medical and dental, and postretirement medical benefit
expense, an $89 million decrease in stock-based
compensation expense related to the issuance of US Airways
Group Class A common stock to employees covered by
collective bargaining agreements following emergence from the
prior bankruptcy in 2003, reduced headcount in 2004 and lower
wage rates in the fourth quarter of 2004 as the result of
interim or permanent relief from labor contracts. These
decreases were partially offset by an increase in expense
associated with long-term disability.
Aviation fuel
increased 32.4% primarily due to higher average fuel prices
and, to a lesser extent, schedule-driven increases in
consumption.
US Airways Express capacity purchases
increased 24.2% reflecting an increase in purchased ASMs
from third-party regional jet operators and other airline
subsidiaries of Group.
Aircraft rent
increased 4.2% as a
result of new leases due to the conversion of mortgaged aircraft
to leased aircraft and the addition of new regional jet leases.
Other rent and landing fees
decreased slightly as a
result of decreases in landing fees partially offsetting
increased airport rental expenses.
Selling expenses
decreased 3.2% due to a decrease in commissions partially
offset by increases to advertising expense and sales volume
driven increases in credit card fees.
Depreciation and
amortization
increased 2.5% due to depreciation associated
with new regional jets and the write-off of certain ground
equipment and an indefinite lived foreign slot, partially offset
by lower book values on the existing fleet as a result of
fresh-start reporting effective March 31, 2003 and by
reduced amortization associated with capitalized software.
Other
operating expenses increased 4.6% due to increases
in the cost associated with the redemption of Dividend Miles for
travel on partner airlines and future travel on US Airways,
Inc. as well as increases to costs associated with passenger and
baggage screening and navigation fees, partially offset by
decreases in insurance expenses and schedule-related expenses
including passenger food expenses. 2003 included
$28 million in reductions to an accrual upon the resolution
of previously outstanding contingencies. Refer to
"Description of Unusual Items" below for information
on
Special items and Government compensation.
Other Income (Expense)
— Other Income
(Expense), net decreased $2 billion primarily as a result
of the reorganization items directly associated with the
emergence from the prior bankruptcy. See "Description of
Unusual Items" below for additional information on the
components of
Reorganization items, net
in 2004 and 2003.
Interest income
decreased as the result of the
reclassification of interest income on cash, cash equivalents
and short term investments to
Reorganization items, net
subsequent to the Chapter 11 filing on
September 12, 2004. Interest expense was flat as a result
of the conversion of mortgaged aircraft to leased aircraft and
the abandonment of certain aircraft, offset by interest related
to the ATSB loan and penalty interest incurred as a result of
the current Chapter 11 proceedings.
Other, net
income in 2004 includes $13 million related to a
business interruption insurance recovery and a $2 million
gain on the sale of four aircraft, while the 2003 results
reflect a $30 million gain recognized in connection with
US Airways Group's sale of its investment in Hotwire,
Inc.
Provision (Credit) for Income Taxes
—
US Airways Group recorded an income tax benefit of
$10 million for the year ended December 31, 2004, as
compared to $11 million of income tax expense in 2003. The
benefit recognized in 2004 related to revisions to prior
estimates upon completion of US Airways Group's
consolidated 2003 tax return. US Airways Group continues to
record a full valuation allowance against its net deferred tax
assets due to the uncertainty regarding their ultimate
realization.
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Table of Contents
Selected Operating and Financial Statistics
—
System capacity, as measured by ASMs, increased 5.8% and
passenger volume, as measured by RPMs, increased 8.7% in 2004.
These increases resulted in a 73.5% system passenger load
factor, representing a 2.0 percentage point increase over
2003. However, system yield declined by 4.9% reflecting the
continued downward pressure on fares. Weather conditions related
primarily to hurricanes adversely impacted US Airways
Group's operating and financial performance in 2004 and
2003. US Airways, Inc.'s full-time equivalent
employees at December 31, 2004 declined 8.1% reflecting the
headcount reduction measures put in place in connection with
US Airways Group's transformation plan.
2003 Compared With 2002
Operating Revenues
— Operating revenues
decreased $131 million, or 1.9%.
Passenger
transportation
revenue decreased $149 million or 2.4%.
RPMs declined 4.4%, which decreased revenues by
$277 million, partially offset by a 2.1% improvement in
yield, which increased revenues by $127 million. Passenger
transportation revenue for 2003 included a favorable
$34 million adjustment to the traffic balances payable
account for unused and now expired tickets.
Other
operating revenue increased 4.9% due to increased third
party fuel sales and mileage credit sales partially offset by
lower ticket change and cancellation fees.
Operating Expenses
— Operating expenses
declined by $1.20 billion, or 14.4%. Operating expenses
excluding
Government compensation
and
Special items
were lower by 8.7% on a capacity decrease, as measured by
ASMs, of 6.9%.
Personnel costs
decreased 18.2% due to
lower headcount levels, wage rates and employee pension and
benefit expenses partially offset by $125 million of
stock-based compensation expenses resulting from the issuance of
Class A common stock to employees covered by collective
bargaining agreements following emergence from the prior
bankruptcy.
Aviation fuel
increased 6.1% due to higher
average fuel prices partially offset by schedule-driven
decreases in consumption.
US Airways Express capacity
purchases
increased 33.8% reflecting a 32% increase in
purchased ASMs from third-party regional jet operators.
Aircraft rent
decreased 17.9% due to favorably
restructured leases and lease rejections made in connection with
the prior bankruptcy, which was partially offset by new leases
as a result of the conversion of mortgaged aircraft to leased
aircraft.
Other rent and landing fees
were flat as a
result of schedule-driven decreases in landing fees offsetting
increased airport rental expenses associated with the new
terminal in Philadelphia.
Selling expenses
decreased 7.9%
due to sales volume driven decreases in credit card fees and
sales- and rate-driven decreases in computer reservation system
fees. Travel agent commission rates decreased due to the
elimination of the base domestic commissions in March 2002 and
increases in internet bookings which are less costly to
US Airways Group.
Depreciation and amortization
decreased 21.7% due to fewer owned aircraft in the operating
fleet and lower book values on the existing fleet as a result of
fresh-start reporting.
Other
operating expenses decreased
8.4% due to decreases in insurance expenses and schedule-related
expenses including passenger food expenses and crew travel
expenses and a $17 million and $12 million reduction
to an accrual upon the resolution of previously outstanding
contingencies partially offset by increases in expenses
associated with third-party fuel sales. Refer to
"Description of Unusual Items" below for information
on
Special items and Government compensation.
Other Income (Expense)
— Other Income
(Expense), net increased $2.3 billion from an expense of
$598 million in 2002 to income of $1.7 billion in
2003.
Interest income
decreased due to lower return rates
partially offset by higher average investment balances.
Interest expense
decreased as a result of the conversion
of mortgaged aircraft to leased aircraft and the abandonment of
certain aircraft partially offset by interest related to the
ATSB loan.
Other, net
income increased as a result of a
$30 million gain recognized in connection with
US Airways Group's sale of its investment in Hotwire,
Inc. and mark-to-market adjustments on certain stock options
held by US Airways Group. Refer to "Description of
Unusual Items" below for information on
Reorganization
items, net.
Provision (Credit) for Income Taxes
—
US Airways Group's federal and state income tax
expense was $11 million in 2003 representing an effective
tax rate of 0.7%. This differed from statutory rates primarily
due to utilization of net operating loss carryforwards. During
2001, US Airways Group recognized a valuation allowance
against its net deferred tax asset. US Airways Group
continues to record a full valuation allowance against its net
deferred tax assets due to the uncertainty regarding their
ultimate realization. As a result of the
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March 2002 enactment of the Job Creation and Worker Assistance
Act of 2002, also referred to as the Job Act, US Airways
Group recognized an income tax credit equal to US Airways
Group's carryback potential. The Job Act provides, among
other things, an extension of the net operating loss carryback
period to five years from two years for net operating losses
arising from tax years that end in 2001 or 2002 and the
elimination of the 90% limitation for alternative minimum tax
purposes on those loss carrybacks. The tax credit recorded in
2002 includes $74 million related to 2001 losses realizable
due to the enactment of the Job Act and recorded in the period
of enactment. US Airways Group continued to record a
valuation allowance against its net deferred tax asset which
resulted in a 2002 effective tax rate of 13%.
Cumulative Effect of Accounting Change
—
Effective January 1, 2002, PSA Airlines, a wholly owned
subsidiary of US Airways Group, changed its method of
accounting for engine maintenance from accruing on the basis of
hours flown to expensing as incurred. In connection with the
change, PSA Airlines recognized a $17 million credit
representing the cumulative effect of the accounting change.
Selected Operating and Financial Statistics
—
System capacity, as measured by ASMs, decreased 6.9% and
passenger volume, as measured by RPMs, decreased 4.4% in 2003.
These decreases resulted in a 71.5% system passenger load
factor, representing a 1.9 percentage point increase over
2002. System yield improved 2.1% reflecting a modest improvement
in economic conditions. Both RPMs and ASMs were significantly
affected by the schedule reductions initiated following the
prior bankruptcy filing. In addition, hurricanes Isabel, Fabian
and Henri adversely impacted US Airways Group's
operating and financial performance in 2003. US Airways,
Inc. full-time equivalent employees at December 31, 2003
declined 12.4% reflecting the headcount reduction measures put
in place in connection with US Airways Group's
2002 restructuring.
Description of Unusual Items
Special Items
— Special items included within
operating expenses on US Airways Group's
consolidated statements of operations include the following
components (dollars in millions):
Successor Company
Predecessor Company
Nine Months Ended
Year Ended
December 31, 2003
December 31, 2002
Aircraft order cancellation penalty
$
35
(a)
$
—
Aircraft impairments and related charges
—
392
(b)
Pension and postretirement benefit curtailments
—
(90
) (c)
Employee severance including benefits
(1
) (d)
(3
) (d)
Other
—
21
(e)
$
34
$
320
(a)
During the quarter ended June 30, 2003,
    US Airways Group recorded a $35 million charge in
    connection with its intention not to take delivery of certain
    aircraft scheduled for future delivery.
(b)
During the fourth quarter of 2002, US Airways, Inc.
    conducted an impairment analysis in accordance with
    SFAS No. 144, "Accounting for the Impairment or
    Disposal of Long-Lived Assets," on its B737-300, B737-400,
    B757-200 and B767-200 aircraft fleets as a result of changes to
    the aircraft's recoverability periods (the planned
    conversion of owned aircraft to leased aircraft) as well as
    indications of possible material changes to the market values of
    these aircraft. The analysis revealed that estimated
    undiscounted future cash flows generated by these aircraft were
    less than their carrying values for four B737-300s, 15
    B737-400s, 21 B757-200s and three B767-200s. In accordance with
    SFAS 144, the carrying values were reduced to fair market
    value. This analysis resulted in a pretax charge of
    $392 million. Management estimated fair market value using
    third-party appraisals and recent leasing transactions.
(c)
During the fourth quarter of 2002, US Airways, Inc.
    recorded a curtailment credit of $120 million related to
    certain postretirement benefit plans and a $30 million
    curtailment charge related to certain defined benefit pension
    plans.
(d)
In September 2001, US Airways, Inc. announced that in
    connection with its reduced flight schedule it would terminate
    or furlough approximately 11,000 employees across all employee
    groups. Approximately 10,200 of the affected employees were
    terminated or furloughed on or prior to January 1, 2002.
    Substantially all the remaining affected employees were
    terminated or furloughed by May 2002. US Airways,
    Inc.'s headcount reduction was largely accomplished through
    involuntary terminations/furloughs. In connection with this
    headcount reduction, US Airways, Inc. offered a voluntary
    leave program to certain employee groups. Voluntary leave
    program participants generally received extended benefits, such
    as medical, dental and life insurance benefits, but
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Table of Contents
did not receive any furlough pay benefit. In accordance with
    Emerging Issues Task Force Issue No. 94-3, US Airways,
    Inc. recorded a pretax charge of $75 million representing
    the involuntary severance pay and the benefits for affected
    employees during the third quarter of 2001. In the fourth
    quarter of 2001, US Airways, Inc. recognized a
    $10 million charge representing the estimated costs of
    extended benefits for those employees who elected to take
    voluntary leave and a $2 million reduction in accruals
    related to the involuntary severance as a result of employees
    electing to accept voluntary furlough. During the quarters ended
    June 30, 2003 and 2002, US Airways Group recognized
    $1 million and $3 million, respectively, in reductions
    to severance pay and benefit accruals related to the involuntary
    termination or furlough of certain employees.
(e)
During the fourth quarter of 2002, US Airways, Inc.
    recognized an impairment charge of $21 million related to
    capitalized gates at certain airports in accordance with
    SFAS No. 142, "Goodwill and Other Intangible
    Assets." The carrying values of the affected gates were
    reduced to fair value based on a third party appraisal.
Reorganization Items, Net
— Reorganization
items, net represent amounts incurred as a direct result of
US Airways Group's Chapter 11 filings and are
presented separately in US Airways Group's
consolidated statements of operations. These items consist of
the following (dollars in millions):
Successor Company
Predecessor Company
Year Ended
Three Months Ended
Year Ended
December 31, 2004
March 31, 2003
December 31, 2002
Discharge of liabilities (a)
$
—
$
3,938
$
—
Restructured aircraft financings (b)
—
967
—
Termination of pension plans (c)
—
387
—
Interest income on accumulated cash
4
2
2
Damage and deficiency claims (d)
(2
)
(2,167
)
—
Revaluation of assets and liabilities (a)
—
(1,107
)
—
Professional fees
(30
)
(51
)
(61
)
Aircraft order cancellation penalties
(7
)
—
—
Loss on aircraft abandonment (e)
—
(9
)
(68
)
Severance including benefits (f)
—
—
(89
)
Write-off of ESOP deferred compensation
—
—
(50
)
Other
—
(43
)
(28
)
$
(35
)
$
1,917
$
(294
)
(a)
Reflects the discharge or reclassification of liabilities
    subject to compromise in the prior bankruptcy. Most of these
    obligations were only entitled to receive such distributions of
    cash and common stock as provided under the 2003 plan of
    reorganization. A portion of the liabilities subject to
    compromise in the prior bankruptcy were restructured and
    continued, as restructured, to be liabilities of
    US Airways Group.
(b)
As of March 31, 2003, US Airways Group restructured
    aircraft debt and lease agreements related to 200 aircraft in
    connection with the prior bankruptcy, including the conversion
    of 52 mortgages to operating leases. The restructured terms
    generally provide for shorter lease periods and lower lease
    rates.
(c)
Effective March 31, 2003, US Airways, Inc. terminated
    its qualified and nonqualified pilot defined benefit pension
    plans. The PBGC was appointed trustee of the qualified plan
    effective with the termination. US Airways Group recognized
    a gain in connection with the termination which is partially
    offset by the PBGC claim.
(d)
Damage and deficiency claims largely arose as a result of
    US Airways Group electing to either restructure, abandon or
    reject aircraft debt and leases during the bankruptcy
    proceedings.
(e)
Includes aircraft (seven A319s for 2003 and 34 F-100s, two
    B757-200s and one B737-400 for 2002) that were legally abandoned
    as part of the prior bankruptcy. Related aircraft liabilities
    were adjusted for each aircraft's expected allowed
    collateral value.
(f)
As a result of schedule reductions made in connection with the
    prior bankruptcy, US Airways, Inc. terminated or furloughed
    approximately 6,600 employees across all employee groups.
    Substantially all affected employees were terminated or
    furloughed prior to March 31, 2003. US Airways,
    Inc.'s headcount reduction was largely accomplished through
    involuntary terminations/furloughs. In connection with this
    headcount reduction, US Airways, Inc. offered a voluntary
    leave program to certain employee groups. Voluntary leave
    program participants generally received extended benefits, such
    as medical, dental and life insurance benefits, but did not
    receive any furlough pay benefit.
Government Compensation
— In April 2003,
President George W. Bush signed into law the Emergency Wartime
Supplemental Appropriations Act, which included
$2.4 billion for reimbursement to the airlines for certain
aviation-related security expenses. Certain airlines that
received the aviation-related assistance were
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Table of Contents
required to agree to limit the total cash compensation for
specified executive officers during the 12-month period
beginning April 1, 2003 to an amount equal to the annual
salary paid to that officer during the air carrier's fiscal
year 2002. Any violation of this agreement would require the
carrier to repay to the government the amount reimbursed for
airline security fees. US Airways Group complied with this
limitation on executive compensation. US Airways
Group's security fee reimbursement was $214 million,
net of amounts due to certain affiliates, and was recorded as a
reduction to operating expenses during the second quarter of
2003. In September 2003, US Airways Group received
approximately $6 million of compensation associated with
flight deck door expenditures which was recorded as an offset to
capital costs.
Selected Operating and Financial Statistics (1)
2004
2003
2002
Revenue passengers miles (millions)*
System
45,087
41,464
43,374
Mainline
39,964
37,741
40,038
Available seat miles (millions):*
System
61,353
58,017
62,329
Mainline
53,220
51,494
56,360
Passenger load factor (2):*
System
73.5
%
71.5
%
69.6
%
Mainline
75.1
%
73.3
%
71.0
%
Yield (3):*
System
14.07
¢
14.79
¢
14.48
¢
Mainline (4)
12.43
¢
13.05
¢
13.05
¢
Passenger revenue per available seat mile (5):*
System
10.34
¢
10.57
¢
10.08
¢
Mainline (4)
9.33
¢
9.56
¢
9.27
¢
Revenue passengers (thousands):*
System
55,954
52,797
58,389
Mainline
41,510
41,251
47,155
Mainline revenue per available seat mile (6)
10.69
¢
10.75
¢
10.38
¢
Mainline cost per available seat mile (Mainline CASM) (7)(8)
11.34
¢
11.36
¢
12.67
¢
Mainline average stage length (miles)*
782
761
685
Mainline cost of aviation fuel per gallon (9)
112.08
¢
88.29
¢
74.36
¢
Mainline cost of aviation fuel per gallon (excluding fuel taxes)
106.35
¢
83.02
¢
68.90
¢
Mainline gallons of aviation fuel consumed (millions)
884
873
972
Mainline number of aircraft in operating fleet at period-end
281
282
280
Mainline full-time equivalent employees at period end
24,628
26,797
30,585
*
Denotes scheduled service only (excludes charter service).
(1)
Operating statistics include free frequent flyer travelers and
    the related miles they flew. System statistics encompass all
    wholly owned airline subsidiaries of US Airways Group,
    including US Airways, Inc., Allegheny Airlines (through
    June 2004), Piedmont Airlines, PSA Airlines, as well as
    operating and financial results from capacity purchase
    agreements with Mesa Airlines, Chautauqua Airlines, Trans States
    Airlines and Midway Airlines (through October 2003). Where
    noted, revenues and expenses associated with US Airways,
    Inc.'s capacity purchase arrangements with certain
    affiliated airlines and US Airways, Inc.'s regional
    jet division, MidAtlantic Airways, have been excluded from
    US Airways, Inc.'s financial results for purposes of
    mainline financial statistical calculation and to provide better
    comparability between periods (see details below).
(2)
Percentage of aircraft seating capacity that is actually
    utilized (RPMs/ ASMs).
(3)
Passenger transportation revenue divided by RPMs.
(4)
Mainline passenger revenue excludes US Airways Express and
    MidAtlantic Airways passenger revenue of $1,379 million,
    $1,208 million, and $1,058 million for the years ended
    December 31, 2004, 2003 and 2002, respectively.
(5)
Passenger transportation revenue divided by ASMs (a measure of
    unit revenue).
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(6)
Mainline operating revenues divided by ASMs (a measure of unit
    revenue). Mainline operating revenues exclude US Airways
    Express and MidAtlantic Airways operating revenues of
    $1,385 million, $1,214 million and $1,063 million
    for the years ended December 31, 2004, 2003 and 2002,
    respectively.
(7)
Total Operating Expenses divided by ASMs (a measure of unit
    cost).
(8)
Mainline operating expenses exclude US Airways, Inc.
    capacity purchases of $1,304 million, $1,145 million,
    and $1,094 million for the years ended December 31,
    2004, 2003 and 2002, respectively, and MidAtlantic Airways
    operating expenses of $79 million for the year ended
    December 31, 2004. Operating expenses for each period
    include unusual items as follows:
•
For the year ended December 31, 2003, operating expenses
    include an aircraft order penalty of $35 million
    (0.07¢) and government compensation of $212 million
    (0.41¢).
•
For the year ended December 31, 2002, operating expenses
    include aircraft impairment and related charges of
    $392 million (0.70¢), a benefit on the pension and
    postretirement curtailment of $90 million (0.16¢), an
    impairment charge related to capitalized gates at certain
    airports of $21 million (0.04¢) and a reduction to the
    involuntary severance accrual of $3 million (0.01¢).
(9)
Includes fuel taxes and transportation charges and excludes
    service fees.
Liquidity and Capital Resources
As of March 31, 2005, US Airways Group's cash and
cash equivalents totaled $513 million compared to
$738 million as of December 31, 2004. The decline in
cash during the first quarter was a result of continued net
losses during seasonally weak winter months and aircraft debt
and lease payments of $317 million on aircraft essential to
the transformation plan. The airline industry continues to be
adversely affected by the historically high aircraft fuel prices
and the continued downward pressure on domestic revenue. As of
December 31, 2004, US Airways Group's cash, cash
equivalents and short-term investments of $738 million
compared to $1.29 billion as of December 31, 2003.
US Airways Group requires substantial liquidity in order to
meet scheduled debt and lease payments and to finance day-to-day
operations. As a result of the recurring losses, decline in
available cash, and risk of defaults or cross defaults under
certain key financing and operating agreements, US Airways
Group filed a voluntary petition for reorganization under
Chapter 11 of the bankruptcy code on September 12,
2004. All of US Airways Group's unrestricted cash
constitutes cash collateral under the ATSB loan. US Airways
Group has been operating with the use of the ATSB cash
collateral since its Chapter 11 filing on
September 12, 2004. Failure to have continued use of the
ATSB cash collateral could necessitate asset sales and layoffs,
and result in an inability to continue operating.
ATSB Loan and Cash Collateral Agreement
As part of its reorganization under the prior bankruptcy,
US Airways, Inc. received a $900 million loan
guarantee under the Air Transportation Safety and System
Stabilization Act from the ATSB in connection with a
$1 billion term loan financing that was funded on
March 31, 2003. US Airways Group required this loan
and related guarantee in order to provide the additional
liquidity necessary to carry out its 2003 plan of
reorganization. US Airways, Inc. is the primary obligor
under the ATSB loan, which is guaranteed by US Airway Group
and each of its other domestic subsidiaries. The ATSB loan is
secured by substantially all of the present and future assets of
the debtors not otherwise encumbered (including certain cash and
investment accounts, previously unencumbered aircraft, aircraft
engines, spare parts, flight simulators, real property, takeoff
and landing slots, ground equipment and accounts receivable),
other than certain specified assets, including assets which are
subject to other financing agreements.
In connection with the September 12, 2004 Chapter 11
filing, the ATSB and the lenders under the ATSB loan agreed to
authorize US Airways Group to continue to use cash
collateral securing the ATSB loan on an interim basis.
US Airways Group has access to the cash collateralizing the
ATSB loan as working capital, subject to certain on-going
conditions and limitations. As a result, US Airways Group
has been able to use this cash instead of obtaining debtor in
possession financing. This interim agreement was approved by the
bankruptcy court on September 13, 2004 as part of the first
day motions, and was scheduled to expire on October 15,
2004. The bankruptcy court approved two subsequent agreements
extending US Airways Group's ability to use the cash
collateral, including an agreement approved on January 13,
2005 extending US Airways Group's use of cash
collateral through June 30, 2005, subject to certain
conditions and limitations. Under the current agreement, which
is referred to in this prospectus as the ATSB cash collateral
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agreement, US Airways Group may continue to access this
cash collateral to support daily operations so long as it
maintains an agreed upon minimum amount of cash on hand each
week. The amount declines from approximately $500 million
at the end of January to $341 million on June 30,
2005. US Airways Group reached agreement with the ATSB
concerning an interim extension to the ATSB cash collateral
agreement while US Airways Group and America West Holdings
work to finalize the post-merger terms of both loans. The
interim agreement will expire on July 29, 2005 and will
require US Airways Group, among other conditions, to
maintain a weekly minimum unrestricted cash balance of
$325 million. US Airways Group must also maintain and
achieve certain cumulative earnings levels during the period, as
defined in the agreement. Further, US Airways Group must
comply with restrictions on its ability to make capital
expenditures. In light of rising fuel prices and continued
downward pressure on fares across the industry, there can be no
assurance that US Airways Group can comply with the ATSB
cash collateral agreement.
The ATSB loan also contains covenants that limit, among other
things, US Airways Group's ability to pay
dividends, make additional corporate investments and
acquisitions, enter into mergers and consolidations and modify
certain concessions obtained as part of the prior bankruptcy.
The ATSB loan contains certain mandatory prepayment events
including, among other things, (i) the occurrence of
certain asset sales and the issuance of certain debt or equity
securities and (ii) the decrease in value of the collateral
pledged in respect of the ATSB loan below specified coverage
levels. During the three months ended March 31, 2005,
US Airways Group made approximately $6 million in
prepayments on the ATSB loan with proceeds received from asset
sales.
The ATSB loan bears interest as follows:
•
90% of the ATSB loan (Tranche A) was funded through a
    participating lender's commercial paper conduit program and
    bears interest at a rate equal to the conduit provider's
    weighted average cost related to the issuance of certain
    commercial paper notes and other short-term borrowings plus
    0.30%, and
•
10% of the ATSB loan (Tranche B) bears interest at LIBOR
    plus 4.0%.
In addition, US Airways, Inc. is charged an annual
guarantee fee in respect of the ATSB guarantee currently equal
to 4.1% of the guaranteed amount (initially $900 million),
with the guarantee fee increasing by ten basis points annually.
Due to US Airways Group's September 2004 bankruptcy
filing and subsequent loss of certain regional jet financing,
the guarantee fee increased by 2% per annum and the
interest rate on Tranche A and Tranche B each
increased by an additional 2% and 4% per annum,
respectively, for an effective increase in the interest rate on
the loan balance of four percentage points.
As of March 31, 2005, $712 million was outstanding
under the ATSB loan. The ATSB loan is reflected as a current
liability on US Airways Group's accompanying balance
sheet at March 31, 2005 at a book value of
$697 million, which is net of $15 million of
unamortized discount, and is not subject to compromise. As of
March 31, 2005, US Airways Group's
$513 million in unrestricted cash and cash equivalents was
available to support daily operations, subject to certain
conditions and limitations under the ATSB cash collateral
agreement.
2004 Amendments to the ATSB Loan
In March 2004, US Airways, Inc. and the ATSB amended the
financial covenants of the ATSB loan to provide covenant relief
for the measurement periods beginning June 30, 2004 through
December 31, 2005. The ratios used in the financial
covenants were adjusted and reset to align with US Airways
Group's forecast for 2004 and 2005 as of the date of the
amendment, which assumed a return to profitability by 2005. In
exchange for this covenant relief and other changes described
below, US Airways, Inc. made a voluntary prepayment of
$250 million on March 12, 2004, which reduced, pro
rata, all future scheduled principal payments of the ATSB loan,
rather than shortening the remaining life of the loan.
In consideration for the lenders agreeing to amend the provision
in the loan agreement related to the going concern paragraph in
the independent auditor's report for US Airways
Group's audited financial statements for the year ended
December 31, 2003, US Airways, Inc. agreed to revised
financial covenants.
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Effective May 21, 2004, US Airways, Inc. and the ATSB
again amended the ATSB loan to permit use of its regional jets
financed by General Electric, or GE, as cross collateral for
other obligations of US Airways, Inc. to GE. In
consideration for this amendment, US Airways, Inc. agreed
to revised covenants relating to minimum required unrestricted
cash balances. US Airways, Inc. made a prepayment of
$5 million in connection with this amendment.
The ATSB loan contains financial covenants that must be
satisfied by US Airways, Inc. at the end of each fiscal
quarter. US Airways, Inc. was uncertain as to its ability
to satisfy these covenants as of June 30, 2004. Effective
June 30, 2004, US Airways, Inc. and the ATSB amended
the ATSB loan to remove the uncertainty relating to
US Airways Group's ability to satisfy its financial
covenant tests for the second quarter of 2004. In consideration
for this amendment, US Airways Group agreed to change the
loan amortization schedule, by increasing each of the first six
principal repayment installments commencing on October 1,
2006 by approximately $16 million, and reducing the last
principal repayment installment on October 1, 2009 by
$94 million.
All of the foregoing rights and obligations of the parties
relating to the ATSB loan are subject to the terms of the cash
collateral orders entered by the bankruptcy court and the terms
of the bankruptcy code.
Eastshore and Wexford Agreements
On February 18, 2005, US Airways Group announced that
it reached an agreement with Eastshore Aviation, LLC, an
investment entity owned by Air Wisconsin Airlines Corporation
and its shareholders, on a $125 million financing
commitment to provide equity funding for a plan of
reorganization. The $125 million facility is in the form of
a debtor in possession term loan. After receiving approval from
the bankruptcy court, $75 million was drawn under the
facility on March 1, 2005 and $25 million was drawn on
April 4, 2005. The final $25 million will be available
on or before September 30, 2005. This loan is second only
to the ATSB loan with regard to US Airways Group's
assets that are pledged as collateral. The interest on the
facility is LIBOR plus 6.5% as determined as of the draw date of
each increment. Interest is payable quarterly in arrears. As
part of this agreement, US Airways, Inc. and Air Wisconsin
also entered into a regional jet services agreement under which
Air Wisconsin may, but is not required to, provide regional jet
service under a US Airways Express code share arrangement.
On April 8, 2005, Air Wisconsin notified US Airways
Group of its intention to deploy 70 regional jets, the maximum
number provided for in the agreement, into the US Airways
Express network. US Airways Group and Eastshore entered
into an amendment to the facility that provides for the
conversion of the outstanding loan amounts upon completion of
the merger pursuant to their investment agreement, as described
in the section entitled "The New Equity Investments."
On March 14, 2005, US Airways Group announced that it
reached an agreement with Republic Airways Holdings, Inc. and
its majority shareholder, Wexford Capital LLC, on an equity and
financing package that includes a $125 million equity
investment upon emergence from Chapter 11 and options for
obtaining $110 million of other liquidity enhancements
prior to emergence. US Airways Group has elected not to
require an equity investment under the agreement, but has
exercised its option for obtaining the $110 million of
additional liquidity. The implementation of transactions under
the agreement was approved by the bankruptcy court on
March 31, 2005.
US Airways, Inc. may obtain the $110 million of
additional liquidity through the sale of certain assets,
including ten currently owned EMB-170 regional aircraft operated
by the MidAtlantic Airways division of US Airways, Inc.,
three EMB-170 regional jet aircraft currently scheduled for
delivery, other regional jet related assets such as a flight
simulator and other items and certain commuter slots at Ronald
Reagan Washington National Airport and LaGuardia Airport.
US Airways, Inc. also has the option to assign the leases
for an additional 15 EMB-170 regional jet aircraft currently
operated by its MidAtlantic Airways division. Upon the sale and
assignment of the leases for the aircraft, Republic Airways
Holdings would enter into a regional jet services agreement with
US Airways Group that would continue the operation of the
aircraft as US Airways Express. Republic Airways Holdings
would lease back the slots to US Airways, Inc. and
US Airways, Inc. would have the right to repurchase the
slots at a predetermined price. In the event that
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US Airways Group does not exercise the slot sale/leaseback
option, Republic Airways Holdings has the option to purchase and
assume the debt and leases for all of US Airways
Group's Embraer regional jets and fly them as
US Airways Express. On June 23, 2005, US Airways,
Inc. exercised its option under its agreement with Republic
Airways Holdings, Inc. and Wexford Capital LLC to sell the
assets of MidAtlantic Airways, including the regional jets, a
flight simulator and certain commuter slots at Ronald Reagan
Washington National Airport and LaGuardia Airport. If the sale
is completed, Republic Airways Holdings will operate the
aircraft as a US Airways Express carrier under a capacity
purchase agreement and will lease the slots back to
US Airways, Inc.
General Electric
General Electric and its affiliates, referred to collectively as
GE, is US Airways Group's largest aircraft creditor,
having financed or leased a substantial portion of
US Airways Group's aircraft prior to the current
Chapter 11 filing. In addition, in November 2001,
US Airways, Inc. obtained a $404 million credit
facility from GE, which was secured by collateral including
11 A320-family aircraft and 28 spare engines. Borrowings
under the 2001 GE credit facility bear interest at the rate of
LIBOR plus 3.5%, and the term of the facility is 2012.
In addition to the 2001 GE credit facility, GE has provided
financing or guarantees with respect to over 140 of
US Airways Group's current operating aircraft, and
also maintains the engines on US Airways Group's
B737-family aircraft, A320-family aircraft, B767 aircraft,
EMB-170 aircraft and CRJ-200 aircraft. In connection with the
prior bankruptcy, US Airways Group reached a settlement
with GE that resolved substantially all aircraft, aircraft
engine and loan-related issues, and provided US Airways
Group with additional financing from GE in the form of a
liquidity facility of up to $360 million that bears
interest at a rate of LIBOR plus 4.25%. Most obligations of
US Airways Group to GE are cross-defaulted to the 2001
GE credit facility, the 2003 GE liquidity facility, the GE
regional jet leases and the GE regional jet mortgage financings.
In November 2004, US Airways Group reached a comprehensive
agreement with GE and its affiliates as described in a Master
Memorandum of Understanding, which we refer to as the
GE Master MOU, that was approved by the bankruptcy court on
December 17, 2004. The GE Master MOU, together with the
transactions contemplated by the term sheets attached to the GE
Master MOU, provided US Airways Group with short-term
liquidity, reduced debt, lower aircraft ownership costs,
enhanced engine maintenance services and operating leases for
new regional jets, while preserving the vast majority of
US Airways, Inc.'s mainline fleet owned or otherwise
financed by GE. The key terms of the GE Master MOU included:
•
agreements providing for continued use by US Airways Group
    of certain Airbus, Boeing and regional jet aircraft, and the
    return to GECC of certain other leased Airbus and Boeing
    aircraft;
•
a bridge facility of up to approximately $56 million for
    use by the debtors during the pendency of the Chapter 11
    proceedings;
•
GE's purchase and immediate leaseback to US Airways,
    Inc. of: (a) 11 Airbus aircraft, 28 spare engines
    and the engine stands securing the 2001 GE credit facility,
    the 2003 GE liquidity facility and certain other GE obligations,
    and (b) ten regional jet aircraft currently debt financed
    by GECC;
•
a restructuring of the balance of the 2001 GE credit
    facility to provide additional liquidity, subject to the pledge
    of junior liens on four CRJ aircraft and a first lien on
    one spare engine to secure the restructured 2001 GE credit
    facility;
•
subject to US Airways Group's satisfaction of certain
    financial tests and other conditions, financing for up to 31
    additional regional jet aircraft;
•
the modification and assumption of certain of US Airways,
    Inc.'s engine maintenance agreements with GE Engine
    Services; and
•
upon emergence from bankruptcy, the issuance of convertible
    notes of the reorganized US Airways, Inc. to GECC in the
    aggregate principal amount of $125 million.
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In connection with the merger, US Airways Group and America
West Holdings have renegotiated certain of their respective
existing agreements, and entered into new agreements, with GE.
These agreements are set forth in a comprehensive agreement with
GE and certain of its affiliates in a Master Merger Memorandum
of Understanding, referred to as the GE Merger MOU, that was
approved by the bankruptcy court on June 23, 2005. In part,
the GE Merger MOU modified and supplemented the agreements
reached between US Airways Group and GE in the
GE Master MOU. As a result of the GE Master MOU, as
modified, amended and supplemented by the GE Merger MOU,
US Airways Group and GE have reached the agreements
discussed below.
Bridge Facility.
The bridge facility entered into between
US Airways Group and GE pursuant to the GE Master MOU
on December 20, 2004 will continue in effect during the
pendancy of the Chapter 11 cases. The bridge facility
provides for a loan in the amount of up to approximately
$56 million, which has been drawn down by US Airways
Group. The bridge facility bears interest at the rate of LIBOR
plus 4.25%, matures on the date US Airways Group emerges
from the Chapter 11 cases, and is payable in cash or, upon
maturity, by issuance of a portion of the $125 million of
convertible notes, as described below. The bridge facility is
cross-collateralized and cross-defaulted with all other
GE obligations owed by any of the debtors to GE, and is
entitled to administrative expense claim status in the
Chapter 11 cases, with priority over all other
administrative claims other than for aircraft financing, which
are
pari passu,
and subordinate only to (i) the
super-priority administrative expense claim of the lenders under
the ATSB loan, (ii) post-petition wages and benefits and
(iii) any new money debtor in possession financing.
Sale-Leaseback Transaction.
Pursuant to the
GE Master MOU, as amended and supplemented by the
GE Merger MOU, US Airways will sell all of the
collateral securing the 2001 GE credit facility, the 2003
GE liquidity facility and certain of the GE Engine
Services maintenance agreements, consisting of 11 Airbus
aircraft and 28 spare engines, together with ten
CRJ aircraft, to affiliates of GE for approximately
$633 million, with US Airways, Inc. immediately
leasing back the aircraft and engines under agreed upon
operating leases at market rates. The lease terms will commence
upon the closing of the sale of each aircraft and spare engine,
and will expire:
•
with respect to the Airbus aircraft, on either October 31,
    2005, or if the debtors emerge from the Chapter 11 cases
    prior to that date, on agreed upon dates, with six of the Airbus
    leases to expire by the end of 2005, without regard to the
    merger, and the balance expiring during 2017;
•
with respect to the CRJ aircraft, on the earlier of the
    debtors' emergence from the Chapter 11 cases and
    October 31, 2005, provided that US Airways, Inc. has
    agreed to convert the leases for the CRJ aircraft into permanent
    long term leases on or before July 29, 2005, with only rent
    payable through October 31, 2005 (or a later date as the
    parties may agree) and return condition obligations being
    afforded administrative expense status in the Chapter 11
    cases; and
•
as to the spare engines, on either of October 31, 2005, or,
    if the debtors emerge from the Chapter 11 cases prior to
    that date, then, with respect to 14 CFM56-5B6 engines on
    agreed upon dates in 2015 (subject to the debtors' right to
    select one engine for early delivery in November 2005, and
    further subject to the debtors' right to swap the expiry
    date for each CFM56-5B6 lease with the expiry date for any other
    CFM56-5B6 lease), and with respect to the 14 CFM56-3B2
    engines on agreed upon dates in 2010. The expiration of the
    lease terms with respect to the 14 CFM56-3B2 engines is
    subject to the debtors' right to terminate the lease for
    one CFM56-3B2 engine upon the scheduled lease expiration date
    for a related Boeing 737-300 aircraft, on the basis of one spare
    engine for every fifth Boeing 737-300 lease terminated, up to a
    maximum of five CFM56-3B2 engine leases, and subject further to
    the debtors' right to terminate any CFM56-3B2 lease upon
    not less than 60 days notice, provided that the debtors pay
    GE an amount equal to the balance of the basic rent due under
    such lease, with a credit for any maintenance adjustment credit
    payable to the debtors on account of the redelivery of the
    applicable engine.
The sale proceeds realized from the sale-leaseback transaction
will be applied to repay the 2003 GE liquidity facility,
the mortgage financing associated with the CRJ aircraft and
a portion of the 2001
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GE credit facility. The operating leases will be
cross-defaulted with all other GE obligations, other than
excepted obligations, and will be subject to return conditions
as agreed to by the parties.
2001 GE Credit Facility.
Following the application of the
proceeds realized from the sale-leaseback transaction, the
remaining balance due on the 2001 GE credit facility will be
restructured into an amended and restated 2001 GE credit
agreement, pursuant to which US Airways Group will be
entitled to borrow additional amounts, which will result in a
total principal outstanding balance thereunder of approximately
$28 million. The additional borrowing will bear interest at
LIBOR plus 4.25%, and will be repayable over eight quarters
commencing September 2005, provided that if the merger occurs,
amortization will commence in September 2006 with a final
maturity in 2010. The amended and restated GE credit
agreement will be secured by a third lien on three CRJ-700
aircraft and a second lien on one CRJ-700 aircraft (in each
case, subject to senior lien positions and subject to the
consent of the senior lien holders pursuant to inter-creditor
agreements reasonably acceptable to GE), and a first lien on one
CF34 spare engine owned by US Airways, Inc., with the
aggregate of any senior liens on the collateral not to exceed
$62 million. GE will release its liens on the four
CRJ aircraft in connection with the sale of all of the
aircraft for a repayment on the loan of an agreed upon amount.
Although US Airways Group's entry into the amended and
restated GE 2001 credit agreement will not constitute an
assumption of the amended and restated GE 2001 credit
agreement, US Airways Group is required to reinstate the
amended and restated GE 2001 credit agreement and related
guaranty in connection with the debtors' emergence from the
Chapter 11 cases.
Regional Jet Financing.
Pursuant to the GE Master
MOU, GE agreed to provide lease financing for up to
31 regional jet aircraft, to consist of 70- to 100-seat
regional jet aircraft in a mix and on terms to be agreed to
between US Airways Group and GE. During the first quarter
of 2005, GE provided lease financing for six CRJ-700 aircraft,
with terms expiring on the earlier of the debtors'
emergence from bankruptcy and June 30, 2005. Under the
terms and conditions of the GE Merger MOU, US Airways
Group and GE have agreed to convert the leases for the six
CRJ aircraft into long term leases by July 29, 2005,
with the long term leases being post-petition agreements,
subject to a limitation on administrative expense status to rent
payable through October 31, 2005 (or a later date agreed to
by the parties) and return condition obligations. The
GE Merger MOU also eliminates any further obligation on GE
to provide regional jet financing directly to US Airways
Group, but GE has agreed to provide single investor or operating
leases to third party carriers meeting financial tests and
otherwise acceptable to GE for ten EMB-170/190/195 aircraft
delivering between 2007 and 2008, on a schedule and terms to be
agreed on by the parties, and subject to manufacturer support.
GE will also provide single investor or operating lease
financing to Republic Airways for three EMB-170 aircraft that
are currently committed to be delivered to the debtors, subject
to manufacturer support and other terms and conditions
acceptable to GE. Finally, to facilitate a transaction agreed to
between US Airways Group and Republic Airways, GE will also
consent to the assignment to Republic Airways of up to
15 EMB-170 leases, subject to manufacturer support and
other conditions acceptable to GE.
Aircraft Transactions.
The GE Master MOU
contemplated a series of transactions intended to provide the
debtors with additional liquidity and lower aircraft ownership
costs. Pursuant to the GE Merger MOU, certain of these
transactions were modified, with the parties also reaching new
agreements regarding the restructuring of lease payments
relative to certain aircraft and the early redelivery of
additional aircraft. Under the GE Master MOU, as modified
and supplemented by the GE Merger MOU, the parties have now
reached the agreements discussed below relative to aircraft.
With respect to certain B737-300, B757 and B737-400 aircraft,
US Airways Group agreed, pursuant to the GE Master MOU
and applicable Section 1110 agreements, to pay and perform
all of its obligations under the applicable leases for those
aircraft during the pendency of the Chapter 11 cases, with
a "true-up" payment to be made with respect to the
B737-300 and B757 aircraft for accrued rent owing on
June 30, 2005, at an assumed lease rental rate per
aircraft, pro-rated for partial months. From and after the
debtors' emergence from bankruptcy, the average monthly
rent on the B737-300, B757 and B737-400 aircraft would be at
reduced rates per month, provided that US Airways Group
could further reduce the postpetition rent for the B737-400
aircraft by either paying GE cash or issuing the convertible
notes of the reorganized US Airways, Inc. in an agreed upon
amount. Under the GE Merger MOU, GE has agreed that,
following the "true-up" payment being made, as
determined as of June 30, 2005, with respect to the
B737-300 and B757
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aircraft, the rent payments due on the B737-300, B757 and
B737-400 aircraft will be adjusted to the agreed upon reduced
rates effective as of July 1, 2005, even though the debtors
have not yet emerged from bankruptcy, and, with respect to the
B737-400, without the agreed upon cash payment or the issuance
of the required amount of convertible notes. Each of the leases
for these Boeing aircraft, as modified, will be assumed by the
debtors, provided that, if the debtors fail to emerge from
bankruptcy, only rent, return conditions and deferred rent
(being the difference between current contractual rentals and
the amended lease rentals) payable through the later of
October 31, 2005 or the return of the aircraft will be
entitled to administrative expense status, with all other claims
under those leases, including rejection damages, being unsecured
pre-petition claims. In the event that US Airways Group
fails to complete the merger, the terms for the Boeing leases,
including the rental rates, return conditions and expiry dates,
will revert to their original terms (with the debtors receiving
credit for all previously paid rent), subject to administrative
expense status, as set forth above, and
US Airways Group will again have the benefit of the
provisions of the GE Master MOU in respect of the Boeing
aircraft.
With respect to 23 CRJ-200 aircraft, GE has agreed to
restructure the timing of the rental payments under the leases
applicable to the aircraft to reduce the quarterly rent payments
for a period of 30 months following the debtors'
emergence from bankruptcy. The amount of the rent reductions
will be deferred and added to the rents payable under the
applicable leases over the 24 month period immediately
following the 30 month deferral, so that the lessors'
lease economics are maintained. Fourteen of the leases for the
CRJ-200 aircraft will also be extended for an additional three
months.
Under the GE Master MOU, the debtors have agreed to enter
into short-term leases with respect to 16 CRJ aircraft,
consisting of nine CRJ-200 aircraft and seven CRJ 700 aircraft,
with those leases to be converted to long-term leases in
connection with the debtors' emergence from the
Chapter 11 cases. Pursuant to the GE Merger MOU, the
debtors have agreed to enter into the contemplated long-term
leases by July 29, 2005, with those leases being
postpetition agreements, subject to administrative expense
status only for (i) rent payable through the later of the
October 31, 2005 and the return of the aircraft and
(ii) return conditions, with all other claims under such
leases, including rejection damages, being unsecured prepetition
claims.
Pursuant to the GE Master MOU, US Airways Group agreed
to modify the expiry dates for the leases relative to ten
A319/A320 aircraft in order to provide for the early redelivery
of the associated aircraft to GE, and also agreed to modify the
expiry dates of the single investor documentation relating to
certain Boeing aircraft, with redelivery conditions to be agreed
upon. GE agreed to waive cross-default provisions and consent to
the foreclosure of its interest in five B737-400 aircraft
without any resulting claims in order to facilitate the
debtors' restructuring of the lease financing with respect
to the aircraft with SNECMA which restructuring occurred in
February 2005. As a result of the GE Merger MOU, in
addition to the ten A319/ A320 aircraft referred to above,
US Airways Group agreed on the terms and conditions for the
early return of 41 aircraft and up to six spare engines,
with related return condition concessions to facilitate these
redeliveries, all as follows:
•
With respect to six A319/320 aircraft that are subject to the
    sale-leaseback transaction, and one B737-300 aircraft, the
    applicable leases will be amended to modify the expiry dates
    under the leases to provide for their early termination and
    return of the subject aircraft to GE during the last six months
    of 2005. The amendments to the applicable leases and the early
    return of the aircraft will be effectuated without regard to the
    completion of the merger or the occurrence of an event of
    default.
•
The leases for five B737-300s currently operated by the debtors
    will be amended to provide for their termination, and attendant
    early redelivery of the subject aircraft between July 2005 and
    October 31, 2005, provided that, as of the date of each
    such termination and redelivery, no event of default has
    occurred and is continuing and there has been no public
    announcement by US Airways Group or America West Holdings,
    any SEC filing or any governmental authority pronouncement,
    which evidences that any significant term or condition of the
    merger will not be complied with or that an applicable milestone
    as provided for in the GE Merger MOU will not be met.
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•
Leases in respect of an additional 29 Boeing aircraft from
    US Airways Group's fleet will be amended to
    modify the expiry dates under the leases so as to provide for
    their early termination and accompanying early return of the
    subject aircraft to GE between 2005 and 2009, subject to
    completion of the merger. With respect to eleven of the Boeing
    aircraft, however, which will be scheduled for removal from
    service during 2009 pursuant to the applicable amended leases,
    US Airways Group will grant GE an option exercisable
    on or before October 31, 2006 to further modify the expiry
    dates of those leases to provide for the removal of those
    aircraft during an earlier period, from July 2007 through July
    2008, unless US Airways Group has, as of September 30,
    2006, achieved an agreed upon corporate credit rating or
    satisfied certain financial covenant tests.
•
In connection with the removal of the above-referenced Boeing
    aircraft from US Airways Group's fleet,
    US Airways Group will be permitted to terminate an agreed
    upon number of the spare engine leases entered into by the
    debtors pursuant to the sale-leaseback transaction, from time to
    time, as and when an agreed upon number of those aircraft have
    been redelivered to GE.
•
To facilitate the early redelivery of the Airbus Aircraft
    from US Airways Group's fleet, GE has agreed to
    grant certain return condition concessions relative to such
    aircraft. Prior to the debtors' emergence from the
    Chapter 11 cases, GE and US Airways Group have agreed
    to net (a) any redelivery payment obligations payable by GE
    to the debtors against (b) any redelivery payment
    obligations payable by the debtors to GE relative to redelivered
    aircraft, and to the extent that any net balance is owing to the
    debtors by GE, the balance will be payable to the debtors upon
    US Airways Group's emergence from the Chapter 11
    cases.
Under the GE Master MOU, US Airways Group and GE
reached an agreement with respect to five engine repair and
maintenance agreements, and certain other matters. This
agreement included, among other things, the agreement of
US Airways Group to assume three of the agreements,
subject to a limitation on possible administrative expense
claims, and also provided for GE's agreement to:
•
forgive and release US Airways, Inc. from certain
    prepetition obligations;
•
defer certain payment obligations arising under these agreements;
•
extend one maintenance agreement;
•
continue certain existing deferrals; and
•
determine the treatment of certain removal charges.
Pursuant to the GE Merger MOU, US Airways Group and GE
further agreed, among other things, to:
•
forgive certain removal charges relative to CFM56-3 engines, in
    addition to those removal charges to be forgiven pursuant to the
    GE Master MOU;
•
provide US Airways, Inc. with the right to remove certain
    CFM56-3 engines otherwise subject to agreements with GE Engine
    Services, with all removal credits owing to the debtors in
    connection with those agreements to be applied against
    outstanding amounts otherwise owing to GE Engine Services by the
    debtors under the term note issued to GE Engine Services
    pursuant to GE Master MOU;
•
modify the debtors' obligations with respect to deferred
    obligations (as defined in the GE Master MOU) to provide that
    those obligations will be payable in two installments, due on
    each of June 30, 2005 and September 30, 2005;
•
extend the term of the CFM56-5 engine maintenance agreement with
    GE Engine Services, with the debtors waiving certain conversion
    rights; and
•
modify the CFM56-3 engine maintenance agreement to provide for
    an agreement upon minimum monthly payments on account of accrued
    engine flight hours.
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In consideration of the foregoing, US Airways Group agreed,
among other things, on:
•
a last right of offer for GE Engine Services with respect to any
    follow-on engine maintenance agreement for the debtors'
    CF6-80C2 fleet;
•
certain arrangements relative to engine selection in the event
    US Airways Group elects to assume an existing A320
    aircraft purchase agreement between Airbus and US Airways
    Group upon its emergence from the Chapter 11 cases; and
•
certain arrangements relative to engine selection in the event
    New US Airways Group, following the merger, proceeds
    to take delivery of certain A350 aircraft from Airbus.
Convertible Notes.
Pursuant to the GE Master MOU,
US Airways Group agreed that upon its emergence from the
Chapter 11 cases, as partial consideration for entering
into the GE Master MOU, an affiliate of GECC will receive
convertible notes of the reorganized US Airways, Inc. in
the aggregate principal amount of $125 million. The
convertible notes will be convertible at any time, at the
holders' election, into shares of common stock of New
US Airways Group at a conversion price equal to the product
of (x) 140%-150% (at US Airways, Inc.'s option)
and (y) the average closing price of New US Airways
Group common stock for the sixty consecutive trading days
following emergence from bankruptcy and the listing of New
US Airways Group common stock on Nasdaq or a national stock
exchange. The convertible notes will bear interest at a rate to
be determined no later than thirty days prior to the
debtors' scheduled date of emergence from bankruptcy and
interest will be payable semi-annually, in arrears, and will
mature in 2020. US Airways, Inc. will be permitted to
redeem some or all of the convertible notes at any time on or
after the fifth anniversary of the issuance of the notes, at a
redemption price payable in cash or, subject to certain
conditions, New US Airways Group common stock. Holders of
the convertible notes may require US Airways, Inc. to
repurchase all or a portion of their convertible notes on the
fifth and tenth anniversary of the issuance of the notes at 100%
of the principal amount of the convertible notes, plus accrued
and unpaid interest to the date of repurchase, payable, at
US Airways, Inc. election, in cash or New US Airways
Group common stock. The convertible notes will be senior
unsecured obligations and will rank equally in right of payment
with all existing and future unsecured senior obligations of the
reorganized US Airways, Inc. The convertible notes will be
guaranteed by New US Airways Group, the parent holding
company of the reorganized US Airways, Inc.
Regional Jet Financing
The 2003 plan of reorganization sought to boost revenue and
enhance competitiveness through the increased use of regional
jets. Regional jets are faster, quieter and more comfortable
than turboprops and are generally preferred by customers over
turboprops. In May 2003, US Airways Group entered into
agreements to purchase a total of 170 regional jets from
Bombardier and Embraer. US Airways Group had previously
secured financing commitments from GE and from the respective
airframe manufacturers for approximately 85% to 90% of these
jets. These commitments were subject to certain credit or
financial tests, as well as customary conditions precedent.
Despite US Airways Group's failure to meet one of the
applicable credit standards as of May 5, 2004,
US Airways Group reached agreements with GE, Embraer and
Bombardier for continued financing of regional jet deliveries
through September 30, 2004. As part of the agreement
reached with Bombardier, US Airways Group converted 23
CRJ-200 deliveries (50-seat regional jets) to CRJ-700 deliveries
(70-seat regional jets) and retained the right to convert some
or all of the CRJ-700 deliveries to CRJ-900 deliveries (90-seat
regional jets). US Airways, Inc. agreed to refinance with
third parties four aircraft originally financed by Bombardier.
DVB Bank AG provided US Airways, Inc. with 18 month
bridge financing for two aircraft, with the objective of
arranging long-term market financing for these aircraft upon
successful implementation of US Airways Group's
transformation plan.
GE's financing commitment with respect to regional jets
through September 30, 2004 was also conditioned on
US Airways, Inc. gaining permission under its ATSB loan to
use its regional jets mortgage financed by GE as
cross-collateral for other obligations of US Airways, Inc.
to GE. On May 21, 2004,
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US Airways Group amended the ATSB loan to allow this
cross-collateralization. At the same time GE waived the
application of the credit rating condition precedent for
regional jet financing through September 30, 2004, thus
securing the continued financing support from GE through
September 2004.
As a result of the September 12, 2004 Chapter 11
filing, US Airways Group failed to meet the conditions
precedent for continued financing of regional jets and
temporarily ceased taking delivery of new regional jet aircraft.
As a result, US Airways Group incurred aircraft order
cancellation penalties of $7 million in the fourth quarter
of 2004. These penalties were offset against purchase deposits
held by the aircraft manufacturers.
US Airways Group has reached agreements with certain
of its lessors and lenders restructuring existing aircraft lease
and debt financings. On December 17, 2004, the bankruptcy
court approved US Airways Group's agreements for
the continued use and operation of substantially all of its
mainline and Express fleet. Under the GE Master MOU,
US Airways Group reached a comprehensive agreement
with GE on aircraft leasing and financing and engine services,
which provided US Airways Group with short-term
liquidity, reduced debt, lower aircraft ownership costs,
enhanced engine maintenance services, and operating leases for
new regional jets. Pursuant to the GE Merger MOU,
US Airways Group and GE reached agreement on further
rent concessions related to single investor and operating
leases, and the terms and conditions of the redelivery of
aircraft and engines, all as described above.
Pursuant to the regional jet leasing term sheet under the GE
Master MOU, GECC or its affiliates agreed to provide leases for
up to 31 regional jet aircraft, which were to consist of 70- to
100-seat regional jet aircraft manufactured by Bombardier and/or
Embraer in a mix and subject to other terms to be mutually
agreed upon by GECC and US Airways, Inc. During the first
quarter of 2005, GECC leased six CRJ-700s to US Airways,
Inc. with terms expiring on the earlier of the debtors'
emergence from Chapter 11 and June 30, 2005. Under the
GE Merger MOU, these leases will be converted into long-term
leases by July 29, 2005. Although the GE Merger MOU
eliminated the obligation of GECC to provide regional jet
financing directly to US Airways Group, GE will
provide single investor or operating leases to Republic Airways
for three EMB-170 aircraft, and to third-party carriers
acceptable to GE for ten EMB-170/190/195 to be delivered between
2007 and 2008 on a schedule and on terms acceptable to GE, and
the satisfaction of certain other conditions.
In December 2004, US Airways Group reached aircraft leasing
and financing agreements with Embraer and Bombardier, which were
approved by the bankruptcy court in January 2005. Pursuant to
the agreement reached with Embraer, US Airways Group
purchased and took delivery of three EMB-170 aircraft in January
2005 and undertook to purchase and take delivery of three
additional EMB-170 aircraft by March 31, 2005. The purchase
of the three EMB-170s delivered in January 2005 was financed by
Embraer through a mortgage loan facility and the application of
$17 million of existing purchase deposits held by Embraer.
As discussed below, US Airways Group did not take delivery
of the second three aircraft in March 2005. Additionally,
approximately $12 million of purchase deposits held by
Embraer will be used to fund an Embraer loan reserve. Embraer
will apply the reserve funds in the amounts and on the dates as
and when payments are due under the Embraer loans during the
period from October 1, 2004 through July 31, 2005 in
full satisfaction of US Airways Group's payment
obligations with respect to those Embraer loans during that
period. Upon delivery of the first three EMB-170s, which
occurred in January 2005, unless US Airways Group assumes
the Embraer aircraft purchase agreement pursuant to
Section 365 of the bankruptcy code, no further obligations
arise on the part of US Airways Group or Embraer with
respect to the purchase and delivery of any aircraft, other than
those obligations that arise from or are related to the purchase
and delivery of the final three EMB-170s originally scheduled
for March 2005. Embraer and US Airways Group have agreed to
negotiate a new delivery schedule upon US Airways
Group's assumption of the Embraer aircraft purchase
agreement.
Due to US Airways Group's failure to take delivery by
March 31, 2005 of the remaining three EMB-170 aircraft,
damages accrue from and after April 1, 2005 until the
delivery of the aircraft at the rate of $162,795 per month
per aircraft. If the aircraft are not delivered by July 31,
2005, Embraer's obligation to deliver these aircraft will
terminate and its damages with respect to the undelivered
aircraft may be as much as $10 million for all three
aircraft, rather than at the rate of $162,795 per month per
aircraft, with Embraer
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having the right to apply any remaining purchase deposits
against Embraer's aggregate damages.
US Airways Group is currently working to arrange
financing for these aircraft, and anticipates that GE's
commitment to finance the aircraft, as discussed above, will be
realized, but recorded a charge of $2 million in the first
quarter of 2005, which is included in reorganization items in
US Airways Group's consolidated statement of
operations, associated with penalties expected to be incurred.
Under the agreement reached with Bombardier, US Airways
Group acquired three new CRJ-700 aircraft in January 2005. The
purchase was financed through the application of
$28 million of existing purchase deposits held by
Bombardier, $2 million in cash and a financed lease
facility with DVB Bank AG. Additionally, $4 million of
existing purchase deposits held by Bombardier were used to
satisfy existing defaults and cure payments. So long as
US Airways Group continues to operate under the protection
of Chapter 11 in compliance with the bankruptcy code, no
obligations will arise on the part of US Airways Group or
Bombardier with respect to the purchase and delivery of any
aircraft.
As of March 31, 2005, regional aircraft manufacturers held
purchase deposits of $26 million related to the acquisition
of aircraft.
Airbus
As of December 31, 2004, US Airways Group had 19
A320-family aircraft on firm order scheduled for delivery in the
years 2007 through 2009. US Airways Group also had ten
A330-200 aircraft on firm order scheduled for delivery in the
years 2007 through 2009. On February 3, 2005, the
bankruptcy court approved US Airways Group's agreement
with Airbus providing for, among other things, delivery of the
19 A320-family aircraft in years 2008 through 2010, and delivery
of the ten A330-200 aircraft in years 2008 through 2009.
In connection with the merger, US Airways Group and
America West Holdings entered into a Memorandum of Understanding
with Airbus, which we refer to as the Airbus MOU, that includes,
among other things:
•
adjustments to the delivery schedules for the narrow-body and
    wide-body aircraft, and an agreement by
    US Airways Group to assume the related purchase
    agreements in connection with its emergence from Chapter 11;
•
a new order for 20 A350 wide-body aircraft, subject to
    US Airways Group's right to convert up to ten
    A350 orders to A330 orders, and a backstop financing commitment
    by Airbus with respect to a substantial number of the A350
    aircraft;
•
elimination of cancellation penalties on
    US Airways Group's existing order for ten
    A330-200 aircraft, provided that New US Airways Group has
    met certain predelivery payment obligations under the A350
    order; and
•
a term loan of up to $250 million, of which $213 million
    can be used for general corporate purposes.
As of March 31, 2005, Airbus held purchase deposits related
to US Airways Group's order for ten
A330-200's, which, under the Airbus MOU will be applied, in
part, as a non-refundable restructuring fee on account of the
agreements reached relating to the A330-200's, and in part
as purchase deposits on account of the A350 orders and the
rescheduled A330-200 orders.
Other
US Airways, Inc. relies heavily on credit card processing
for its sales, and utilizes credit card issuers and third-party
service providers to process credit card transactions under
agreements which require US Airways Group to provide cash
collateral and to comply with certain other financial and
nonfinancial requirements. If US Airways, Inc. fails to
meet any such conditions, these issuers and providers can
require additional cash collateral and, under certain
circumstances, terminate these credit card processing
agreements. The termination of credit card agreements would have
a material adverse affect on US Airways, Inc.'s
financial condition and results of operations.
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During the second quarter of 2004, US Airways, Inc. amended
its agreement with American Express Travel Related Services
Company, Inc. The new agreement has been extended to
December 31, 2006 and provides for additional cash
collateral to reduce the exposure borne by American Express
against potential customer liabilities relating to unflown
tickets purchased by customers using the American Express card.
The agreement required additional cash collateral in the event
that US Airways, Inc.'s regional jet financing
programs were terminated or if US Airways Group failed to
demonstrate by September 30, 2004 its ability to
successfully implement its transformation plan. This amendment
effectively aligned the American Express agreement with the
arrangements in place for certain other credit card processors.
As of March 31, 2005, $376 million in cash collateral
classified as restricted cash on US Airways Groups'
consolidated balance sheet secured credit card sales. This
amount fluctuates with the amount of sold but unflown tickets.
Statement of Cash Flows Narrative
For the first three months of 2005, US Airways Group's
operating activities before reorganization items used net cash
of $98 million, compared to operating activities for the
three months ended March 31, 2004 which provided cash of
$75 million. Operating cash flows during the first quarter
of 2005 included the use of $11 million for reorganization
items. Cash flows for 2005 were adversely affected by the same
factors that affected financial results, including continued
reductions in unit revenue and significant increases in fuel
prices.
For the first three months of 2005, net cash used by investing
activities was $174 million due primarily to the increase
in restricted cash of $139 million. The increase in
restricted cash reflects additional collateral deposits related
to US Airways Group's third-party credit card
processors. US Airways Group, in the ordinary course
of business, withholds from employees and collects from
passengers funds that are required to be paid to applicable
governmental authorities, which include withholding for payroll
taxes, transportation excise taxes, passenger facility charges,
transportation security charges and other related fees, and has
established trust accounts to fund these obligations. Net cash
flows from investing activities in the first quarter of 2005
also includes $39 million in capital expenditures,
primarily related to the acquisition of new regional jets.
For the first three months of 2004, investing activities
included net cash outflows of $2 million related to capital
expenditures and net equipment purchase deposit activity.
Capital expenditures reflects the early return of aircraft
purchase deposits by an aircraft manufacturer of
$31 million. The decrease in short-term investments in the
first quarter of 2004 reflects a shift in the investment
portfolio to investments with maturities less than 90 days
as of March 31, 2004. Investing activities in 2004 also
included an increase in restricted cash of $113 million.
Net cash provided by financing activities during the three
months ended March 31, 2005 was $58 million. Principal
payments on debt and capital lease obligations of
$72 million includes $6 million in prepayments on the
ATSB loan with proceeds from sales of assets. On March 1,
2005, US Airways Group made the first draw of
$75 million under the debtor in possession loan provided by
Air Wisconsin. Net cash used by financing activities for the
three months ended March 31, 2004 was $272 million.
Principal payments on long-term debt and capital lease
obligations of $295 million included the $250 million
prepayment made in connection with the ATSB loan amendment in
March 2004.
As discussed in "Results of Operations" above, the
successor company's financial statements are not comparable
with the predecessor company's financial statements.
However, for purposes of discussion of liquidity and capital
resources, 2004 has been compared to the full year 2003 as
included, in part, in US Airways Group's consolidated
statements of cash flows.
For 2004, US Airways Group's operating activities
before reorganization items used net cash of $89 million,
compared to 2003, which used net cash of $77 million.
Included in 2003 cash flows from operating activities is
$218 million received from TSA in connection with the
Emergency Wartime Supplemental Appropriations Act. Cash flows
from operating activities for 2004 were favorably impacted by an
increase in accounts payable and other accrued expenses as a
result of the Chapter 11 filing in September 2004, as
US Airways Group received liquidity protection under the
automatic stay provisions of the bankruptcy code related to
prepetition liabilities. Cash flows from operating activities
were also favorably
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impacted for this reason during the prior bankruptcy for the
period from August 2002 to March 2003. Cash flows for all
periods have been adversely affected by the same factors that
adversely affected financial results, as discussed above in
"Results of Operations," including reductions in unit
revenue and significant increases in fuel prices.
For 2004, net cash provided by investing activities was
$83 million. Investing activities include a
$358 million decrease in short term investments, reflecting
a shift to cash and cash equivalents, and an increase in
restricted cash of $76 million. The increase in restricted
cash in 2004 and 2003 reflects the additional cash collateral
deposits required by US Airways Group's credit card
processors, letters of credit and trust accounts described
below, partially offset by the decline in cash collateral
required for fuel hedging. Capital expenditures and net
equipment purchase deposit activity in 2004 of $217 million
reflect the early return of aircraft purchase deposits by an
aircraft manufacturer of $31 million in the first quarter
of 2004.
For 2003, net cash used for investing activities was
$511 million. Investing activities included cash outflows
of $215 million related to capital expenditures, including
$174 million for purchase deposits on future regional jet
aircraft deliveries and payments made in connection with the
delivery of two regional jets with the balance related to
rotables, ground equipment and miscellaneous assets. The
increase in short-term investments in 2003 reflects activity
intended to increase the returns on US Airways Group's
higher cash balances. Other investing activity in 2003 also
reflects $24 million in proceeds received related to the
sale of US Airways Group's investment in Hotwire, Inc.
For 2002, net cash provided by investing activities was
$22 million. Investing activities included cash outflows of
$146 million related to capital expenditures. Capital
expenditures included $106 million for three A321 aircraft
(two other A321s were purchased in noncash transactions) with
the balance related to rotables, ground equipment and
miscellaneous assets. Proceeds from disposition of property
includes, among other things, proceeds related to surplus
aircraft and related parts. During the first quarter of 2002,
US Airways, Inc. sold 97 surplus DC-9, B737-200 and MD-80
aircraft. The increase in short-term investments reflects
proceeds from the sale of short-term investments.
US Airways Group, in the ordinary course of business,
withholds from employees and collects from passengers funds that
are required to be paid to applicable governmental authorities,
which funds include withholding for payroll taxes,
transportation excise taxes, passenger facility charges,
transportation security charges and other related fees. During
the second quarter of 2002, US Airways Group
established trusts to fund these obligations. The initial
funding, which totaled approximately $201 million, and the
net cash flows of the trusts are reflected in decrease
(increase) in restricted cash on
US Airways Group's consolidated statements of
cash flows. The funds in the trust accounts, which totaled
$138 million and $164 million as of December 31,
2004 and 2003, respectively, are classified as restricted cash
on US Airways Group's consolidated balance sheets,
including $99 million and $124 million in current
restricted cash and $39 million and $39 million in
noncurrent restricted cash, respectively.
US Airways Group used $185 million in cash for
financing activities in 2004. Principal payments on debt and
capital lease obligations of $425 million include
$255 million of prepayments made in connection with
amendments to the ATSB loan in March and May 2004. The financing
activities in 2003 were significantly impacted by
US Airways Group's emergence from the prior bankruptcy
in March 2003.
Net cash provided by financing activities during 2003 was
$1.02 billion. US Airways, Inc. received proceeds of
$1 billion from the ATSB loan. Additionally, prior to
emergence from Chapter 11 US Airways Group
borrowed $69 million under a debtor in possession facility
provided by RSA, and $62 million under a debtor in
possession liquidity facility provided by GE. US Airways
Group borrowed $114 million under an exit liquidity
facility provided by GE and $20 million under a credit
facility provided by GE. US Airways Group also
received proceeds of $240 million in connection with the
RSA investment agreement and $34 million related to a
private placement offering, as discussed below. US Airways
Group used a portion of the proceeds it received in connection
with its emergence from Chapter 11 to repay
$369 million that was then outstanding under the RSA debtor
in possession facility (including the $69 million discussed
above) on March 31, 2003. US Airways Group also used a
portion of the proceeds to repay the $62 million then
outstanding under the GE debtor in possession liquidity
facility. US Airways Group also
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made principal payments of debt of $85 million, including a
$24 million required prepayment on the ATSB loan related to
the sale of its investment in Hotwire, Inc.
Net cash provided by financing activities during 2002 was
$334 million. US Airways, Inc. received proceeds of
$116 million from the mortgage financing of three A321
aircraft (two other A321s were financed in noncash
transactions). Additionally, US Airways, Inc. received
proceeds of $33 million with the private placement of pass
through certificates that partially financed five previously
delivered A330 aircraft and $18 million from an engine
manufacturer credit facility. US Airways Group also
borrowed $300 million under the RSA debtor in possession
facility and $75 million under a senior secured debtor in
possession financing facility provided by Credit Suisse First
Boston, Cayman Islands Branch, and Bank of America, N.A., with
participation from the Texas Pacific Group, which we refer to as
the original debtor in possession facility. US Airways
Group used a portion of the RSA debtor in possession facility
funds to repay the full $75 million that was then
outstanding under the original debtor in possession facility.
Prior to the 2002 bankruptcy filing, US Airways Group made
scheduled principal repayments of debt in the amount of
$77 million. Subsequent to the 2002 bankruptcy filing,
US Airways Group made principal repayments of debt of
$56 million, including $38 million to the engine
manufacturer credit facility.
US Airways Group sold 4,679,000 shares of its
Class A common stock at a price of $7.34 per share
before transaction fees during August 2003 in a private
placement transaction with Aviation Acquisition L.L.C., Goldman,
Sachs and Co. and OCM Principal Opportunities Fund II, L.P.
These shares related to Class A common stock retained by
US Airways Group from those shares allocated to employees
pursuant to the 2003 plan of reorganization that vested at
July 31, 2003. The retained shares represented the employee
tax withholding obligation with respect to the vested portion of
the restricted stock grants. The amount of withholding was
determined on the basis of a price of $7.34 per
Class A common share and applicable federal, state, and
local taxes. US Airways Group received net proceeds of
$34 million related to this transaction, which offset
US Airways Group's remittance to taxing authorities.
Contractual Obligations
The following table provides detail of US Airways
Group's future cash contractual obligations as of
December 31, 2004, including classification of the ATSB
loan as current and without regard to liabilities subject to
compromise (dollars in millions).
Payments Due by Period
2005
2006
2007
2008
2009
Thereafter
Total
Debt and capital lease obligations (1)
$
863
$
159
$
145
$
143
$
147
$
1,868
$
3,325
Operating lease commitments (2)
878
774
707
629
554
4,169
7,711
Aircraft purchase commitments (3)(4)
221
15
57
622
792
232
1,939
Regional jet capacity purchase agreements
257
262
268
266
202
266
1,521
Total
$
2,219
$
1,210
$
1,177
$
1,660
$
1,695
$
6,535
$
14,496
(1)
Excludes related interest amounts.
(2)
Includes aircraft obligations financed under enhanced equipment
    trust certificates.
(3)
As long as US Airways Group operates under the protection
    of Chapter 11 in compliance with the bankruptcy code and
    unless US Airways Group assumes the aircraft purchase
    agreements pursuant to Section 365 of the bankruptcy code,
    neither US Airways Group nor the aircraft
    manufacturers have any obligation in respect to the purchase or
    delivery of regional jet aircraft beyond the commitments for
    deliveries in the first quarter of 2005 discussed below.
(4)
The minimum determinable payments associated with these
    acquisition agreements for all firm-order aircraft include
    progress payments, payments at delivery, spares, capitalized
    interest and nonrefundable deposits.
As of December 31, 2004, US Airways Group had 19
A320-family aircraft on firm order scheduled for delivery in the
years 2007 through 2009. US Airways Group also had ten
A330-200 aircraft on firm order scheduled for delivery in the
years 2007 through 2009. On February 3, 2005, the
bankruptcy court approved US Airways Group's agreement
with Airbus providing for, among other things, delivery of the
19 A320-
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family aircraft in years 2008 through 2010, and delivery of the
ten A330-200 aircraft in years 2008 through 2009. Subsequently,
a Memorandum of Understanding was executed on May 18, 2005
among Airbus, US Airways Group, US Airways, Inc. and
America West Airlines, Inc. which provides for a
$250 million financing commitment from Airbus upon the
satisfaction of various conditions precedent (including the
completion of the merger and the emergence of US Airways,
Inc. from bankruptcy), the rescheduling of US Airways
Inc.'s A320-family and A330-200 delivery commitments, and
the order of 20 A350 aircraft for which Airbus has agreed to
provide a substantial portion of the financing, subject to
certain terms and conditions. Pursuant to the Airbus MOU,
US Airways Inc.'s A320-family aircraft are scheduled
for delivery in 2009 and 2010, US Airways Inc.'s
A330-200 aircraft will be scheduled for delivery in 2009 and
2010 and the A350 aircraft deliveries are scheduled to occur
during the period 2011 through 2013. The Airbus MOU also
substantially eliminates cancellation penalties on
US Airways Group's orders for ten A330-200 aircraft,
provided that New US Airways Group has met certain predelivery
payment obligations under the related A350 order.
US Airways Group acquired three new Embraer EMB-170
aircraft and three new Bombardier CRJ-700 aircraft in January
2005. US Airways Group also has firm orders for three
additional EMB-170 aircraft which were scheduled to be delivered
by March 31, 2005. Due to US Airways Group's
failure to take delivery by March 31, 2005 of the remaining
three EMB-170 aircraft, damages are accruing from and after
April 1, 2005 at the rate of $162,795 per month per
aircraft until July 31, 2005, at which time Embraer's
obligation to deliver those aircraft will terminate and its
damages with respect to the undelivered aircraft may be as much
as $10 million, rather than at the rate of
$162,795 per month, with Embraer having the right to apply
any remaining purchase deposits against Embraer's aggregate
damages. As a result of regional jet aircraft acquisitions,
US Airways Group did not take delivery of certain
previously ordered narrow-body aircraft and recorded an accrual
of $35 million for related penalties during the three
months ended June 30, 2003.
Off-Balance Sheet Arrangements
An off-balance sheet arrangement is any transaction, agreement
or other contractual arrangement involving an unconsolidated
entity under which a company has (1) made guarantees,
(2) a retained or a contingent interest in transferred
assets, (3) an obligation under derivative instruments
classified as equity or (4) any obligation arising out of a
material variable interest in an unconsolidated entity that
provides financing, liquidity, market risk or credit risk
support to US Airways Group, or that engages in leasing,
hedging or research and development arrangements with
US Airways Group.
US Airways Group has no off-balance sheet arrangements of
the types described in the first three categories that it
believes may have a material current or future effect on its
financial condition, liquidity or results of operations. Certain
guarantees that US Airways Group does not expect to have a
material current or future effect on its financial condition,
liquidity or results of operations are disclosed in
note 7(e) to the consolidated financial statements included
in US Airways Group's Annual Report on Form 10-K,
attached to this prospectus.
US Airways Group does have obligations arising out of
variable interests in unconsolidated entities. In 2003,
US Airways Group adopted Financial Accounting Standards
Board Interpretation No. 46, "Consolidation of
Variable Interest Entities," or FIN 46, which
addresses the accounting for these variable interests. An entity
is subject to FIN 46 and is called a variable interest
entity, or VIE, if it has (1) equity that is insufficient
to permit the entity to finance its activities without
additional subordinated financial support from other parties, or
(2) equity investors that cannot make significant decisions
about the entity's operations, or that do not absorb the
expected losses or receive the expected returns of the entity. A
VIE is consolidated by its primary beneficiary, which is the
party involved with the VIE that has a majority of the expected
losses or a majority of the expected residual returns or both,
as a result of ownership, contractual or other financial
interests in the VIE. The adoption of FIN 46 did not
materially affect US Airways Group's financial
statements. In reaching this conclusion, US Airways Group
identified certain lease arrangements that were within the scope
of FIN 46. This included a review of 62 aircraft operating
leases for which US Airways Group was the lessee and a pass
through trust established specifically to purchase, finance and
lease the aircraft to US Airways Group served as
lessor. These trusts, which issue certificates, also known as
Enhanced
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Equipment Trust Certificates or EETC, allow US Airways
Group to raise the financing for several aircraft at one time
and place these funds in escrow pending the purchase or delivery
of the relevant aircraft. The trusts are also structured to
provide for certain credit enhancements, such as liquidity
facilities to cover certain interest payments, that reduce the
risks to the purchasers of the trust certificates and, as a
result, reduce the cost of aircraft financing to US Airways
Group. Each of these leases contains a fixed-price purchase
option that allows US Airways Group to purchase the
aircraft at predetermined prices on specified dates during the
latter part of the lease term. However, US Airways Group
does not guarantee the residual value of the aircraft, and
US Airways Group does not believe it is the primary
beneficiary under these lease arrangements based upon its cash
flow analysis.
US Airways Group also reviewed long-term operating leases
at a number of airports, including leases where US Airways
Group is also the guarantor of the underlying debt. These leases
are typically with municipalities or other governmental
entities. FIN 46, as revised in December 2003, provided a
scope exception that generally precludes the consolidation of
governmental organizations or financing entities established by
a governmental organization. US Airways Group believes that
its arrangements meet the scope exception.
Critical Accounting Policies
US Airways Group's discussion and analysis of its
financial condition and results of operations are based upon
US Airways Group's consolidated financial statements,
which have been prepared in conformity with accounting
principles generally accepted in the United States of America.
The preparation of these financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Critical accounting policies are defined as those that are
reflective of significant judgments and uncertainties and
potentially result in materially different results under
different assumptions and conditions. US Airways Group has
identified the following critical accounting policies that
impact the preparation of its financial statements. See also
note 2, Summary of Significant Accounting Policies, to the
notes to US Airways Group's consolidated financial
statements included in US Airways Group's Annual
Report on Form 10-K for the year ended December 31,
2004 and Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2005, attached as annexes to this
prospectus, for additional discussion of the application of
these estimates and other accounting policies.
Impairment of Goodwill
Effective January 1, 2002 US Airways Group adopted the
provisions of Statement of Financial Accounting Standards, or
SFAS, No. 142, "Goodwill and Other Intangible
Assets." SFAS 142 requires management to make
judgments about the fair value of the reporting unit to
determine whether goodwill is impaired. The reporting unit is
US Airways Group. US Airways Group believes that this
accounting estimate is a critical accounting estimate because:
(1) goodwill is a significant asset and (2) the impact
that recognizing an impairment would have on the assets reported
on its consolidated balance sheet, as well as its consolidated
statement of operations, could be material. Goodwill is tested
annually for impairment or more frequently if events or changes
in circumstances indicate that it might be impaired.
US Airways Group assesses the fair value of the
reporting unit considering both the income approach and market
approach. Under the market approach, the fair value of the
reporting unit is based on quoted market prices and the number
of shares outstanding for US Airways Group common stock.
Under the income approach, the fair value of the reporting unit
is based on the present value of estimated future cash flows.
The income approach is dependent on a number of factors
including estimates of future market growth trends, forecasted
revenues and expenses, expected periods the assets will be
utilized, appropriate discount rates and other variables.
US Airways Group bases its estimates on assumptions
that it believes to be reasonable, but which are unpredictable
and inherently uncertain. Actual future results may differ from
those estimates. US Airways Group concluded that the
fair value of the reporting unit was in excess of the carrying
value and
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therefore not impaired during 2004. Cash flow projections for
US Airways Group's 2004 test were prepared on a
going-concern basis. Additionally, in the third and fourth
quarters of 2004, the carrying value of
US Airways Group's net assets was less than zero.
See note 2(g) to US Airways Group's consolidated
financial statements for details regarding past goodwill
impairment tests.
Impairment of Long-Lived Assets and Intangible
    Assets
US Airways Group assesses the impairment of long-lived
assets and intangible assets whenever events or changes in
circumstances indicate that the carrying value may not be
recoverable. Factors which could trigger an impairment review
include the following: significant changes in the manner of use
of the assets; significant underperformance relative to
historical or projected future operating results; or significant
negative industry or economic trends. US Airways Group
determines that an impairment has occurred when the future
undiscounted cash flows estimated to be generated by those
assets are less than the carrying amount of those items. Cash
flow estimates are based on historical results adjusted to
reflect US Airways Group's best estimate of future
market and operating conditions. The net carrying value of
assets not recoverable is reduced to fair value. Estimates of
fair value represent US Airways Group's best estimate
based on appraisals, industry trends and reference to market
rates and transactions. Changes in industry capacity and demand
for air transportation can significantly impact the fair value
of aircraft and related assets. US Airways Group recorded
an aircraft impairment charge of $392 million in 2002. See
"Description of Unusual Items" above for details
regarding this impairment charge.
Passenger Revenue Recognition
US Airways Group recognizes passenger transportation
revenue and related commission expense when transportation is
rendered. Passenger ticket sales collected prior to the
transportation taking place are reflected in traffic balances
payable and unused tickets on US Airways Group's
consolidated balance sheet. Due to various factors including
refunds, exchanges, unused tickets and transactions involving
other carriers, certain amounts are recorded based on estimates.
These estimates are based upon historical experience and have
been consistently applied to record revenue. US Airways
Group routinely performs evaluations of the liability that may
result in adjustments which are recognized as a component of
passenger transportation revenue. Actual refund, exchange and
expiration activity may vary from estimated amounts.
US Airways Group has experienced changes in customer travel
patterns resulting from various factors, including new airport
security measures, concerns about further terrorist attacks and
an uncertain economy, resulting in more forfeited tickets and
fewer refunds. Therefore, during the fourth quarter of 2003, a
$34 million favorable adjustment was made to passenger
transportation revenue to reflect an increase in expired tickets.
Frequent Traveler Program
US Airways, Inc.'s Dividend Miles frequent traveler
program awards miles to passengers who fly on US Airways,
Inc., US Airways Express, Star Alliance carriers and
certain other airlines that participate in the program.
US Airways, Inc. also sells mileage credits to
participating airline partners and non-airline business
partners. US Airways Group has an obligation to provide
this future travel and has therefore recognized an expense and
recorded a liability for mileage awards to passengers redeeming
on US Airways, Inc. or an airline partner. Members may
redeem outstanding miles for travel on any airline that
participates in the program, in which case US Airways, Inc.
pays a designated amount to the transporting carrier.
Members may not reach the threshold necessary for a free ticket
and outstanding miles may not be redeemed for free travel.
Therefore, US Airways Group estimates how many miles will
never be used for an award and excludes those miles from the
estimate of the liability. A portion of the mileage credits of
Dividend Miles participants who have excessive balances are also
excluded from the liability. Estimates are also made for the
number of miles that will be used per award and the number of
awards that will be redeemed on partner airlines. These
estimates are based upon past customer behavior. Estimated
future travel awards for travel on US Airways, Inc. are
valued at the estimated average incremental cost of carrying one
additional passenger. Incremental costs include unit costs for
passenger food, beverages and supplies, credit card fees, fuel,
communications, insurance and denied boarding compensation. No
profit or overhead margin
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is included in the accrual for incremental costs. For travel
awards on partner airlines, the liability is based upon the
gross payment to be paid to the other airline for redemption on
the other airline. A change to these costs estimates, actual
redemption activity or award redemption level could have a
significant impact on the liability in the year of change as
well as future years. Incremental changes in the liability
resulting from participants earning or redeeming mileage credits
or changes in assumptions used for the related calculations are
recorded as part of the regular review process.
As of December 31, 2004 and 2003, Dividend Miles
participants had accumulated mileage credits for approximately
4.0 million and 6.3 million awards, respectively. The
reduction in estimated awards from 2003 to 2004 is a result of
changes in the program and related assumptions, including the
increase in redemptions on partner airlines. Because
US Airways, Inc. expects that some potential awards will
never be redeemed, the calculation of the frequent traveler
liability is based on approximately 80% of potential awards. The
liability for the future travel awards was $73 million and
$85 million as of December 31, 2004 and 2003,
respectively.
The number of awards redeemed for free travel during the years
ending December 31, 2004, 2003 and 2002 was approximately
1.5 million, 1.2 million and 1.3 million,
respectively, representing approximately 8% of US Airways,
Inc.'s RPMs in each of those years. These low percentages
as well as the use of certain inventory management techniques
minimize the displacement of revenue passengers by passengers
traveling on Dividend Miles award tickets. In addition to the
awards issued for travel on US Airways, Inc., approximately
20% of the total awards redeemed in 2004 were for travel on
partner airlines.
US Airways, Inc. defers a portion of the revenue from the
sale of mileage credits to participating airline and non-airline
partners. The deferred revenue is recognized over the period in
which the credits are expected to be redeemed for travel. A
change to either the period over which the credits are used or
the estimated fair value of credits sold could have a
significant impact on revenue in the year of change as well as
future years.
Pensions and Other Postretirement Benefits
US Airways Group accounts for its defined benefit pension
plans using SFAS No. 87, "Employer's
Accounting for Pensions," and its other postretirement
benefit plans using SFAS No. 106,
"Employer's Accounting for Postretirement Benefits
Other than Pensions." Under both SFAS 87 and
SFAS 106, expense is recognized on an accrual basis over
employees' approximate service periods. Expenses calculated
under SFAS 87 and SFAS 106 are generally independent
of funding decisions or requirements. Exclusive of fresh-start
charges, curtailment and settlement items, US Airways Group
recognized defined benefit pension plan expense of
$66 million, $52 million, $50 million and
$326 million for the year ended December 31, 2004, the
nine months ended December 31, 2003, the three months ended
March 31, 2003 and the year ended December 31, 2002,
respectively, and other postretirement benefit expense of
$105 million, $96 million, $36 million and
$145 million for the year ended December 31, 2004, the
nine months ended December 31, 2003, the three months ended
March 31, 2003 and the year ended December 31, 2002,
respectively.
On November 12, 2004, US Airways, Inc. filed a motion
requesting a determination from the bankruptcy court that
US Airways, Inc. satisfied the financial requirements for a
distress termination of the three mainline defined benefit plans
under section 4041(c)(2)(B)(ii)(IV) of ERISA, and approval
of each plan's termination. These plans were projected to
have benefit obligations aggregating $2.7 billion and plan
assets aggregating $1.7 billion as of September 30,
2004, the most recent valuation date. On January 6, 2005,
the bankruptcy court entered an order (i) finding that the
financial requirements under section 4041(c)(2)(B)(ii)(IV)
of ERISA for a distress termination of the plans had been met
and (ii) approving termination of the plans. The AFA
pension plan and the IAM pension plan were terminated effective
January 10, 2005 by agreement between the PBGC and
US Airways, Inc. The Certain Employees pension plan was
terminated effective January 17, 2005 by agreement between
the PBGC and US Airways, Inc. Effective February 1,
2005, the PBGC was appointed trustee for each of the three plans.
During hearings in late 2004 and January 2005, the bankruptcy
court approved various settlement agreements between
US Airways, Inc. and its unions, and between
US Airways Group and the court-appointed Section 1114
Committee, representing retirees other than those represented by
the IAM, to begin the significant curtailments of
US Airways Group's other postretirement benefits.
US Airways Group's
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unfunded obligations for these benefits aggregated
$1.4 billion as of September 30, 2004, the most recent
valuation date.
Fresh-start Reporting
In accordance with SOP 90-7, US Airways Group adopted
fresh-start reporting upon emergence from the prior bankruptcy.
Accordingly, US Airways Group valued its assets,
liabilities and equity at fair value. The excess of the
reorganization value over tangible assets and identifiable
intangible assets has been reflected as goodwill on
US Airways Group's consolidated balance sheet.
Estimates of fair value represent
US Airways Group's best estimate based on
independent appraisals and valuations and, where the foregoing
are not available, industry trends and by reference to market
rates and transactions. US Airways Group's fresh-start
equity value of $438 million at March 31, 2003 was
determined with the assistance of financial advisors. The
estimates and assumptions are inherently subject to significant
uncertainties and contingencies beyond the control of
US Airways Group. Accordingly, there can be no assurance
that the estimates, assumptions, and values reflected in the
valuations will be realized, and actual results could vary
materially. See note 13 to US Airways Group's
consolidated financial statements for further detail related to
the fresh-start fair value adjustments.
Recent Accounting and Reporting Developments
In September 2004, the Financial Accounting Standards Board, or
FASB, issued FASB Staff Position Emerging Issues Task Force, or
EITF, Issue 03-1-1, Effective Date of
Paragraphs 10–20 of EITF Issue No. 03-1,
"The Meaning of Other Than Temporary Impairment and Its
Application to Certain Investments," which delays the
effective date for the recognition and measurement guidance in
EITF Issue No. 03-1. In addition, the FASB has issued a
proposed Staff Position to consider whether further application
guidance is necessary for securities analyzed for impairment
under EITF Issue No. 03-1. US Airways Group continues
to assess the potential impact that the adoption of the proposed
Staff Position could have on its financial statements.
In November 2004, the FASB issued SFAS No. 151,
"Inventory Costs," which clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling
costs and wasted material. SFAS 151 will be effective for
inventory costs incurred beginning January 1, 2006.
US Airways Group does not believe the adoption of
SFAS 151 will have a material impact on its financial
statements.
In December 2004, the FASB issued SFAS No. 153,
"Exchanges of Nonmonetary Assets," which eliminates
the exception for nonmonetary exchanges of similar productive
assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance.
SFAS 153 will be effective for nonmonetary asset exchanges
occurring after July 1, 2005. US Airways Group is
currently evaluating the impact of SFAS 153 on its
financial statements.
In December 2004, the FASB issued SFAS No. 123(R),
"Share-Based Payment," SFAS 123(R), which
establishes standards for transactions in which an entity
exchanges its equity instruments for goods or services. This
standard requires a public entity to measure the cost of
employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award.
This eliminates the exception to account for these awards using
the intrinsic method previously allowable under Accounting
Principle Board Opinion No. 25. US Airways Group
previously adopted the fair value recognition provisions of
SFAS 123, "Accounting for Stock-Based
Compensation," upon emergence from the prior bankruptcy on
March 31, 2003. Accordingly, US Airways Group believes
SFAS 123(R) will not have a material impact on its
financial statements. US Airways Group currently
expects to adopt SFAS 123(R) upon the earlier of emergence
from Chapter 11 or January 1, 2006.
Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
None.
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Quantitative and Qualitative Disclosures About Market Risk
US Airways Group's primary market risk exposures
include commodity price risk (i.e., the price paid to obtain
aviation fuel), interest rate risk and equity price risk. The
potential impact of adverse increases in these risks and general
strategies employed by US Airways Group to manage these
risks are discussed below. The risks identified below are
consistent from year to year.
The following sensitivity analyses do not consider the effects
that an adverse change may have on the overall economy nor do
they consider additional actions US Airways Group may take
to mitigate its exposure to these changes. Actual results of
changes in prices or rates may differ materially from the
following hypothetical results.
Commodity Price Risk
Prices and availability of all petroleum products are subject to
political, economic and market factors that are generally
outside of US Airways Group's control. Accordingly,
the price and availability of aviation fuel, as well as other
petroleum products, can be unpredictable. Prices may be affected
by many factors, including:
•
the impact of political instability on crude production,
    especially in Russia and OPEC countries;
•
unexpected changes to the availability of petroleum products due
    to disruptions in distribution systems or refineries;
•
unpredicted increases to oil demand due to weather or the pace
    of economic growth;
•
inventory levels of crude, refined products and natural
    gas; and
•
other factors, such as the relative fluctuation between the
    U.S. dollar and other major currencies and influence of
    speculative positions on the futures exchanges.
Because the operations of US Airways Group are dependent
upon aviation fuel, significant increases in aviation fuel costs
materially and adversely affect US Airways Group's
liquidity, results of operations and financial condition. Given
forecasted fuel consumption of approximately 1.14 billion
gallons per year for US Airways Group, a one cent per
gallon increase in fuel price results in a $1 million per
month increase in expense.
US Airways Group has utilized financial derivatives,
including fixed price swap agreements, collar structures and
other similar instruments to manage some of the risk associated
with changes in aviation fuel prices. As of March 31, 2005,
US Airways Group had no open fuel hedge positions in place.
US Airways Group previously liquidated hedges
representing approximately 4% of its 2005 anticipated fuel
requirements and recognized a $6 million reduction to fuel
expense for the three months ended March 31, 2005.
US Airways Group will continue to recognize a
$2 million reduction to expense per month through December
2005. US Airways Group had $16 million of unrealized
gains related to fuel hedge positions recorded in accumulated
other comprehensive income, net of income tax effect, on its
consolidated balance sheet at March 31, 2005.
Interest Rate Risk
Exposure to interest rate risk relates primarily to
US Airways Group's cash equivalents and short-term
investments portfolios and debt obligations. As of
December 31, 2004 and 2003, US Airways Group had
$1.63 billion and $1.53 billion of variable-rate debt
outstanding, respectively. Assuming a hypothetical 10% increase
in average interest rates during 2005 as compared to 2004,
interest expense would increase by
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$8 million. Additional information regarding
US Airways Group's debt obligations as of
December 31, 2004 is as follows (dollars in millions):
Expected Maturity Date
2005
2006
2007
2008
2009
Thereafter
Total
Fixed-rate debt
$ 66
$80
$86
$83
$87
$1,296
$1,698
Weighted avg. interest rate
7.1
%
7.2
%
7.2
%
7.3
%
7.3
%
6.6
%
Variable-rate debt
$797
$79
$59
$60
$60
$ 572
$1,627
Weighted avg. interest rate
9.8
%
5.4
%
5.2
%
5.2
%
5.2
%
4.5
%
As a result of US Airways Group's Chapter 11
filing, the fair value of the debt outstanding could not be
reasonably determined as of December 31, 2004.
As noted in "Contractual Obligations" above,
US Airways Group has future aircraft purchase commitments
of $1.93 billion. US Airways Group expects to lease or
mortgage a majority of those commitments. Changes in interest
rates will impact the cost of these financings.
Equity Price Risk
US Airways, Inc. holds Sabre Holdings Corporation stock
options that have a fair value and carrying value of
$10 million as of December 31, 2004. Fair value is
computed using the Black-Scholes stock option pricing model. A
hypothetical ten percent decrease in the December 31, 2004
value of the Sabre Holdings Corporation stock price would
decrease the fair value of the stock options by $2 million.
See note 3(b) to US Airways Group's notes to its
consolidated financial statements for information related to the
fair value of these options.
LEGAL MATTERS
The validity of the issuance of the shares of New
US Airways Group common stock offered by this prospectus
will be passed upon for us by Elizabeth K. Lanier, US Airways
Group Executive Vice President — Corporate Affairs and
General Counsel. As of June 27, 2005, Ms. Lanier was
the beneficial owner of approximately 188,400 shares of
US Airways Group Class A common stock and had warrants
to purchase an aggregate of 111,600 shares of
US Airways Group Class A common stock within the next
60 days. We expect that these shares and warrants will be
cancelled pursuant to the debtors' plan of reorganization.
Certain matters in connection with this rights offering will be
passed upon for Merrill Lynch by Cahill Gordon &
Reindel
llp
, New
York, New York.
EXPERTS
US Airways Group.
The consolidated financial statements
of US Airways Group and its subsidiaries as of December 31,
2004 and 2003, and for the year ended December 31, 2004 and
the nine months ended December 31, 2003 for the successor
company and the three months ended March 31, 2003 and the
year ended December 31, 2002 for the predecessor company,
and management's assessment of the effectiveness of
internal control over financial reporting as of
December 31, 2004, have been included herein and in the
registration statement in reliance upon the reports of KPMG LLP,
an independent registered public accounting firm, appearing
elsewhere herein, and upon the authority of said firm as experts
in accounting and auditing.
The audit report of KPMG LLP, dated February 25, 2005, on
the December 31, 2004 consolidated financial statements
contains an explanatory paragraph that states that US Airways
Group's significant recurring losses from operations,
accumulated deficit and ongoing reorganization under
Chapter 11 of the federal bankruptcy laws raise substantial
doubt about the entity's ability to continue as a going
concern. The consolidated financial statements do not include
any adjustments that might result from the outcome of that
uncertainty.
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The audit report of KPMG LLP, dated February 25, 2005, on
the December 31, 2004 consolidated financial statements
refers to the adoption of fresh-start reporting pursuant to
Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" as of
March 31, 2003. As a result, the consolidated financial
statements of the successor company are presented on a different
basis than those of the predecessor company and, therefore, are
not comparable in all respects. The audit report covering the
December 31, 2004 financial statements also refers to a
change in accounting for stock-based compensation as described
by SFAS No. 148, "Accounting for Stock-Based
Compensation — Transition and Disclosure" as of
April 1, 2003 and a change in accounting for engine
maintenance effective January 1, 2002 at PSA Airlines,
Inc., a wholly owned subsidiary of US Airways Group.
America West Holdings.
The consolidated financial
statements of America West Holdings and America West Airlines,
Inc. (a wholly owned subsidiary of America West Holdings) as of
December 31, 2004 and 2003, and for the years then ended
and America West Holdings management's assessment of the
effectiveness of internal control over financial reporting as of
December 31, 2004 have been included herein and in the
registration statement in reliance upon the reports of KPMG LLP,
independent registered public accounting firm, appearing
elsewhere herein, and upon the authority of said firm as experts
in accounting and auditing.
The report of KPMG LLP, dated March 11, 2005, on America
West Holdings management's assessment of the effectiveness
of internal control over financial reporting and the
effectiveness of internal control over financial reporting as of
December 31, 2004, expresses KPMG's opinion that
America West Holdings did not maintain effective internal
control over financial reporting as of December 31, 2004
because of the effect of a material weakness on the achievement
of the control criteria and contains an explanatory paragraph
that states that America West Holdings did not maintain
effective internal control over financial reporting due to a
material weakness associated with its accounting for America
West Airlines, Inc.'s fuel hedging transactions. Management
concluded that America West Airlines Inc.'s fuel hedging
transactions did not qualify for hedge accounting under
U.S. generally accepted accounting principles and that
America West Holdings' and America West Airlines,
Inc.'s financial statements for prior periods required
restatement to reflect the fair value of fuel hedging contracts
in the balance sheets and statements of stockholders'
equity and comprehensive income of America West Holdings and
America West Airlines, Inc. These accounting errors were the
result of deficiencies in its internal control over financial
reporting from the lack of effective reviews of hedge
transaction documentation and of quarterly mark-to-market
accounting entries on open fuel hedging contracts by personnel
at an appropriate level.
The consolidated statements of operations, of cash flows and of
stockholders' equity and comprehensive income and the
related financial statement schedule of America West Holdings
and its subsidiaries for the year ended December 31, 2002
included in Annex B-1 to this prospectus have been so
included in reliance on the reports of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on
the authority of said firm as experts in auditing and accounting.
The consolidated statements of operations, of cash flows and of
stockholder's equity and comprehensive income and the
related financial statement schedule of America West Airlines,
Inc. (a wholly-owned subsidiary of America West Holdings) for
the year ended December 31, 2002 included in Annex B-1
to this prospectus have been so included in reliance on the
reports of PricewaterhouseCoopers LLP, an independent registered
public accounting firm, given on the authority of said firm as
experts in auditing and accounting.
161
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ANNEX A-1
US Airways Group, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 2004
A-1
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
For the transition period
    from           to
US Airways Group, Inc.
(Debtor-in-Possession)
(Exact name of registrant as specified in its charter)
State of Incorporation: Delaware
2345 Crystal Drive
Arlington, Virginia 22227
(Address of principal executive offices)
(703) 872-7000
(Registrant's telephone number, including area code)
(Commission file number: 1-8444)
(I.R.S. Employer Identification No: 54-1194634)
Securities registered pursuant to Section 12(b) of the
Act: None
Securities registered pursuant to Section 12(g) of the
Act:
Title of Each Class
Class A common stock, par value $1.00 per share
(Class A Common Stock)
Class B common stock, par value $1.00 per share
(Class B Common Stock)
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days.     Yes
þ
No
o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.
o
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the
Act).     Yes
þ
No
o
The aggregate market value of common stock held by
non-affiliates of the registrant as of June 30, 2004 was
approximately $11,676,500.
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12,
13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a
court.     Yes
þ
No
o
On February 18, 2005, there were outstanding approximately
51,643,527 shares of Class A Common Stock and
5,000,000 shares of Class B Common Stock.
Table of Contents
US Airways Group, Inc.
Form 10-K
Year Ended December 31, 2004
TABLE OF CONTENTS
Page
Part I
Item 1.
Business
Overview
1
Airline Industry and the
    Company's Position in the Marketplace
5
Marketing Agreements with Other
    Airlines
6
Industry Regulation and Airport
    Access
6
Employees
8
Aviation Fuel
9
Airline Ticket Distribution
9
Frequent Traveler Program
10
Insurance
10
Item 2.
Properties
Flight Equipment
11
Ground Facilities
12
Terminal Construction
    Projects
12
Item 3.
Legal Proceedings
13
Item 4.
Submission of Matters to a Vote of Security
    Holders
16
Part II
Item 5.
Market for US Airways Group's Common
    Equity, Related Stockholder Matters and Issuer Purchases of
    Equity Securities
Stock Exchange Listing
16
Market Prices of Common
    Stock
16
Foreign Ownership
    Restrictions
17
Item 6.
Selected Financial Data
Consolidated Statements of
    Operations
18
Consolidated Balance Sheets
18
Item 7.
Management's Discussion and Analysis
    of Financial Condition and Results of Operations
Introduction
19
Chapter 11 Proceedings
19
Results of Operations
23
Selected Operating and
    Financial Statistics
28
Liquidity and Capital
    Resources
30
Off-Balance Sheet
    Arrangements
39
Critical Accounting Policies
39
Recent Accounting and Reporting
    Developments
42
Item 7A.
Quantitative and Qualitative Disclosures
    About Market Risk
43
Item 8.
Financial Statements and Supplementary
    Data
45
Item 9.
Changes In and Disagreements With
    Accountants on Accounting and Financial Disclosure
93
Item 9A.
Controls and Procedures
93
Item 9B.
Other Information
93
Table of Contents
Page
Part III
Item 10.
Directors and Executive Officers of US
    Airways Group
94
Item 11.
Executive Compensation
102
Item 12.
Security Ownership of Certain Beneficial
    Owners and Management
121
Item 13.
Certain Relationships and Related
    Transactions
127
Item 14.
Principal Accountant Fees and Services
129
Part IV
Item 15.
Exhibits and Financial Statement
    Schedules
Consolidated Financial Statements
131
Consolidated Financial Statement
    Schedules
131
Exhibits
131
Signatures
140
Table of Contents
PART I
Item 1.
Business
Overview
US Airways Group, Inc. (US Airways Group and collectively with
its consolidated subsidiaries, the Company) is a corporation
organized under the laws of the State of Delaware. The
Company's executive offices are located at 2345 Crystal
Drive, Arlington, Virginia 22227 (telephone number
(703) 872-7000). The Company's internet address is
usairways.com.
US Airways Group's primary business activity is the
operation of a major network air carrier through its ownership
of the common stock of US Airways, Inc. (US Airways), Piedmont
Airlines, Inc. (Piedmont), PSA Airlines, Inc. (PSA), Material
Services Company, Inc. (MSC) and Airways Assurance Limited,
LLC (AAL). Effective July 1, 2004, Allegheny Airlines, Inc.
merged with Piedmont, with Piedmont as the surviving entity.
As discussed in more detail below, on September 12, 2004,
US Airways Group and its domestic subsidiaries, including its
principal operating subsidiary, US Airways, (collectively, the
Debtors), which account for substantially all of the operations
of the Company, filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code (Bankruptcy
Code) in the United States Bankruptcy Court for the Eastern
District of Virginia, Alexandria Division (Bankruptcy Court)
(Case Nos. 04-13819-SSM through 04-13823-SSM). The Debtors
continue to operate their businesses as
"Debtors-in-Possession" under the jurisdiction of the
Bankruptcy Court and in accordance with the applicable
provisions of the Bankruptcy Code and orders of the Bankruptcy
Court.
Each of the Debtors in these cases had previously filed a
voluntary petition for relief under Chapter 11 on
August 11, 2002 (the Prior Bankruptcy). The Debtors emerged
from the Prior Bankruptcy under the First Amended Joint Plan of
Reorganization of US Airways Group, Inc. and Affiliated Debtors
and Debtors-in-Possession, As Modified (the 2003 Plan), which
was confirmed pursuant to an order of the Bankruptcy Court on
March 18, 2003 and became effective on March 31, 2003.
In accordance with AICPA Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code," and in connection with the Prior
Bankruptcy, the Company adopted fresh-start reporting on
March 31, 2003. References in the Consolidated Financial
Statements and the Notes to the Consolidated Financial
Statements to "Predecessor Company" refer to the
Company prior to March 31, 2003. References to
"Successor Company" refer to the Company on and after
March 31, 2003, after giving effect to the cancellation of
then-existing common stock and the issuance of new securities in
accordance with the 2003 Plan, and the application of
fresh-start reporting. As a result of the application of
fresh-start reporting, the Successor Company's financial
statements are not comparable with the Predecessor
Company's financial statements, because they are, in
effect, those of a new entity.
US Airways, which is also a corporation organized under the laws
of the State of Delaware, is the Company's principal
operating subsidiary. US Airways is a certificated air carrier
engaged primarily in the business of transporting passengers,
property and mail. US Airways enplaned approximately
42 million passengers in 2004 and was the seventh largest
U.S. air carrier (as ranked by revenue passenger miles
(RPMs)). As of December 31, 2004, US Airways operated 281
jet aircraft and 22 regional jet aircraft (see Item 2.
"Properties" for additional information related to
aircraft operated by US Airways) and provided regularly
scheduled service at 89 airports in the continental United
States, Canada, Mexico, France, Germany, Italy, Spain, Ireland,
the Netherlands, the United Kingdom and the Caribbean.
Certain air carriers have code share arrangements with US
Airways to operate under the trade name "US Airways
Express." Typically, under a code share arrangement, one
air carrier places its designator code and sells tickets on the
flights of another air carrier (its code share partner). US
Airways Express carriers are an integral component of the
Company's operating network. Due to the relatively small
local traffic base at its hubs, US Airways relies heavily on
feed traffic from its US Airways Express affiliates, who carry
passengers from low-density markets that are uneconomical for US
Airways to serve with large jets to US Airways' hubs.
As of December 2004, the US Airways Express network served 127
airports in the
1
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continental United States, Canada and the Bahamas, including 42
airports also served by US Airways. During 2004, US Airways
Express air carriers enplaned approximately 15.2 million
passengers, approximately 48% of whom connected to the
Company's flights. Of these 15.2 million passengers,
approximately 6.2 million were enplaned by the
Company's wholly owned regional airlines, approximately
7.4 million were enplaned by third-party carriers operating
under capacity purchase agreements and approximately
1.6 million were enplaned by carriers operating under
prorate agreements, as described below. In addition, US Airways
Express operators offer complementary service in existing US
Airways markets by operating flights during off-peak periods
between US Airways flights.
The US Airways Express code share arrangements are either in the
form of capacity purchase or prorate agreements. The two wholly
owned regional airlines and the regional jet affiliate operators
are capacity purchase relationships. The regional jet affiliates
with capacity purchase agreements are Chautauqua Airlines
(Chautauqua), Mesa Airlines, Inc. (Mesa), Trans States Airlines,
Inc. (Trans States) and Midway Airlines Corporation (Midway)
prior to Midway ceasing service in October 2003. The capacity
purchase agreements provide that all revenues (passenger, mail
and freight) go to US Airways. In return, US Airways agrees to
pay predetermined fees to such airlines for operating an agreed
number of aircraft, without regard to the number of passengers
onboard. In addition, these agreements provide that certain
variable costs, such as fuel and airport landing fees, will be
reimbursed 100% by US Airways. US Airways controls marketing,
scheduling, ticketing, pricing and seat inventories. The
regional jet capacity purchase agreements have expirations from
2008 to 2013 and provide for optional extensions at the
Company's discretion. The carriers with prorate agreements
are non-owned turboprop operators and include all or a portion
of the turboprop operations of Colgan Airlines, Inc., Trans
States, Shuttle Acquisition LLC (through October 2004), and Air
Midwest, Inc. The prorate agreements provide for affiliate
carriers to pay certain service fees to US Airways as well as to
receive a prorated share of revenue for connecting customers. US
Airways is responsible for pricing and marketing of connecting
services to and from the prorate carrier. The prorate carrier is
responsible for pricing and marketing the local, point to point
markets. All US Airways Express carriers use US Airways'
reservation systems, and have logos, service marks, aircraft
paint schemes and uniforms similar to those of US Airways.
In April 2004, MidAtlantic Airways (MidAtlantic), US
Airways' new regional jet division, began operating as part
of the US Airways Express network. As of December 31, 2004,
MidAtlantic operates 22 Embraer ERJ-170 regional jets with
72 seats. These larger regional jets help fill the gap
between 50-seat and 120-seat fleet-types, allow for a better
match with demand in certain existing markets and have enabled
US Airways to add flights to markets it did not previously
serve. MidAtlantic served approximately one million passengers
in 2004.
The Company's major connecting hubs are at airports in
Charlotte and Philadelphia. The Company also has substantial
operations at Boston's Logan International Airport (Logan),
New York's LaGuardia Airport (LaGuardia), Pittsburgh
International Airport (Pittsburgh) and Washington's Ronald
Reagan Washington National Airport (Reagan National). Measured
by departures, US Airways is among the largest at each of
the foregoing airports. US Airways is also a leading airline
from the Northeast United States to Florida.
US Airways' East coast-based hubs, combined with its
strong presence at many East coast airports, have made it among
the largest intra-East coast carriers, comprising approximately
30% of the industry's intra-East coast revenues based on
the most recent industry revenue data available.
For the year ended December 31, 2004, passenger revenues
accounted for approximately 89% of the Company's
consolidated operating revenues. Cargo revenues and other
sources accounted for 11% of the Company's consolidated
operating revenues in 2004. The Company's results are
seasonal with operating results typically highest in the second
and third quarters due to US Airways' combination of
business traffic and North-South leisure traffic in the eastern
United States during those periods.
MSC and AAL operate in support of the Company's airline
subsidiaries in areas such as the procurement of aviation fuel
and insurance.
2
Table of Contents
Available Information
A copy of this annual report on Form 10-K, as well as other
annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and amendments
to those reports are accessible free of charge at
investor.usairways.com/edgar.cfm
as soon as reasonably
possible after such report is filed with or furnished to the
Securities and Exchange Commission (SEC).
Chapter 11 Proceedings
Before emerging from the Prior Bankruptcy in 2003, the Company
examined virtually every phase of its contracts and operations
and had significantly reduced costs. The Company reduced its
mainline capacity, realigned its network to maximize yield,
initiated a business plan to use more regional jets and procured
financing for these aircraft, and expanded its alliances with
other carriers. However, after emerging from the Prior
Bankruptcy, the Company continued to incur substantial losses
from operations. The primary factors contributing to these
losses include the reduction in domestic industry unit revenue
and significant increases in fuel prices. The downward pressure
on domestic industry revenue is a result of the rapid growth of
low-fare, low-cost airlines, the increasing transparency of
fares through Internet sources and other changes in fare
structures that have resulted in substantially lower fares for
many business and leisure travelers. The competitive environment
continued to intensify throughout 2004, particularly in key
markets such as Philadelphia, Washington, D.C., Boston and
New York.
Throughout the spring and summer of 2004, the Company
communicated with key stakeholders and the public its plan to
transform US Airways into a fully competitive and profitable
airline (the Transformation Plan). A key element of the
Transformation Plan is significant reductions in labor costs
through changes to the Company's collective bargaining
agreements. The Company aggressively sought the necessary
agreements to allow full implementation of the Transformation
Plan without the need for filing new Chapter 11 cases but
was unable to do so in a timely manner. As a result of the
recurring losses, declining available cash and risk of defaults
or cross defaults under certain key financing and operating
agreements, it was necessary for the Debtors to file voluntary
petitions for reorganization under Chapter 11 of the
Bankruptcy Code on September 12, 2004.
At hearings held on September 13, 2004, the Bankruptcy
Court granted the Company's first day motions for relief
designed to stabilize its operations and business relationships
with customers, vendors, employees and others, and entered
orders granting permission to the Debtors to, among other
things: (a) pay employee wages and continue benefits, such
as medical and dental insurance; (b) honor prepetition
obligations to customers and continue customer programs,
including US Airways' Dividend Miles program; (c) pay
for fuel under existing supply contracts, and honor existing
fuel supply, distribution and storage agreements;
(d) assume certain contracts related to interline
agreements with other airlines; (e) pay prepetition
obligations to certain foreign vendors, foreign service
providers and foreign governments; and (f) continue
maintenance of existing bank accounts and existing cash
management systems. The Bankruptcy Court also approved the
interim agreement reached between the Company, the Air
Transportation Stabilization Board (ATSB) and the lenders
under the $1 billion loan, obtained upon emergence from the
Prior Bankruptcy and substantially guaranteed by the ATSB, to
allow the Company continued use of the cash collateral securing
the loan (see further discussion below).
Since filing for bankruptcy on September 12, 2004, the
Company has achieved cost-savings agreements with all of its
collective bargaining groups. Through a motion filed under
Section 1113(e) of the Bankruptcy Code on
September 24, 2004, the Company sought interim relief from
collective bargaining agreements (CBAs) with the Air Line Pilots
Association (ALPA), Association of Flight
Attendants-Communications Workers of America (AFA), Transport
Workers Union (TWU), Communications Workers of America
(CWA) and International Association of Machinists and
Aerospace Workers (IAM). On October 15, 2004, the
Bankruptcy Court approved base rates of pay reductions of 21%
through February 15, 2005 or entry of an order approving a
new CBA or granting final relief under Section 1113(c) of
the Bankruptcy Code. Reductions to pension contributions and
certain work rule changes were also approved. The interim relief
order did not apply to ALPA or TWU, whose members reached and
ratified CBAs prior to the interim relief
3
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going into effect. CBAs with the CWA and AFA were reached in
December 2004 and were subsequently ratified. On January 6,
2005, the Bankruptcy Court approved the Company's request
to reject the IAM CBAs and approved the termination of US
Airways' three defined benefit plans. The IAM subsequently
ratified Company cost-savings proposals on January 21,
2005. As part of these negotiations and subsequent
ratifications, all collective bargaining groups had their
pension plans reduced or eliminated. In addition, the Bankruptcy
Court has also approved various settlement agreements between
the Company and the court-appointed Section 1114 Committee
representing retirees other than those represented by the IAM to
begin the significant curtailment of postretirement benefits.
In addition to the cost savings achieved with labor groups, the
Company also implemented pay and benefit reductions for its
current management and other non-union employees, including
reductions to base pay, workforce reductions and modifications
to vacation and sick time accruals. The Company also implemented
modifications to its defined contribution pension plans and will
implement modifications to retiree benefits in 2005. The pay
rate and defined contribution plan reductions went into effect
October 11, 2004 and the reductions to retiree medical
benefits will become effective March 1, 2005.
The Company has reached agreements with certain of its lessors
and lenders restructuring existing aircraft lease and debt
financings. On November 19, 2004, the Bankruptcy Court
approved the Company's agreements for the continued use and
operation of substantially all of its mainline and Express
fleet. As discussed in detail below, the Company reached a
comprehensive agreement with GE Capital Aviation Services
(GECAS) and GE Engine Service (GEES) on aircraft
leasing and financing and engine services, which will provide
the Company with short-term liquidity, reduced debt, lower
aircraft ownership costs, enhanced engine maintenance services,
and operating leases for new regional jets. The Company also
reached agreements with EMBRAER-Empresa Brasileria de
Aeronautica SA (Embraer) and Bombardier, Inc. (Bombardier)
providing for continued use and operation of its aircraft, short
term liquidity and new financing for regional jets, which were
approved by the Bankruptcy Court in January 2005.
The Company has notified all known or potential creditors of the
Chapter 11 filing for the purposes of identifying and
quantifying all prepetition claims. The Chapter 11 filing
triggered defaults on substantially all debt and lease
obligations. Subject to certain exceptions under the Bankruptcy
Code, the Chapter 11 filing automatically stayed the
continuation of any judicial or administrative proceedings or
other actions against the Debtors or their property to recover
on, collect or secure a claim arising prior to
September 12, 2004. The deadline for filing proofs of claim
with the Bankruptcy Court was February 3, 2005, with a
limited exception for governmental entities, which have until
March 11, 2005.
The potential adverse publicity associated with the
Chapter 11 filings and the resulting uncertainty regarding
the Company's future prospects may hinder the
Company's ongoing business activities and its ability to
operate, fund and execute its business plan by impairing
relations with existing and potential customers; negatively
impacting the ability of the Company to attract and retain key
employees; limiting the Company's ability to obtain trade
credit; limiting the Company's ability to effectively hedge
rising aviation fuel costs; and impairing present and future
relationships with vendors and service providers.
As a result of the Chapter 11 filings, realization of
assets and liquidation of liabilities are subject to significant
uncertainty. While operating as debtors-in-possession under the
protection of Chapter 11, and subject to Bankruptcy Court
approval or otherwise as permitted in the normal course of
business, US Airways may sell or otherwise dispose of assets and
liquidate or settle liabilities for amounts other than those
reflected in the financial statements. Further, a plan of
reorganization could materially change the amounts and
classifications reported in the historical financial statements,
which do not give effect to any adjustments to the carrying
value of assets or amounts of liabilities that might be
necessary as a consequence of confirmation of a plan of
reorganization.
To exit Chapter 11 successfully, the Company must obtain
confirmation by the Bankruptcy Court of a plan of
reorganization. The Company currently has the exclusive right to
file a plan of reorganization until March 31, 2005 and
solicit acceptance of the plan through June 30, 2005. Under
the terms of the agreement reached with General Electric, the
Company has until March 15, 2005 to file a plan of
reorganization. These deadlines could potentially be extended. A
plan of reorganization would, among other things, resolve all
4
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prepetition obligations, set forth a revised capital structure
and establish the corporate governance subsequent to exiting
from bankruptcy. The Company is currently working towards
emerging from Chapter 11 mid-year 2005, but that timing is
dependent upon, among other things, the timely and successful
confirmation and implementation of a plan of reorganization. The
ultimate recovery to creditors and/or holders of the common
stock, if any, will not be determined until confirmation of a
plan of reorganization. No assurance can be given as to what
values, if any, will be ascribed in the Chapter 11 cases to
each of these constituencies or what type or amount of
distributions, if any, they would receive. A plan of
reorganization could result in holders of the Company's
common stock receiving no distribution on account of their
interests and cancellation of their existing stock. The value of
the common stock is highly speculative. The Company urges that
appropriate caution be exercised with respect to existing and
future investments in the securities of the Company.
Financing during the Chapter 11 Proceedings
As part of its reorganization under the Prior Bankruptcy, US
Airways received a $900 million loan guarantee (ATSB
Guarantee) under the Air Transportation Safety and System
Stabilization Act from the ATSB in connection with a
$1 billion term loan financing (ATSB Loan). In connection
with the September 12, 2004 Chapter 11 filing, the
ATSB and the lenders under the ATSB Loan agreed to authorize the
Company to continue to use cash collateral securing the ATSB
Loan on an interim basis. Therefore, in lieu of
debtor-in-possession financing, the Company has access to the
cash collateralizing the ATSB Loan as working capital, subject
to certain on-going conditions and limitations. This interim
agreement was approved by the Bankruptcy Court on
September 13, 2004 as part of the first day motions, and
was scheduled to expire on October 15, 2004. The Bankruptcy
Court approved two subsequent agreements extending the
Company's ability to use the cash collateral, including an
agreement approved on January 13, 2005 extending the
Company's use of cash collateral through June 30,
2005, subject to certain conditions and limitations. Under the
current agreement, the Company may continue to access such cash
collateral to support daily operations so long as it maintains
an agreed minimum amount of cash on hand each week. The amount
declines from approximately $500 million at the end of
January to $341 million on June 30, 2005, with weekly
cash levels permitted as low as $325 million in March 2005.
See "Liquidity and Capital Resources" in Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operation, for a complete discussion on the
Company's financing while in Chapter 11.
Airline Industry and the Company's Position in the
Marketplace
Most of the markets in which US Airways Group's airline
subsidiaries operate are highly competitive. These airline
subsidiaries compete to varying degrees with other air carriers
and with other forms of transportation. US Airways competes with
at least one major airline on most of its routes between major
cities. Airlines, including US Airways, typically use discount
fares and other promotions to stimulate traffic during normally
slack travel periods to generate cash flow and to maximize
revenue per available seat mile. Discount and promotional fares
are often non-refundable and may be subject to various
restrictions such as minimum stay requirements, advance
ticketing, limited seating and change fees. US Airways has often
elected to match discount or promotional fares initiated by
other air carriers in certain markets in order to compete in
those markets. Competition between air carriers also involves
certain route structure characteristics, such as flight
frequencies, availability of nonstop flights, markets served and
the time certain flights are operated. To a lesser extent,
competition can involve other products, such as frequent flier
programs and airport clubs.
US Airways considers the growth of low-fare low-cost competition
to be its foremost competitive threat. Recent years have seen
the entrance and growth of low-fare low-cost competitors in many
of the markets in which the Company's airline subsidiaries
operate. These competitors, based on low costs of operations and
low-fare structures, include Southwest Airlines Co. (Southwest),
AirTran Airways, Inc., and JetBlue Airways. Southwest has
steadily increased operations within the eastern United States
since first offering service in this region in late 1993. In May
2004, Southwest began service at the Philadelphia International
Airport, a hub airport for US Airways. Southwest has also
announced that it will begin service from Pittsburgh
International
5
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Airport, a former hub, in May 2005. In January 2005, Delta
Airlines, Inc. (Delta) announced a broad low-fare pricing
scheme. The Company anticipates continued low-fare competition
in the industry in the future.
A substantial portion of US Airways' flights are to or from
cities in the eastern United States. Accordingly, severe
weather, air traffic control problems and downturns in the
economy in the eastern United States adversely affect US Airways
Group's results of operations and financial condition. With
its concentration in the eastern United States, US Airways'
average stage length (i.e., trip distance) is shorter than those
of other major airlines. This makes US Airways more susceptible
than other major airlines to competition from surface
transportation (e.g., automobiles, trains, etc.). The increased
airport security charges and procedures have also had a
disproportionate impact on short-haul travel, which constitutes
a significant portion of the Company's flying. Additional
terrorist attacks or fear of such attacks, even if not made
directly on the airline industry, including elevated national
threat warnings, negatively affect the Company and the airline
industry.
In recent years, the Company's profitability was
significantly eroded by competitive pressures (including the
incursion of regional jets, the expansion of low-fare low-cost
carriers and the entry of additional carriers into its operating
territories, including key focus cities and hubs), unfavorable
economic trends, and rising fuel and labor costs. The May 2000
proposed merger of United Airlines (United) and US Airways Group
was designed to address this profitability erosion by adding US
Airways Group into a global network. During the period in which
the merger was pending, which ended in the termination of the
merger agreement in late July 2001 after failing to receive
approval from the United States Department of Justice, the
Company was effectively precluded from restructuring its
operations as a stand-alone carrier. Following the merger
termination, the Company embarked on a phased, stand-alone
restructuring plan to address the problems facing its airline
subsidiaries; however, this plan was preempted by the
September 11th terrorist attacks, which was then followed
by the filing for Chapter 11 in the Prior Bankruptcy in
August 2002.
Marketing Agreements with Other Airlines
The Company has entered into a number of bilateral and
multilateral alliances with other airlines to provide customers
with more choices and to access markets worldwide that the
Company does not serve directly. In May 2004, US Airways joined
the Star Alliance, the world's largest airline alliance,
with 15 member airlines servicing 772 destinations in 133
countries. Membership in the Star Alliance will further enhance
the value of US Airways' domestic and international route
network by allowing customers access to the global marketplace.
Expanded benefits for customers include network expansion
through code share service, Dividend Miles benefits, airport
lounge access, convenient single-ticket pricing, and one-stop
check-in and coordinated baggage handling.
US Airways also has comprehensive marketing agreements with
United, a member of the Star Alliance, which began in July 2002.
United, as well as its parent company, UAL Corporation (UAL),
and certain of its affiliates, filed for protection under
Chapter 11 of the Bankruptcy Code on December 9, 2002.
United immediately requested bankruptcy court authority to
assume these agreements and the court granted United's
request. US Airways also has marketing agreements with
Lufthansa, Spanair, bmi and other Star Alliance carriers, as
well as several smaller regional carriers in the Caribbean,
operating collectively as the "GoCaribbean" network.
Industry Regulation and Airport Access
The Company's airline subsidiaries operate under
certificates of public convenience and necessity or commuter
authority issued by the Department of Transportation (DOT). Such
certificates may be altered, amended, modified or suspended by
the DOT if the public convenience and necessity so require, or
may be revoked for failure to comply with the terms and
conditions of the certificates. Airlines are also regulated by
the U.S. Federal Aviation Administration (FAA), a division
of the DOT, primarily in the areas of flight operations,
maintenance, ground facilities and other technical matters.
Pursuant to these regulations, the Company's airline
subsidiaries have FAA-approved maintenance programs for each
type of aircraft they operate that provide for the ongoing
maintenance of such aircraft, ranging from periodic routine
inspections
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to major overhauls. From time to time, the FAA issues
airworthiness directives and other regulations affecting the
Company's airline subsidiaries or one or more of the
aircraft types they operate. In recent years, for example, the
FAA has issued or proposed such mandates relating to, among
other things, enhanced ground proximity warning systems;
fuselage pressure bulkhead reinforcement; fuselage lap joint
inspection rework; increased inspections and maintenance
procedures to be conducted on certain aircraft; increased
cockpit security; fuel tank flammability reductions and domestic
reduced vertical separation.
The DOT allows local airport authorities to implement procedures
designed to abate special noise problems, provided such
procedures do not unreasonably interfere with interstate or
foreign commerce or the national transportation system. Certain
locales, including Boston, Washington, D.C., Chicago,
San Diego and San Francisco, among others, have
established airport restrictions to limit noise, including
restrictions on aircraft types to be used and limits on the
number of hourly or daily operations or the time of such
operations. In some instances these restrictions have caused
curtailments in services or increases in operating costs and
such restrictions could limit the ability of US Airways to
expand its operations at the affected airports. Authorities at
other airports may consider adopting similar noise regulations.
The airline industry is also subject to increasingly stringent
federal, state and local laws protecting the environment. Future
regulatory developments and actions could affect operations and
increase operating costs for the airline industry, including the
Company's airline subsidiaries.
The Company's airline subsidiaries are obligated to collect
a federal excise tax on domestic and international air
transportation (commonly referred to as the "ticket
tax"). The Company's airline subsidiaries collect
these taxes, along with certain other U.S. and foreign taxes and
user fees on air transportation, and pass through the collected
amounts to the appropriate governmental agencies. Although such
taxes are not operating expenses of the Company, they represent
an additional cost to the Company's customers.
The Aviation and Transportation Security Act (Security Act) was
enacted in November 2001. Under the Security Act, substantially
all aspects of civil aviation passenger security screening were
federalized and a new Transportation Security Administration
(TSA) under the DOT was created. TSA was then transferred
to the Department of Homeland Security pursuant to the Homeland
Security Act of 2002. The Security Act, among other matters,
mandates improved flight deck security; carriage at no charge of
federal air marshals; enhanced security screening of passengers,
baggage, cargo, mail, employees and vendors; enhanced security
training; fingerprint-based background checks of all employees
and vendor employees with access to secure areas of airports
pursuant to regulations issued in connection with the Security
Act; and the provision of passenger data to U.S. Customs.
Funding for TSA is provided, in part, by a fee collected by air
carriers from their passengers of $2.50 per flight segment
(which is proposed to increase to up to $5.50 per flight
segment in 2005, but not more than $8.00 per one-way trip),
and a fee on air carriers that is limited to the amount that the
carrier spent on passenger security screening in 2000.
Implementation of the requirements of the Security Act have
resulted and will continue to result in increased costs for US
Airways, Piedmont and PSA and their passengers and has and will
likely continue to result in service disruptions and delays.
Most major U.S. airports impose passenger facility charges.
The ability of airlines to contest increases in these charges is
restricted by federal legislation, DOT regulations and judicial
decisions. Legislation enacted in 2000 permitted airports to
increase passenger facility charges effective April 1,
2001. With certain exceptions, air carriers pass these charges
on to passengers. However, the ability of the Company to
pass-through security fees and passenger facility charges to its
customers is subject to various factors, including market
conditions and competitive factors.
The FAA has designated John F. Kennedy International Airport
(Kennedy), LaGuardia and Reagan National as "high-density
traffic airports" and limited the number of departure and
arrival slots available to air carriers at those airports. In
April 2000, legislation was enacted which eliminates slot
restrictions in 2007 at LaGuardia and Kennedy. Among other
things, the legislation encouraged the development of air
service to smaller communities from slot-controlled airports.
During the interim period while slot restrictions remained in
effect at LaGuardia, airlines could apply for slot exemptions to
serve smaller communities using aircraft with a maximum seating
capacity of less than 71. In connection with this legislation,
the Company and
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several other airlines increased service from LaGuardia, which
led to excessive flight delays. In response to such delays, the
FAA implemented a slot lottery system in December 2000 limiting
the number of new flights at LaGuardia. As a result, several
airlines, including US Airways, were required to reduce the
number of flights added at LaGuardia in connection with this
legislation. The resulting allocation of slots from the slot
lottery system was initially scheduled to expire on
September 15, 2001, but on August 3, 2001, the FAA
announced an extension until October 26, 2002. On
July 8, 2002, the FAA announced another extension until
October 30, 2004, and subsequently announced a further
extension through October 30, 2005. As a result of the 2007
slot elimination, the FAA has indicated an intent to rethink its
approach to regulating operations at LaGuardia. Several
proposals, including auctions, congestion pricing and other
market-based solutions, are being considered along with more
traditional regulatory approaches.
At Reagan National an additional eleven roundtrips were awarded
by the DOT, pursuant to the Vision 100 — Century of
Aviation Reauthorization Act, which created additional slots for
distribution by the DOT. Although US Airways participated in the
proceeding and was awarded slots, most of the slots were awarded
to new entrant carriers.
Where the FAA has seen congestion and delay increases, it has
stepped in and worked with the carriers to freeze operations at
current or somewhat reduced levels. Specifically, incumbent
carriers, including US Airways, are not permitted to
increase operations at Chicago O'Hare as a result of an
agreement reached between the FAA and these airlines in August
2004. US Airways expects that the current operations freeze will
continue at least through the summer 2005 travel season. FAA
rulemaking to address congestion issues at crowded airports is
expected sometime in 2005. It is not yet clear how many airports
or issues will be encompassed by the rulemaking, the exact
timing and outcome of which cannot be ascertained at this time.
As a result of widely-reported operational difficulties
experienced by US Airways during the Christmas 2004 time period,
the DOT's Inspector General (IG) commenced an inquiry
into the causes of the operational problems. The IG plans to
issue a report summarizing its findings, including
recommendations for avoiding similar incidents in the future.
The Company is cooperating with the IG in its inquiry.
The availability of international routes to domestic air
carriers is regulated by agreements between the U.S. and foreign
governments. Changes in U.S. or foreign government aviation
policy could result in the alteration or termination of these
agreements and affect US Airways' international operations.
Employees
As of December 31, 2004, on a full-time equivalent basis,
the Company and its subsidiaries employed approximately
29,500 active employees. US Airways employed
approximately 24,600 active employees including
approximately 6,600 station personnel, 5,600 flight
attendants, 4,600 mechanics and related employees,
3,100 pilots, 1,600 reservations personnel and
3,100 personnel in administrative and miscellaneous job
categories. The Company's remaining subsidiaries employed
4,900 employees including approximately 2,400 station
personnel, 900 pilots, 500 flight attendants,
500 mechanics and related employees and 600 personnel
in administrative and miscellaneous job categories.
As of December 31, 2004, approximately 81% of the
Company's active employees were covered by collective
bargaining agreements with various labor unions.
The status of US Airways' labor agreements with its
major employee groups as of December 31, 2004 is as follows:
Union(1)
Class or Craft
Employees(2)
Date Contract Amendable
ALPA
Pilots
3,100
12/31/09
IAMAW
Mechanics and related employees
4,600
12/31/09
IAMAW
Fleet service employees
4,200
12/31/09
CWA
Passenger service employees
5,400
12/31/11
AFA
Flight attendants
5,600
12/21/11
TWU
Dispatchers and other
200
12/31/09 & 12/31/11
8
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(1)
ALPA     Air Line Pilots Association
IAMAW   International Association of Machinists
and Aerospace Workers
CWA     Communications Workers of
America
AFA      Association of Flight
Attendants
-
Communications Workers of America
TWU     Transport Workers Union
(2)
Approximate number of active employees covered by the contract.
Aviation Fuel
Aviation fuel is typically the Company's second largest
expense. Because the operations of the airline are dependent
upon aviation fuel, increases in aviation fuel costs could
materially and adversely affect liquidity, results of operations
and financial condition. The following table shows aircraft fuel
consumption and costs for 2002-2004:
Percentage of Total
Average price
Aviation fuel
Operating
Year
Gallons
per gallon(1)
expense(1)
Expenses
(in millions)
(in millions)
2004
973
$
1.129
$
1,099
14.7
%
2003
936
0.887
830
11.7
%
2002
1,047
0.747
782
9.4
%
(1)
Includes fuel taxes and the impact of fuel hedges.
Prices and availability of all petroleum products are subject to
political, economic and market factors that are generally
outside of the Company's control. Accordingly, the price
and availability of aviation fuel, as well as other petroleum
products, can be unpredictable. Prices may be affected by many
factors, including: the impact of political instability on crude
production, especially in Russia and OPEC countries; unexpected
changes to the availability of petroleum products due to
disruptions in distribution systems or refineries; unpredicted
increases to oil demand due to weather or the pace of economic
growth; inventory levels of crude, refined products and natural
gas; and other factors, such as the relative fluctuation between
the U.S. dollar and other major currencies and influence of
speculative positions on the futures exchanges. To reduce the
exposure to changes in fuel prices, the Company periodically
enters into certain fixed price swaps, collar structures and
other similar derivative contracts. The Company's current
financial position and credit rating negatively affect its
ability to hedge fuel in the future. See "Selected
Operating and Financial Statistics" in Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operation, for additional information related to
aviation fuel.
Airline Ticket Distribution
The now common usage of electronic tickets within North America,
and the rapid expansion in Europe and the rest of the world, has
allowed for the streamlining of processes and the increased
efficiency of customer servicing and support. The Company began
to support the issuance of electronic tickets in 1996. During
2004, electronic tickets represented 96% of all tickets issued
to customers flying US Airways. The addition of a $50 surcharge
to most customers requiring paper tickets has allowed the
Company to continue to support the exceptional requests, while
offsetting any cost variance associated with the issuance and
postal fulfillment of paper tickets. Airlines based in North
America have recently proposed a requested mandate that airlines
move to 100% electronic ticketing over the next couple of years,
which will only serve to enhance customer service and control
costs for ticketing services supported by the airline and
distribution partners.
The shift of consumer bookings from traditional travel agents,
airline ticket offices and reservation centers to online travel
agent sites (e.g., Orbitz, Travelocity, Expedia and others) as
well as airline direct websites (e.g.,
usairways.com
)
continues to grow within the industry. Historically, traditional
and online travel agencies used Global Distribution Systems
(GDS), such as Sabre, to obtain their fare and inventory data
from airlines. Bookings made through these agencies result in a
fee, the "GDS fee", that is charged to the airline.
Bookings made directly with the airline, through its reservation
call centers or website, do not incur a GDS
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fee. The growth of the airline direct websites and travel agent
sites (e.g., Orbitz) that connect directly to airline host
systems, effectively by-passing the traditional connection via
GDSs, helps the Company reduce distribution costs from the
channels of distribution on the internet. In the fourth quarter
of 2004, the Company received over 31% of its sales from
internet sites. The Company's direct website,
usairways.com
, comprised over 12% of Company sales, while
the rest of the internet sites accounted for the remaining 19%
of Company sales.
Due to the continued pressure on legacy airlines to lower
distribution fees more aggressively than anytime in the past in
order to compete with low-cost airlines, many
"new-comers" have entered the distribution industry.
New low-cost GDSs, such as ITA Software, G2 Switchworks,
Navitaire and others, are providing airlines with alternative
economic models to do business with traditional travel agents.
These new low-cost GDSs substantially reduce the fees charged to
airlines by this distribution channel.
In an effort to further reduce distribution costs through
internal channels, US Airways and other airlines have instituted
service fees for interaction in channels requiring specialized
service such as reservation call centers ($5.00 per
ticket), Airline Ticket Offices ($10.00 per ticket) and
City Ticket Offices ($10.00), while continuing to offer free
service via the airlines' websites. The goals of these
service fees are to reduce the cost to provide customer service
as required by the traveler and promote the continued goal of
shifting customers to the Company's lowest cost
distribution channel,
usairways.com.
Internal channels of
distribution account for 25% of all Company sales.
In July 2004, the DOT eliminated most regulations governing
GDSs. Airlines and GDSs continue to have open dialogue regarding
possible cost savings.
Frequent Traveler Program
US Airways operates a frequent traveler program known as
"Dividend Miles" under which participants earn mileage
credits for each paid flight segment on US Airways, US Airways
Shuttle, US Airways Express, Star Alliance carriers, and certain
other airlines that participate in the program. Participants
flying on first class or Envoy class tickets receive additional
mileage credits. Participants can also receive mileage credits
through special promotions periodically offered by US Airways
and may also earn mileage credits by utilizing certain credit
cards and purchasing services from various non-airline partners.
Mileage credits can be redeemed for various free, discounted, or
upgraded travel awards on US Airways, Star Alliance carriers or
other participating airlines.
US Airways and the other participating airline partners limit
the number of seats allocated per flight for award recipients by
using various inventory management techniques. Award travel for
all but the highest-level Dividend Miles participants is
generally not permitted on blackout dates, which correspond to
certain holiday periods or peak travel dates. US Airways
reserves the right to terminate Dividend Miles or portions of
the program at any time. Program rules, partners, special
offers, blackout dates, awards and requisite mileage levels for
awards are subject to change.
Insurance
The Company and its subsidiaries maintain insurance of the types
and in amounts deemed adequate to protect themselves and their
property. Principal coverage includes: liability for injury to
members of the public, including passengers; damage to property
of the Company, its subsidiaries and others; loss of or damage
to flight equipment, whether on the ground or in flight; fire
and extended coverage; directors and officers; fiduciary; and
workers' compensation and employer's liability. In
addition to customary deductibles, the Company self-insures for
all or a portion of its losses from claims related to
environmental liabilities and medical insurance for employees.
Since September 11, 2001, the Company and other airlines
have been unable to obtain coverage for liability to persons
other than employees and passengers for claims resulting from
acts of terrorism, war or similar events (war risk coverage) at
reasonable rates from the commercial insurance market. US
Airways has, as have most other U.S. airlines, therefore
purchased its war risk coverage through a special program
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administered by the FAA. The Emergency Wartime Supplemental
Appropriations Act extended this insurance protection until
August 2005. The Secretary of Transportation may extend this
policy until December 31, 2005. If the federal insurance
program terminates, the Company would likely face a material
increase in the cost of war risk coverage, and because of
competitive pressures in the industry, the Company's
ability to pass this additional cost to passengers would be
limited.
There can be no assurances that the Company can maintain
insurance coverages and costs at its current levels.
Item 2.
Properties
Flight Equipment
As of December 31, 2004, US Airways operated the following
jet and regional jet aircraft:
Average Seat
Average
Type
Capacity
Age (years)
Owned(1)
Leased(2)
Total
Airbus A330
266
4.4
9
—
9
Boeing 767-200ER
203
15.5
4
6
10
Boeing 757-200
193
14.2
—
31
31
Airbus A321
169
3.6
20
8
28
Boeing 737-400
144
14.8
3
42
45
Airbus A320
142
5.2
11
13
24
Boeing 737-300
126
17.7
7
61
68
Airbus A319
120
4.9
15
51
66
10.9
69
212
281
EMB-170
72
0.5
7
15
22
(1)
All owned aircraft are pledged as collateral for various secured
    financing agreements.
(2)
The terms of the leases expire between 2005 and 2023.
As of December 31, 2004, the Company's wholly owned
regional airline subsidiaries operated the following turboprop
and regional jet aircraft:
Average Seat
Average
Type
Capacity
Age (years)
Owned
Leased(1)
Total
CRJ-700
70
0.6
5
—
5
CRJ-200
50
0.8
21
14
35
De Havilland Dash 8-300
50
13.0
—
12
12
De Havilland Dash 8-100
37
14.4
30
12
42
De Havilland Dash 8-200
37
7.2
—
9
9
7.0
56
47
103
(1)
The terms of the leases expire between 2005 and 2021.
As of December 31, 2004, US Airways Group had 19
A320-family aircraft on firm order scheduled for delivery in the
years 2007 through 2009. US Airways Group also had ten A330-200
aircraft on firm order scheduled for delivery in the years 2007
through 2009. On February 3, 2005, the Bankruptcy Court
approved the Company's agreement with Airbus providing for,
among other things, delivery of the 19 A320-family aircraft in
years 2008 through 2010 and delivery of the ten A330-200
aircraft in years 2008 through 2009.
Pursuant to the Regional Jet Leasing Term Sheet of the Master
Memorandum of Understanding approved by the Bankruptcy Court in
December 2004, General Electric Credit Corporation
(GECC) or its affiliates will provide lease financing for
up to 31 regional jet aircraft. The aircraft to be financed will
consist of 70- to 100-seat regional jet aircraft manufactured by
Bombardier and/or Embraer in a mix and subject to other terms
11
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to be agreed mutually by GECC and US Airways. In the first
quarter of 2005, GECC will lease six Bombardier CRJ-700s to US
Airways with terms expiring on the earlier of the Company's
emergence from Chapter 11 and June 30, 2005; these
leases may be extended upon the Company's emergence from
bankruptcy.
The Company acquired three new Embraer ERJ-170 aircraft in
January 2005 and has firm orders for three additional ERJ-170
aircraft scheduled to be delivered by March 31, 2005. The
Company also acquired three new CRJ-700 aircraft in January 2005.
The Company maintains inventories of spare engines, spare parts,
accessories and other maintenance supplies sufficient to meet
its operating requirements.
As of December 31, 2004, the Company owned or leased the
following aircraft that were not considered part of its
operating fleet presented in the tables above. These aircraft
were either parked at storage facilities or, as shown in the far
right column, leased or subleased to third parties or related
parties.
Average
Leased/
Type
Age (years)
Owned
Leased
Total
Subleased
De Havilland Dash 8
14.5
3
—
3
—
Douglas DC-9-30
24.0
6
—
6
6
9
—
9
6
As discussed in Item 1, "Overview" above, the
Company has code share agreements in the form of capacity
purchase agreements with certain US Airways Express regional jet
affiliate operators. Collectively, these regional jet affiliate
operators flew 107 50-seat regional jet aircraft as part of US
Airways Express as of December 31, 2004.
US Airways is a participant in the Civil Reserve Air Fleet
(CRAF), a voluntary program administered by the Air Mobility
Command (AMC). The General Services Administration of the
U.S. Government requires that airlines participate in CRAF
in order to receive U.S. Government business. US
Airways' commitment under CRAF is to provide up to its
entire widebody fleet of ten 767-200ER aircraft and nine
A330-300 aircraft in support of military missions. US Airways is
reimbursed at compensatory rates when aircraft are activated
under CRAF. US Airways is reimbursed during peacetime
proportionally to its commitment.
The Company's 767-200ER aircraft are committed to the
Aeromed Program of CRAF. Under this program, the aircraft are
converted to flying hospitals for transportation of injured
troops. US Airways, Delta and United are participants in the
Aeromed Program. Participation in this program provides
increased U.S. government revenues for the Company. Since
the CRAF activation of 2003, US Airways has not provided
"voluntary" lift to AMC, due to operational
limitations.
Ground Facilities
The Company leases the majority of its ground facilities,
including executive and administrative offices in Arlington,
Virginia adjacent to Reagan National Airport; its principal
operating, overhaul and maintenance bases at the Pittsburgh
International Airport and Charlotte/Douglas International
Airports; training facilities in Pittsburgh and Charlotte;
central reservations offices in Pittsburgh and Winston-Salem
(North Carolina); and line maintenance bases and local ticket,
cargo and administrative offices throughout its system. US
Airways owns a training facility in Winston-Salem and a
reservation facility in Orlando. The Orlando facility was closed
on January 10, 2003 and is currently available for sale.
The Pittsburgh reservations call and service center will be
closed in 2005 and consolidated into one location in
Winston-Salem.
Terminal Construction Projects
The Company utilizes public airports for its flight operations
under lease arrangements with the government entities that own
or control these airports. Airport authorities frequently
require airlines to execute long-term leases to assist in
obtaining financing for terminal and facility construction. Any
future
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requirements for new or improved airport facilities and
passenger terminals at airports at which the Company operates
could result in additional expenditures and long-term
commitments.
In 1998, US Airways reached an agreement with the Philadelphia
Authority for Industrial Development (PAID) and the City of
Philadelphia to construct a new international terminal and a new
US Airways Express terminal at the Philadelphia International
Airport, one of US Airways' connecting hubs and US
Airways' principal international gateway. The international
terminal includes 12 gates for widebody aircraft and new federal
customs and immigration facilities. The international terminal
gates were put into operation in May 2003 and the ticket lobby
opened in September 2003. The US Airways Express facility,
completed in June 2001, can accommodate 38 regional aircraft.
Item 3.
Legal Proceedings
On September 12, 2004, US Airways Group and its domestic
subsidiaries, including its principal operating subsidiary, US
Airways, filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Eastern District of
Virginia, Alexandria Division (Case Nos. 04-13819-SSM
through 03-13823-SSM). Each of the Debtors continues to operate
its business and manage its property as a debtor-in-possession
pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
As a result of the current Chapter 11 filing, attempts to
collect, secure or enforce remedies with respect to prepetition
claims against the Debtors are subject to the automatic stay
provisions of Section 362(a) of the Bankruptcy Code.
On February 26, 2004, a company called I.A.P. Intermodal,
LLC filed suit against US Airways Group and its wholly owned
airline subsidiaries in the United States District Court for the
Eastern District of Texas alleging that the defendants infringed
upon three patents held by plaintiffs, all of which patents are
entitled, "Method to Schedule a Vehicle in Real-Time to
Transport Freight and Passengers." Plaintiff seeks various
injunctive relief as well as costs, fees and treble damages. US
Airways Group and its subsidiaries were formally served with the
complaint on June 21, 2004. US Airways Group is unable to
ascertain at this time the likelihood or potential scale of
liability. On the same date, the same plaintiff filed what the
Company believes to be substantially similar cases against nine
other major airlines, including British Airways, Northwest
Airlines Corporation (Northwest), Korean Airlines Co., Ltd.,
Deutsche Lufthansa AG, Air France, Air Canada, Singapore
Airlines Ltd., Delta, and Continental Airlines, Inc., and had
filed a suit against the parent company of American Airlines in
December 2003. This action was stayed as to US Airways Group and
its wholly owned subsidiaries as a result of the bankruptcy
filing on September 12, 2004.
The Port Authority of New York and New Jersey filed a proof of
claim against US Airways in the Prior Bankruptcy. The claim was
in the amount of $8.5 million and it alleged environmental
contamination and building deficiencies at LaGuardia. US
Airways' liability and defenses to such liability were
unaffected by the Prior Bankruptcy. US Airways has received no
notice, inquiry or other communication from the Port Authority
other than in connection with the proof of claim, and therefore
is unable to evaluate at this time the validity of the
underlying claim, the degree to which US Airways might share
responsibility with other parties, or the cost of cleanup or
correction of the alleged building deficiencies.
On January 7, 2003, the Internal Revenue Service (IRS)
issued a notice of proposed adjustment to US Airways Group
proposing to disallow $573 million of capital losses that
US Airways Group sustained in the tax year 1999 on the sale of
stock of USLM Corporation (USLM). On February 5, 2003, the
IRS filed a proof of claim with the Bankruptcy Court in
connection with the Prior Bankruptcy asserting the following
claims with respect to USLM: (1) secured claims for
U.S. federal income tax and interest of $0.7 million;
(2) unsecured priority claims for U.S. federal income
tax of $68 million and interest of $14 million; and
(3) an unsecured general claim for penalties of
$25 million. On May 8, 2003, US Airways Group reached
a tentative agreement with the IRS on the amount of
U.S. federal income taxes, interest and penalties due
subject to final approval from the Joint Committee on Taxation.
By letter dated September 11, 2003, US Airways Group
was notified that the Joint Committee on Taxation had accepted
the tentative agreement with the IRS, including a settlement of
all federal income taxes through the end of 2002. Due to the
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bankruptcy filing on September 11, 2004, which suspended
payment of prepetition liabilities, final payment terms under
the agreement have not been submitted to the Bankruptcy Court
for approval.
US Airways is named as a defendant along with most of the major
domestic airlines, several national carriers and a number of
international carriers, in a class action lawsuit on behalf of
all United States-based travel agents filed in federal court in
North Carolina. The complaint alleges violation of the federal
antitrust laws with respect to commission rate reductions and/or
commission cap reductions implemented by various airlines in
1997, 1998, 1999, 2001 and 2002. Plaintiffs seek unspecified
damages for lost commissions, as well as injunctive relief. On
October 30, 2003, the federal court granted a motion for
summary judgment dismissing all claims against airline
defendants other than the carriers then in bankruptcy, including
US Airways, because proceedings had been stayed against
those bankrupt defendants. That grant of summary judgment was
affirmed by the Fourth Circuit Court of Appeals. On
January 28, 2004, the federal court in North Carolina
dismissed all claims against US Airways. The plaintiffs in this
proceeding had also filed a claim in Bankruptcy Court for
prepetition and continuing postpetition damages. The Bankruptcy
Court determined that the entire claim was prepetition and
unsecured, and the plaintiffs appealed this decision to the
District Court. The parties agreed to stay this appeal pending
the outcome of the plaintiffs' appeal of the grant of
summary judgment in the North Carolina action. Following the
Fourth Circuit's decision to affirm the summary judgment
ruling, the plaintiffs dismissed their appeal of the Bankruptcy
Court decision.
Williard, Inc. (Williard), together with the joint venture of
Williard and Len Parker Associates (Williard/Parker), was
awarded construction contracts with US Airways for work to be
performed at the Philadelphia International Airport. On
May 29, 2002, US Airways terminated the largest contract
between the parties. Williard and Williard/Parker sued US
Airways in Pennsylvania state court for over $14 million in
damages representing termination costs and lost profits, along
with other alleged contractual damage claims. Subsequently,
Limbach Company, LLC (Limbach) alleged that it purchased the
claims of Williard. After a trial, the Bankruptcy Court, on
June 7, 2004, determined the value of the Limbach and
Limbach/Parker claims to be $2,542,843. Limbach and
Limbach/Parker are challenging on appeal various rulings of the
Bankruptcy Court, including the amount of the claim and its
status as an unsecured claim. US Airways has also filed an
appeal. Limbach and Limbach/Parker have filed an action in state
court against the City of Philadelphia (the City) and the
Philadelphia Authority for Industrial Development (PAID) and
received permission to include US Airways as a co-defendant,
provided that Limbach and Limbach/Parker did not make any claims
against US Airways in that action. In the lawsuit against the
City and PAID, Limbach and Limbach/Parker are seeking the same
sums as in their earlier lawsuit and proofs of claim against
US Airways, but this time under the equitable theories of
third-party beneficiary, quantum meruit and constructive trust.
The court in the Philadelphia action dismissed US Airways from
the lawsuit and dismissed the third-party beneficiary claims
against the City and PAID. These rulings are subject to appeal
at a later date. On May 21, 2004, the City and PAID filed a
Motion for Summary Judgment seeking dismissal of the lawsuit.
Should Limbach and/or Limbach/Parker recover in the Philadelphia
action against the City and PAID, that award would be paid at
100 cents on the dollar. US Airways may have an obligation to
indemnify the City and PAID under its agreements related to the
airport development, which US Airways assumed as part of the
Prior Bankruptcy. Therefore, any recovery by Limbach and/or
Limbach/Parker against the City and PAID could result in an
indemnification claim that US Airways may have to pay at full
value. Proceedings in the Bankruptcy Court were stayed by the
bankruptcy filing on September 12, 2004.
On October 4, 2004, the System Board of Adjustment (the
System Board) issued a ruling in which US Airways'
outsourcing of heavy maintenance visits was deemed to be in
violation of the collective bargaining agreement between US
Airways and the IAM as the representative of Mechanic and
Related Employees. The System Board ordered US Airways to cease
and desist from outsourcing the work, and ordered that affected
employees be made whole. The System Board did not specify any
particular monetary remedy and none has since been decided or
agreed upon by the parties. However, the Bankruptcy Court's
order granting in part US Airways' motion for relief
under Section 1113(e) of the Bankruptcy Code included
relief from any restrictions on US Airways' right to
outsource the work covered by this award through
February 15, 2005. Neither US Airways'
Section 1113(e) motion nor the Bankruptcy Court's
order addressed the make-whole portion of this award. On
November 12, 2004, US Airways filed a motion asking the
14
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Bankruptcy Court for permission to reject the IAM collective
bargaining agreement under which the grievance had been filed.
On January 6, 2005, the Bankruptcy Court granted US
Airways' motion. On January 21, 2005, the IAM ratified
a new collective bargaining agreement to replace the one that
had been rejected, and as part of the new agreement, the IAM
agreed not to pursue any claims for damages associated with the
rejection of the previous agreement.
The Company and US Airways have been named as defendants in two
lawsuits filed in federal district court for the Eastern
District of Michigan. Delta is also named as a defendant in both
actions, while Northwest and the Airlines Reporting Corporation
were sued separately in a third action. The complaints were
filed on behalf of a class of airline passengers who originated
or terminated their trips at the defendant carriers'
respective hubs. These passengers allege that they paid
excessive fares due to the respective airlines' enforcement
of ticketing rules that prohibit the use of a connecting segment
coupon that is part of a through-fare ticket where the passenger
does not fly or intend to fly the entire ticketed itinerary.
Plaintiffs allege monopolization and restraint of trade in
violation of federal antitrust laws. They seek recovery of
treble damages from all named defendants in the amount of
$390 million and an injunction prohibiting future
enforcement of the rules at issue. On May 16, 2002, the
court denied the defendant airlines' Motion for Summary
Judgment and granted the plaintiffs' Motion for Class
Certification in each of the cases. On May 31, 2002, the
Company and US Airways filed a petition with the United States
Court of Appeals for the Sixth Circuit seeking a discretionary
review of the certification order. On November 21, 2002,
the petition for permission to appeal the class certification
decision was denied. On December 4, 2002, Delta and
Northwest filed a rehearing petition seeking en banc review of
the initial Sixth Circuit denial. On February 24, 2003,
Northwest and Delta's petition for rehearing en banc was
denied. Notwithstanding the district court's denial of
summary judgment and the petition, the Company and US Airways
believe the claims are without merit and intend to pursue a
vigorous defense. The automatic stay under Section 362(a)
of the Bankruptcy Code was lifted when the Company emerged from
bankruptcy on March 31, 2003, but the action was
subsequently stayed once more as a result of the Company's
bankruptcy filing on September 12, 2004.
In May 1995, the Company, US Airways and the Retirement Plan for
Pilots of US Airways, Inc. (Pilot Retirement Plan) were sued in
federal district court for the District of Columbia by 481
active and retired pilots, alleging that defendants had
incorrectly interpreted the plan provisions and erroneously
calculated benefits under the Pilot Retirement Plan. The
plaintiffs sought damages in excess of $70 million. In May
1996, the court issued a decision granting US Airways'
Motion to Dismiss the majority of the complaint for lack of
jurisdiction, deciding that the dispute must be resolved through
the arbitration process under the Railway Labor Act because the
Pilot Retirement Plan was collectively bargained. The plaintiffs
appealed the district court's dismissal and in February
1999, the U.S. Court of Appeals upheld the district
court's decision originally granted in May 1996, in the
defendants' favor. In May 1999, the plaintiffs filed a
petition for certiorari with the U.S. Supreme Court. In
October 1999, the U.S. Supreme Court denied the
plaintiffs' petition for certiorari. The U.S. District
Court retained jurisdiction over one count of the complaint,
alleging violation of a disclosure requirement under ERISA. In
August 2000, the U.S. District Court dismissed the
remaining count without prejudice, giving plaintiffs the right
to reinstate their claims after completion of the arbitration.
Certain of the plaintiffs filed a claim before the US Airways
Pilot Retirement Board, requesting arbitration of their claim
for benefits that they believe were erroneously calculated, and
the Retirement Board selected an arbitrator to decide certain
issues related to the plaintiffs' claims for benefits.
However, the Pilot Retirement Plan was terminated on
March 31, 2003, and on April 1, 2003 the Pension
Benefit Guaranty Corporation (PBGC) became trustee of the plan.
Also, claims related to this matter were expunged in the Prior
Bankruptcy. Accordingly, the Company does not believe there is
any continuing risk of material liability associated with this
matter.
On September 29, 2000, US Airways intervened in a
proceeding that was originally brought on January 26, 1998,
by the Pennsylvania Department of Environment Protection (DEP)
against Allegheny County, Pennsylvania and the Allegheny County
Aviation Administration (ACAA), alleging that a variety of
airfield and aircraft de-icing activities at Pittsburgh
International Airport (Airport) violated the requirements of
(a) a 1994 Consent Order and Adjudication issued to
Allegheny County and air carrier tenants at the Airport,
(b) the Airport's National Pollutant Discharge
Elimination System Permit, and (c) the Pennsylvania
15
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Clean Streams Law. The action was brought before the
Pennsylvania Environmental Hearing Board. During March 2001, the
Environmental Hearing Board approved Allegheny County's
Motion to Withdraw the Appeal without Prejudice, thereby
terminating the appeal. However, during the course of settlement
discussions leading to the termination of the appeal, the DEP
advised Allegheny County and US Airways that DEP (i) will
require additional measures to be taken to control de-icing
materials at the Airport, and (ii) will assess a civil
penalty against Allegheny County and US Airways for the alleged
violations described above. The ACAA, US Airways and the DEP
have continued to work together with the goal of fashioning an
ultimate resolution to the de-icing issues. The Company does not
believe that the settlement of this matter will have a material
adverse effect on its financial condition, results of operations
or liquidity.
Item 4.
Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during
the fourth quarter of 2004.
Item 5.
Market for US Airways Group's Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity Securities
Stock Exchange Listing
Through September 24, 2002, the Predecessor Company's
common stock was traded on the New York Stock Exchange
(NYSE) under the Symbol "U". As a result of the
Prior Bankruptcy, the NYSE announced on August 14, 2002
that it would suspend trading and move to delist US Airways
Group's common stock. The SEC approved the delisting and
the common stock was delisted effective September 25, 2002.
As a result, on September 25, 2002, the Common Stock began
trading on the NASDAQ over-the-counter market under the Symbol
"UAWGQ." On March 31, 2003, in conjunction with
the effective date of the 2003 Plan, all then-outstanding equity
securities of the Predecessor Company were cancelled.
On October 21, 2003, the Company's Class A Common
Stock began trading on the NASDAQ National Market under the
symbol "UAIR." Prior to listing on the NASDAQ National
Market, the Class A Common Stock had limited trading
activity on the Over-the-Counter Bulletin Board and in the
Pink Sheets, which provide trading for the over-the-counter
securities markets.
On September 13, 2004, the Company received written notice
from The NASDAQ Stock Market that the Class A Common Stock
would be delisted in accordance with Marketplace Rules 4300
and 4450(f), effective with the opening of business on
September 22, 2004. NASDAQ indicated in its letter that the
delisting determination followed its review of the
Company's press release announcing that the Company had
filed for bankruptcy protection. As a result of this
notification, a fifth character "Q" was added to the
trading symbol, changing it from "UAIR" to
"UAIRQ" at the opening of business on
September 15, 2004. Shares are currently trading on the
NASDAQ over-the-counter market under the symbol as changed
above. The Company cannot assure that an active trading market
for its stock will exist in the future. As of February 18,
2005, there were 491 holders of record of Class A Common
Stock. This number does not include beneficial owners of the
Company's Class A Common Stock whose shares are held
in the names of various dealers, clearing agencies, banks,
brokers and other fiduciaries. In addition, the Company has five
million shares of Class B Common Stock outstanding. The
Class B Common Stock has no public trading market and is
held by one shareholder of record as of February 18, 2005.
Market Prices of Common Stock
The high and low sale prices of the Successor Company's
Class A Common Stock and the Predecessor Company's
common stock were as follows:
Period
High
Low
2004
Fourth Quarter
$
2.00
$
0.76
Third Quarter
3.16
0.58
Second Quarter
4.55
1.44
First Quarter
6.77
4.11
16
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Period
High
Low
2003
Fourth Quarter
$
15.25
$
5.01
Third Quarter*
17.50
4.85
Second Quarter
*
*
First Quarter
0.28
0.06
*
As a result of emergence from the Prior Bankruptcy, the
    Predecessor Company's common stock was cancelled effective
    March 31, 2003. An established public trading market,
    defined as more than limited or sporadic trading, did not exist
    for the Successor Company Class A Common Stock until
    September 8, 2003.
The Company, organized under the laws of the State of Delaware,
is subject to Sections 160 and 170 of the Delaware General
Corporation Law with respect to the payment of dividends on or
the repurchase or redemption of its capital stock. The Company
is restricted from engaging in any of these activities unless it
maintains a capital surplus.
The Company has not declared or paid cash or other dividends on
common stock since 1990 and currently does not intend to do so
on its Class A Common Stock. Under the provisions of
certain debt agreements, including the ATSB Loan, its ability to
pay dividends on or repurchase its Class A Common Stock is
restricted. Any future determination to pay cash dividends will
be at the discretion of the Company's board of directors,
subject to applicable limitations under Delaware law and the
Bankruptcy Code, and will depend upon its results of operations,
financial condition, contractual restrictions and other factors
deemed relevant by its board of directors. See "Liquidity
and Capital Resources" in Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operation below for more information, including information
related to dividend restrictions associated with the ATSB Loan.
The ultimate recovery, if any, to holders of the common stock
will not be determined until confirmation of a plan of
reorganization. The plan of reorganization could result in
holders of US Airways Group's common stock and related
equity securities receiving no distribution on account of their
interest and cancellation of the equity.
Foreign Ownership Restrictions
Under current federal law, non-U.S. citizens cannot own or
control more than 25% of the outstanding voting securities of a
domestic air carrier. The Company believes that it was in
compliance with this statute during the time period covered by
this report.
17
Table of Contents
Item 6.
Selected Financial Data
Consolidated Statements of Operations
Successor Company
Predecessor Company
Nine Months
Three Months
Year Ended
Ended
Ended
Year Ended December 31,
December 31,
December 31,
March 31,
2004
2003
2003
2002
2001
2000
(in millions, except per share amounts)(1)
Operating Revenues
$
7,117
$
5,312
$
1,534
$
6,977
$
8,288
$
9,269
Operating Expenses
7,495
5,356
1,741
8,294
9,971
9,322
Operating Loss
$
(378
)
$
(44
)
$
(207
)
$
(1,317
)
$
(1,683
)
$
(53
)
Income (Loss) Before Cumulative Effect of Accounting Change
$
(611
)
$
(174
)
$
1,635
$
(1,663
)
$
(2,124
)
$
(166
)
Cumulative Effect of Accounting Change, Net of Applicable Income
    Taxes
—
—
—
17
7
(103
)
Net Income (Loss)
$
(611
)
$
(174
)
$
1,635
$
(1,646
)
$
(2,117
)
$
(269
)
Earnings (Loss) per Common Share
Basic
Before Cumulative Effect of Accounting Change
$
(11.19
)
$
(3.25
)
$
24.02
$
(24.45
)
$
(31.59
)
$
(2.47
)
Cumulative Effect of Accounting Change
—
—
—
0.25
0.11
(1.55
)
Net Earnings (Loss) per Common Share
$
(11.19
)
$
(3.25
)
$
24.02
$
(24.20
)
$
(31.48
)
$
(4.02
)
Diluted
Before Cumulative Effect of Accounting Change
$
(11.19
)
$
(3.25
)
$
24.02
$
(24.45
)
$
(31.59
)
$
(2.47
)
Cumulative Effect of Accounting Change
—
—
—
0.25
0.11
(1.55
)
Net Earnings (Loss) per Common Share
$
(11.19
)
$
(3.25
)
$
24.02
$
(24.20
)
$
(31.48
)
$
(4.02
)
Cash Dividends per Common Share
$
—
$
—
$
—
$
—
$
—
$
—
(1)
Includes unusual items. See Note 16 to the Company's
    Notes to Consolidated Financial Statements for related
    information.
Consolidated Balance Sheets
Successor Company
Predecessor Company
December 31,
December 31,
2004
2003
2002
2001
2000
(in millions)
Total Assets
$
8,422
$
8,555
$
6,543
$
8,025
$
9,127
Long-Term Obligations and Redeemable Preferred Stock(2)
$
4,871
4,641
5,009
5,148
$
4,379
Total Stockholders' Equity (Deficit)
$
(434
)
$
172
$
(4,921
)
$
(2,615
)
$
(358
)
Shares of Common Stock Outstanding
55.0
54.0
68.1
67.6
67.0
(2)
Includes debt, capital leases and postretirement benefits other
    than pensions (noncurrent). Also includes liabilities subject to
    compromise at December 31, 2004 and December 31, 2002.
18
Table of Contents
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations
General Information
Certain of the statements contained herein should be considered
"forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, which reflect
the current views of the Company with respect to current events
and financial performance. You can identify these statements by
forward-looking words such as "may," "will,"
"expect," "intend," "anticipate,"
"believe," "estimate," "plan,"
"could," "should," and "continue"
or similar words. These forward-looking statements may also use
different phrases. Such forward-looking statements are and will
be, as the case may be, subject to many risks, uncertainties and
factors relating to the Company's operations and business
environment which may cause the actual results of the Company to
be materially different from any future results, express or
implied, by such forward-looking statements. Factors that could
cause actual results to differ materially from these
forward-looking statements include, but are not limited to, the
following: the ability of the Company to continue as a going
concern; the ability of the Company to obtain and maintain any
necessary financing for operations and other purposes, whether
debtor-in-possession financing or other financing; the ability
of the Company to maintain adequate liquidity; the ability of
the Company to absorb escalating fuel costs; the Company's
ability to obtain court approval with respect to motions in the
Chapter 11 proceedings prosecuted by it from time to time;
the ability of the Company to develop, prosecute, confirm and
consummate one or more plans of reorganization with respect to
the Chapter 11 proceedings; risks associated with third
parties seeking and obtaining court approval to terminate or
shorten the exclusivity period for the Company to propose and
confirm one or more plans of reorganization, to appoint a
Chapter 11 trustee or to convert the cases to
Chapter 7 cases; the ability of the Company to obtain and
maintain normal terms with vendors and service providers; the
Company's ability to maintain contracts that are critical
to its operations; the potential adverse impact of the
Chapter 11 proceedings on the Company's liquidity or
results of operations; the ability of the Company to operate
pursuant to the terms of its financing facilities (particularly
the financial covenants); the ability of the Company to fund and
execute its Transformation Plan during the Chapter 11
proceedings and in the context of a plan of reorganization and
thereafter; the ability of the Company to attract, motivate
and/or retain key executives and associates; the ability of the
Company to attract and retain customers; the ability of the
Company to maintain satisfactory labor relations; demand for
transportation in the markets in which the Company operates;
economic conditions; labor costs; financing availability and
costs; security-related and insurance costs; competitive
pressures on pricing (particularly from lower-cost competitors)
and on demand (particularly from low-cost carriers and
multi-carrier alliances); weather conditions; government
legislation and regulation; impact of the continued military
activities in Iraq; other acts of war or terrorism; and other
risks and uncertainties listed from time to time in the
Company's reports to the SEC. There may be other factors
not identified above of which the Company is not currently aware
that may affect matters discussed in the forward-looking
statements, and may also cause actual results to differ
materially from those discussed. The Company assumes no
obligation to update such estimates to reflect actual results,
changes in assumptions or changes in other factors affecting
such estimates other than as required by law. Similarly, these
and other factors, including the terms of any reorganization
plan ultimately confirmed, can affect the value of the
Company's various prepetition liabilities, common stock
and/or other equity securities. Accordingly, the Company urges
that the appropriate caution be exercised with respect to
existing and future investments in any of these liabilities
and/or securities.
Chapter 11 Proceedings
On September 12, 2004, US Airways Group and its domestic
subsidiaries (collectively, the Debtors), which account for
substantially all of the operations of the Company, including
its principal operating subsidiary, US Airways, filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy
Code in the United States Bankruptcy Court for the Eastern
District of Virginia, Alexandria Division (Case Nos.
04-13819-SSM through 04-13823-SSM). Each of the Debtors in these
cases had previously filed a voluntary petition for relief under
Chapter 11 on August 11, 2002 (the Prior Bankruptcy).
The Debtors emerged from the Prior Bankruptcy under the First
Amended Joint Plan of Reorganization of US Airways
19
Table of Contents
Group, Inc. and Affiliated Debtors and Debtors-in-Possession, As
Modified (the 2003 Plan), which was confirmed pursuant to an
order of the Bankruptcy Court on March 18, 2003 and became
effective on March 31, 2003. In accordance with AICPA
Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code"
(SOP 90-7), the Company adopted fresh-start reporting on
March 31, 2003. References to "Predecessor
Company" refer to the Company prior to March 31, 2003.
References to "Successor Company" refer to the Company
on and after March 31, 2003, after giving effect to the
cancellation of the then-existing common stock and the issuance
of new securities in accordance with the 2003 Plan and
application of fresh-start reporting. As a result of the
application of fresh-start reporting, the Successor
Company's financial statements are not comparable with the
Predecessor Company's financial statements.
Before emerging from the Prior Bankruptcy in 2003, the Company
examined virtually every phase of its contracts and operations
and had significantly reduced costs. The Company reduced its
mainline capacity, realigned its network to maximize yield,
initiated a business plan to use more regional jets and procured
financing for these aircraft, and expanded its alliances with
other carriers. However, after emerging from the Prior
Bankruptcy, the Company continued to incur substantial losses
from operations. The primary factors contributing to these
losses include the reduction in domestic industry unit revenue
and significant increases in fuel prices. The downward pressure
on domestic industry revenue is a result of the rapid growth of
low-fare, low-cost airlines, the increasing transparency of
fares through Internet sources and other changes in fare
structures that have resulted in substantially lower fares for
many business and leisure travelers. The competitive environment
continued to intensify throughout 2004, particularly in key
markets such as Philadelphia, Washington, D.C., Boston and
New York.
Throughout the spring and summer of 2004, the Company
communicated with key stakeholders and the public its plan to
transform US Airways into a fully competitive and profitable
airline (the Transformation Plan). A key element of the
Transformation Plan is significant reductions in labor costs
through changes to the Company's collective bargaining
agreements. The Company aggressively sought the necessary
agreements to allow full implementation of the Transformation
Plan without the need for filing new Chapter 11 cases but
was unable to do so in a timely manner. As a result of the
recurring losses, declining available cash and risk of defaults
or cross defaults under certain key financing and operating
agreements, it was necessary for the Debtors to file voluntary
petitions for reorganization under Chapter 11 of the
Bankruptcy Code on September 12, 2004.
At hearings held on September 13, 2004, the Bankruptcy
Court granted the Company's first day motions for relief
designed to stabilize its operations and business relationships
with customers, vendors, employees and others and entered orders
granting permission to the Debtors to, among other things:
(a) pay employee wages and continue benefits, such as
medical and dental insurance; (b) honor prepetition
obligations to customers and continue customer programs,
including US Airways' Dividend Miles program; (c) pay
for fuel under existing supply contracts, and honor existing
fuel supply, distribution and storage agreements;
(d) assume certain contracts related to interline
agreements with other airlines; (e) pay prepetition
obligations to certain foreign vendors, foreign service
providers and foreign governments; and (f) continue
maintenance of existing bank accounts and existing cash
management systems. The Bankruptcy Court also approved the
interim agreement reached between the Company, the ATSB and the
lenders under the $1 billion loan, obtained upon emergence
from the Prior Bankruptcy and substantially guaranteed by the
ATSB, to allow the Company continued use of the cash collateral
securing the loan (see further discussion below).
Since filing for bankruptcy on September 12, 2004, the
Company has achieved cost-savings agreements with all of its
collective bargaining groups. Through a motion filed under
Section 1113(e) of the Bankruptcy Code on
September 24, 2004, the Company sought interim relief from
their collective bargaining agreements (CBAs) with ALPA, AFA,
TWU, CWA and IAM. On October 15, 2004, the Bankruptcy Court
approved base rates of pay reductions of 21% through
February 15, 2005 or entry of an order approving a new CBA
or granting final relief under Section 1113(c) of the
Bankruptcy Code. Reductions to pension contributions and certain
work rule changes were also approved. The interim relief order
did not apply to ALPA or TWU, whose members reached and ratified
CBAs prior to the interim relief going into effect. CBAs with
the CWA and AFA were reached in December 2004 and were
subsequently ratified. On January 6, 2005, the
20
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Bankruptcy Court approved the Company's request to reject
the IAM CBAs and approved the termination of the three mainline
defined benefit plans. The IAM subsequently ratified Company
cost-savings proposals on January 21, 2005. In addition,
the Bankruptcy Court has also approved various settlement
agreements between the Company and the court-appointed
Section 1114 Committee representing retirees other than
those represented by the IAM to begin the significant
curtailment of postretirement benefits.
On November 12, 2004, US Airways filed a motion requesting
a determination from the Bankruptcy Court that US Airways
satisfied the financial requirements for a "distress
termination" of the Retirement Plan for Flight Attendants
in the Service of US Airways, Inc. (AFA Plan), the Pension Plan
for Employees of US Airways, Inc. Who Are Represented by the
International Association of Machinists and Aerospace Workers
(IAM Plan), and the Retirement Plan for Certain Employees of US
Airways, Inc. (CE Plan) under section 4041(c)(2)(B)(ii)(IV)
of the Employee Retirement Income Security Act of 1974, as
amended (ERISA), and approval of each such plan's
termination. These plans were projected to have benefit
obligations and plan assets aggregating $2.7 billion and
$1.7 billion, respectively, as of September 30, 2004,
the most recent valuation date. On January 6, 2005, the
Bankruptcy Court entered an order (i) finding that the
financial requirements under section 4041(c)(2)(B)(ii)(IV)
of ERISA for a distress termination of the plans had been met
and (ii) approving termination of the plans. The AFA Plan
and the IAM Plan were terminated effective January 10,
2005, by agreement between the PBGC and the Company. The CE Plan
was terminated effective January 17, 2005, by agreement
between the PBGC and US Airways. Effective February 1,
2005, the PBGC was appointed trustee for each of the three plans.
In addition to the cost savings achieved with labor groups, the
Company also implemented pay and benefit reductions for its
current management and other non-union employees, including
reductions to base pay, workforce reductions and modifications
to vacation and sick time accruals. The Company also implemented
modifications to its defined contribution pension plans and will
implement modifications to retiree benefits in 2005. The pay
rate and defined contribution plan reductions went into effect
October 11, 2004 and the reductions to retiree medical
benefits will become effective March 1, 2005.
The Company has reached agreements with certain of its lessors
and lenders restructuring existing aircraft lease and debt
financings. On November 19, 2004, the Bankruptcy Court
approved the Company's agreements for the continued use and
operation of substantially all of its mainline and Express
fleet. As discussed in detail below, the Company reached a
comprehensive agreement with GE Capital Aviation Services
(GECAS) and GE Engine Service (GEES) on aircraft
leasing and financing and engine services, which will provide
the Company with short-term liquidity, reduced debt, lower
aircraft ownership costs, enhanced engine maintenance services,
and operating leases for new regional jets. The Company also
reached agreements with EMBRAER-Empresa Brasileria de
Aeronautica SA (Embraer) and Bombardier, Inc. (Bombardier)
providing for continued use and operation of its aircraft, short
term liquidity and new financing for regional jets, which were
approved by the Bankruptcy Court in January 2005. These
agreements are discussed in more detail below in "Liquidity
and Capital Resources."
The Company has notified all known or potential creditors of the
Chapter 11 filing for the purposes of identifying and
quantifying all prepetition claims. The Chapter 11 filing
triggered defaults on substantially all debt and lease
obligations. Subject to certain exceptions under the Bankruptcy
Code, the Chapter 11 filing automatically stayed the
continuation of any judicial or administrative proceedings or
other actions against the Debtors or their property to recover
on, collect or secure a claim arising prior to
September 12, 2004. The deadline for filing proofs of claim
with the Bankruptcy Court was February 3, 2005, with a
limited exception for governmental entities, which have until
March 11, 2005.
The potential adverse publicity associated with the
Chapter 11 filings and the resulting uncertainty regarding
the Company's future prospects may hinder the
Company's ongoing business activities and its ability to
operate, fund and execute its business plan by impairing
relations with existing and potential customers; negatively
impacting the ability of the Company to attract and retain key
employees; limiting the Company's ability to obtain trade
credit; limiting the Company's ability to effectively hedge
rising aviation fuel costs; and impairing present and future
relationships with vendors and service providers.
21
Table of Contents
As a result of the Chapter 11 filings, realization of
assets and liquidation of liabilities are subject to significant
uncertainty. While operating as a debtor-in-possession under the
protection of Chapter 11, and subject to Bankruptcy Court
approval or otherwise as permitted in the normal course of
business, US Airways may sell or otherwise dispose of assets and
liquidate or settle liabilities for amounts other than those
reflected in the financial statements. Further, a plan of
reorganization could materially change the amounts and
classifications reported in the historical financial statements,
which do not give effect to any adjustments to the carrying
value of assets or amounts of liabilities that might be
necessary as a consequence of confirmation of a plan of
reorganization.
To exit Chapter 11 successfully, the Company must obtain
confirmation by the Bankruptcy Court of a plan of
reorganization. The Company currently has the exclusive right to
file a plan of reorganization until March 31, 2005 and
solicit acceptance of the plan through June 30, 2005. Under
the terms of the agreement reached with General Electric, the
Company has until March 15, 2005 to file a plan of
reorganization. These deadlines could potentially be extended. A
plan of reorganization would, among other things, resolve all
prepetition obligations, set forth a revised capital structure
and establish the corporate governance subsequent to exiting
from bankruptcy. The Company is currently working towards
emerging from Chapter 11 mid-year 2005, but that timing is
dependent upon, among other things, the timely and successful
confirmation and implementation of a plan of reorganization. The
ultimate recovery to creditors and/or holders of the common
stock, if any, will not be determined until confirmation of a
plan of reorganization. No assurance can be given as to what
values, if any, will be ascribed in the Chapter 11 cases to
these constituencies or what type or amount of distributions, if
any, they would receive. A plan of reorganization could result
in holders of the Company's common stock receiving no
distribution and cancellation of existing stock.
On September 13, 2004, the Company received written notice
from The NASDAQ Stock Market that its Class A Common Stock
would be delisted in accordance with Marketplace Rules 4300
and 4450(f), effective with the opening of business on
September 22, 2004. NASDAQ indicated in its letter that the
delisting determination followed its review of the
Company's press release announcing that the Company had
filed for bankruptcy protection. As a result of this
notification, a fifth character "Q" was added to the
trading symbol, changing it from "UAIR" to
"UAIRQ" at the opening of business on
September 15, 2004. Shares of the Class A Common Stock
are currently trading on the NASDAQ over-the-counter market
under the symbol as changed above. The Company cannot assure
that an active trading market for its stock will exist in the
future.
The value of the common stock is highly speculative. The Company
urges that appropriate caution be exercised with respect to
existing and future investments in the securities of the Company.
Transformation Plan
The Company continues to implement its Transformation Plan,
which is built on several aspects of proven success in the
airline industry, beyond the necessary lower labor costs that
have been achieved. Those include lower overall costs, a
simplified fare structure and expanded services in the eastern
United States, the Caribbean and Latin America. Specifically,
the Company has taken or is currently undertaking the following
initiatives:
•
Lower, simplified pricing and lower distribution costs. US
    Airways has already taken steps to simplify its fares by
    introducing its GoFares pricing plan in many markets served from
    Philadelphia, Washington, D.C., and Fort Lauderdale,
    and has stated its intent to expand that pricing plan across its
    system in conjunction with achieving lower costs. A redesigned
    website and more airport technology will also lower distribution
    costs, enhance customer service and improve airport processing.
•
Enhanced low-cost product offering. US Airways customers will
    continue to benefit from a combination of product offerings that
    is unique among low-cost carriers, including two-class service,
    international flights to Europe, the Caribbean, Latin America
    and Canada, service to airports that business travelers prefer,
    access to a global network via the Star Alliance, a premium
    frequent flyer program and competitive onboard service.
22
Table of Contents
•
Network enhancements. Leveraging its strong positions in major
    Northeast markets, US Airways intends to use its airport
    slot and facilities assets to offer nonstop service to more
    major business and leisure destinations. Pittsburgh is no longer
    a hub and service has been reduced in accordance with previously
    announced operational changes. Fort Lauderdale is being
    expanded to handle additional Latin America service. Operations
    at Charlotte are being expanded and new routes from Reagan
    National are being introduced. In addition, changes are being
    made to the scheduling practices at Philadelphia to improve
    reliability, adding new destinations in the Caribbean and Latin
    America and introducing service to Barcelona and Venice in May.
•
Lower unit operating costs. In conjunction with more
    point-to-point flying, US Airways intends to fly its fleet more
    hours per day as it decreases the time aircraft sit on the
    ground at hubs, waiting for connecting passengers. Productivity
    increases will be gained through this more efficient scheduling
    in conjunction with the contractual labor changes.
Prior Bankruptcy Information
As discussed above, the Company emerged from the Prior
Bankruptcy under the 2003 Plan. The 2003 Plan constituted a
separate plan of reorganization for each of the Company and its
domestic subsidiaries (the Filing Entities). In accordance with
the Bankruptcy Code, the 2003 Plan divided claims against, and
interests in, each of the Filing Entities into classes according
to their relative seniority and other criteria and provided the
same treatment for each claim or interest of a particular class
unless the holder of a particular claim or interest agreed to a
less favorable treatment of its claim or interest. Among other
things, the 2003 Plan generally provided for full payment of all
allowed administrative and priority claims, and the distribution
of shares (or warrants to purchase shares) of new equity in the
reorganized US Airways Group, Inc. (Reorganized US Airways
Group) to the ATSB, the Retirement Systems of Alabama Holdings
LLC (RSA), the Company's management and labor unions,
General Electric Capital Corporation and Bank of America, N.A.,
and to unsecured creditors of the Filing Entities, including the
PBGC, in satisfaction of their allowed claims. Persons holding
equity in US Airways Group prior to March 31, 2003 were not
entitled to any distribution under the 2003 Plan and their
shares of common stock were cancelled. For a complete discussion
of the distributions provided for under the 2003 Plan, investors
should refer to the 2003 Plan confirmed by the Bankruptcy Court
on March 18, 2003 and filed with US Airways Group's
Current Report on Form 8-K dated March 18, 2003 and
filed with the SEC on April 2, 2003.
On March 31, 2003, RSA invested $240 million in cash
in Reorganized US Airways Group pursuant to an investment
agreement (the RSA Investment Agreement) in exchange for
approximately 36.2%, on a fully diluted basis, of the equity in
Reorganized US Airways Group. As of March 31, 2003, in
connection with its investment, RSA was granted a voting
interest of approximately 71.6% in Reorganized US Airways Group
and became entitled to designate and vote to elect eight of
15 directors to Reorganized US Airways Group's Board
of Directors. See Notes 10 and 12(a) in the Notes to the
Consolidated Financial Statements for a summary of the equity
structure following the Prior Bankruptcy and related party
transactions with RSA.
Results of Operations
As discussed above, the Company emerged from the Prior
Bankruptcy and adopted fresh-start reporting on March 31,
2003. As a result of the application of fresh-start reporting,
the Successor Company's financial statements are not
comparable with the Predecessor Company's financial
statements. However, for purposes of discussion of the results
of operations, 2004 has been compared to the full year 2003 as
included, in part, in the Company's Statements of
Operations (which are contained in Part II, Item 8 of
this report) and in "Selected Operating and Financial
Statistics" below. Except where noted, operating statistics
referred to below are for scheduled service only.
23
Table of Contents
2004 Compared With 2003
Operating Revenues
— Operating revenues
increased $271 million, or 4.0%.
Passenger
transportation
revenues increased $212 million or 3.5%.
Revenue passenger miles (RPMs) were up 8.7%, which increased
revenues by $536 million, partially offset by a 4.9%
decrease in yield, which decreased revenues by
$324 million. Passenger transportation revenues were
negatively impacted by the Company's bankruptcy
proceedings. Passenger transportation revenue in 2003 included a
favorable $34 million adjustment to the traffic balances
payable account for unused and now expired tickets.
Cargo and
freight
revenue was flat.
Other
operating revenue
increased as a result of increased third party fuel sales due to
higher fuel prices and revenue associated with certain marketing
arrangements.
Operating Expenses
— Operating expenses
increased by $398 million, or 5.6%. Operating expenses
excluding
Government compensation
and S
pecial
items
increased 3.0% on a capacity increase (as measured by
available seat miles or ASMs) of 5.8%.
Personnel costs
decreased 8.4% due to lower employee pension, medical and
dental, and postretirement medical benefit expense, an
$89 million decrease in stock-based compensation expense
related to the issuance of US Airways Group Class A Common
Stock to employees covered by collective bargaining agreements
following emergence from the Prior Bankruptcy in 2003, reduced
headcount in 2004 and lower wage rates in the fourth quarter of
2004 as the result of interim or permanent relief from labor
contracts. These decreases were partially offset by an increase
in expense associated with long-term disability.
Aviation
fuel
increased 32.4% primarily due to higher average fuel
prices and, to a lesser extent, schedule-driven increases in
consumption.
US Airways Express capacity purchases
increased 24.2% reflecting an increase in purchased ASMs
from third-party regional jet operators and other airline
subsidiaries of US Airways Group.
Aircraft rent
increased
4.2% as a result of new leases due to the conversion of
mortgaged aircraft to leased aircraft and the addition of new
regional jet leases.
Other rent and landing fees
decreased slightly as a result of decreases in landing fees
partially offsetting increased airport rental expenses.
Selling expenses
decreased 3.2% due to a decrease in
commissions partially offset by increases to advertising expense
and sales volume driven increases in credit card fees.
Depreciation and amortization
increased 2.5% due to
depreciation associated with new regional jets and the write-off
of certain ground equipment and an indefinite lived foreign
slot, partially offset by lower book values on the existing
fleet as a result of fresh-start reporting effective
March 31, 2003 and by reduced amortization associated with
capitalized software.
Other
operating expenses increased
4.6% due to increases in the cost associated with the redemption
of Dividend Miles for travel on partner airlines and future
travel on US Airways as well as increases to costs associated
with passenger and baggage screening and navigation fees,
partially offset by decreases in insurance expenses and
schedule-related expenses including passenger food expenses.
2003 included $28 million in reductions to an accrual upon
the resolution of previously outstanding contingencies. Refer to
"Description of Unusual Items" below for information
on S
pecial items
and
Government compensation.
Other Income (Expense)
— Other Income
(Expense), net decreased $2.0 billion primarily as a result
of the reorganization items directly associated with the
emergence from the Prior Bankruptcy. See "Description of
Unusual Items" below for additional information on the
components of
Reorganization items, net
in 2003. In 2004,
reorganization items consisted of $30 million of
professional fees, $7 million in aircraft order
cancellation penalties, and $2 million in damage and
deficiency claims associated with the rejection of certain
aircraft in the Prior Bankruptcy, offset by $4 million in
interest income on accumulated cash as a result of the current
Chapter 11 proceedings.
Interest income
decreased as
the result of the reclassification of interest income on cash,
cash equivalents and short term investments to
Reorganization
items, net
subsequent to the Chapter 11 filing on
September 12, 2004.
Interest expense
was flat as a
result of the conversion of mortgaged aircraft to leased
aircraft and the abandonment of certain aircraft, offset by
interest related to the ATSB Loan and penalty interest incurred
as a result of the current Chapter 11 proceedings
.
Other, net
income in 2004 includes $13 million related
to a business interruption insurance recovery and a
$2 million gain on the sale of four aircraft, while the
2003 results reflect a $30 million gain recognized in
connection with the Company's sale of its investment in
Hotwire, Inc.
24
Table of Contents
Provision (Credit) for Income Taxes
— The
Company recorded an income tax benefit of $10 million for
the year ended December 31, 2004, as compared to
$11 million of income tax expense in 2003. The benefit
recognized in 2004 related to revisions to prior estimates upon
completion of the Company's consolidated 2003 tax return.
The Company continues to record a full valuation allowance
against its net deferred tax assets due to the uncertainty
regarding their ultimate realization.
Selected Operating and Financial Statistics
—
System capacity (as measured by ASMs) increased 5.8% and
passenger volume (as measured by RPMs) increased 8.7% in 2004.
These increases resulted in a 73.5% system passenger load
factor, representing a 2.0 percentage point increase over
2003. However, system yield declined by 4.9% reflecting the
continued downward pressure on fares. Weather conditions related
primarily to hurricanes adversely impacted the Company's
operating and financial performance in 2004 and 2003.
US Airways' full-time equivalent employees at
December 31, 2004 declined 8.1% reflecting the headcount
reduction measures put in place in connection with the
Company's Transformation Plan.
2003 Compared With 2002
Operating Revenues
— Operating revenues
decreased $131 million, or 1.9%.
Passenger
transportation
revenue decreased $149 million or 2.4%.
RPMs declined 4.4%, which decreased revenues by
$277 million, partially offset by a 2.1% improvement in
yield, which increased revenues by $127 million. Passenger
transportation revenue for 2003 included a favorable
$34 million adjustment to the traffic balances payable
account for unused and now expired tickets.
Other
operating revenue increased 4.9% due to increased third party
fuel sales and mileage credit sales partially offset by lower
ticket change and cancellation fees.
Operating Expenses
— Operating expenses
declined by $1.20 billion, or 14.4%. Operating expenses
excluding
Government compensation
and S
pecial items
were lower by 8.7% on a capacity decrease (as measured by
ASMs) of 6.9%.
Personnel costs
decreased 18.2% due to
lower headcount levels, wage rates and employee pension and
benefit expenses partially offset by $125 million of
stock-based compensation expenses resulting from the issuance of
Class A Common Stock to employees covered by collective
bargaining agreements following emergence from Chapter 11.
Aviation fuel
increased 6.1% due to higher average fuel
prices partially offset by schedule-driven decreases in
consumption.
US Airways Express capacity purchases
increased 33.8% reflecting a 32% increase in purchased ASMs
from third-party regional jet operators.
Aircraft rent
decreased 17.9% due to favorably restructured leases and lease
rejections made in connection with the Company's Prior
Bankruptcy, which was partially offset by new leases as a result
of the conversion of mortgaged aircraft to leased aircraft.
Other rent and landing fees
were flat as a result of
schedule-driven decreases in landing fees offsetting increased
airport rental expenses associated with the new terminal in
Philadelphia.
Selling expenses
decreased 7.9% due to
sales volume driven decreases in credit card fees and sales- and
rate-driven decreases in computer reservation system fees.
Travel agent commission rates decreased due to the elimination
of the base domestic commissions in March 2002 and increases in
internet bookings which are less costly to the Company.
Depreciation and amortization
decreased 21.7% due to
fewer owned aircraft in the operating fleet and lower book
values on the existing fleet as a result of fresh-start
reporting.
Other
operating expenses decreased 8.4% due to
decreases in insurance expenses and schedule-related expenses
including passenger food expenses and crew travel expenses and a
$17 million and $12 million reduction to an accrual
upon the resolution of previously outstanding contingencies
partially offset by increases in expenses associated with
third-party fuel sales. Refer to "Description of Unusual
Items" below for information on
Special items
and
Government compensation.
Other Income (Expense)
— Other Income
(Expense), net increased $2.3 billion from an expense of
$598 million in 2002 to income of $1.7 billion in
2003.
Interest income
decreased due to lower return rates
partially offset by higher average investment balances.
Interest expense
decreased as a result of the conversion
of mortgaged aircraft to leased aircraft and the abandonment of
certain aircraft partially offset by interest related to the
ATSB Loan
. Other, net
income increased as a result of a
$30 million gain recognized in connection with the
Company's sale of its investment in Hotwire, Inc. and
mark-to-market adjustments on certain stock options held by the
Company. Refer to "Description of Unusual Items" below
for information on
Reorganization items, net.
25
Table of Contents
Provision (Credit) for Income Taxes
— The
Company's federal and state income tax expense was
$11 million in 2003 representing an effective tax rate of
0.7%. This differed from statutory rates primarily due to
utilization of net operating loss carryforwards. During 2001,
the Company recognized a valuation allowance against its net
deferred tax asset. The Company continues to record a full
valuation allowance against its net deferred tax assets due to
the uncertainty regarding their ultimate realization. As a
result of the March 2002 enactment of the Job Creation and
Worker Assistance Act of 2002 (Job Act), the Company recognized
an income tax credit equal to the Company's carryback
potential. The Job Act provides, among other things, an
extension of the net operating loss carryback period to five
years from two years for net operating losses arising from tax
years that end in 2001 or 2002 and the elimination of the 90%
limitation for alternative minimum tax purposes on those loss
carrybacks. The tax credit recorded in 2002 includes
$74 million related to 2001 losses realizable due to the
enactment of the Job Act and recorded in the period of
enactment. The Company continued to record a valuation allowance
against its net deferred tax asset which resulted in a 2002
effective tax rate of 13%.
Cumulative Effect of Accounting Change
—
Effective January 1, 2002, PSA, a wholly owned subsidiary
of the Company, changed its method of accounting for engine
maintenance from accruing on the basis of hours flown to
expensing as incurred. In connection with the change, PSA
recognized a $17 million credit representing the cumulative
effect of the accounting change.
Selected Operating and Financial Statistics
—
System capacity (as measured by ASMs) decreased 6.9% and
passenger volume (as measured by RPMs) decreased 4.4% in 2003.
These decreases resulted in a 71.5% system passenger load
factor, representing a 1.9 percentage point increase over
2002. System yield improved 2.1% reflecting a modest improvement
in economic conditions. Both RPMs and ASMs were significantly
affected by the schedule reductions initiated following the
Company's Prior Bankruptcy filing. In addition, hurricanes
Isabel, Fabian and Henri adversely impacted the Company's
operating and financial performance in 2003. US Airways
full-time equivalent employees at December 31, 2003
declined 12.4% reflecting the headcount reduction measures put
in place in connection with the Company's 2002
restructuring.
Description of Unusual Items
Special Items
— Special items included within
operating expenses on the Company's Consolidated Statements
of Operations include the following components (dollars in
millions):
Successor Company
Predecessor Company
Nine Months Ended
Year Ended
December 31, 2003
December 31, 2002
Aircraft order cancellation penalty
$
35
(a)
$
—
Aircraft impairments and related charges
—
392
(b)
Pension and postretirement benefit curtailments
—
(90
)(c)
Employee severance including benefits
(1
)(d)
(3
)(d)
Other
—
21
(e)
$
34
$
320
(a)
During the quarter ended June 30, 2003, the Company
    recorded a $35 million charge in connection with its
    intention not to take delivery of certain aircraft scheduled for
    future delivery.
(b)
During the fourth quarter of 2002, US Airways conducted an
    impairment analysis in accordance with Statement of Financial
    Accounting Standards No. 144, "Accounting for the
    Impairment or Disposal of Long-Lived Assets"
    (SFAS 144) on its B737-300, B737-400, B757-200 and B767-200
    aircraft fleets as a result of changes to the aircraft's
    recoverability periods (the planned conversion of owned aircraft
    to leased aircraft) as well as indications of possible material
    changes to the market values of these aircraft. The analysis
    revealed that estimated undiscounted future cash flows generated
    by these aircraft were less than their carrying values for four
    B737-300s, 15 B737-400s, 21 B757-200s and three B767-200s. In
    accordance with SFAS 144, the carrying values were reduced
    to fair market value. This analysis resulted in a pretax charge
    of $392 million. Management estimated fair market value
    using third-party appraisals and recent leasing transactions.
(c)
During the fourth quarter of 2002, US Airways recorded a
    curtailment credit of $120 million related to certain
    postretirement benefit plans and a $30 million curtailment
    charge related to certain defined benefit pension plans.
26
Table of Contents
(d)
In September 2001, US Airways announced that in connection
    with its reduced flight schedule it would terminate or furlough
    approximately 11,000 employees across all employee groups.
    Approximately 10,200 of the affected employees were terminated
    or furloughed on or prior to January 1, 2002. Substantially
    all the remaining affected employees were terminated or
    furloughed by May 2002. US Airways' headcount
    reduction was largely accomplished through involuntary
    terminations/furloughs. In connection with this headcount
    reduction, US Airways offered a voluntary leave program to
    certain employee groups. Voluntary leave program participants
    generally received extended benefits (e.g. medical, dental, life
    insurance) but did not receive any furlough pay benefit. In
    accordance with Emerging Issues Task Force Issue No. 94-3,
    US Airways recorded a pretax charge of $75 million
    representing the involuntary severance pay and the benefits for
    affected employees during the third quarter of 2001. In the
    fourth quarter of 2001, US Airways recognized a
    $10 million charge representing the estimated costs of
    extended benefits for those employees who elected to take
    voluntary leave and a $2 million reduction in accruals
    related to the involuntary severance as a result of employees
    electing to accept voluntary furlough. During the quarters ended
    June 30, 2003 and 2002, the Company recognized
    $1 million and $3 million, respectively, in reductions
    to severance pay and benefit accruals related to the involuntary
    termination or furlough of certain employees.
(e)
During the fourth quarter of 2002, US Airways recognized an
    impairment charge of $21 million related to capitalized
    gates at certain airports in accordance with Statement of
    Financial Accounting Standards No. 142, "Goodwill and
    Other Intangible Assets." The carrying values of the
    affected gates were reduced to fair value based on a third party
    appraisal.
Reorganization Items, Net
— Reorganization
items, net represent amounts incurred as a direct result of the
Company's Chapter 11 filings and are presented
separately in the Company's Consolidated Statements of
Operations. Such items consist of the following (dollars in
millions):
Successor Company
Predecessor Company
Year Ended
Three Months Ended
Year Ended
December 31, 2004
March 31, 2003
December 31, 2002
Discharge of liabilities(a)
$
—
$
3,938
$
—
Restructured aircraft financings(b)
—
967
—
Termination of pension plans(c)
—
387
—
Interest income on accumulated cash
4
2
2
Damage and deficiency claims(d)
(2
)
(2,167
)
—
Revaluation of assets and liabilities(a)
—
(1,107
)
—
Professional fees
(30
)
(51
)
(61
)
Aircraft order cancellation penalties
(7
)
—
—
Loss on aircraft abandonment(e)
—
(9
)
(68
)
Severance including benefits(f)
—
—
(89
)
Write-off of ESOP deferred compensation
—
—
(50
)
Other
—
(43
)
(28
)
$
(35
)
$
1,917
$
(294
)
(a)
Reflects the discharge or reclassification of liabilities
    subject to compromise in the Prior Bankruptcy. Most of these
    obligations were only entitled to receive such distributions of
    cash and common stock as provided under the 2003 Plan. A portion
    of the liabilities subject to compromise in the Prior Bankruptcy
    were restructured and continued, as restructured, to be
    liabilities of the Company.
(b)
As of March 31, 2003, the Company restructured aircraft
    debt and lease agreements related to 200 aircraft in
    connection with its Prior Bankruptcy including the conversion of
    52 mortgages to operating leases. The restructured terms
    generally provide for shorter lease periods and lower lease
    rates.
(c)
Effective March 31, 2003, US Airways terminated its
    qualified and nonqualified pilot defined benefit pension plans.
    The PBGC was appointed trustee of the qualified plan effective
    with the termination. The Company recognized a gain in
    connection with the termination which is partially offset by the
    PBGC claim.
(d)
Damage and deficiency claims largely arose as a result of the
    Company electing to either restructure, abandon or reject
    aircraft debt and leases during the bankruptcy proceedings.
(e)
Includes aircraft (seven A319s for 2003 and 34 F-100s, two
    B757-200s and one B737-400 for 2002) that were legally abandoned
    as part of the Prior Bankruptcy. Related aircraft liabilities
    were adjusted for each aircraft's expected allowed
    collateral value.
(f)
As a result of schedule reductions made in connection with the
    Prior Bankruptcy, US Airways terminated or furloughed
    approximately 6,600 employees across all employee groups.
    Substantially all affected employees were terminated or
    furloughed prior to March 31, 2003. US Airways'
    headcount reduction was largely accomplished through involuntary
    terminations/furloughs. In connection with this headcount
    reduction, US Airways offered a voluntary leave program to
    certain employee groups. Voluntary
27
Table of Contents
leave program participants generally received extended benefits
    (e.g. medical, dental, life insurance) but did not receive any
    furlough pay benefit.
Government Compensation
— In April 2003,
President George W. Bush signed into law the Emergency Wartime
Supplemental Appropriations Act (Emergency Wartime Act), which
included $2.4 billion for reimbursement to the airlines for
certain aviation-related security expenses. Certain airlines
that received the aviation-related assistance were required to
agree to limit the total cash compensation for certain executive
officers during the 12-month period beginning April 1, 2003
to an amount equal to the annual salary paid to that officer
during the air carrier's fiscal year 2002. Any violation of
this agreement would require the carrier to repay to the
government the amount reimbursed for airline security fees. The
Company complied with this limitation on executive compensation.
The Company's security fee reimbursement was
$214 million, net of amounts due to certain affiliates, and
was recorded as a reduction to operating expenses during the
second quarter of 2003. In September 2003, the Company received
approximately $6 million of compensation associated with
flight deck door expenditures which was recorded as an offset to
capital costs.
Selected Operating and Financial Statistics(1)
Year Ended
December 31,
2004
2003
2002
Revenue passengers miles (millions):*
System
45,087
41,464
43,374
Mainline
39,964
37,741
40,038
Available seat miles (millions):*
System
61,353
58,017
62,329
Mainline
53,220
51,494
56,360
Passenger load factor(2):*
System
73.5
%
71.5
%
69.6
%
Mainline
75.1
%
73.3
%
71.0
%
Yield(3):*
System
14.07¢
14.79¢
14.48¢
Mainline(4)
12.43¢
13.05¢
13.05¢
Passenger revenue per available seat mile(5):*
System
10.34¢
10.57¢
10.08¢
Mainline(4)
9.33¢
9.56¢
9.27¢
Revenue passengers (thousands):*
System
55,954
52,797
58,389
Mainline
41,510
41,251
47,155
Mainline revenue per available seat mile(6)
10.69¢
10.75¢
10.38¢
Mainline cost per available seat mile (Mainline CASM)(7)(8)
11.34¢
11.36¢
12.67¢
Mainline average stage length (miles)*
782
761
685
Mainline cost of aviation fuel per gallon(9)
112.08¢
88.29¢
74.36¢
Mainline cost of aviation fuel per gallon (excluding fuel taxes)
106.35¢
83.02¢
68.90¢
Mainline gallons of aviation fuel consumed (millions)
884
873
972
Mainline number of aircraft in operating fleet at period-end
281
282
280
Mainline full-time equivalent employees at period end
24,628
26,797
30,585
*
Denotes scheduled service only (excludes charter service).
(1)
Operating statistics include free frequent flyer travelers and
    the related miles they flew. System statistics encompass all
    wholly owned airline subsidiaries of US Airways Group, including
    US Airways, Allegheny (through June 2004), Piedmont, PSA, as
    well as operating and financial results from capacity purchase
    agreements with Mesa, Chautauqua, Trans States and Midway
    (through October 2003). Where noted, revenues and expenses
    associated with US Airways' capacity purchase arrangements
    with certain
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affiliated airlines and US
    Airways' regional jet division, MidAtlantic, have been
    excluded from US Airways' financial results for
    purposes of mainline financial statistical calculation and to
    provide better comparability between periods (see details below).
(2)
Percentage of aircraft seating
    capacity that is actually utilized (RPMs/ ASMs).
(3)
Passenger transportation revenue
    divided by RPMs.
(4)
Mainline passenger revenue excludes
    US Airways Express and MidAtlantic passenger revenue of
    $1,379 million, $1,208 million, and
    $1,058 million for the years ended December 31, 2004,
    2003 and 2002, respectively.
(5)
Passenger transportation revenue
    divided by ASMs (a measure of unit revenue).
(6)
Mainline operating revenues divided
    by ASMs (a measure of unit revenue). Mainline operating revenues
    exclude US Airways Express and MidAtlantic operating revenues of
    $1,385 million, $1,214 million and $1,063 million
    for the years ended December 31, 2004, 2003 and 2002,
    respectively.
(7)
Total Operating Expenses divided by
    ASMs (a measure of unit cost).
(8)
Mainline operating expenses exclude
    US Airways capacity purchases of $1,304 million,
    $1,145 million, and $1,094 million for the years ended
    December 31, 2004, 2003 and 2002, respectively, and
    MidAtlantic operating expenses of $79 million for the year
    ended December 31, 2004. Operating expenses for each period
    include unusual items as follows:
•
For the year ended December 31, 2003, operating expenses
    include an aircraft order penalty of $35 million
    (0.07¢) and government compensation of $212 million
    (0.41¢).
•
For the year ended December 31, 2002, operating expenses
    include aircraft impairment and related charges of
    $392 million (0.70¢), a benefit on the pension and
    postretirement curtailment of $90 million (0.16¢), an
    impairment charge related to capitalized gates at certain
    airports of $21 million (0.04¢) and a reduction to the
    involuntary severance accrual of $3 million (0.01¢).
(9)
Includes fuel taxes and transportation charges and excludes
    service fees.
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Liquidity and Capital Resources
As of December 31, 2004, the Company's Cash, Cash
equivalents and Short-term investments totaled $738 million
compared to $1.29 billion as of December 31, 2003. All
of the Company's unrestricted cash constitutes cash
collateral under the ATSB Loan.
The Company requires substantial liquidity in order to meet
scheduled debt and lease payments and to finance day-to-day
operations. As a result of the recurring losses, decline in
available cash, and risk of defaults or cross defaults under
certain key financing and operating agreements, the Company
filed a voluntary petition for reorganization under
Chapter 11 of the Bankruptcy Code on September 12,
2004. The Company has been operating with the use of the ATSB
cash collateral since its Chapter 11 filing on
September 12, 2004.
The Company currently estimates its cash balance will continue
to decline through the first quarter of 2005. The projected
decline in cash is a result of continued net losses during
winter months, front-loaded transition costs to achieve a
competitive cost structure and approximately $302 million
in aircraft debt and lease payments due in the first quarter of
2005. Failure to make debt and lease payments would result in
the loss of those aircraft which are essential to the
Transformation Plan. The Company projects modest accumulation of
cash for several months beginning in the second quarter of 2005.
Failure to have continued use of the ATSB cash collateral could
necessitate asset sales and layoffs, and result in an inability
to continue operating.
On February 18, 2005, the Company announced that it reached
agreement with Eastshore Aviation, LLC, an investment entity
owned by Air Wisconsin Airlines Corporation and its shareholders
(Air Wisconsin), on a $125 million financing commitment to
provide a substantial portion of the equity funding for a plan
of reorganization. The $125 million facility will be in the
form of a debtor-in-possession term loan, to be drawn in the
amount of $75 million, upon approval by Bankruptcy Court,
and as early as February 28, 2005, and two subsequent
$25 million increments. This loan would be second only to
the ATSB Loan with regard to the Company's assets that are
pledged as collateral. Upon emergence from Chapter 11, the
$125 million financing package would then convert to equity
in the reorganized US Airways Group. As part of this agreement,
US Airways and Air Wisconsin will enter into an air services
agreement under which Air Wisconsin may, but is not required to,
provide regional jet service under a US Airways Express code
share arrangement.
ATSB Loan and Cash Collateral Agreement
As part of its reorganization under the Prior Bankruptcy,
US Airways received a $900 million loan guarantee
(ATSB Guarantee) under the Air Transportation Safety and System
Stabilization Act from the ATSB in connection with a
$1 billion term loan financing (ATSB Loan) that was funded
on March 31, 2003. The Company required this loan and
related guarantee in order to provide the additional liquidity
necessary to carry out its 2003 Plan. US Airways is the primary
obligor under the ATSB Loan, which is guaranteed by
US Airways Group and each of its other domestic
subsidiaries. The ATSB Loan is secured by substantially all of
the present and future assets of the Debtors not otherwise
encumbered (including certain cash and investment accounts,
previously unencumbered aircraft, aircraft engines, spare parts,
flight simulators, real property, takeoff and landing slots,
ground equipment and accounts receivable), other than certain
specified assets, including assets which are subject to other
financing agreements. As of December 31, 2004,
$718 million was outstanding under the ATSB Loan. The ATSB
Loan is reflected as a current liability on the accompanying
balance sheet at a book value of $701 million, which is net
of $17 million of unamortized discount, and is not subject
to compromise. As of December 31, 2004, the Company's
$738 million in unrestricted cash and short-term
investments was available to support daily operations, subject
to certain conditions and limitations, under the Cash Collateral
Agreement described below.
In connection with the September 12, 2004 Chapter 11
filing, the ATSB and the lenders under the ATSB Loan agreed to
authorize the Company to continue to use cash collateral
securing the ATSB Loan on an interim basis. Therefore, in lieu
of debtor-in-possession financing, the Company has access to the
cash collateralizing the ATSB Loan as working capital, subject
to certain on-going conditions and limitations. This
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interim agreement was approved by the Bankruptcy Court on
September 13, 2004 as part of the first day motions, and
was scheduled to expire on October 15, 2004. The Bankruptcy
Court approved two subsequent agreements extending the
Company's ability to use the cash collateral, including an
agreement approved on January 13, 2005 extending the
Company's use of cash collateral through June 30,
2005, subject to certain conditions and limitations (the Cash
Collateral Agreement). Under the current agreement, the Company
may continue to access such cash collateral to support daily
operations so long as it maintains an agreed upon minimum amount
of cash on hand each week. The amount declines from
approximately $500 million at the end of January to
$341 million on June 30, 2005, with weekly cash levels
permitted as low as $325 million in March 2005. The Company
must also maintain and achieve certain cumulative earnings
levels during the period, as defined in the agreement. Further,
the Company must comply with restrictions on its ability to make
capital expenditures. In light of rising fuel prices and
continued downward pressure on fares across the industry, there
can be no assurance that the Company can comply with the Cash
Collateral Agreement.
The ATSB Loan also contains covenants that limit, among other
things, the Company's ability to pay dividends, make
additional corporate investments and acquisitions, enter into
mergers and consolidations and modify certain concessions
obtained as part of the Prior Bankruptcy. The ATSB Loan contains
certain mandatory prepayment events including, among other
things, (i) the occurrence of certain asset sales and the
issuance of certain debt or equity securities and (ii) the
decrease in value of the collateral pledged in respect of the
ATSB Loan below specified coverage levels. The amendments
discussed below and the Cash Collateral Agreement have not
eliminated any of these covenants.
The ATSB Loan bears interest as follows: (i) 90% of the
ATSB Loan (Tranche A) was funded through a participating
lender's commercial paper conduit program and bears
interest at a rate equal to the conduit provider's weighted
average cost related to the issuance of certain commercial paper
notes and other short-term borrowings plus 0.30%, and
(ii) 10% of the ATSB Loan (Tranche B) bears interest
at LIBOR plus 4.0%. In addition, US Airways is charged an annual
guarantee fee in respect of the ATSB Guarantee currently equal
to 4.1% of the ATSB's guaranteed amount (initially
$900 million) under the ATSB Guarantee, with such guarantee
fee increasing by ten basis points annually. Due to the
Company's September 2004 bankruptcy filing and subsequent
loss of certain regional jet financing, the guarantee fee
increased by 2% per annum and the interest rate on
Tranche A and Tranche B each increased by an
additional 2% and 4% per annum, respectively, for an
effective increase in the interest rate on the loan balance of
4 percentage points.
Prior Amendments to the ATSB Loan during 2004
In March 2004, US Airways and the ATSB amended the financial
covenants of the ATSB Loan to provide covenant relief for the
measurement periods beginning June 30, 2004 through
December 31, 2005. The ratios used in the financial
covenants were adjusted and reset to align with the
Company's forecast for 2004 and 2005 as of the date of the
amendment, which assumed a return to profitability by 2005. In
exchange for this covenant relief and other changes described
below, US Airways made a voluntary prepayment of
$250 million on March 12, 2004, which reduced, pro
rata, all future scheduled principal payments of the ATSB Loan
(rather than shortening the remaining life of the loan).
The March 2004 amendment permitted US Airways to retain, at its
election, up to 25% of the net cash proceeds from any asset sale
for which definitive documentation would be completed by
February 28, 2005, up to a total of $125 million for
all asset sales. In addition, the amendment permitted US Airways
to accept a third-party secured note as consideration for
certain asset sales (including the US Airways Shuttle and wholly
owned regional airline assets) as long as specified conditions
are met. These conditions include: the note's amortization
schedule will be no more favorable than the ATSB Loan; proceeds
from the note will be used to prepay the ATSB Loan; the credit
strength of the ATSB Loan will not be adversely affected as
measured by specified ratings tests; and the note will be
pledged as collateral for the ATSB Loan. Finally, in
consideration for the lenders agreeing to amend the provision
related to the going concern paragraph in the independent
auditor's report for the Company's audited financial
statements for the year ended December 31, 2003,
US Airways agreed to revised covenants relating to minimum
required unrestricted cash balances.
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Effective May 21, 2004, US Airways again amended the ATSB
Loan to permit use of its regional jets financed by General
Electric (GE) as cross collateral for other obligations of
US Airways to GE. In consideration for this amendment, US
Airways agreed to revised covenants relating to minimum required
unrestricted cash balances. In addition, US Airways agreed to
give up the right to retain up to 25% of the net cash proceeds
from any asset sale, as had been permitted by the March 2004
amendment. US Airways made a prepayment of $5 million in
connection with this amendment.
The ATSB Loan contains financial covenants that must be
satisfied by US Airways at the end of each fiscal quarter. US
Airways was uncertain as to its ability to satisfy these
covenants as of June 30, 2004. Effective June 30,
2004, US Airways and the ATSB amended the ATSB Loan to remove
the uncertainty relating to the Company's ability to
satisfy its financial covenant tests for the second quarter of
2004. In consideration for this amendment, the Company agreed to
change the loan amortization schedule, by increasing each of the
first six principal repayment installments commencing on
October 1, 2006 by approximately $16 million, and
reducing the last principal repayment installment on
October 1, 2009 by $94 million.
All of the foregoing rights and obligations of the parties
relating to the ATSB Loan are subject to the terms of the cash
collateral orders entered by the Bankruptcy Court and the terms
of the Bankruptcy Code.
General Electric
GE is the Company's largest creditor. Together with GEES
and other affiliates, GE directly financed or leased a
substantial portion of the Company's aircraft prior to the
current Chapter 11 filing. In November 2001, US Airways
obtained a $404 million credit facility from GE (2001
GE Credit Facility). The 2001 GE Credit Facility is secured
by collateral including 11 A320-family aircraft and 28
spare engines. As discussed below, borrowings under the 2001 GE
Credit Facility bear interest rates of LIBOR plus 3.5% and the
term of the facility is 2012.
In addition to the 2001 GE Credit Facility, GE has provided
financing or guarantees on 145 of the Company's current
operating aircraft. It also maintains the engines on the
Company's B737-family aircraft, A320-family aircraft, B767
aircraft, EMB-170 aircraft and CRJ-200 aircraft. In connection
with its Prior Bankruptcy, the Company reached a settlement with
GE that resolved substantially all aircraft, aircraft engine and
loan-related issues and the Company obtained additional
financing from GE in the form of a liquidity facility of up to
$360 million (2003 GE Liquidity Facility). Borrowings under
the liquidity facility bear interest at LIBOR plus 4.25%. Every
obligation of the Company to GE is generally cross-defaulted to
the 2001 GE Credit Facility, the 2003 GE Liquidity Facility, the
GE regional jet leases and the GE regional jet mortgage
financings. All of the Company's obligations to GE are
generally cross-collateralized and cross-defaulted with all
other obligations owned by any Debtor to GECC or any of its
affiliates (collectively, the GE Obligations).
In November 2004, the Company reached a comprehensive agreement
with GE and its affiliates as described in the Master Memorandum
of Understanding (Master MOU) that was approved by the
Bankruptcy Court on December 16, 2004. The Master MOU and
the transactions contemplated by the term sheets will provide
the Company with short-term liquidity, reduced debt, lower
aircraft ownership costs, enhanced engine maintenance services
and operating leases for new regional jets, while preserving the
vast majority of US Airways' mainline fleet owned by
GECAS. The key aspects of the Master MOU are as follows:
(i) agreements providing for continued use by the Company
of certain Airbus, Boeing and regional jet aircraft, and the
return to GECC of certain other leased Airbus and Boeing
aircraft (the Aircraft Lease Term Sheet); (ii) GECC will
provide a bridge facility of up to approximately
$56 million for use by the Debtors during the pendency of
the Chapter 11 proceedings (the Bridge Facility Term
Sheet); (iii) GECC will purchase and immediately leaseback
to US Airways (a) the assets securing the 2001 GE Credit
Facility and the 2003 GE Liquidity Facility (collectively, the
2001 Credit Facility Assets), and other GE obligations,
consisting of 11 Airbus aircraft and 28 spare engines and engine
stands, and (b) ten regional jet aircraft currently debt
financed by GECC; (iv) the balance of the 2001 GE Credit
Facility will be restructured to provide additional liquidity of
approximately $10 million, subject to the pledge of certain
collateral to secure
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the 2001 GE Credit Facility; (v) subject to the
Company's satisfaction of certain financial tests and other
conditions, GECC will provide lease financing for up to 31
additional regional jet aircraft (the Regional Jet Leasing Term
Sheet); (vi) certain of US Airways' engine maintenance
agreements with GEES will be modified and assumed; and
(viii) upon emergence from bankruptcy, convertible notes of
the reorganized US Airways will be issued to GECC in the
aggregate principal amount of $125 million (the Convertible
Note Term Sheet).
The Bridge Facility Term Sheet provides for a loan facility of
up to $56 million made available by GECC to the Debtors in
a series of drawdowns commencing on December 20, 2004, and
ending on or before June 30, 2005 (the Bridge Facility).
The Company and GECC entered into the Bridge Facility on
December 20, 2004, at which time $20 million was drawn
down under the facility. Interest on the Bridge Facility accrues
at the rate of LIBOR plus 4.25% and will be payable in cash or
in kind at the option of the Debtors. The Bridge Facility
matures on the date the Company emerges from Chapter 11 and
will be satisfied by the issuance of Convertible Notes described
below. The Bridge Facility is cross-collateralized and
cross-defaulted with all other GE obligations owed by any Debtor
to GECC or any of its affiliates and will be granted status as
an administrative expense claim with priority over all other
administrative claims other than for aircraft financing
deferrals, which are pari passu, and subordinate only to
(i) the super-priority administrative expense claim of the
ATSB and the ATSB Lenders as defined and provided for in the
Cash Collateral Agreement (ii) postpetition wages and
benefits, and (iii) any other new money
debtor-in-possession financing.
The 2001 GE Credit Facility will be amended to, among other
things: (i) provide the Debtors with an additional
$10 million of liquidity upon consummation of the
sale-leaseback of the 2001 GE Credit Facility Assets and CRJ
Mortgaged Assets (defined below), (ii) after the prepayment
of the loan balance outstanding under the 2001 GE Credit
Facility made in connection with the sale-leaseback of the 2001
GE Credit Facility Assets and CRJ Mortgaged Assets, as described
below, revise the amortization schedule so that the remaining
principal of the loan begins amortizing over a period of eight
quarters following the Debtors' emergence from bankruptcy
(the Remaining Term), (iii) provide that the interest rate
will be LIBOR plus 4.25% for the Remaining Term, and
(iv) provide that the loan will be secured with a third
lien position on three CRJ-700 aircraft (subject to first and
second lien positions and conditioned upon consent of such
senior lien holders pursuant to an inter-creditor agreement
reasonably acceptable to GECC), a second lien position on one
CRJ-700 aircraft (subject to first lien position and conditioned
upon consent of such senior lien holders pursuant to an
inter-creditor agreement reasonably acceptable to GECC) and a
first lien position on one CF34 spare engine owned by US
Airways, with the aggregate of any senior liens on such
collateral not to exceed $62 million. The amendments to the
2001 GE Credit Facility do not constitute an assumption thereof,
but it is anticipated that in connection with a plan of
reorganization, the 2001 GE Credit Facility, as amended, will be
reinstated.
The Aircraft Lease Term Sheet sets forth a comprehensive
agreement regarding the treatment of GECC-owned and mortgaged
aircraft pursuant to Section 1110 of the Bankruptcy Code.
The Debtors and GECC have agreed to subject certain of such
aircraft to consensual Section 1110(a) agreements providing
for continued use of such aircraft so long as the Company
complies with the terms of such agreements. In certain cases,
the Debtors and GECC have agreed to amend prepetition
agreements. Except as set forth in the Master MOU or the Term
Sheets attached to the Master MOU, the Section 1110(a)
agreements and any related amendments will not constitute an
assumption of any related underlying agreements, and no such
agreement will constitute a postpetition contract for purposes
of, among other things, Sections 365, 503 and 507 of the
Bankruptcy Code, but will be subject to the Debtors'
obligations under Section 1110 of the Bankruptcy Code.
After emergence from bankruptcy, US Airways will have an option
to restructure the monthly rental obligations of certain
additional B737-400 leases following the issuance of the
Convertible Notes described below, for cash or additional
convertible notes of equal market value.
Subject to the swap of three aircraft contemplated by the
Aircraft Lease Term Sheet, GECC will purchase the two A319
aircraft, the four A320 aircraft, the five A321 aircraft, the 14
CFM56-5B spare engines, the 14 CFM56-3B spare engines, and
certain engine stands that currently secure the 2001 GE Credit
Facility and the 2003 GE Liquidity Facility, together with the
nine CRJ-200s and one CRJ-700 aircraft
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currently mortgage debt financed by GECC (collectively, the CRJ
Mortgaged Assets) for a total purchase price of approximately
$640 million, subject to adjustment, at which time the 2001
Credit Facility Assets and the CRJ Mortgaged Assets will be
leased back to US Airways under operating leases having an
initial lease term expiring on the earlier of the Debtors'
emergence from Chapter 11 or June 30, 2005. The sale
proceeds will be applied to repay (in order) the 2003 GE
Liquidity Facility in full, the GECC mortgage-debt financed CRJ
aircraft in full, and a portion of the 2001 GE Credit Facility,
leaving a balance thereon of approximately $15 million,
subject to adjustment, before the $10 million additional
drawdown on the 2001 GE Credit Facility contemplated above. The
operating leases may be extended upon the Debtors'
emergence from bankruptcy, will be cross-defaulted with all
other GE Obligations (other than certain excepted obligations),
and will be subject to return conditions to be agreed upon by
the parties.
The Debtors and the GE entities have reached an agreement with
respect to five engine repair and maintenance agreements, and
certain other matters. This agreement includes, among other
things, the agreement of US Airways to assume three of such
agreements of GEES and certain of its affiliates to:
(i) forgive and release US Airways from certain prepetition
obligations, (ii) defer certain payment obligations arising
under such agreements, (iii) extend one maintenance
agreement, (iv) continue certain existing deferrals, and
(v) determine the treatment of certain removal charges.
Pursuant to the Convertible Note Term Sheet, the Debtors
have agreed that upon emergence from Chapter 11, as partial
consideration for entering into the Master MOU, an affiliate of
GECC will receive convertible notes of the reorganized US
Airways in the aggregate principal amount of $125 million
(Convertible Notes). The Convertible Notes will be convertible
at any time, at the holders' election, into shares of
common stock of the reorganized Company (New Common Stock) at a
conversion price equal to the product of (x) 140%-150% (at
US Airways' option) and (y) the average closing price
of the New Common Stock for the sixty consecutive trading days
following US Airways' emergence from bankruptcy and the
listing of the New Common Stock on NASDAQ or a national stock
exchange. The Convertible Notes will bear interest at a rate to
be determined no later than thirty days prior to the
Debtors' scheduled date of emergence from bankruptcy and
interest will be payable semi-annually, in arrears, and will
mature in 2020. US Airways will be permitted to redeem some or
all of the Convertible Notes at any time on or after the fifth
anniversary of the issuance of such notes, at a redemption price
payable in cash or, subject to certain conditions, New Common
Stock. Holders of the Convertible Notes may require US Airways
to repurchase all or a portion of their Convertible Notes on the
fifth and tenth anniversary of the issuance of such notes at
100% of the principal amount of the Convertible Notes, plus
accrued and unpaid interest to the date of repurchase, payable,
at US Airways election, in cash or New Common Stock. The
Convertible Notes will be senior unsecured obligations and will
rank equally in right of payment with all existing and future
unsecured senior obligations of the reorganized US Airways. The
Convertible Notes will be guaranteed by the parent holding
company of the reorganized US Airways.
Regional Jet Financing
The 2003 Plan sought to boost revenue and enhance
competitiveness through the increased use of regional jets.
Regional jets are faster, quieter and more comfortable than
turboprops and are generally preferred by customers over
turboprops. In May 2003, the Company entered into agreements to
purchase a total of 170 regional jets from Bombardier and
Embraer. The Company had previously secured financing
commitments from GE and from the respective airframe
manufacturers for approximately 85% to 90% of these jets. These
commitments were subject to certain credit or financial tests,
as well as customary conditions precedent.
Despite the Company's failure to meet one of the applicable
credit standards as of May 5, 2004, the Company reached
agreements with GE, Embraer and Bombardier for continued
financing of regional jet deliveries through September 30,
2004. As part of the agreement reached with Bombardier, the
Company converted 23 CRJ-200 deliveries (50-seat regional jets)
to CRJ-700 deliveries (70-seat regional jets) and retained the
right to convert some or all of the CRJ-700 deliveries to
CRJ-900 deliveries (90-seat regional jets). US Airways agreed to
refinance with third parties four aircraft originally financed
by Bombardier. DVB Bank AG provided US Airways with
18 month bridge financing for two aircraft, with the
objective of
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arranging long-term market financing for these aircraft upon
successful implementation of the Company's Transformation
Plan.
GE's financing commitment with respect to regional jets
through September 30, 2004 was also conditioned on US
Airways gaining permission under its ATSB Loan to use its
regional jets mortgage financed by GE as cross-collateral for
other obligations of US Airways to GE. On May 21, 2004, the
Company amended the ATSB Loan to allow this
cross-collateralization. At the same time GE waived the
application of the credit rating condition precedent for
regional jet financing through September 30, 2004, thus
securing the continued financing support from GE through
September 2004.
As a result of the September 12, 2004 Chapter 11
filing, the Company failed to meet the conditions precedent for
continued financing of regional jets and temporarily ceased
taking delivery of new regional jet aircraft. As a result, the
Company incurred aircraft order cancellation penalties of
$7 million in the fourth quarter of 2004. These penalties
were offset against purchase deposits held by the aircraft
manufacturers.
Pursuant to the Regional Jet Leasing Term Sheet, GECC or its
affiliates will provide leases for up to 31 regional jet
aircraft. The aircraft to be leased will consist of 70- to
100-seat regional jet aircraft manufactured by Bombardier and/or
Embraer in a mix and subject to such other terms to be agreed
mutually by GECC and US Airways. During the first quarter of
2005, GECC will lease six CRJ-700s to US Airways with terms
expiring on the earlier of the Debtors' emergence from
Chapter 11 and June 30, 2005. These leases may be
extended upon the Debtors' emergence from Chapter 11.
To effectuate the contemplated regional jet leasing, US Airways
and GECC agreed to reinstate that portion of the RJ Lease
Transaction and Debt Financing Agreement, dated as of
December 18, 2003 (RJ Lease Agreement), pursuant to which
GECC has agreed to provide single investor lease transactions
(provided that the obligations under the reinstated RJ Lease
Agreement will not be afforded administrative expense status),
subject to additional terms and conditions.
In December 2004, the Company reached aircraft leasing and
financing agreements with Embraer and Bombardier, which were
approved by the Bankruptcy Court in January 2005. Pursuant to
the agreement reached with Embraer, the Company purchased and
took delivery of three ERJ-170 aircraft in January 2005 and
committed to purchase and take delivery of three additional
ERJ-170 aircraft by March 31, 2005. The purchase of the
three ERJ-170s delivered in January 2005 was financed by Embraer
through a mortgage loan facility and the application of
$17 million of existing purchase deposits held by Embraer.
Additionally, $12 million of purchase deposits held by
Embraer will be used to fund an Embraer loan reserve. Embraer
shall apply the reserve funds in the amounts and on the dates as
and when payments are due under the Embraer loans during the
period from October 1, 2004 through July 31, 2005 in
full satisfaction of the Company's payment obligations with
respect to such Embraer loans during such period. Upon delivery
of the first three ERJ-170s, which occurred in January 2005,
unless the Company assumes the Embraer aircraft purchase
agreement pursuant to Section 365 of the Bankruptcy Code,
no further obligations arise on the part of the Company or
Embraer with respect to the purchase and delivery of any
aircraft, other than those obligations that arise from or are
related to the purchase and delivery of the final three ERJ-170s
in March 2005. Embraer and the Company have agreed to negotiate
a new delivery schedule upon the Company's assumption of
the Embraer aircraft purchase agreement or upon the occurrence
of certain other events.
In the event that the Company fails to take delivery by
March 31, 2005 of the remaining three ERJ-170 aircraft,
damages will accrue on account of the Company's failure to
take delivery of such aircraft from and after April 1, 2005
at the rate of $162,795 per month per aircraft until the
later of (i) 30 days after the Company emerges from
the current Chapter 11 proceedings and
(ii) July 31, 2005, at which time Embraer's
obligation to deliver such aircraft will terminate and its
damages with respect to such undelivered aircraft may be as much
as $10 million (rather than at the rate of
$162,795 per month), with Embraer having the right to apply
any remaining purchase deposits against Embraer's aggregate
damages.
Under the agreement reached with Bombardier, the Company
acquired three new CRJ-700 aircraft in January 2005. The
purchase was financed through the application of
$28 million of existing purchase deposits held by
Bombardier, $2 million in cash and a financed lease
facility with DVB Bank. Additionally, $4 million of
existing purchase deposits held by Bombardier were used to
satisfy existing defaults and cure
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payments. So long as the Company continues to operate under the
protection of Chapter 11 in compliance with the Bankruptcy
Code, no obligations will arise on the part of the Company or
Bombardier with respect to the purchase and delivery of any
aircraft.
As of December 31, 2004, the aircraft manufacturers held
purchase deposits of $138 million related to the
acquisition of aircraft.
Other
US Airways relies heavily on credit card processing for its
sales, and utilizes credit card issuers and third-party service
providers to process credit card transactions under agreements
which require the Company to provide cash collateral and to
comply with certain other financial and nonfinancial
requirements. If US Airways fails to meet any such
conditions, these issuers and providers can require additional
cash collateral and, under certain circumstances, terminate such
credit card processing agreements. The termination of credit
card agreements would have a material adverse affect on US
Airways' financial condition and results of operations.
During the second quarter of 2004, US Airways amended its
agreement with American Express Travel Related Services Company,
Inc. (American Express). The new agreement has been extended to
December 31, 2006 and provides for additional cash
collateral to reduce the exposure borne by American Express
against potential customer liabilities relating to unflown
tickets purchased by customers using the American Express card.
The agreement required additional cash collateral in the event
that US Airways' regional jet financing programs were
terminated or if the Company failed to demonstrate by
September 30, 2004 its ability to successfully implement
its Transformation Plan. This amendment effectively aligned the
American Express agreement with the arrangements in place for
certain other credit card processors. As the result of the
Company's financial position and various triggers in the
American Express agreement, the Company deposited an additional
$64 million in cash collateral during the third quarter of
2004.
Statements of Cash Flow Discussion
As discussed in "Results of Operations" above, the
Successor Company's financial statements are not comparable
with the Predecessor Company's financial statements.
However, for purposes of discussion of liquidity and capital
resources, 2004 has been compared to the full year 2003 as
included, in part, in the Company's Statements of Cash
Flows.
For 2004, the Company's operating activities before
reorganization items used net cash of $89 million, compared
to 2003, which used net cash of $77 million. Included in
2003 cash flows from operating activities is $218 million
received from TSA in connection with the Emergency Wartime Act.
Cash flows from operating activities for 2004 were favorably
impacted by an increase in accounts payable and other accrued
expenses as a result of the Chapter 11 filing in September
2004, as the Company received liquidity protection under the
automatic stay provisions of the Bankruptcy Code related to
prepetition liabilities. Cash flows from operating activities
were also favorably impacted for this reason during the Prior
Bankruptcy for the period from August 2002 to March 2003. Cash
flows for all periods have been adversely affected by the same
factors that adversely affected financial results, as discussed
in "Results of Operations," including reductions in
unit revenue and significant increases in fuel prices.
For 2004, net cash provided by investing activities was
$83 million. Investing activities include a
$358 million decrease in short term investments, reflecting
a shift to cash and cash equivalents, and an increase in
restricted cash of $76 million. The increase in restricted
cash in 2004 and 2003 reflects the additional cash collateral
deposits required by the Company's credit card processors,
letters of credit and trust accounts described below, partially
offset by the decline in cash collateral required for fuel
hedging. Capital expenditures and net equipment purchase deposit
activity in 2004 of $217 million reflect the early return
of aircraft purchase deposits by an aircraft manufacturer of
$31 million in the first quarter of 2004.
For 2003, net cash used for investing activities was
$511 million. Investing activities included cash outflows
of $215 million related to capital expenditures, including
$174 million for purchase deposits on
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future regional jet aircraft deliveries and payments made in
connection with the delivery of two regional jets with the
balance related to rotables, ground equipment and
miscellaneous assets. The increase in short-term investments in
2003 reflects activity intended to increase the returns on the
Company's higher cash balances. Other investing activity in
2003 also reflects $24 million in proceeds received related
to the sale of the Company's investment in Hotwire, Inc.
For 2002, net cash provided by investing activities was
$22 million. Investing activities included cash outflows of
$146 million related to capital expenditures. Capital
expenditures included $106 million for three A321 aircraft
(two other A321s were purchased in noncash transactions) with
the balance related to rotables, ground equipment and
miscellaneous assets. Proceeds from disposition of property
includes, among other things, proceeds related to surplus
aircraft and related parts. During the first quarter of 2002, US
Airways sold 97 surplus DC-9, B737-200 and MD-80 aircraft. The
increase in short-term investments reflects proceeds from the
sale of short-term investments.
The Company, in the ordinary course of business, withholds from
employees and collects from passengers funds that are required
to be paid to applicable governmental authorities, which funds
include withholding for payroll taxes, transportation excise
taxes, passenger facility charges, transportation security
charges and other related fees. During the second quarter of
2002, the Company established trusts to fund these obligations.
The initial funding (which totaled approximately
$201 million) and the net cash flows of the trusts are
reflected in Decrease (increase) in restricted cash on the
Company's Consolidated Statements of Cash Flows. The funds
in the trust accounts, which totaled $138 million and
$164 million as of December 31, 2004 and 2003,
respectively, are classified as Restricted cash on the
Company's Consolidated Balance Sheets, including
$99 million and $124 million in current Restricted
cash and $39 million and $39 million in noncurrent
Restricted cash, respectively.
The Company used $185 million in cash for financing
activities in 2004. Principal payments on debt and capital lease
obligations of $425 million include $255 million of
prepayments made in connection with amendments to the ATSB Loan
in March and May 2004. The financing activities in 2003 were
significantly impacted by the Company's emergence from the
Prior Bankruptcy in March 2003.
Net cash provided by financing activities during 2003 was
$1.02 billion. US Airways received proceeds of
$1 billion from the ATSB Loan. Additionally, prior to
emergence from Chapter 11 the Company borrowed
$69 million under a debtor-in-possession facility provided
by RSA (RSA DIP Facility) and $62 million under a
debtor-in-possession liquidity facility provided by General
Electric (GE DIP Facility). The Company borrowed
$114 million under an exit liquidity facility provided by
GE and $20 million under a credit facility provided by GE.
The Company also received proceeds of $240 million in
connection with the RSA Investment Agreement and
$34 million related to a private placement offering (see
below). The Company used a portion of the proceeds it received
in connection with its emergence from Chapter 11 to repay
$369 million that was then outstanding under the RSA DIP
Facility (including the $69 million discussed above) on
March 31, 2003. The Company also used a portion of the
proceeds to repay the $62 million then outstanding under
the GE DIP Facility. The Company also made principal payments of
debt of $85 million, including a $24 million required
prepayment on the ATSB Loan related to the sale of its
investment in Hotwire, Inc.
Net cash provided by financing activities during 2002 was
$334 million. US Airways received proceeds of
$116 million from the mortgage financing of three A321
aircraft (two other A321s were financed in noncash
transactions). Additionally, US Airways received proceeds of
$33 million with the private placement of pass through
certificates that partially financed five previously delivered
A330 aircraft and $18 million from an engine manufacturer
credit facility. The Company also borrowed $300 million
under the RSA DIP Facility and $75 million under a senior
secured debtor-in-possession financing facility provided by
Credit Suisse First Boston, Cayman Islands Branch, and Bank of
America, N.A., with participation from the Texas Pacific Group
(Original DIP facility). The Company used a portion of the RSA
DIP Facility funds to repay the full $75 million that was
then outstanding under the Original DIP Facility. Prior to the
2002 bankruptcy filing, the Company made scheduled principal
repayments of debt in the amount of $77 million. Subsequent
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to the 2002 bankruptcy filing, the Company made principal
repayments of debt of $56 million, including
$38 million to the engine manufacturer credit facility.
The Company sold 4,679,000 shares of its Class A
Common Stock at a price of $7.34 per share before
transaction fees during August 2003 in a private placement
transaction with Aviation Acquisition L.L.C., Goldman, Sachs and
Co. and OCM Principal Opportunities Fund II, L.P. These
shares related to Class A Common Stock retained by US
Airways Group from those shares allocated to employees pursuant
to the 2003 Plan and vested at July 31, 2003. The retained
shares represented the employee tax withholding obligation with
respect to the vested portion of the restricted stock grants.
The amount of withholding was determined on the basis of a price
of $7.34 per Class A common share and applicable
federal, state, and local taxes. The net proceeds received by
the Company were $34 million related to this transaction
and offset the Company's remittance to taxing authorities.
Contractual Obligations
The following table provides detail of the Company's future
cash contractual obligations as of December 31, 2004,
including classification of the ATSB Loan as current and without
regard to liabilities subject to compromise (dollars in
millions).
Payments Due by Period
2005
2006
2007
2008
2009
Thereafter
Total
Debt and capital lease obligations(1)
$
863
$
159
$
145
$
143
$
147
$
1,868
$
3,325
Operating lease commitments(2)
878
774
707
629
554
4,169
7,711
Aircraft purchase commitments(3)(4)
221
15
57
622
792
232
1,939
Regional jet capacity purchase agreements
257
262
268
266
202
266
1,521
Total
$
2,219
$
1,210
$
1,177
$
1,660
$
1,695
$
6,535
$
14,496
(1)
Excludes related interest amounts.
(2)
Includes aircraft obligations financed under enhanced equipment
    trust certificates.
(3)
As long as the Company operates under the protection of
    Chapter 11 in compliance with the Bankruptcy Code and
    unless the Company assumes the aircraft purchase agreements
    pursuant to Section 365 of the Bankruptcy Code, neither the
    Company nor the aircraft manufacturers have any obligation in
    respect to the purchase or delivery of regional jet aircraft
    beyond the commitments for deliveries in the first quarter of
    2005 discussed below.
(4)
The minimum determinable payments associated with these
    acquisition agreements for all firm-order aircraft include
    progress payments, payments at delivery, spares, capitalized
    interest and nonrefundable deposits.
As of December 31, 2004, US Airways Group had 19
A320-family aircraft on firm order scheduled for delivery in the
years 2007 through 2009. US Airways Group also had ten A330-200
aircraft on firm order scheduled for delivery in the years 2007
through 2009. On February 3, 2005, the Bankruptcy Court
approved the Company's agreement with Airbus providing for,
among other things, delivery of the 19 A320-family aircraft in
years 2008 through 2010, and delivery of the ten A330-200
aircraft in years 2008 through 2009.
The Company acquired three new Embraer ERJ-170 aircraft in
January 2005 and has firm orders for three additional ERJ-170
aircraft scheduled to be delivered by March 31, 2005. The
Company also acquired three new CRJ-700 aircraft in January 2005.
As a result of regional jet aircraft acquisitions, the Company
believes it is probable that it will not take delivery of
certain previously ordered narrow-body aircraft and recorded an
accrual of $35 million for related penalties during the
three months ended June 30, 2003. In the event that the
Company fails to take delivery by March 31, 2005 of the
remaining three ERJ-170 aircraft, damages will accrue on account
of the Company's failure to take delivery of such aircraft
from and after April 1, 2005 at the rate of
$162,795 per month per aircraft until the later of
(i) 30 days after the Company emerges from the current
Chapter 11 proceedings and (ii) July 31, 2005, at
which time Embraer's obligation to deliver such aircraft
will terminate and its damages with respect to such undelivered
aircraft may be as much as $10 million rather than at the
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rate of $162,795 per month), with Embraer having the right
to apply any remaining purchase deposits against Embraer's
aggregate damages.
Off-Balance Sheet Arrangements
An off-balance sheet arrangement is any transaction, agreement
or other contractual arrangement involving an unconsolidated
entity under which a company has (1) made guarantees,
(2) a retained or a contingent interest in transferred
assets, (3) an obligation under derivative instruments
classified as equity or (4) any obligation arising out of a
material variable interest in an unconsolidated entity that
provides financing, liquidity, market risk or credit risk
support to the company, or that engages in leasing, hedging or
research and development arrangements with the company.
The Company has no off-balance sheet arrangements of the types
described in the first three categories that it believes may
have a material current or future effect on its financial
condition, liquidity or results of operations. Certain
guarantees that the Company does not expect to have a material
current or future effect on its financial condition, liquidity
or results of operations are disclosed in Note 7(e) to the
Financial Statements included in Item 8 of this report.
The Company does have obligations arising out of variable
interests in unconsolidated entities. In 2003, the Company
adopted Financial Accounting Standards Board Interpretation
No. 46, "Consolidation of Variable Interest
Entities" (FIN 46) which addresses the accounting for
these variable interests. An entity is subject to FIN 46
and is called a variable interest entity (VIE) if it has
(1) equity that is insufficient to permit the entity to
finance its activities without additional subordinated financial
support from other parties, or (2) equity investors that
cannot make significant decisions about the entity's
operations, or that do not absorb the expected losses or receive
the expected returns of the entity. A VIE is consolidated by its
primary beneficiary, which is the party involved with the VIE
that has a majority of the expected losses or a majority of the
expected residual returns or both, as a result of ownership,
contractual or other financial interests in the VIE. The
adoption of FIN 46 did not materially affect the
Company's financial statements. In reaching this
conclusion, the Company identified certain lease arrangements
that were within the scope of FIN 46. This included a
review of 62 aircraft operating leases for which the Company was
the lessee and a pass through trust established specifically to
purchase, finance and lease the aircraft to the Company served
as lessor. These trusts, which issue certificates (also known as
Enhanced Equipment Trust Certificates or EETC), allow the
Company to raise the financing for several aircraft at one time
and place such funds in escrow pending the purchase or delivery
of the relevant aircraft. The trusts are also structured to
provide for certain credit enhancements, such as liquidity
facilities to cover certain interest payments, that reduce the
risks to the purchasers of the trust certificates and, as a
result, reduce the cost of aircraft financing to the Company.
Each of these leases contains a fixed-price purchase option that
allows the Company to purchase the aircraft at predetermined
prices on specified dates during the latter part of the lease
term. However, the Company does not guarantee the residual value
of the aircraft, and the Company does not believe it is the
primary beneficiary under these lease arrangements based upon
its cash flow analysis.
The Company also reviewed long-term operating leases at a number
of airports, including leases where the Company is also the
guarantor of the underlying debt. Such leases are typically with
municipalities or other governmental entities. FIN 46, as
revised in December 2003, provided a scope exception that
generally precludes the consolidation of governmental
organizations or financing entities established by a
governmental organization. The Company believes that its
arrangements meet the scope exception.
Critical Accounting Policies
The Company's discussion and analysis of its financial
condition and results of operations are based upon the
Company's Financial Statements, which have been prepared in
conformity with accounting principles generally accepted in the
United States of America. The preparation of these financial
statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the
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reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Critical accounting policies are defined as those that are
reflective of significant judgments and uncertainties and
potentially result in materially different results under
different assumptions and conditions. The Company has identified
the following critical accounting policies that impact the
preparation of its financial statements. See also Note 2,
Summary of Significant Accounting Policies, for additional
discussion of the application of these estimates and other
accounting policies.
Impairment of Goodwill
Effective January 1, 2002 the Company adopted the
provisions of Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets"
(SFAS 142). SFAS 142 requires management to make
judgments about the fair value of the reporting unit to
determine whether goodwill is impaired. The reporting unit is US
Airways Group. The Company believes that this accounting
estimate is a "critical accounting estimate" because:
(1) goodwill is a significant asset and (2) the impact
that recognizing an impairment would have on the assets reported
on the Consolidated Balance Sheet, as well as the Consolidated
Statement of Operations, could be material. Goodwill is tested
annually for impairment or more frequently if events or changes
in circumstances indicate that it might be impaired. The Company
assesses the fair value of the reporting unit considering both
the income approach and market approach. Under the market
approach, the fair value of the reporting unit is based on
quoted market prices and the number of shares outstanding for US
Airways Group common stock. Under the income approach, the fair
value of the reporting unit is based on the present value of
estimated future cash flows. The income approach is dependent on
a number of factors including estimates of future market growth
trends, forecasted revenues and expenses, expected periods the
assets will be utilized, appropriate discount rates and other
variables. The Company bases its estimates on assumptions that
it believes to be reasonable, but which are unpredictable and
inherently uncertain. Actual future results may differ from
those estimates. The Company concluded that the fair value of
the reporting unit was in excess of the carrying value and
therefore not impaired during 2004. Cash flow projections for
the Company's 2004 test were prepared on a going-concern
basis. Additionally, in the third and fourth quarters of 2004,
the carrying value of the Company's net assets was less
than zero. See Note 2(g) to the Financial Statements for
details regarding past goodwill impairment tests.
Impairment of Long-Lived Assets and Intangible Assets
The Company assesses the impairment of long-lived assets and
intangible assets whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Factors
which could trigger an impairment review include the following:
significant changes in the manner of use of the assets;
significant underperformance relative to historical or projected
future operating results; or significant negative industry or
economic trends. The Company determines that an impairment has
occurred when the future undiscounted cash flows estimated to be
generated by those assets are less than the carrying amount of
those items. Cash flow estimates are based on historical results
adjusted to reflect the Company's best estimate of future
market and operating conditions. The net carrying value of
assets not recoverable is reduced to fair value. Estimates of
fair value represent the Company's best estimate based on
appraisals, industry trends and reference to market rates and
transactions. Changes in industry capacity and demand for air
transportation can significantly impact the fair value of
aircraft and related assets. The Company recorded an aircraft
impairment charge of $392 million in 2002. See
"Description of Unusual Items" above for details
regarding this impairment charge.
Passenger Revenue Recognition
The Company recognizes passenger transportation revenue and
related commission expense when transportation is rendered.
Passenger ticket sales collected prior to the transportation
taking place are reflected in Traffic balances payable and
unused tickets on the Balance Sheet. Due to various factors
including refunds, exchanges, unused tickets and transactions
involving other carriers, certain amounts are recorded based on
estimates. These estimates are based upon historical experience
and have been consistently applied to record
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revenue. The Company routinely performs evaluations of the
liability that may result in adjustments which are recognized as
a component of Passenger transportation revenue. Actual refund,
exchange and expiration activity may vary from estimated
amounts. The Company has experienced changes in customer travel
patterns resulting from various factors, including new airport
security measures, concerns about further terrorist attacks and
an uncertain economy, resulting in more forfeited tickets and
fewer refunds. Therefore, during the fourth quarter of 2003, a
$34 million favorable adjustment was made to Passenger
transportation revenue to reflect an increase in expired tickets.
Frequent Traveler Program
US Airways' Dividend Miles frequent traveler program
awards miles to passengers who fly on US Airways,
US Airways Express, Star Alliance carriers and certain
other airlines that participate in the program. US Airways
also sells mileage credits to participating airline partners and
non-airline business partners. The Company has an obligation to
provide this future travel and has therefore recognized an
expense and recorded a liability for mileage awards to
passengers redeeming on US Airways or an airline partner.
Outstanding miles may be redeemed for travel on any airline that
participates in the program, in which case US Airways pays
a designated amount to the transporting carrier.
Members may not reach the threshold necessary for a free ticket
and outstanding miles may not be redeemed for free travel.
Therefore, the Company estimates how many miles will never be
used for an award and excludes those miles from the estimate of
the liability. A portion of the mileage credits of Dividend
Miles participants who have excessive balances are also excluded
from the liability. Estimates are also made for the number of
miles that will be used per award and the number of awards that
will be redeemed on partner airlines. These estimates are based
upon past customer behavior. Estimated future travel awards for
travel on US Airways are valued at the estimated average
incremental cost of carrying one additional passenger.
Incremental costs include unit costs for passenger food,
beverages and supplies, credit card fees, fuel, communications,
insurance and denied boarding compensation. No profit or
overhead margin is included in the accrual for incremental
costs. For travel awards on partner airlines, the liability is
based upon the gross payment to be paid to the other airline for
redemption on the other airline. A change to these costs
estimates, actual redemption activity or award redemption level
could have a significant impact on the liability in the year of
change as well as future years. Incremental changes in the
liability resulting from participants earning or redeeming
mileage credits or changes in assumptions used for the related
calculations are recorded as part of the regular review process.
As of December 31, 2004 and 2003, Dividend Miles
participants had accumulated mileage credits for approximately
4.0 million and 6.3 million awards, respectively. The
reduction in estimated awards from 2003 to 2004 is a result of
changes in the program and related assumptions, including the
increase in redemptions on partner airlines. Because
US Airways expects that some potential awards will never be
redeemed, the calculation of the frequent traveler liability is
based on approximately 80% of potential awards. The liability
for the future travel awards was $73 million and
$85 million as of December 31, 2004 and 2003,
respectively.
The number of awards redeemed for free travel during the years
ending December 31, 2004, 2003 and 2002 was approximately
1.5 million, 1.2 million and 1.3 million,
respectively, representing approximately 8% of
US Airways' RPMs in each of those years. These low
percentages as well as the use of certain inventory management
techniques minimize the displacement of revenue passengers by
passengers traveling on Dividend Miles award tickets. In
addition to the awards issued for travel on US Airways,
approximately 20% of the total awards redeemed in 2004 were for
travel on partner airlines.
US Airways defers a portion of the revenue from the sale of
mileage credits to participating airline and non-airline
partners. The deferred revenue is recognized over the period in
which the credits are expected to be redeemed for travel. A
change to either the period over which the credits are used or
the estimated fair value of credits sold could have a
significant impact on revenue in the year of change as well as
future years.
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Pensions and Other Postretirement Benefits
The Company accounts for its defined benefit pension plans using
Statement of Financial Accounting Standards No. 87,
"Employer's Accounting for Pensions"
(SFAS 87) and its other postretirement benefit plans using
Statement of Financial Accounting Standards No. 106,
"Employer's Accounting for Postretirement Benefits
Other than Pensions" (SFAS 106). Under both
SFAS 87 and SFAS 106, expense is recognized on an
accrual basis over employees' approximate service periods.
Expenses calculated under SFAS 87 and SFAS 106 are
generally independent of funding decisions or requirements.
Exclusive of fresh-start charges, curtailment and settlement
items, the Company recognized defined benefit pension plan
expense of $66 million, $52 million, $50 million,
and $326 million for the year ended December 31, 2004,
the nine months ended December 31, 2003, the three months
ended March 31, 2003 and the year ended December 31,
2002, respectively, and other postretirement benefit expense of
$105 million, $96 million, $36 million, and
$145 million for the year ended December 31, 2004, the
nine months ended December 31, 2003, the three months ended
March 31, 2003 and the year ended December 31, 2002,
respectively.
On November 12, 2004, US Airways filed a motion
requesting a determination from the Bankruptcy Court that
US Airways satisfied the financial requirements for a
"distress termination" of the three mainline defined
benefit plans under section 4041(c)(2)(B)(ii)(IV) of ERISA,
and approval of each such plan's termination. These plans
were projected to have benefit obligations and plan assets
aggregating $2.7 billion and $1.7 billion,
respectively, as of September 30, 2004, the most recent
valuation date. On January 6, 2005, the Bankruptcy Court
entered an order (i) finding that the financial
requirements under section 4041(c)(2)(B)(ii)(IV) of ERISA
for a distress termination of the plans had been met and
(ii) approving termination of the plans. The AFA Plan and
the IAM Plan were terminated effective January 10, 2005, by
agreement between the PBGC and US Airways. The CE Plan was
terminated effective January 17, 2005, by agreement between
the PBGC and US Airways. Effective February 1, 2005,
the PBGC was appointed trustee for each of the three plans.
During hearings in late 2004 and January 2005, the Bankruptcy
Court approved various settlement agreements between
US Airways and its unions, and between the Company and the
court-appointed Section 1114 Committee (representing
retirees other than those represented by the IAM) to begin the
significant curtailments of the Company's other
postretirement benefits. The Company's unfunded obligations
for these benefits aggregated $1.4 billion as of
September 30, 2004, the most recent valuation date.
Fresh-start Reporting
In accordance with SOP 90-7, the Company adopted
fresh-start reporting upon emergence from the Prior Bankruptcy.
Accordingly, the Company valued its assets, liabilities and
equity at fair value. The excess of the reorganization value
over tangible assets and identifiable intangible assets has been
reflected as Goodwill on the Balance Sheet. Estimates of fair
value represent the Company's best estimate based on
independent appraisals and valuations and, where the foregoing
are not available, industry trends and by reference to market
rates and transactions. The Company's fresh-start equity
value of $438 million at March 31, 2003 was determined
with the assistance of financial advisors. The estimates and
assumptions are inherently subject to significant uncertainties
and contingencies beyond the control of the Company.
Accordingly, there can be no assurance that the estimates,
assumptions, and values reflected in the valuations will be
realized, and actual results could vary materially. See
Note 13 to the Financial Statements for further detail
related to the fresh-start fair value adjustments.
Recent Accounting and Reporting Developments
In September 2004, the Financial Accounting Standards Board
(FASB) issued FASB Staff Position (FSP) Emerging
Issues Task Force (EITF) Issue 03-1-1, Effective Date
of Paragraphs 10–20 of EITF Issue No. 03-1,
"The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments," which delays the
effective date for the recognition and measurement guidance in
EITF Issue No. 03-1. In addition, the FASB has issued a
proposed FSP to consider whether further application guidance is
necessary for securities analyzed for impairment under EITF
Issue No. 03-1. The Company continues to assess the
potential impact that the adoption of the proposed FSP could
have on its financial statements.
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In November 2004, the FASB issued Statement of Financial
Accounting Standards (SFAS) No. 151, "Inventory
Costs" (SFAS 151), which clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling
costs, and wasted material. SFAS 151 will be effective for
inventory costs incurred beginning January 1, 2006. The
Company does not believe the adoption of SFAS 151 will have
a material impact on its financial statements.
In December 2004, the FASB issued SFAS No. 153,
"Exchanges of Nonmonetary Assets" (SFAS 153),
which eliminates the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general
exception for exchanges of nonmonetary assets that do not have
commercial substance. SFAS 153 will be effective for
nonmonetary asset exchanges occurring after July 1, 2005.
The Company is currently evaluating the impact of SFAS 153
on its financial statements.
In December 2004, the FASB issued SFAS No. 123(R),
"Share-Based Payment" (SFAS 123(R)), which
establishes standards for transactions in which an entity
exchanges its equity instruments for goods or services. This
standard requires a public entity to measure the cost of
employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award.
This eliminates the exception to account for such awards using
the intrinsic method previously allowable under Accounting
Principle Board Opinion No. 25. SFAS 123(R) will be
effective for the Company's interim reporting period
beginning July 1, 2005. The Company previously adopted the
fair value recognition provisions of SFAS 123,
"Accounting for Stock-Based Compensation," upon
emergence from the Prior Bankruptcy on March 31, 2003.
Accordingly, the Company believes SFAS 123(R) will not have
a material impact on its financial statements.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
The Company's primary market risk exposures include
commodity price risk (i.e., the price paid to obtain aviation
fuel), interest rate risk and equity price risk. The potential
impact of adverse increases in the aforementioned risks and
general strategies employed by the Company to manage such risks
are discussed below. The risks identified below are consistent
from year to year.
The following sensitivity analyses do not consider the effects
that an adverse change may have on the overall economy nor do
they consider additional actions the Company may take to
mitigate its exposure to such changes. Actual results of changes
in prices or rates may differ materially from the following
hypothetical results.
Commodity Price Risk
Aviation fuel is typically the Company's second largest
expense. Prices and availability of all petroleum products are
subject to political, economic and market factors that are
generally outside of the Company's control. Accordingly,
the price and availability of aviation fuel, as well as other
petroleum products, can be unpredictable. Prices may be affected
by many factors, including: the impact of political instability
on crude production, especially in Russia and OPEC countries;
unexpected changes to the availability of petroleum products due
to disruptions in distribution systems or refineries;
unpredicted increases to oil demand due to weather or the pace
of economic growth; inventory levels of crude, refined products
and natural gas; and other factors, such as the relative
fluctuation between the U.S. dollar and other major
currencies and influence of speculative positions on the futures
exchanges. Because the operations of the Company's airline
subsidiaries are dependent upon aviation fuel, increases in
aviation fuel costs could materially and adversely affect the
Company's liquidity, results of operations and financial
condition.
The Company utilizes financial derivatives, including fixed
price swap agreements, collar structures and other similar
instruments, to manage some of the risk associated with changes
in aviation fuel prices. As of December 31, 2004, the
Company had no open fuel hedge positions in place, but will
recognize approximately $2 million per month for previously
liquidated hedges representing approximately 4% of its 2005
anticipated jet fuel requirements. The Company had
$22 million of unrealized gains related to fuel
43
Table of Contents
hedge positions recorded in Accumulated other comprehensive
loss, net of income tax effect on its Consolidated Balance Sheet
as of December 31, 2004.
Interest Rate Risk
Exposure to interest rate risk relates primarily to the
Company's cash equivalents and short-term investments
portfolios and debt obligations. As of December 31, 2004
and 2003, the Company had $1.63 billion and
$1.53 billion of variable-rate debt outstanding,
respectively. Assuming a hypothetical 10% increase in average
interest rates during 2005 as compared to 2004, interest expense
would increase by $8 million. Additional information
regarding the Company's debt obligations as of
December 31, 2004 is as follows (dollars in millions):
Expected Maturity Date
2005
2006
2007
2008
2009
Thereafter
Total
Fixed-rate debt
$
66
$
80
$
86
$
83
$
87
$
1,296
$
1,698
Weighted avg. interest rate
7.1
%
7.2
%
7.2
%
7.3
%
7.3
%
6.6
%
Variable-rate debt
$
797
$
79
$
59
$
60
$
60
$
572
$
1,627
Weighted avg. interest rate
9.8
%
5.4
%
5.2
%
5.2
%
5.2
%
4.5
%
As a result of the Company's Chapter 11 filing, the
fair value of the debt outstanding could not be reasonably
determined as of December 31, 2004.
As noted in "Contractual Obligations" above, US
Airways Group has future aircraft purchase commitments of
$1.93 billion. It expects to lease or mortgage a majority
of those commitments. Changes in interest rates will impact the
cost of such financings.
Equity Price Risk
US Airways holds Sabre Holdings Corporation (Sabre) stock
options that have a fair value and carrying value of
$10 million as of December 31, 2004. Fair value is
computed using the Black-Scholes stock option pricing model. A
hypothetical ten percent decrease in the December 31, 2004
value of the Sabre stock price would decrease the fair value of
the stock options by $2 million. See Note 3(b) to the
Company's Notes to Consolidated Financial Statements for
information related to the fair value of these options.
44
Table of Contents
Item 8. Consolidated Financial Statements of US
Airways Group
Management's Annual Report on Internal Control over
    Financial Reporting
Management of US Airways Group, Inc. (the Company) is
responsible for establishing and maintaining adequate internal
control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange
Act of 1934, as amended. The Company's internal control
over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. The
Company's internal control over financial reporting
includes those policies and procedures that:
•
pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of the assets of the Company;
•
provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the Company are being made
    only in accordance with authorizations of management and
    directors of the Company; and
•
provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    Company's assets that could have a material effect on the
    financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company's
internal control over financial reporting as of
December 31, 2004. In making this assessment, management
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework.
Based on our assessment and those criteria, management believes
that the Company maintained effective internal control over
financial reporting as of December 31, 2004.
The Company's independent registered public accounting firm
has issued an attestation report on management's assessment
of the Company's internal control over financial reporting.
That report has been included herein.
45
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
US Airways Group, Inc.:
We have audited management's assessment, included in the
accompanying Management's Annual Report on Internal Control
over Financial Reporting that US Airways Group, Inc. and
subsidiaries (the Company) maintained effective internal control
over financial reporting as of December 31, 2004, based on
criteria established in
Internal Control —
Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Company's management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting. Our responsibility is to express an opinion
on management's assessment and an opinion on the
effectiveness of the Company's internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
management's assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company's
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, management's assessment that the Company
maintained effective internal control over financial reporting
as of December 31, 2004, is fairly stated, in all material
respects, based on criteria established in
Internal
Control — Integrated Framework
issued by COSO.
Also, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2004, based on criteria established in
Internal Control — Integrated Framework
issued
by COSO.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of US Airways Group, Inc. and
subsidiaries as of December 31, 2004 and 2003, and the
related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the
year ended December 31, 2004 and the nine months ended
December 31, 2003 for the Successor Company and the three
months ended March 31, 2003 and the year ended
December 31, 2002 for the Predecessor Company and our
report dated February 25, 2005 expressed an unqualified
opinion on those financial statements. Our report included an
explanatory paragraph that states that the Company's
significant recurring losses, accumulated deficit and voluntary
petition seeking to reorganize under Chapter 11 of the
federal bankruptcy laws raise substantial doubt about its
ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
KPMG LLP
McLean, Virginia
February 25, 2005
46
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
US Airways Group, Inc.:
We have audited the accompanying consolidated balance sheets of
US Airways Group, Inc. and subsidiaries as of December 31,
2004 and 2003, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash
flows for the year ended December 31, 2004 and the nine
months ended December 31, 2003 for the Successor Company
and the three months ended March 31, 2003 and the year
ended December 31, 2002 for the Predecessor Company. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of US Airways Group, Inc. and subsidiaries as of
December 31, 2004 and 2003, and the results of their
operations and their cash flows for the year ended
December 31, 2004 and nine months ended December 31,
2003 for the Successor Company and the three months ended
March 31, 2003 and the year ended December 31, 2002
for the Predecessor Company, in conformity with
U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. The Company has incurred significant recurring losses
from operations, has an accumulated deficit and as discussed in
Note 1 to the consolidated financial statements, filed a
voluntary petition seeking to reorganize under Chapter 11
of the federal bankruptcy laws which raise substantial doubt
about its ability to continue as a going concern. Although the
Company is currently operating as a debtor-in-possession under
the jurisdiction of the Bankruptcy Court, the continuation of
the business as a going concern is contingent upon, among other
things: (1) the ability to maintain compliance with all
terms of its ATSB Loan; (2) the ability of the Company to
successfully achieve required cost savings to complete its
restructuring; (3) the ability of the Company to generate
cash from operations and to maintain adequate cash on hand;
(4) the resolution of the uncertainty as to the amount of
claims that will be allowed and as to a number of disputed
claims which are materially in excess of amounts reflected in
the accompanying consolidated financial statements; (5) the
ability of the Company to confirm a plan of reorganization under
the Bankruptcy Code and obtain the required debt and equity
financing to emerge from bankruptcy protection; and (6) the
Company's ability to achieve profitability.
Management's plans in regard to these matters are also
described in Note 1. The accompanying consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
47
Table of Contents
As discussed in Note 2(b) to the consolidated financial
statements, on March 18, 2003, the Bankruptcy Court
confirmed the Company's Plan of Reorganization (the 2003
Plan) related to its prior Chapter 11 proceeding. The 2003
Plan became effective on March 31, 2003 and the Company
emerged from the prior Chapter 11 proceeding. In connection
with its emergence from the prior Chapter 11 proceeding,
the Company adopted fresh-start reporting pursuant to Statement
of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" as of
March 31, 2003. As a result, the consolidated financial
statements of the Successor Company are presented on a different
basis than those of the Predecessor Company and, therefore, are
not comparable in all respects. As discussed in Notes 2(m)
and 9 to the consolidated financial statements, effective
April 1, 2003, the Company changed its method of accounting
for stock-based compensation as described by Statement of
Financial Accounting Standards No. 148, "Accounting
for Stock-Based Compensation — Transition and
Disclosure." As discussed in Note 2(n) to the
consolidated financial statements, effective January 1,
2002 the Company changed its method of accounting for engine
maintenance at PSA Airlines, Inc. a wholly owned subsidiary of
the Company.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Company's internal control over
financial reporting as of December 31, 2004, based on
criteria established in "Internal Control-Integrated
Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report
dated February 25, 2005 expressed an unqualified opinion on
management's assessment of, and the effective operation of,
internal control over financial reporting.
KPMG LLP
McLean, Virginia
February 25, 2005
48
Table of Contents
US Airways Group, Inc.
(Debtor-in-Possession)
Consolidated Statements of Operations
Successor Company
Predecessor Company
Year Ended
Nine Months Ended
Three Months Ended
Year Ended
December 31, 2004
December 31, 2003
March 31, 2003
December 31, 2002
(dollars in millions, except share and per share amounts)
Operating Revenues
Passenger transportation
$
6,345
$
4,775
$
1,358
$
6,282
Cargo and freight
132
97
35
141
Other
640
440
141
554
Total Operating Revenues
7,117
5,312
1,534
6,977
Operating Expenses
Personnel costs
2,439
2,040
622
3,255
Aviation fuel
1,099
617
213
782
US Airways Express capacity purchases
801
515
130
482
Aircraft rent
449
322
109
525
Other rent and landing fees
419
323
106
429
Selling expenses
394
316
91
442
Aircraft maintenance
361
314
88
405
Depreciation and amortization
248
172
70
309
Special items
—
34
—
320
Government compensation
—
(214
)
—
3
Other
1,285
917
312
1,342
Total Operating Expenses
7,495
5,356
1,741
8,294
Operating Income
(378
)
(44
)
(207
)
(1,317
)
Other Income (Expense)
Interest income
12
15
1
22
Interest expense, net
(242
)
(170
)
(73
)
(315
)
Reorganization items, net
(35
)
—
1,917
(294
)
Other, net
22
36
(3
)
(11
)
Other Income (Expense), Net
(243
)
(119
)
1,842
(598
)
Income (Loss) Before Income Taxes and Cumulative Effect of
    Accounting Change
(621
)
(163
)
1,635
(1,915
)
Income Taxes Provision (Benefit)
(10
)
11
—
(252
)
Income (Loss) Before Cumulative Effect of Accounting Change
(611
)
(174
)
1,635
(1,663
)
Cumulative Effect of Accounting Change
—
—
—
17
Net Income (Loss)
$
(611
)
$
(174
)
$
1,635
$
(1,646
)
Earnings (Loss) per Common Share
Basic
Before Cumulative Effect of Accounting Change
$
(11.19
)
$
(3.25
)
$
24.02
$
(24.45
)
Cumulative Effect of Accounting Change
—
—
—
0.25
Net Earnings (Loss) per Common Share
$
(11.19
)
$
(3.25
)
$
24.02
$
(24.20
)
Diluted
Before Cumulative Effect of Accounting Change
$
(11.19
)
$
(3.25
)
$
24.02
$
(24.45
)
Cumulative Effect of Accounting Change
—
—
—
0.25
Net Earnings (Loss) per Common Share
$
(11.19
)
$
(3.25
)
$
24.02
$
(24.20
)
Shares Used for Computation (000)
Basic
54,597
53,495
68,076
68,040
Diluted
54,597
53,495
68,076
68,040
See accompanying Notes to Consolidated Financial Statements.
49
Table of Contents
US Airways Group, Inc.
(Debtor-in-Possession)
Consolidated Balance Sheets
December 31,
2004
2003
(dollars in millions,
except share and
per share amounts)
ASSETS
Current Assets
Cash and cash equivalents
$
738
$
929
Short-term investments
—
358
Restricted cash
99
151
Receivables, net
252
251
Materials and supplies, net
177
196
Prepaid expenses and other
147
170
Total Current Assets
1,413
2,055
Property and Equipment
Flight equipment
3,176
2,573
Ground property and equipment
372
369
Less accumulated depreciation and amortization
(316
)
(127
)
3,232
2,815
Purchase deposits for flight equipment
138
213
Total Property and Equipment
3,370
3,028
Other Assets
Goodwill
2,490
2,475
Other intangibles, net
532
572
Restricted cash
527
399
Other assets, net
90
26
Total Other Assets
3,639
3,472
$
8,422
$
8,555
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Current maturities of debt
$
721
$
360
Accounts payable
353
376
Traffic balances payable and unused tickets
820
835
Accrued aircraft rent
51
78
Accrued salaries, wages and vacation
162
197
Other accrued expenses
276
707
Total Current Liabilities
2,383
2,553
Noncurrent Liabilities and Deferred Credits
Long-term debt, net of current maturities
—
2,630
Deferred gains and credits, net
44
439
Postretirement benefits other than pensions
2
1,651
Employee benefit liabilities and other
248
1,110
Total Noncurrent Liabilities and Deferred Credits
294
5,830
Liabilities Subject to Compromise
6,179
—
Commitments and Contingencies
Stockholders' Equity (Deficit)
Class A Common Stock, par value $1 per share,
    50,616,000 and 48,979,000 shares outstanding, respectively
51
49
Class B Common Stock, par value $1 per share,
    5,000,000 shares outstanding
5
5
Paid-in capital
410
392
Accumulated deficit
(785
)
(174
)
Common stock held in treasury, at cost
(3
)
(1
)
Deferred compensation
(14
)
(44
)
Accumulated other comprehensive loss
(98
)
(55
)
Total Stockholders' Equity (Deficit)
(434
)
172
$
8,422
$
8,555
See accompanying Notes to Consolidated Financial Statements.
50
Table of Contents
US Airways Group, Inc.
(Debtor-in-Possession)
Consolidated Statements of Cash Flows
Successor Company
Predecessor Company
Nine Months
Three Months
Year Ended
Ended
Ended
Year Ended
December 31,
December 31,
March 31,
December 31,
2004
2003
2003
2002
(in millions)
Cash flows from operating activities
Net income (loss)
$
(611
)
$
(174
)
$
1,635
$
(1,646
)
Adjustments to reconcile net income (loss) to net cash provided
    by (used for) operating activities
Gain on debt discharge
—
—
(3,938
)
—
Fresh start adjustments
(15
)
—
1,107
—
Non-cash impairments and other special items
—
—
809
442
Other reorganization items
35
—
—
—
Depreciation and amortization
248
172
70
309
Gains on dispositions of property
—
—
(4
)
(2
)
Amortization of deferred gains and credits
(63
)
(65
)
(10
)
(48
)
Cumulative effect of accounting change
—
—
—
(17
)
Stock-based compensation
50
125
—
—
Other
7
18
138
160
Changes in certain assets and liabilities
Decrease (increase) in receivables
1
44
(67
)
23
Decrease (increase) in materials and supplies, prepaid expenses
    and other assets
(22
)
(25
)
(6
)
454
Increase (decrease) in traffic balances payable and unused
    tickets
(15
)
(89
)
140
(33
)
Increase (decrease) in accounts payable and accrued expenses
262
47
(95
)
(33
)
Increase in postretirement benefits other than pensions,
    noncurrent
45
62
29
89
Net cash provided by (used for) operating activities before
    reorganization items
(78
)
115
(192
)
(302
)
Reorganization items, net
(11
)
—
(90
)
(62
)
Net cash provided by (used for) operating activities
(89
)
115
(282
)
(364
)
Cash flows from investing activities
Capital expenditures and purchase deposits for flight equipment,
    net
(217
)
(207
)
(8
)
(146
)
Proceeds from dispositions of property
18
18
2
100
Decrease (increase) in short-term investments
358
(289
)
(19
)
430
Decrease (increase) in restricted cash and investments
(76
)
24
(57
)
(370
)
Other
—
32
(7
)
8
Net cash provided by (used for) investing activities
83
(422
)
(89
)
22
Cash flows from financing activities
Proceeds from issuance of debt
240
52
1,081
167
Proceeds from issuance of Debtor-in-Possession financings
—
—
131
375
Proceeds from issuance of preferred stock, common stock and
    warrants
—
—
240
—
Principal payments on long-term debt and capital lease
    obligations
(425
)
(50
)
(35
)
(133
)
Principal payments on Debtor-in-Possession financings
—
—
(431
)
(75
)
Sales of treasury stock
—
34
—
—
Net cash provided by (used for) financing activities
(185
)
36
986
334
Net increase (decrease) in Cash and cash equivalents
(191
)
(271
)
615
(8
)
Cash and Cash equivalents at beginning of period
929
1,200
585
593
Cash and Cash equivalents at end of period
$
738
$
929
$
1,200
$
585
Noncash investing and financing activities
Flight equipment acquired through issuance of debt
$
345
$
30
$
—
$
77
Supplemental Information
Interest paid during the period
$
165
$
130
$
72
$
248
Income taxes refunded (paid) during the period
11
(18
)
2
177
See accompanying Notes to Consolidated Financial Statements.
51
Table of Contents
US Airways Group, Inc.
(Debtor-in-Possession)
Consolidated Statements of Stockholders' Equity
(Deficit)
Three Years Ended December 31, 2004
Accumulated other comprehensive income
(loss), net of income tax effect
Unrealized
gain (loss) on
Unrealized
Adjustment
Class A
Class B
Common
available-for-
gain (loss) on
for minimum
Common
Common
Common
Paid-in
Accumulated
Stock held
Deferred
sale
cash flow
pension
Comprehensive
Stock
Stock
Stock
capital
Deficit
in treasury
compensation
securities
hedges
liability
Total
income (loss)
(dollars in millions, except share amounts)
Predecessor Company:
Balance as of December 31, 2001
$
101
$
—
$
—
$
2,185
$
(2,937
)
$
(1,749
)
$
(62
)
$
2
$
(17
)
$
(138
)
$
(2,615
)
Grant of 753,000 shares of non-vested stock
—
—
—
—
—
5
(5
)
—
—
—
—
Reversion of 242,000 shares of previously-granted
    non-vested stock
—
—
—
—
—
(5
)
5
—
—
—
—
Reissuance of shares held in treasury for less than cost
—
—
—
(38
)
—
38
—
—
—
—
—
Amortization of deferred compensation
—
—
—
—
—
—
7
—
—
—
7
Write off of ESOP deferred compensation
—
—
—
—
—
—
50
—
—
—
50
Unrealized loss on available-for-sale securities, net of
    reclassification adjustment
—
—
—
—
—
—
—
(2
)
—
—
(2
)
$
(2
)
Unrealized gain on fuel cash flow hedges, net of
    reclassification adjustment
—
—
—
—
—
—
—
—
27
—
27
27
Minimum pension liability change
—
—
—
—
—
—
—
—
—
(742
)
(742
)
(742
)
Net loss
—
—
—
—
(1,646
)
—
—
—
—
—
(1,646
)
(1,646
)
Total comprehensive loss
$
(2,363
)
Balance as of December 31, 2002
101
—
—
2,147
(4,583
)
(1,711
)
(5
)
—
10
(880
)
(4,921
)
Unrealized loss on fuel cash flow hedges, net of
    reclassification adjustment
—
—
—
—
—
—
—
—
(11
)
—
(11
)
$
(11
)
Termination of pilot pension plan
—
—
—
—
—
—
—
—
—
85
85
85
Net income
—
—
—
—
1,635
—
—
—
—
—
1,635
1,635
Reorganization adjustments:
Cancellation of Predecessor common stock
(101
)
—
—
(2,147
)
—
1,711
—
—
—
—
(537
)
Adjustments to Stockholders' Deficit in connection with
    reorganization
—
—
—
—
2,948
—
5
—
1
795
3,749
796
Issuance of Class A Common Stock to labor groups
—
23
—
146
—
—
(169
)
—
—
—
—
Issuance of Class A and Class B Common Stock to
    creditors and investors
—
26
5
238
—
—
—
—
—
—
269
Total comprehensive income
$
2,505
Successor Company:
Balance sheet as of March 31, 2003
$
—
$
49
$
5
$
384
$
—
$
—
$
(169
)
$
—
$
—
$
—
$
269
52
Table of Contents
US Airways Group, Inc.
(Debtor-in-Possession)
Consolidated Statements of Stockholders' Equity
(Deficit) — (Continued)
Three Years Ended December 31, 2004
Accumulated other comprehensive income
(loss), net of income tax effect
Unrealized
gain (loss) on
Unrealized
Adjustment
Class A
Class B
Common
available-for-
gain (loss) on
for minimum
Common
Common
Common
Paid-in
Accumulated
Stock held
Deferred
sale
cash flow
pension
Comprehensive
Stock
Stock
Stock
capital
Deficit
in treasury
compensation
securities
hedges
liability
Total
income (loss)
(dollars in millions, except share amounts)
Successor Company:
Balance as of March 31, 2003
$
—
$
49
$
5
$
384
$
—
$
—
$
(169
)
$
—
$
—
$
—
$
269
Common stock surrendered for tax withholdings
—
—
—
—
—
(35
)
—
—
—
—
(35
)
Private placement of Class A common shares
—
—
—
—
—
34
—
—
—
—
34
Amortization of deferred compensation
—
—
—
8
—
—
125
—
—
—
133
Unrealized gain on fuel cash flow hedges, net of
    reclassification adjustment
—
—
—
—
—
—
—
—
31
—
31
$
31
Minimum pension liability change
—
—
—
—
—
—
—
—
—
(86
)
(86
)
(86
)
Net loss
—
—
—
—
(174
)
—
—
—
—
—
(174
)
(174
)
Total comprehensive loss
$
(229
)
Balance as of December 31, 2003
—
49
5
392
(174
)
(1
)
(44
)
—
31
(86
)
172
Restricted stock vestings
—
2
—
(2
)
—
—
—
—
—
—
—
Common Stock surrendered for tax withholdings
—
—
—
—
—
(2
)
—
—
—
—
(2
)
Amortization of deferred compensation
—
—
—
20
—
—
30
—
—
—
50
Unrealized loss on fuel cash flow hedges, net
—
—
—
—
—
—
—
—
(9
)
—
(9
)
$
(9
)
Minimum pension liability change
—
—
—
—
—
—
—
—
—
(34
)
(34
)
(34
)
Net loss
—
—
—
—
(611
)
—
—
—
—
—
(611
)
(611
)
Total comprehensive loss
$
(654
)
Balance as of December 31, 2004
$
—
$
51
$
5
$
410
$
(785
)
$
(3
)
$
(14
)
$
—
$
22
$
(120
)
$
(434
)
See accompanying Notes to Consolidated Financial Statements.
53
Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements
1.
Chapter 11 Reorganization
Chapter 11 Proceedings
On September 12, 2004, US Airways Group, Inc. (US Airways
Group or the Company) and its domestic subsidiaries
(collectively, the Debtors), which account for substantially all
of the operations of the Company, including its principal
operating subsidiary, US Airways, Inc. (US Airways), filed
voluntary petitions for relief under Chapter 11 of the
United States Bankruptcy Code (Bankruptcy Code) in the United
States Bankruptcy Court for the Eastern District of Virginia,
Alexandria Division (Bankruptcy Court) (Case
Nos. 04-13819-SSM through 04-13823-SSM). Each of the
Debtors in these cases had previously filed a voluntary petition
for relief under Chapter 11 on August 11, 2002 (the
Prior Bankruptcy). The Debtors emerged from the Prior Bankruptcy
under the First Amended Joint Plan of Reorganization of US
Airways Group, Inc. and Affiliated Debtors and
Debtors-in-Possession, As Modified (the 2003 Plan), which was
confirmed pursuant to an order of the Bankruptcy Court on
March 18, 2003 and became effective on March 31, 2003.
Before emerging from the Prior Bankruptcy in 2003, the Company
examined virtually every phase of its contracts and operations
and had significantly reduced costs. The Company reduced its
mainline capacity, realigned its network to maximize yield,
initiated a business plan to use more regional jets and procured
financing for these aircraft, and expanded its alliance with
other carriers. However, after emerging from the Prior
Bankruptcy, the Company continued to incur substantial losses
from operations. The primary factors contributing to these
losses include the reduction in domestic industry unit revenue
and significant increases in fuel prices. The downward pressure
on domestic industry revenue is a result of the rapid growth of
low-fare, low-cost airlines, the increasing transparency of
fares through Internet sources and other changes in fare
structures that have resulted in substantially lower fares for
many business and leisure travelers. The competitive environment
continued to intensify throughout 2004, particularly in key
markets such as Philadelphia, Washington, D.C., Boston and
New York.
Throughout the spring and summer of 2004, the Company
communicated with key stakeholders and the public its plan to
transform US Airways into a fully competitive and profitable
airline (the Transformation Plan). A key element of the
Transformation Plan is significant reductions in labor costs
through changes to the Company's collective bargaining
agreements. The Company aggressively sought the necessary
agreements to allow full implementation of the Transformation
Plan without the need for filing new Chapter 11 cases but
was unable to do so in a timely manner. As a result of the
recurring losses, declining available cash, and risk of defaults
or cross defaults under certain key financing and operating
agreements, it was necessary for the Debtors to file voluntary
petitions for reorganization under Chapter 11 of the
Bankruptcy Code on September 12, 2004.
At hearings held on September 13, 2004, the Bankruptcy
Court granted the Company's first day motions for relief
designed to stabilize its operations and business relationships
with customers, vendors, employees and others and entered orders
granting permission to the Debtors to, among other things:
(a) pay employee wages and continue benefits, such as
medical and dental insurance; (b) honor prepetition
obligations to customers and continue customer programs,
including US Airways' Dividend Miles program; (c) pay
for fuel under existing supply contracts, and honor existing
fuel supply, distribution and storage agreements;
(d) assume certain contracts related to interline
agreements with other airlines; (e) pay prepetition
obligations to certain foreign vendors, foreign service
providers and foreign governments; and (f) continue
maintenance of existing bank accounts and existing cash
management systems. The Bankruptcy Court also approved the
interim agreement reached between the Company, the Air
Transportation Stabilization Board (ATSB) and the lenders
under the $1 billion loan, obtained upon emergence from the
Prior Bankruptcy and substantially guaranteed by the ATSB, to
allow the Company continued use of the cash collateral securing
the loan (see Note 4 for further discussion of the ATSB
Loan and subsequent amendments).
Since filing for bankruptcy on September 12, 2004, the
Company has achieved cost-savings agreements with all of its
collective bargaining groups. Through a motion filed under
Section 1113(e) of the Bankruptcy
54
Table of Contents
Code on September 24, 2004, the Company sought interim
relief from their collective bargaining agreements (CBAs) with
the Air Line Pilots Association (ALPA), Association of Flight
Attendants-Communications Workers of America (AFA), Transport
Workers Union (TWU), Communications Workers of America
(CWA) and International Association of Machinists and
Aerospace Workers (IAM). On October 15, 2004, the
Bankruptcy Court approved base rates of pay reductions of 21%
through February 15, 2005 or entry of an order approving a
new CBA or granting final relief under Section 1113(c) of
the Bankruptcy Code. Reductions to pension contributions and
certain work rule changes were also approved. The interim relief
order did not apply to ALPA or TWU, whose members reached and
ratified agreements prior to the interim relief going into
effect. Agreements with the CWA and AFA were reached in December
2004 and were subsequently ratified. On January 6, 2005,
the Bankruptcy Court approved the Company's request to
reject the IAM CBAs and approved the termination of the three
mainline defined benefit plans. The IAM subsequently ratified
Company cost-savings proposals on January 21, 2005. As part
of these negotiations and subsequent ratifications, all
collective bargaining groups had their pension plans reduced or
eliminated. See Note 5(a) for further detail on the
termination of US Airways' three defined benefit plans. In
addition, the Bankruptcy Court has also approved various
settlement agreements between the Company and the
court-appointed Section 1114 Committee representing
retirees other than those represented by the IAM to begin the
significant curtailment of postretirement benefits.
In addition to the cost savings achieved with labor groups, the
Company also implemented pay and benefit reductions for its
current management and other non-union employees, including
reductions to base pay, workforce reductions and modifications
to vacation and sick time accruals. The Company also implemented
modifications to its defined contribution pension plans and will
implement modifications to retiree benefits in 2005. The pay
rate and defined contribution plan reductions went into effect
October 11, 2004 and the reductions to retiree medical
benefits will become effective March 1, 2005.
The Company has reached agreements with certain of its lessors
and lenders restructuring existing aircraft lease and debt
financings. On November 19, 2004, the Bankruptcy Court
approved the Company's agreements for the continued use and
operation of substantially all of its mainline and Express
fleet. As discussed in detail below, the Company reached a
comprehensive agreement with GE Capital Aviation Services
(GECAS) and GE Engine Service (GEES) on aircraft
leasing and financing and engine services, which will provide
the Company with short-term liquidity, reduced debt, lower
aircraft ownership costs, enhanced engine maintenance services,
and operating leases for new regional jets. The Company also
reached agreements with EMBRAER-Empresa Brasileria de
Aeronautica SA (Embraer) and Bombardier, Inc. (Bombardier)
providing for continued use and operation of its aircraft, short
term liquidity and new financing for regional jets, which were
approved by the Bankruptcy Court in January 2005. These
agreements are discussed in more detail in Note 4.
The Company has notified all known or potential creditors of the
Chapter 11 filing for the purposes of identifying and
quantifying all prepetition claims. The Chapter 11 filing
triggered defaults on substantially all debt and lease
obligations. Subject to certain exceptions under the Bankruptcy
Code, the Chapter 11 filing automatically stayed the
continuation of any judicial or administrative proceedings or
other actions against the Debtors or their property to recover
on, collect or secure a claim arising prior to
September 12, 2004. The deadline for filing proofs of claim
with the Bankruptcy Court was February 3, 2005, with a
limited exception for governmental entities, which have until
March 11, 2005.
The potential adverse publicity associated with the
Chapter 11 filings and the resulting uncertainty regarding
the Company's future prospects may hinder the
Company's ongoing business activities and its ability to
operate, fund and execute its business plan by impairing
relations with existing and potential customers; negatively
impacting the ability of the Company to attract and retain key
employees; limiting the Company's ability to obtain trade
credit; limiting the Company's ability to effectively hedge
rising aviation fuel costs; and impairing present and future
relationships with vendors and service providers.
As a result of the Chapter 11 filings, realization of
assets and liquidation of liabilities are subject to significant
uncertainty. While operating as a debtor-in-possession under the
protection of Chapter 11, and subject to Bankruptcy Court
approval or otherwise as permitted in the normal course of
business, US Airways may sell or otherwise dispose of assets and
liquidate or settle liabilities for amounts other than those
reflected
55
Table of Contents
in the financial statements. Further, a plan of reorganization
could materially change the amounts and classifications reported
in the historical financial statements, which do not give effect
to any adjustments to the carrying value of assets or amounts of
liabilities that might be necessary as a consequence of
confirmation of a plan of reorganization.
To exit Chapter 11 successfully, the Company must obtain
confirmation by the Bankruptcy Court of a plan of
reorganization. The Company currently has the exclusive right to
file a plan of reorganization until March 31, 2005 and
solicit acceptance of the plan through June 30, 2005. Under
the terms of the agreement reached with General Electric, the
Company has until March 15, 2005 to file a plan of
reorganization. These deadlines could potentially be extended. A
plan of reorganization would, among other things, resolve all
prepetition obligations, set forth a revised capital structure
and establish the corporate governance subsequent to exiting
from bankruptcy. The Company is currently working towards
emerging from Chapter 11 mid-year 2005, but that timing is
dependent upon, among other things, the timely and successful
confirmation and implementation of a plan of reorganization. The
ultimate recovery to creditors and/or holders of the common
stock, if any, will not be determined until confirmation of a
plan of reorganization. No assurance can be given as to what
values, if any, will be ascribed in the Chapter 11 cases to
these constituencies or what type or amount of distributions, if
any, they would receive. A plan of reorganization could result
in holders of the Company's common stock receiving no
distribution and cancellation of existing stock.
On February 18, 2005, the Company announced that it reached
agreement with Eastshore Aviation, LLC, an investment entity
owned by Air Wisconsin Airlines Corporation and its shareholders
(Air Wisconsin), on a $125 million financing commitment to
provide a substantial portion of the equity funding for a plan
of reorganization. The $125 million facility will be in the
form of a debtor-in-possession term loan, to be drawn in the
amount of $75 million, upon approval by Bankruptcy Court,
and as early as February 28, 2005, and two subsequent
$25 million increments. This loan would be second only to
the ATSB Loan with regard to the Company's assets that are
pledged as collateral. Upon emergence from Chapter 11, the
$125 million financing package would then convert to equity
in the reorganized US Airways Group. As part of this agreement,
US Airways and Air Wisconsin will enter into an air services
agreement under which Air Wisconsin may, but is not required to,
provide regional jet service under a US Airways Express code
share arrangement.
Financial Statement Presentation
The accompanying consolidated financial statements have been
prepared in accordance with AICPA Statement of
Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" (SOP 90-7)
and on a going-concern basis. SOP 90-7 requires that the
financial statements for periods following the Chapter 11
filing through emergence distinguish transactions and events
that are directly associated with the reorganization from the
ongoing operations of the business. Accordingly, revenues,
expenses, realized gains and losses and provisions for losses
directly associated with the reorganization and restructuring of
the business are reported separately as Reorganization items,
net in the Statements of Operations.
56
Table of Contents
Reorganization items, net as shown on the Consolidated Statement
of Operations related to the current Chapter 11 proceedings
as well as the Prior Bankruptcy consist of the following (in
millions):
Successor Company
Predecessor Company
Year Ended
Three Months Ended
Year Ended
December 31, 2004
March 31, 2003
December 31, 2002
Discharge of liabilities(a)
$
—
$
3,938
$
—
Restructured aircraft financings(b)
—
967
—
Termination of pension plans(c)
—
387
—
Interest income on accumulated cash
4
2
2
Damage and deficiency claims(d)
(2
)
(2,167
)
—
Revaluation of assets and liabilities(a)
—
(1,107
)
—
Professional fees
(30
)
(51
)
(61
)
Aircraft order cancellation penalties(e)
(7
)
—
—
Loss on aircraft abandonment(f)
—
(9
)
(68
)
Severance including benefits(g)
—
—
(89
)
Write-off of ESOP deferred compensation
—
—
(50
)
Other
—
(43
)
(28
)
$
(35
)
$
1,917
$
(294
)
(a)
Reflects the discharge or reclassification of liabilities
    subject to compromise in the Prior Bankruptcy. Most of these
    obligations were only entitled to receive such distributions of
    cash and common stock as provided under the 2003 Plan. A portion
    of the liabilities subject to compromise in the Prior Bankruptcy
    were restructured and continued, as restructured, to be
    liabilities of the Company.
(b)
As of March 31, 2003, the Company restructured aircraft
    debt and lease agreements related to 200 aircraft in connection
    with its Prior Bankruptcy including the conversion of 52
    mortgages to operating leases. The restructured terms generally
    provide for shorter lease periods and lower lease rates.
(c)
Effective March 31, 2003, US Airways terminated its
    qualified and nonqualified pilot defined benefit pension plans.
    The Pension Benefit Guaranty Corporation (PBGC) was
    appointed trustee of the qualified plan effective with the
    termination. The Company recognized a gain in connection with
    the termination which is partially offset by the Company's
    estimate of the PBGC claim.
(d)
Damage and deficiency claims largely arose as a result of the
    Company electing to either restructure, abandon or reject
    aircraft debt and leases during the bankruptcy proceedings.
(e)
As the result of the Company's bankruptcy filing in
    September 2004, the Company failed to meet the conditions
    precedent for continued financing of regional jets and was not
    able to take delivery of scheduled aircraft and therefore
    incurred penalties of $7 million in the fourth quarter of
    2004.
(f)
Includes aircraft (seven A319s for 2003 and 34 F-100s, two
    B757-200s and one B737-400 for 2002) that were legally abandoned
    as part of the Prior Bankruptcy. Related aircraft liabilities
    were adjusted for each aircraft's expected allowed
    collateral value.
(g)
As a result of schedule reductions made in connection with the
    Prior Bankruptcy, US Airways terminated or furloughed
    approximately 6,600 employees across all employee groups.
    Substantially all affected employees were terminated or
    furloughed prior to March 31, 2003. US Airways'
    headcount reduction was largely accomplished through involuntary
    terminations/furloughs. In connection with this headcount
    reduction, US Airways offered a voluntary leave program to
    certain employee groups. Voluntary leave program participants
    generally received extended benefits (e.g. medical, dental, life
    insurance) but did not receive any furlough pay benefit.
SOP 90-7 also requires that prepetition liabilities subject
to compromise should be distinguished from both prepetition
liabilities that are not subject to compromise and postpetition
liabilities. Liabilities subject to compromise are reported at
the amounts expected to be allowed by the Bankruptcy Court, even
if they may be settled for lesser amounts. The following table
summarizes the components of Liabilities Subject to Compromise
included in the Company's Consolidated Balance Sheets as of
December 31, 2004 (in millions):
Debt and capital leases
$
2,454
Postretirement and other employee related expenses
2,858
Other accrued expenses
570
Accounts payable
183
Aircraft-related accruals and deferrals
114
Total Liabilities Subject to Compromise
$
6,179
57
Table of Contents
2.
Summary of Significant Accounting Policies
(a)
Nature of operations
US Airways Group's primary business activity is the
operation of a major network air carrier through its ownership
of the common stock of US Airways, Piedmont Airlines, Inc.
(Piedmont), PSA Airlines, Inc. (PSA), Material Services Company,
Inc. (MSC) and Airways Assurance Limited, LLC (AAL). US
Airways is a certificated air carrier engaged primarily in the
business of transporting passengers, property and mail.
US Airways is the Company's principal operating subsidiary.
US Airways enplaned approximately 42 million passengers in
2004 and was the seventh largest U.S. air carrier, as
ranked by revenue passenger miles (RPMs). As of
December 31, 2004, US Airways operated 281 jet aircraft and
22 regional jet aircraft and provided regularly scheduled
service at 89 airports in the continental United States, Canada,
Mexico, France, Germany, Italy, Spain, Ireland, the Netherlands,
the United Kingdom and the Caribbean.
Piedmont, PSA and Allegheny (through June 2004) are regional
carriers that, along with other non-owned regional airlines with
which the Company has marketing agreements, form "US
Airways Express." During 2004, US Airways Express air
carriers enplaned approximately 15.2 million passengers. Of
these 15.2 million passengers, approximately
6.2 million were enplaned by the Company's wholly
owned regional airlines, approximately 7.4 million were
enplaned by third-party carriers operating under capacity
purchase agreements and approximately 1.6 million were
enplaned by carriers operating under prorate agreements.
Most of the operations of the Company's airline
subsidiaries are in competitive markets. Competitors include
other air carriers along with other modes of transportation.
Although a competitive strength in some regards, the
concentration of significant operations in the eastern
U.S. results in US Airways being susceptible to changes in
certain regional conditions that may have an adverse effect on
the Company's financial condition and results of operations.
Personnel costs represent the Company's largest expense
category. As of December 31, 2004, the Company's
subsidiaries employed approximately 29,500 full-time
equivalent employees. Approximately 81% of the Company's
active employees are covered by collective bargaining agreements
with various labor unions.
(b)
Basis of presentation and use of estimates
The accompanying Consolidated Financial Statements include the
accounts of US Airways Group and its wholly owned subsidiaries.
Principal subsidiaries include US Airways, Allegheny Airlines,
Inc. (Allegheny), Piedmont and PSA. Effective July 1, 2004,
Allegheny merged with Piedmont, with Piedmont as the surviving
entity. All significant intercompany accounts and transactions
have been eliminated. Certain prior year amounts have been
reclassified to conform with the 2004 presentation.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. The principal areas of judgment
relate to impairment of goodwill, impairment of long-lived
assets and intangible assets, passenger revenue recognition,
frequent traveler program, pensions and other postretirement
benefits and fresh-start reporting.
As discussed above, SOP 90-7 requires that the financial
statements for periods following the Chapter 11 filing
through emergence distinguish transactions and events that are
directly associated with the reorganization from the ongoing
operations of the business. The Consolidated Balance Sheet as of
December 31, 2004 also distinguishes prepetition
liabilities subject to compromise from both those prepetition
liabilities that are not subject to compromise and from
postpetition liabilities. Liabilities subject to compromise are
reported at the amounts expected to be allowed, even if they may
be settled for lesser amounts. In addition, cash used for
reorganization items is disclosed separately in the Consolidated
Statements of Cash Flows.
In accordance with SOP 90-7 and in connection with the
Prior Bankruptcy, the Company adopted fresh-start reporting on
March 31, 2003. References in the Consolidated Financial
Statements and the Notes to the
58
Table of Contents
Consolidated Financial Statements to "Predecessor
Company" refer to the Company prior to March 31, 2003.
References to "Successor Company" refer to the Company
on and after March 31, 2003, after giving effect to the
application of fresh-start reporting. Fresh-start reporting
requires assets and liabilities be adjusted to fair value on the
emergence date. The term "cost" as used in the
Successor Company's Consolidated Notes to the Financial
Statements is after giving effect to such adjustments. See
Note 13 for information related to fresh-start reporting.
The 2003 Plan constituted a separate plan of reorganization for
each of the Company and its domestic subsidiaries (the Filing
Entities). In accordance with the Bankruptcy Code, the 2003 Plan
divided claims against, and interests in, each of the Filing
Entities into classes according to their relative seniority and
other criteria and provided the same treatment for each claim or
interest of a particular class unless the holder of a particular
claim or interest agreed to a less favorable treatment of its
claim or interest. Among other things, the 2003 Plan generally
provided for full payment of all allowed administrative and
priority claims, and the distribution of shares (or warrants to
purchase shares) of new equity in the reorganized US Airways
Group, Inc. (Reorganized US Airways Group) to the ATSB, the
Retirement Systems of Alabama Holdings LLC (RSA), the
Company's management and labor unions, General Electric
Capital Corporation and Bank of America, N.A., and to unsecured
creditors of the Filing Entities, including the PBGC, in
satisfaction of their allowed claims. Persons holding equity in
the Company prior to March 31, 2003 were not entitled to
any distribution under the 2003 Plan and their shares of common
stock were cancelled. For a complete discussion of the
distributions provided for under the 2003 Plan, see the 2003
Plan confirmed by the Bankruptcy Court on March 18, 2003
and filed with US Airways Group's Current Report on
Form 8-K, dated March 18, 2003 and filed with the SEC
on April 2, 2003.
Pursuant to a definitive agreement and in connection with
emergence from the Prior Bankruptcy, RSA invested
$240 million in cash in Reorganized US Airways Group (the
RSA Investment Agreement) in exchange for approximately 36.2%,
on a fully-diluted basis, of the equity in Reorganized US
Airways Group. As of March 31, 2003, in connection with its
investment, RSA was granted a voting interest of approximately
71.6% in Reorganized US Airways Group and entitled to designate
and vote to elect eight of 15 directors to Reorganized US
Airways Group's Board of Directors. See also Note 10
for further discussion.
(c)
Cash equivalents and Short-term investments
Cash equivalents and Short-term investments consist primarily of
cash in money market securities of various banks, commercial
paper and asset-backed securities of various financial
institutions, other companies with high credit ratings and
securities backed by the U.S. Government. All highly liquid
investments purchased within three months of maturity are
classified as Cash equivalents. All other highly liquid
investments are classified as Short-term investments.
US Airways classifies securities underlying its Cash equivalents
and Short-term investments as "available-for-sale" in
accordance with Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" (SFAS 115). Cash equivalents
are stated at cost, which approximates fair value due to the
highly liquid nature and short maturities of the underlying
securities. Short-term investments are stated at fair value with
the offsetting unrecognized gain or loss reflected as a separate
component of Stockholders' Equity (Deficit) within
Accumulated other comprehensive income (loss).
(d)
Restricted cash
Restricted cash includes deposits in trust accounts primarily to
fund certain taxes and fees and collateralize letters of credit
and workers' compensation claims, credit card processing
collateral and fuel hedge collateral. Restricted cash is stated
at cost which approximates fair value. See Note 3(b) for
further information.
(e)
Materials and supplies, net
Inventories of materials and supplies are valued at the lower of
cost or fair value. Costs are determined using average costing
methods and are charged to operations as consumed. An allowance
for obsolescence is provided for flight equipment expendable and
repairable parts.
59
Table of Contents
(f)
Property and Equipment
Property and equipment is stated at cost or, if acquired under
capital lease, at the lower of the present value of minimum
lease payments or fair value of the asset at the inception of
the lease. Interest expenses related to the acquisition of
certain property and equipment are capitalized as an additional
cost of the asset or as a leasehold improvement if the asset is
leased. Costs of major improvements that enhance the usefulness
of the asset are capitalized and depreciated over the estimated
useful life of the asset or the modifications, whichever is less.
Depreciation and amortization expense for principal asset
classifications is calculated on a straight-line basis to an
estimated residual value. Depreciable lives are 11-30 years
for operating flight equipment, 25-30 years for facilities
and 3-10 years for other ground property and equipment.
Rotable parts and assemblies are depreciated over the estimated
fleet life of the associated aircraft, on a group basis. The
cost of property acquired under capital lease and improvements
to leased assets are depreciated over the term of the lease on a
straight-line basis. When property and equipment is sold any
gain or loss is recognized in the Other, net category of Other
Income (Expense).
The Company monitors the recoverability of the carrying value of
its long-lived assets. Under the provisions of Statement of
Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets"
(SFAS 144), the Company recognizes an "impairment
charge" when the expected net undiscounted future cash
flows from an asset's use (including any proceeds from
disposition) are less than the asset's carrying value and
the asset's carrying value exceeds its fair value.
(g)
Goodwill and Other intangibles, net
Goodwill is the cost in excess of fair value of the tangible and
identifiable intangible assets of businesses acquired. Excess
reorganization value resulting from the application of
SOP 90-7 upon emergence from bankruptcy is also reported
and accounted for as goodwill. The provisions of Statement of
Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" (SFAS 142) require that a
two-step impairment test be performed on goodwill. In the first
step, the Company compares the fair value of the reporting unit
to its carrying value. If the fair value of the reporting unit
exceeds the carrying value of the net assets of the reporting
unit, goodwill is not impaired and the Company is not required
to perform further testing. If the carrying value of the net
assets of the reporting unit exceeds the fair value of the
reporting unit, then the Company must perform the second step in
order to determine the implied fair value of the goodwill and
compare it to the carrying value of the goodwill. If the
carrying value of goodwill exceeds its implied fair value, then
the Company must record an impairment loss equal to the
difference. The Company tested its goodwill for impairment
during the fourth quarter of 2004, the third quarter of 2004 (as
a result of its Chapter 11 filing), the fourth quarter of
2003, the third quarter of 2002 (as a result of its prior
Chapter 11 filing) and the second quarter of 2002 (in
connection with its transition to SFAS 142). The Company
concluded in each test that fair value of the reporting unit was
in excess of the carrying value. In the third and fourth
quarters of 2004, the Company's cash flows were prepared on
a going-concern basis. Additionally, the carrying value of the
Company's net assets was less than zero. The Company
assessed the fair value of the reporting unit considering both
the income approach and market approach for 2003. Under the
market approach, the fair value of the reporting unit is based
on quoted market prices for US Airways Group common stock and
the number of shares outstanding of US Airways Group common
stock. Under the income approach, the fair value of the
reporting unit is based on the present value of estimated future
cash flows.
In connection with fresh-start reporting upon emergence from the
Prior Bankruptcy, the Company recognized route authorities and
trademarks on its Consolidated Balance Sheets. As of
December 31, 2004 and 2003, the Company had
$32 million and $36 million of route authorities on
the Consolidated Balance Sheets, respectively. The carrying
value of trademarks was $33 million as of December 31,
2004 and 2003. Route authorities and trademarks are classified
as indefinite lived assets under SFAS 142. Indefinite-lived
assets are not amortized but instead are reviewed for impairment
annually and more frequently if events or circumstances indicate
that the asset may be impaired. In the second quarter of 2004,
the Company wrote off an indefinite lived foreign slot.
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SFAS 142 requires that intangible assets with estimable
useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for
impairments in accordance with SFAS 144. The following
table provides information relating to the Company's
intangible assets subject to amortization as of
December 31, 2004 and 2003 (in millions):
December 31,
December 31,
2004
2003
Cost
A/A
Cost
A/A
Airport take-off and landing slots
$
465
$
32
$
465
$
14
Airport gate leasehold rights
32
10
32
4
Capitalized software costs
50
38
50
26
Total
$
547
$
80
$
547
$
44
A/ A=Accumulated Amortization
The intangible assets subject to amortization generally are
amortized over 25 years for airport take-off and landing
slots, over the term of the lease for airport gate leasehold
rights and over five years for capitalized software costs on a
straight-line basis and are included in Depreciation and
amortization on the Consolidated Statements of Operations. As a
result of the depressed revenue environment in the airline
industry, during the fourth quarter of 2002, the Company
conducted an impairment analysis of its airport take-off and
landing slots and airport gate leasehold rights and determined
that certain airport gate leasehold rights were impaired. The
Company estimated fair market value using third-party
appraisals. This culminated in an impairment charge of
$21 million reflected in Special items on the Consolidated
Statement of Operations. For the year ended December 31,
2004, the nine months ended December 31, 2003, the three
months ended March 31, 2003, and the year ended
December 31, 2002, the Company recorded amortization
expense of $37 million, $44 million, $11 million
and $51 million (exclusive of the impairment charge
discussed above), respectively, related to its intangible
assets. The Company expects to record annual amortization
expense of $28 million in 2005; $26 million in 2006;
$24 million in 2007; $22 million in 2008 and
$21 million in 2009 related to these intangible assets.
(h)            Other
    assets, net
Other assets, net consist primarily of deposits held by vendors,
unamortized debt issuance costs, and long-term investments.
(i)            Frequent
    traveler program
US Airways accrues the estimated incremental cost of travel
awards earned by participants in its Dividend Miles frequent
traveler program when the requisite mileage award levels are
achieved. For travel awards on partner airlines, the liability
is based on the average contractual amount to be paid to the
other airline per redemption. US Airways also sells mileage
credits to certain participating airlines and marketing
partners. US Airways defers the portion of revenue attributable
to future transportation and recognizes it as passenger
transportation revenue when the service is provided. The
remaining portion of sales proceeds is recognized immediately as
a component of Other operating revenues.
(j)            Derivative
    financial instruments
Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133) requires the Company to
recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the
nature of the hedge, changes in the fair value of derivatives
are either offset against the change in fair value of assets,
liabilities or firm commitments through earnings or recognized
in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a hedging
derivative's change in fair value is immediately recognized
in earnings.
The Company's results of operations can be significantly
impacted by changes in the price of aircraft fuel. To manage
this risk, the Company periodically enters into fixed price swap
agreements, collar structures and other similar instruments.
These agreements substantially fix the Company's cash flows
related to fuel expense. Because jet fuel derivatives are
significantly less liquid and relatively more expensive, the
Company
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primarily uses heating oil and crude oil contracts to manage its
exposure to the movement of aircraft fuel prices. The changes in
the market value of the heating oil and crude oil contracts have
a high correlation to changes in aircraft fuel prices. The
agreements generally qualify as cash flow hedges under
SFAS 133. The Company does not purchase or hold any
derivative financial instruments for trading purposes.
The Company records the fair market value of its fuel hedge
contracts on its Consolidated Balance Sheets. On an ongoing
basis, the Company adjusts its balance sheet to reflect the
current fair market value of its fuel hedge contracts. The
related gains or losses on these contracts are deferred in
accumulated other comprehensive income until the hedged fuel is
recognized into earnings. However, to the extent that the
absolute change in the value of the fuel hedge contract exceeds
the absolute change in the value of the aircraft fuel purchase
being hedged, the difference is considered
"ineffective" and is immediately recognized in
earnings as either gain or loss. The amount recognized in
earnings may reverse in following periods if the relationship
reverses. The fuel hedge contracts' gains and losses
including those classified as "ineffective" are
recognized to Aviation fuel on the Company's Consolidated
Statements of Operations, except for those related to hedging
purchases of aviation fuel under its capacity purchase
agreements, which are recorded to US Airways Express capacity
purchases.
The Company holds stock options in Sabre Holding Corporation
(Sabre) and warrants in a number of e-commerce companies as a
result of service agreements with them. On an ongoing basis, the
Company adjusts its balance sheet to reflect changes in the
current fair market value of the stock options and warrants to
Other, net on its Consolidated Statements of Operations. See
Note 3 for more information on the Company's
derivative financial instruments.
(k)            Deferred
    gains and credits, net
In connection with fresh-start reporting upon emergence from the
Prior Bankruptcy, aircraft operating leases were adjusted to
fair value. The present value of the difference between the
contractual lease rates and the fair market value rates was
recorded as a deferred credit in the accompanying Consolidated
Balance Sheet. The deferred credit is decreased on a
straight-line basis as a reduction in aircraft rent expense over
the applicable lease periods, generally three to 21 years.
In periods prior to the adoption of fresh-start reporting, gains
on aircraft sale and leaseback transactions were deferred and
amortized over the terms of the leases as a reduction of the
related aircraft rent expense.
The gain related to the exercise of Sabre options is deferred
and amortized over the contract period as a reduction to Other
operating expenses. See Note 3 for more information
concerning the Sabre options.
(l)            Passenger
    transportation revenues
Revenue is recognized when the transportation service is
rendered. Passenger ticket sales are recorded as a liability
(Traffic balances payable and unused tickets) and subsequently
relieved either through carriage of the passenger, refund to the
passenger, expiration of the passenger ticket or billing from
another air carrier which provided the service. Due to various
factors including refunds, exchanges, unused tickets and
transactions involving other carriers, certain amounts are
recorded based on estimates. These estimates are based upon
historical experience and have been consistently applied to
record revenue. The Company routinely performs evaluations of
the liability, which may result in adjustments that are
recognized as a component of Passenger transportation revenue.
Actual refund, exchange and expiration activity may vary from
estimated amounts. Except when noted, such differences have
historically not been material. During the fourth quarter of
2003, a $34 million favorable adjustment was made to
Passenger transportation revenue to reflect an increase in
expired tickets. This adjustment was attributable to the Company
experiencing changes in customer travel patterns resulting from
various factors, including new airport security measures,
concerns about further terrorist attacks and an uncertain
economy, which resulted in more forfeited tickets and fewer
refunds.
US Airways purchases capacity (available seat miles) generated
by Mesa Airlines, Inc. (Mesa), Chautauqua Airlines, Inc.
(Chautauqua) and Trans States Airlines, Inc. (Trans States) in
certain markets. US Airways also purchased the capacity of
Midway Airlines Corporation (Midway) prior to Midway's
liquidation during the fourth quarter of 2003. Mesa, Chautauqua
and Trans States operate regional jet aircraft
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in these markets as part of US Airways Express. US Airways
recognizes revenues related to these arrangements as Passenger
transportation revenue when transportation service is rendered
by these affiliates or the related tickets otherwise expire.
Liabilities related to tickets sold for travel on these air
carriers are also included in US Airways' Traffic
balances payable and unused tickets and are subsequently
relieved in the same manner as described above. See
Note 2(i) above for information on the sale of Dividend
Miles that are recognized as a component of Passenger
transportation revenue.
(m)            Stock-based
    compensation
The Predecessor Company applied the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25) and related
interpretations to account for awards of stock-based
compensation granted to employees. Upon emergence, the Successor
Company adopted the fair value method of recording stock-based
employee compensation contained in Statement of Financial
Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123) and accounted for
this change in accounting principle using the "prospective
method" as described by Statement of Financial Accounting
Standards No. 148, "Accounting for Stock-Based
Compensation — Transition and Disclosure, an amendment
of FASB Statement No. 123" (SFAS 148).
Accordingly, the fair value of all Successor Company stock
option and warrant grants, as determined on the date of grant,
will be amortized as compensation expense in the Consolidated
Statements of Operations over the vesting period.
The following table illustrates the effect on net income (loss)
and net earnings (loss) per common share as if the fair value
based recognition provisions of SFAS 123 had been applied
to all outstanding and unvested stock option awards in each
period presented for the Predecessor Company (in millions,
except per share data).
Predecessor Company
Three Months Ended
Year Ended
March 31, 2003
December 31, 2002
Net income (loss), as reported
$
1,635
$
(1,646
)
Recorded stock-based compensation expense
—
—
Stock-based compensation expense determined under the fair value
    based method
(1
)
(13
)
Net income (loss), pro forma
$
1,634
$
(1,659
)
Net earnings (loss) per common share:
Basic/ Diluted, as reported
$
24.02
$
(24.20
)
Basic/ Diluted, pro forma
$
24.00
$
(24.38
)
In order to calculate the pro forma stock-based compensation
shown above, the Company used the Black-Scholes stock option
pricing model with the following weighted-average assumptions
for the year ended December 31, 2002: stock volatility of
80.1%; risk-free interest rates of 4.2%; expected stock option
lives of four years; and no dividend yield. There were no stock
options awarded in the three months ended March 31, 2003.
See Note 9 for more information on stock-based compensation
and Note 10 for more information on the Successor
Company's equity structure.
(n)            Maintenance
    and repair costs
Maintenance and repair costs for owned and leased flight
equipment are charged to operating expense as incurred. Prior to
2002, engine overhaul costs incurred by PSA were accrued on the
basis of hours flown. Effective January 1, 2002, PSA
changed its method of accounting for engine overhaul costs from
accruing on the basis of hours flown to expensing as incurred.
While the former method was permitted under GAAP, the Company
believes the new method is preferable since an obligation does
not exist until the maintenance services have been performed.
The new method is the predominant method used in the airline
industry and is consistent with the method used by US Airways
and the Company's other subsidiaries. In connection with
the change, the Company recognized a $17 million credit
representing the cumulative effect of the accounting change. The
effect of adopting the new method was immaterial to the
Company's net loss for 2002.
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(o)            Selling
    expenses
Selling expenses include commissions, credit card fees,
computerized reservations systems fees and advertising and
promotional expenses. Advertising and promotional expenses are
expensed when incurred. Advertising and promotional expenses for
the year ended December 31, 2004, the nine months ended
December 31, 2003, the three months ended March 31,
2003, and the year ended December 31, 2002 were
$27 million, $15 million, $5 million and
$30 million, respectively.
(p)            Earnings
    (Loss) per Common Share
Basic Earnings (Loss) per Common Share (EPS) is computed by
dividing net income (loss) by the weighted average number of
shares of common stock outstanding during the period. Diluted
EPS reflects the maximum dilution that would result after giving
effect to dilutive stock options, warrants, and non-vested
restricted stock. The number of additional shares is calculated
by assuming that outstanding, in-the-money stock options and
warrants were exercised and the proceeds from such exercises
were used to buy back shares of common stock at the average
market price for the reporting period.
For the year ended December 31, 2004, 21.3 million
stock options, warrants, and non-vested restricted stock are not
included in the computation of diluted EPS because of the
anti-dilutive effect. For the nine months ended
December 31, 2003, 3.4 million incremental shares from
the assumed exercise of stock options and warrants and
non-vested restricted stock are not included in the computation
of diluted EPS because of the anti-dilutive effect on EPS. For
the three months ended March 31, 2003, 19.0 million
stock options are not included in the computation of diluted EPS
because the option price was greater than the average market
value of common stock for the period. For the year ended
December 31, 2002, 16.3 million stock options are not
included in the computation of diluted EPS because of the
anti-dilutive effect.
The earnings per share calculations for the Predecessor Company
are based on common shares outstanding prior to the
Company's emergence from the Prior Bankruptcy on
March 31, 2003. Upon emergence, these shares were
cancelled. Earnings per share for the Successor Company is based
upon shares outstanding subsequent to emergence from the Prior
Bankruptcy. Accordingly, post-emergence earnings per share is
not comparable with pre-emergence amounts. See Note 10 for
more information on the Successor Company's equity
structure.
(q)            Recent
    Accounting Pronouncements
In September 2004, the Financial Accounting Standards Board
(FASB) issued FASB Staff Position (FSP) Emerging
Issues Task Force (EITF) Issue 03-1-1, Effective Date
of Paragraphs 10–20 of EITF Issue No. 03-1,
"The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments," which delays the
effective date for the recognition and measurement guidance in
EITF Issue No. 03-1. In addition, the FASB has issued a
proposed FSP to consider whether further application guidance is
necessary for securities analyzed for impairment under EITF
Issue No. 03-1. The Company continues to assess the
potential impact that the adoption of the proposed FSP could
have on its financial statements.
In November 2004, the FASB issued Statement of Financial
Accounting Standards (SFAS) No. 151, "Inventory
Costs" (SFAS 151), which clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling
costs, and wasted material. SFAS 151 will be effective for
inventory costs incurred beginning January 1, 2006. The
Company does not believe the adoption of SFAS 151 will have
a material impact on its financial statements.
In December 2004, the FASB issued SFAS No. 153,
"Exchanges of Nonmonetary Assets" (SFAS 153),
which eliminates the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general
exception for exchanges of nonmonetary assets that do not have
commercial substance. SFAS 153 will be effective for
nonmonetary asset exchanges occurring after July 1, 2005.
The Company is currently evaluating the impact of SFAS 153
on its financial statements.
In December 2004, the FASB issued SFAS No. 123(R),
"Share-Based Payment" (SFAS 123(R)), which
establishes standards for transactions in which an entity
exchanges its equity instruments for goods or services. This
standard requires a public entity to measure the cost of
employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award.
This eliminates the
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exception to account for such awards using the intrinsic method
previously allowable under Accounting Principle Board Opinion
No. 25. SFAS 123(R) will be effective for the
Company's interim reporting period beginning July 1,
2005. The Company previously adopted the fair value recognition
provisions of SFAS 123, "Accounting for Stock-Based
Compensation," upon emergence from the Prior Bankruptcy on
March 31, 2003. Accordingly, the Company believes
SFAS 123(R) will not have a material impact on its
financial statements.
3.
Financial Instruments
(a)            General
On January 1, 1998, as part of a comprehensive information
technology services agreement with Sabre, US Airways was granted
two tranches of stock options (SHC Stock Options) to acquire up
to 6,000,000 shares of Class A Common Stock,
$.01 par value, of Sabre Holdings Corporation (SHC Common
Stock), Sabre's parent company. Each tranche included
3,000,000 stock options. In December 1999, US Airways
exercised the first tranche of stock options at an exercise
price of $27 per option and received proceeds of
$81 million in January 2000 in lieu of receiving SHC Common
Stock. Realized gains resulting from the exercise of Sabre
options are subject to a clawback provision. Under the clawback
provision, if US Airways elects to terminate its
information technology service agreement with Sabre it will be
required to pay Sabre an amount equal to the gain multiplied by
the ratio of the remaining months in the contract period over
180 months. The deferred gain from the 1999 exercise is
amortized on a straight-line basis over a contractually
determined period ending December 2012. In February 2000, SHC
declared a cash dividend resulting in a dilution adjustment to
the terms of the second tranche. The adjusted terms of the
second tranche include stock options to acquire
3,406,914 shares of SHC Common Stock at an exercise price
of $23.78 subject to an $111.83 per share cap on the fair
market value of the underlying common stock. These options are
exercisable during a ten-year period beginning January 2,
2003.
The Company utilizes fixed price swap agreements and other
similar instruments to manage its exposure related to jet fuel
price changes. For the year ended December 31, 2004, the
nine months ended 2003, and the three months ended
March 31, 2003, the Company recognized gains of
approximately $130 million, $14 million, and
$27 million, respectively, related to its fuel hedging
activities. During the three months ended March 31, 2003,
the gain included $4 million related to hedge
ineffectiveness. During 2002, the Company recognized gains of
approximately $18 million including a gain of
$1 million related to hedge ineffectiveness. These
recognized gains were primarily included in Aviation fuel on the
Company's Consolidated Statements of Operations. As of
December 31, 2004, the Company had no open fuel hedge
positions in place, but will recognize approximately
$2 million per month for previously liquidated hedges
representing approximately 4% of its 2005 anticipated jet fuel
requirements. The Company had $22 million of unrealized
gains related to fuel hedge positions recorded in Accumulated
other comprehensive loss, net of income tax effect on its
Consolidated Balance Sheet as of December 31, 2004. These
gains will be realized in the 2005 results.
(b)            Fair
    value of financial instruments
In accordance with the provisions of SFAS 115, the fair
values for US Airways' short-term investments are
determined based upon quoted market prices. Cash equivalents and
restricted cash are carried at cost which approximates fair
value. US Airways estimated the fair values of its note
receivable and long-term debt by discounting expected future
cash flows using current rates offered to US Airways for notes
receivable and debt with similar maturities. The estimated fair
value of the remaining SHC Stock Options (including the clawback
provision) was calculated using the Black-Scholes stock option
pricing model. The fair values of the fuel contracts are
obtained from dealer quotes. These values represent the
estimated amount US Airways would receive or pay to terminate
such agreements as of the valuation date.
US Airways holds warrants in a number of e-commerce companies as
a result of entering into service agreements with them. The
carrying amount of the warrants is equal to the estimated fair
value, which is calculated using the Black-Scholes stock option
pricing model. The carrying amount of these warrants was not
material as of December 31, 2004 and 2003.
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Table of Contents
The estimated fair values of US Airways' financial
instruments, none of which are held for trading purposes, are
summarized as follows (in millions; brackets denote a liability):
December 31, 2004
December 31, 2003
Carrying
Estimated
Carrying
Estimated
Amount
Fair Value
Amount
Fair Value
Cash equivalents
$
700
$
700
$
893
$
893
Short-term investments(a)
—
—
358
358
Restricted cash
626
626
553
553
Notes receivable(b)
3
3
7
7
SHC Stock Options(c)
10
10
7
7
Long-term debt (excludes capital lease obligations)(d)
(3,198
)
(f
)
(3,029
)
(2,793
)
Fuel contracts(e)
—
—
38
38
(a)
Classified as "available for sale" in accordance with
    SFAS 115. See also Note 2(c).
(b)
Carrying amount included in Receivables, net on the
    Company's Consolidated Balance Sheets, except for the
    noncurrent portion ($3 million at December 31, 2003)
    which is included in Other assets, net.
(c)
Carrying amount included in Other assets, net on the
    Company's Consolidated Balance Sheets.
(d)
Includes Long-term debt classified as subject to compromise as
    of December 31, 2004. See also Notes 1 and 4.
(e)
Carrying amount included in Prepaid expenses and other on the
    Company's Consolidated Balance Sheets.
(f)
As a result of the Company's Chapter 11 filing, the
    fair value of the debt outstanding could not be reasonably
    determined as of December 31, 2004.
4.
Debt, Including Capital Lease Obligations
Details of the Company's debt are as follows (in millions):
December 31,
December 31,
2004
2003
Senior Debt:
Equipment financing agreements, installments due 2005 to 2022(1)
$
1,948
$
1,546
ATSB Loan
718
976
GE Credit Facility, installments due 2005 to 2012(1)
354
389
GE Liquidity Facility, installments due 2010 to 2012(1)
158
118
GE Bridge Facility due 2005
20
—
3,198
3,029
Class B mandatorily redeemable preferred stock(1)
78
75
Capital lease obligations(1)
49
50
Total
3,325
3,154
Less: Unamortized discount(2)
(150
)
(164
)
Obligations classified as subject to compromise
(2,454
)
—
Current maturities of debt and capital lease obligations
(721
)
(360
)
Long-term debt and capital lease obligations, net of current
    maturities
$
—
$
2,630
(1)
December 31, 2004 obligations were classified as subject to
    compromise. See Note 1 for further discussion.
(2)
For the year ended December 31, 2004 and the nine months
    ended December 31, 2003, $20 million and
    $15 million of debt discount was amortized and included in
    interested expense on the Consolidated Statement of Operations.
Maturities of debt and debt under capital leases for the next
five years, including the classification of the ATSB Loan as
current and without regard to liabilities subject to compromise,
are as follows (in millions):
2005
$
863
2006
159
2007
145
2008
143
2009
147
Thereafter
1,868
$
3,325
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ATSB Loan
As part of its reorganization under the Prior Bankruptcy,
US Airways received a $900 million loan guarantee
(ATSB Guarantee) under the Air Transportation Safety and System
Stabilization Act from the ATSB in connection with a
$1 billion term loan financing (ATSB Loan) that was funded
on March 31, 2003. The Company required this loan and
related guarantee in order to provide the additional liquidity
necessary to carry out its 2003 Plan. US Airways is the
primary obligor under the ATSB Loan, which is guaranteed by
US Airways Group and each of its other domestic
subsidiaries. The ATSB Loan is secured by substantially all of
the present and future assets of the Debtors not otherwise
encumbered (including certain cash and investment accounts,
previously unencumbered aircraft, aircraft engines, spare parts,
flight simulators, real property, takeoff and landing slots,
ground equipment and accounts receivable), other than certain
specified assets, including assets which are subject to other
financing agreements. As of December 31, 2004,
$718 million was outstanding under the ATSB Loan. The ATSB
Loan is reflected as a current liability on the accompanying
balance sheet at a book value of $701 million, which is net
of $17 million of unamortized discount, and is not subject
to compromise.
The maturity date of the ATSB Loan is October 1, 2009. The
ATSB Loan is subject to acceleration upon the occurrence of an
event of default, after expiration of applicable notice and/or
cure periods. The ATSB Loan contains certain mandatory
prepayment events including, among other things, (i) the
occurrence of certain asset sales and the issuance of certain
debt or equity securities and (ii) the value of the
collateral pledged in respect of the ATSB Loan decreasing below
specified coverage levels.
The Company's Chapter 11 filing in September 2004, was
an event of default under the terms of the ATSB Loan. The
Company has entered into an agreement, which has been
subsequently extended, with the approval of the Bankruptcy
Court, for the continued use of the cash securing the ATSB Loan
(Cash Collateral Agreement). The initial agreement was extended
until January 15, 2005 and the current agreement, subject
to certain conditions and limitations, will expire on
June 30, 2005. Under the Cash Collateral Agreement, the
Company is required to maintain a certain amount of unrestricted
cash each week. The amount declines from approximately
$500 million at the end of January to $341 million on
June 30, 2005, with weekly cash levels permitted as low as
$325 million in March 2005. The Company must also maintain
and achieve certain cumulative earnings levels during the
period, as defined in the agreement. Further, the Company must
comply with restrictions on its ability to make capital
expenditures. As of December 31, 2004, the Company was in
compliance with the Cash Collateral Agreement; therefore, the
Company's $738 million in unrestricted cash and
short-term investments was available to support daily
operations, subject to certain conditions and limitations, under
the Cash Collateral Agreement. In light of rising fuel prices
and continued downward pressure on fares across the industry,
there can be no assurance that the Company will be able to
comply with the Cash Collateral Agreement. If the Company is
unable to meet the aforementioned financial covenants, as
amended, it would be in default under the ATSB Loan and the ATSB
would have the right to accelerate the ATSB Loan and exercise
other remedies against US Airways. Such acceleration would
have a material adverse effect on the Company's future
liquidity, results of operation and financial condition.
The ATSB Loan bears interest as follows: (i) 90% of
the ATSB Loan (Tranche A) was funded through a
participating lender's commercial paper conduit program and
bears interest at a rate equal to the conduit provider's
weighted average cost related to the issuance of certain
commercial paper notes and other short-term borrowings plus
0.30%, and (ii) 10% of the ATSB Loan (Tranche B) bears
interest at LIBOR plus 4.0%. In addition, US Airways is
charged an annual guarantee fee in respect of the ATSB Guarantee
currently equal to 4.1% of the ATSB's guaranteed amount
(initially $900 million) under the ATSB Guarantee, with
such guarantee fee increasing by ten basis points annually. Due
to the Company's September 2004 bankruptcy filing and
subsequent loss of certain regional jet financing, the guarantee
fee increased by 2% per annum and the interest rate on
Tranche A and Tranche B each increased by an
additional 2% and 4% per annum, respectively, for an
effective increase in the interest rate on the loan balance of
4 percentage points. The effective interest rate of the
ATSB Loan was 10.91% for the year ended December 31, 2004
and 6.0% for the nine months ended December 31, 2003.
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Prior Amendments to the ATSB Loan during 2004
In March 2004, US Airways and the ATSB amended the
financial covenants of the ATSB Loan to provide covenant relief
for the measurement periods beginning June 30, 2004 through
December 31, 2005. The ratios used in the financial
covenants were adjusted and reset to align with the
Company's forecast for 2004 and 2005 as of the date of the
amendment, which assumed a return to profitability by 2005. In
exchange for this covenant relief and other changes described
below, US Airways made a voluntary prepayment of
$250 million on March 12, 2004, which reduced, pro
rata, all future scheduled principal payments of the ATSB Loan
(rather than shortening the remaining life of the loan).
The March 2004 amendment permitted US Airways to retain, at
its election, up to 25% of the net cash proceeds from any asset
sale for which definitive documentation would be completed by
February 28, 2005, up to a total of $125 million for
all asset sales. In addition, the amendment permitted
US Airways to accept a third-party secured note as
consideration for certain asset sales (including the
US Airways Shuttle and wholly owned regional airline
assets) as long as specified conditions are met. These
conditions include: the note's amortization schedule will
be no more favorable than the ATSB Loan; proceeds from the note
will be used to prepay the ATSB Loan; the credit strength of the
ATSB Loan will not be adversely affected as measured by
specified ratings tests; and the note will be pledged as
collateral for the ATSB Loan. Finally, in consideration for the
lenders agreeing to amend the provision related to the going
concern paragraph in the independent auditor's report for
the Company's audited financial statements for the year
ended December 31, 2003, US Airways agreed to revised
covenants relating to minimum required unrestricted cash
balances.
Effective May 21, 2004, US Airways again amended the ATSB
Loan to permit use of its regional jets financed by General
Electric (GE) as cross collateral for other obligations of
US Airways to GE. In consideration for this amendment,
US Airways agreed to revised covenants relating to minimum
required unrestricted cash balances. In addition,
US Airways agreed to give up the right to retain up to 25%
of the net cash proceeds from any asset sale, as had been
permitted by the March 2004 amendment. US Airways made a
prepayment of $5 million in connection with this amendment.
The ATSB Loan contains financial covenants that must be
satisfied by US Airways at the end of each fiscal quarter.
US Airways was uncertain as to its ability to satisfy these
covenants as of June 30, 2004. Effective June 30,
2004, US Airways and the ATSB amended the ATSB Loan to
remove the uncertainty relating to the Company's ability to
satisfy its financial covenant tests for the second quarter of
2004. In consideration for this amendment, the Company agreed to
change the loan amortization schedule, by increasing each of the
first six principal repayment installments commencing on
October 1, 2006 by approximately $16 million, and
reducing the last principal repayment installment on
October 1, 2009 by $94 million.
In connection with the ATSB Guarantee, the ATSB received
7,635,000 warrants that enable it to purchase shares of
Reorganized US Airways Group's Class A Common
Stock at $7.42 per share. The value attributed to the
warrants at issuance is being amortized over the term of the
warrants.
General Electric
GE is the Company's largest creditor. Together with GEES
and other affiliates, GE directly financed or leased a
substantial portion of the Company's aircraft prior to the
current Chapter 11 filing. In November 2001,
US Airways obtained a $404 million credit facility
from GE (2001 GE Credit Facility). The 2001 GE Credit Facility
is secured by collateral including 11 A320-family aircraft and
28 spare engines. As discussed below, borrowings under the 2001
GE Credit Facility bear interest rates of LIBOR plus 3.5% and
the term of the facility is 2012.
In addition to the 2001 GE Credit Facility, GE has provided
financing or guarantees on 145 of the Company's current
operating aircraft. It also maintains the engines on the
Company's B737-family aircraft, A320-family aircraft, B767
aircraft, EMB-170 aircraft and CRJ-200 aircraft. In connection
with its Prior Bankruptcy, the Company reached a settlement with
GE that resolved substantially all aircraft, aircraft engine and
loan-related issues and the Company obtained additional
financing from GE in the form of a liquidity facility of up to
$360 million (2003 GE Liquidity Facility). Borrowings under
the liquidity facility bear interest of LIBOR plus 4.25%. Every
obligation of the Company to GE is generally cross-defaulted to
the
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2001 GE Credit Facility, the 2003 GE Liquidity Facility, the GE
regional jet leases and the GE regional jet mortgage financings.
All of the Company's obligations to GE are generally
cross-collateralized and cross-defaulted with all other
obligations owned by any Debtor to General Electric Credit
Corporation (GECC) or any of its affiliates (collectively,
the GE Obligations).
In November 2004, the Company reached a comprehensive agreement
with GE and its affiliates as described in the Master Memorandum
of Understanding (Master MOU) that was approved by the
Bankruptcy Court on December 16, 2004. The Master MOU and
the transactions contemplated by the term sheets will provide
the Company with short-term liquidity, reduced debt, lower
aircraft ownership costs, enhanced engine maintenance services
and operating leases for new regional jets, while preserving the
vast majority of US Airways' mainline fleet owned by
GECAS. The key aspects of the Master MOU are as follows:
(i) agreements providing for continued use by the Company
of certain Airbus, Boeing and regional jet aircraft, and the
return to GECC of certain other leased Airbus and Boeing
aircraft (the Aircraft Lease Term Sheet); (ii) GECC will
provide a bridge facility of up to approximately
$56 million for use by the Debtors during the pendency of
the Chapter 11 proceedings (the Bridge Facility Term
Sheet); (iii) GECC will purchase and immediately leaseback
to US Airways (a) the assets securing the 2001 GE Credit
Facility and the 2003 GE Liquidity Facility (collectively, the
2001 Credit Facility Assets), and other GE obligations,
consisting of 11 Airbus aircraft and 28 spare engines and engine
stands, and (b) ten regional jet aircraft currently debt
financed by GECC; (iv) the balance of the 2001 GE Credit
Facility will be restructured to provide additional liquidity of
approximately $10 million, subject to the pledge of certain
collateral to secure the 2001 GE Credit Facility;
(v) subject to the Company's satisfaction of certain
financial tests and other conditions, GECC will provide lease
financing for up to 31 additional regional jet aircraft (the
Regional Jet Leasing Term Sheet); (vi) certain of
US Airways' engine maintenance agreements with GEES
will be modified and assumed; and (viii) upon emergence
from bankruptcy, convertible notes of the reorganized
US Airways will be issued to GECC in the aggregate
principal amount of $125 million (the Convertible
Note Term Sheet).
The Bridge Facility Term Sheet provides for a loan facility of
up to $56 million made available by GECC to the Debtors in
a series of drawdowns commencing on December 20, 2004, and
ending on or before June 30, 2005 (the Bridge Facility).
The Company and GECC entered into the Bridge Facility on
December 20, 2004, at which time $20 million was drawn
down under the facility. Interest on the Bridge Facility accrues
at the rate of LIBOR plus 4.25% and will be payable in cash or
in kind at the option of the Debtors. The Bridge Facility
matures on the date the Company emerges from Chapter 11 and
will be satisfied by the issuance of Convertible Notes described
below. The Bridge Facility is cross-collateralized and
cross-defaulted with all other GE obligations owed by any Debtor
to GECC or any of its affiliates and will be granted status as
an administrative expense claim with priority over all other
administrative claims other than for aircraft financing
deferrals, which are pari passu, and subordinate only to
(i) the super-priority administrative expense claim of the
ATSB and the ATSB Lenders as defined and provided for in the
Cash Collateral Agreement (ii) postpetition wages and
benefits, and (iii) any other new money
debtor-in-possession financing.
The 2001 GE Credit Facility will be amended to, among other
things: (i) provide the Debtors with an additional
$10 million of liquidity upon consummation of the
sale-leaseback of the 2001 GE Credit Facility Assets and CRJ
Mortgaged Assets (defined below), (ii) after the prepayment
of the loan balance outstanding under the 2001 GE Credit
Facility made in connection with the sale-leaseback of the 2001
GE Credit Facility Assets and CRJ Mortgaged Assets, as described
below, revise the amortization schedule so that the remaining
principal of the loan begins amortizing over a period of eight
quarters following the Debtors' emergence from bankruptcy
(the Remaining Term), (iii) provide that the interest rate
will be LIBOR plus 4.25% for the Remaining Term, and
(iv) provide that the loan will be secured with a third
lien position on three CRJ-700 aircraft (subject to first and
second lien positions and conditioned upon consent of such
senior lien holders pursuant to an inter-creditor agreement
reasonably acceptable to GECC), a second lien position on one
CRJ-700 aircraft (subject to first lien position and conditioned
upon consent of such senior lien holders pursuant to an
inter-creditor agreement reasonably acceptable to GECC) and a
first lien position on one CF34 spare engine owned by
US Airways, with the aggregate of any senior liens on such
collateral not to exceed $62 million. The amendments to the
2001 GE Credit Facility do not constitute an assumption thereof,
but it
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is anticipated that in connection with a plan of reorganization,
the 2001 GE Credit Facility, as amended, will be reinstated.
The Aircraft Lease Term Sheet sets forth a comprehensive
agreement regarding the treatment of GECC-owned and mortgaged
aircraft pursuant to Section 1110 of the Bankruptcy Code.
The Debtors and GECC have agreed to subject certain of such
aircraft to consensual Section 1110(a) agreements providing
for continued use of such aircraft so long as the Company
complies with the terms of such agreements. In certain cases,
the Debtors and GECC have agreed to amend prepetition
agreements. Except as set forth in the Master MOU or the Term
Sheets attached to the Master MOU, the Section 1110(a)
agreements and any related amendments will not constitute an
assumption of any related underlying agreements, and no such
agreement will constitute a postpetition contract for purposes
of, among other things, Sections 365, 503 and 507 of the
Bankruptcy Code, but will be subject to the Debtors'
obligations under Section 1110 of the Bankruptcy Code.
After emergence from bankruptcy, US Airways will have an
option to restructure the monthly rental obligations of certain
additional B737-400 leases following the issuance of the
Convertible Notes described below, for cash or additional
convertible notes of equal market value.
Subject to the swap of three aircraft contemplated by the
Aircraft Lease Term Sheet, GECC will purchase the two A319
aircraft, the four A320 aircraft, the five A321 aircraft, the 14
CFM56-5B spare engines, the 14 CFM56-3B spare engines, and
certain engine stands that currently secure the 2001 GE Credit
Facility and the 2003 GE Liquidity Facility, together with the
nine CRJ-200s and one CRJ-700 aircraft currently mortgage-debt
financed by GECC (collectively, the CRJ Mortgaged Assets) for a
total purchase price of approximately $640 million, subject
to adjustment, at which time the 2001 Credit Facility Assets and
the CRJ Mortgaged Assets will be leased back to US Airways
under operating leases having an initial lease term expiring on
the earlier of the Debtors' emergence from Chapter 11
or June 30, 2005. The sale proceeds will be applied to
repay (in order) the 2003 GE Liquidity Facility in full, the
GECC mortgage-debt financed CRJ aircraft in full, and a portion
of the 2001 GE Credit Facility, leaving a balance thereon of
approximately $15 million, subject to adjustment, before
the $10 million additional drawdown on the 2001 GE Credit
Facility contemplated above. The operating leases may be
extended upon the Debtors' emergence from bankruptcy, will
be cross-defaulted with all other GE Obligations (other than
certain excepted obligations), and will be subject to return
conditions to be agreed upon by the parties.
The Debtors and the GE entities have reached an agreement with
respect to five engine repair and maintenance agreements, and
certain other matters. This agreement includes, among other
things, the agreement of US Airways to assume three of such
agreements of GEES and certain of its affiliates to:
(i) forgive and release US Airways from certain
prepetition obligations, (ii) defer certain payment
obligations arising under such agreements, (iii) extend one
maintenance agreement, (iv) continue certain existing
deferrals, and (v) determine the treatment of certain
removal charges.
Pursuant to the Convertible Note Term Sheet, the Debtors
have agreed that upon emergence from Chapter 11, as partial
consideration for entering into the Master MOU, an affiliate of
GECC will receive convertible notes of the reorganized
US Airways in the aggregate principal amount of
$125 million (Convertible Notes). The Convertible Notes
will be convertible at any time, at the holders' election,
into shares of common stock of the reorganized Company (New
Common Stock) at a conversion price equal to the product of
(x) 140%-150% (at US Airways' option) and
(y) the average closing price of the New Common Stock for
the sixty consecutive trading days following US Airways'
emergence from bankruptcy and the listing of the New Common
Stock on the NASDAQ Stock Market or a national stock exchange.
The Convertible Notes will bear interest at a rate to be
determined no later than thirty days prior to the Debtors'
scheduled date of emergence from bankruptcy and interest will be
payable semi-annually, in arrears, and will mature in 2020.
US Airways will be permitted to redeem some or all of the
Convertible Notes at any time on or after the fifth anniversary
of the issuance of such notes, at a redemption price payable in
cash or, subject to certain conditions, New Common Stock.
Holders of the Convertible Notes may require US Airways to
repurchase all or a portion of their Convertible Notes on the
fifth and tenth anniversary of the issuance of such notes at
100% of the principal amount of the Convertible Notes, plus
accrued and unpaid interest to the date of repurchase, payable,
at US Airways election, in cash or New Common Stock. The
Convertible Notes will be senior unsecured obligations and will
rank equally in right of payment with all existing and future
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Table of Contents
unsecured senior obligations of the reorganized US Airways.
The Convertible Notes will be guaranteed by the parent holding
company of the reorganized US Airways.
Interest rates on $1.63 billion and $1.53 billion
principal amount of debt as of December 31, 2004 and 2003,
respectively, are subject to adjustment to reflect changes in
floating interest rates. As of December 31, 2004, the
weighted average effective interest rate was 7.9% for the
Equipment financing agreements.
The Class B Preferred Stock issued to RSA is subject to
mandatory redemption on its maturity date of March 31, 2011
and is therefore classified as debt. Upon its maturity, the
Company will be required to redeem each share for $1,000, or
$75 million in aggregate, plus accrued and unpaid
dividends. The Class B Preferred Stock holders are entitled
to cumulative quarterly dividends at a rate of 8% per annum
paid in cash by the Company. After March 31, 2006, the
Company may redeem for cash each Class B Preferred Share at
a redemption price initially equal to $1,025 declining ratably
to par value through March 31, 2010, plus accrued and
unpaid dividends. The carrying value of the Class B
Preferred Stock as of December 31, 2004 and 2003, was
$54 million and $49 million, net of unamortized
discount of $24 million and $26 million, respectively.
See Note 12 for further discussion of dividend payments.
5.
Employee Pension and Benefit Plans
Substantially all of the Company's employees meeting
certain service and other requirements are eligible to
participate in various pension, medical, dental, life insurance,
disability and survivorship plans.
(a)            Defined
benefit and other postretirement benefit plans
The Company sponsors several qualified defined benefit plans and
other postretirement benefit plans for certain employees.
Effective March 31, 2003, US Airways terminated its
qualified and nonqualified pilot defined benefit pension plans.
The PBGC was appointed trustee of the qualified plan effective
with the termination. Liabilities related to pension plans
covering foreign employees are calculated in accordance with
generally accepted accounting principles and funded in
accordance with the laws of the individual country.
On November 12, 2004, US Airways filed a motion
requesting a determination from the Bankruptcy Court that
US Airways satisfied the financial requirements for a
"distress termination" of the Retirement Plan for
Flight Attendants in the Service of US Airways, Inc. (AFA
Plan), the Pension Plan for Employees of US Airways, Inc.
Who Are Represented by the International Association of
Machinists and Aerospace Workers (IAM Plan), and the Retirement
Plan for Certain Employees of US Airways, Inc.
(CE Plan) under section 4041(c)(2)(B)(ii)(IV) of the
Employee Retirement Income Security Act of 1974, as amended
(ERISA), and approval of each such plan's termination.
These plans were projected to have benefit obligations and plan
assets aggregating $2.7 billion and $1.7 billion,
respectively, as of September 30, 2004, the most recent
valuation date. On January 6, 2005, the Bankruptcy Court
entered an order (i) finding that the financial
requirements under section 4041(c)(2)(B)(ii)(IV) of ERISA
for a distress termination of the plans had been met and
(ii) approving termination of the plans. The AFA Plan and
the IAM Plan were terminated effective January 10, 2005, by
agreement between the Pension Benefit Guaranty Corporation
(PBGC) and US Airways. The CE Plan was terminated
effective January 17, 2005, by agreement between the PBGC
and US Airways. Effective February 1, 2005, the PBGC
was appointed trustee for each of the three plans.
During hearings in late 2004 and January 2005, the Bankruptcy
Court approved various settlement agreements between
US Airways and its unions, and between US Airways and
the court-appointed Section 1114 Committee (representing
retirees not represented by the unions) to begin the significant
curtailments of postretirement benefits.
In December 2003, the Medicare Prescription Drug, Improvement
and Modernization Act of 2003 (the Medicare Prescription Drug
Act) became law in the United States. The Medicare Prescription
Drug Act introduces a prescription drug benefit under Medicare
as well as a federal subsidy to sponsors of retiree health care
benefit plans that provide a benefit that is at least
actuarially equivalent to the Medicare benefit. The Company
elected to recognize the effects of the Medicare Prescription
Drug Act in the quarter ended June 30, 2004, as permitted
by FASB Staff Position FAS 106-2, "Accounting and
Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003."
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Table of Contents
The recognition of this subsidy resulted in a reduction in
expense of $20 million for the year ended December 31,
2004 and a $198 million actuarial gain that will be
amortized over the remaining period to expected retirement.
Significant assumptions included in the re-measurement of the
accumulated postretirement benefit obligation are a 6.25%
discount rate and a reduction in retiree participation in the
Company-sponsored plan as certain defined drug benefit caps make
the plan more costly to retirees than Medicare.
The following table sets forth changes in the fair value of plan
assets, benefit obligations and the funded status of the plans
as of the measurement date of September 30, 2004 and 2003,
in addition to the amounts recognized in the Company's
Consolidated Balance Sheets as of December 31, 2004,
December 31, 2003 and March 31, 2003 (in millions):
Defined Benefit Pension Plans(1)
Other Postretirement Benefits
Predecessor
Predecessor
Successor Company
Company
Successor Company
Company
Nine
Three
Nine
Three
Months
Months
Months
Months
Year Ended
Ended
Ended
Year Ended
Ended
Ended
Dec. 31,
Dec. 31,
Mar. 31,
Dec. 31,
Dec. 31,
Mar. 31,
2004
2003
2003
2004
2003
2003
Fair value of plan assets at the beginning of the period
$
1,667
$
1,566
$
2,842
$
—
$
—
$
—
Actual return on plan assets
178
158
77
—
—
—
Employer contributions
29
2
6
51
27
21
Plan participants' contributions
—
—
—
16
8
3
Gross benefits paid
(125
)
(59
)
(136
)
(67
)
(35
)
(24
)
Settlement
—
—
(1,223
)
—
—
—
Fair value of plan assets at the end of the period
1,749
1,667
1,566
—
—
—
Benefit obligation at the beginning of the period
2,589
2,380
5,287
1,654
1,644
1,693
Service cost
42
29
28
39
30
11
Interest cost
158
114
90
88
75
29
Plan participants' contributions
—
—
—
16
8
3
Plan amendments
—
—
—
—
(94
)
(168
)
Actuarial (gain) loss
84
125
381
(361
)
26
100
Curtailment/settlement(2)
—
—
(3,270
)
—
—
—
Gross benefits paid
(125
)
(59
)
(136
)
(67
)
(35
)
(24
)
Benefit obligation at the end of the period
2,748
2,589
2,380
1,369
1,654
1,644
Funded status of the plan
(999
)
(922
)
(814
)
(1,369
)
(1,654
)
(1,644
)
Unrecognized actuarial (gain)/ loss
100
58
—
(329
)
24
—
Unrecognized prior service cost (benefit)
—
—
—
(71
)
(84
)
—
Contributions for October to December
1
—
—
15
13
—
Net liability recognized
$
(898
)
$
(864
)
$
(814
)
$
(1,754
)
$
(1,701
)
$
(1,644
)
Components of the amounts recognized in the Company's
Consolidated Balance Sheets (in millions):
Defined Benefit Pension Plans(1)
Other Postretirement Benefits
Successor
Predecessor
Predecessor
Company
Company
Successor Company
Company
Dec. 31,
Dec. 31,
Mar. 31,
Dec. 31,
Dec. 31,
Mar. 31,
2004
2003
2003
2004
2003
2003
Accrued benefit cost
$
(898
)
$
(864
)
$
(814
)
$
(1,754
)
$
(1,701
)
$
(1,644
)
Adjustment for minimum pension liability
(120
)
(86
)
—
—
—
—
Accumulated other comprehensive loss
120
86
—
—
—
—
Net amount recognized
$
(898
)
$
(864
)
$
(814
)
$
(1,754
)
$
(1,701
)
$
(1,644
)
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(1)
For plans with accumulated benefit obligations in excess of plan
    assets, the aggregate projected benefit obligations, accumulated
    benefit obligations and plan assets were $2.75 billion,
    $2.72 billion and $1.75 billion, respectively, as of
    September 30, 2004 and $2.59 billion,
    $2.57 billion and $1.67 billion, respectively, as of
    September 30, 2003.
(2)
In 2003, US Airways recognized curtailments and settlements
    related to the termination of certain defined benefit pension
    plans. These curtailments and settlements were recognized in
    accordance with Statement of Financial Accounting Standards
    No. 88, "Employers' Accounting for Settlements
    and Curtailments of Defined Benefit Pension Plans and for
    Termination Benefits."
The accumulated benefit obligation for defined benefit pension
plans was $2.72 billion and $2.57 billion as of
September 30, 2004 and 2003.
The following table presents the weighted average assumptions
used to determine benefit obligations:
Defined Benefit Pension Plans
Other Postretirement Benefits
Predecessor
Predecessor
Successor Company
Company
Successor Company
Company
Nine
Three
Nine
Three
Months
Months
Months
Months
Year Ended
Ended
Ended
Year Ended
Ended
Ended
Dec. 31,
Dec. 31,
Mar. 31,
Dec. 31,
Dec. 31,
Mar. 31,
2004
2003
2003
2004
2003
2003
Discount rate
6.00
%
6.00
%
6.50
%
6.00
%
6.00
%
6.50
%
Rate of compensation increase
3.75
%
3.74
%
3.75
%
4.00
%
4.00
%
4.00
%
The Company discounted both its future pension obligations and
its other postretirement benefit obligations using a rate of
6.00% at September 30, 2004 and 2003. The assumed discount
rate is based on the current rates earned on long-term bonds
that receive one of the two highest ratings given by a
recognized rating agency.
The assumed health care cost trend rates are 9% in 2005 and
2006, decreasing to 5% in 2010, and thereafter. This compares to
a health care cost trend rate of 9% in 2004 decreasing to 5% in
2009 and thereafter. The assumed health care cost trend rates
have a significant effect on amounts reported for retiree health
care plans. A one-percentage point change in the health care
cost trend rates would have the following effects on Other
Postretirement Benefits as of September 30, 2004 (in
millions):
1% Increase
1% Decrease
Effect on total service and interest costs
$
55
$
(45
)
Effect on postretirement benefit obligation
$
407
$
(338
)
Weighted average assumptions used to determine net periodic
benefit cost were as follows:
Defined Benefit Pension Plans
Other Postretirement Benefits
Predecessor
Predecessor
Successor Company
Company
Successor Company
Company
Nine
Three
Nine
Three
Months
Months
Months
Months
Year Ended
Ended
Ended
Year Ended
Ended
Ended
Dec. 31,
Dec. 31,
Mar. 31,
Dec. 31,
Dec. 31,
Mar. 31,
2004
2003
2003
2004
2003
2003
Discount rate
6.00
%
6.50
%
6.75
%
6.19
%
6.50
%
6.75
%
Expected return on plan assets
8.01
%
8.01
%
8.75
%
—
—
—
Rate of compensation increase
3.74
%
3.75
%
5.42
%
4.00
%
4.00
%
5.22
%
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Table of Contents
Components of the net and total periodic cost for Pension
Benefits (in millions):
Successor Company
Predecessor Company
Nine Months
Three Months
Year Ended
Ended
Ended
Year Ended
Dec. 31, 2004
Dec. 31, 2003
Mar. 31, 2003
Dec. 31, 2002
Service cost
$
42
$
29
$
28
$
194
Interest cost
158
114
90
420
Expected return on plan assets
(132
)
(91
)
(70
)
(332
)
Amortization of:
Transition asset
—
—
—
(4
)
Prior service cost
—
—
1
10
Actuarial (gain)/loss
(2
)
—
1
38
Net periodic cost
66
52
50
326
Fresh start charge
—
—
1,004
—
Curtailment/settlement
—
—
(1,391
)
42
Total periodic cost
$
66
$
52
$
(337
)
$
368
Components of the net and total periodic cost for Other
Postretirement Benefits (in millions):
Successor Company
Predecessor Company
Nine Months
Three Months
Year Ended
Ended Dec. 31,
Ended
Year Ended
Dec. 31, 2004
2003
Mar. 31, 2003
Dec. 31, 2002
Service cost
$
39
$
30
$
11
$
47
Interest cost
88
75
29
110
Amortization of:
Prior service cost
(13
)
(9
)
(10
)
(12
)
Actuarial (gain)/loss
(9
)
—
6
—
Net periodic cost
105
96
36
145
Fresh start charge
—
—
118
—
Curtailment
—
—
—
(120
)
Total periodic cost
$
105
$
96
$
154
$
25
The change in the additional minimum pension liability included
in Other comprehensive income (loss) was $(34) million,
$(86) million, and $880 million for the year ended
December 31, 2004, the nine months ended December 31,
2003, and the three months ended March 31, 2003,
respectively. See Note 8 for a reconciliation of the
components of Other comprehensive income.
Because US Airways does not expect to make further contributions
to the three defined benefit pension plans, future contributions
to the remaining plans are expected to be immaterial. The
Company expects to contribute $63 million to its other
postretirement plans in 2005. Prior to the termination of the
three US Airways defined benefit plans in January 2005, the
following benefits, which reflect expected future service, as
appropriate, were expected to be paid from the plans (in
millions):
Other
Postretirement
Defined Benefit
Benefits before
Pension Plans
Medicare Subsidy
Medicare Subsidy
2005
$
125
$
63
$
—
2006
126
66
4
2007
128
71
5
2008
139
75
6
2009
150
74
7
2010 to 2014
788
421
43
The Company assumed that its pension plans' assets would
generate a long-term rate of return of 7.36% at
September 30, 2004. This rate is lower than the assumed
rate of 8.01% used at September 30, 2003. The expected
long-term rate of return assumption is developed by evaluating
input from the plan's investment consultants, including
their review of asset class return expectations and long-term
inflation assumptions.
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The weighted average asset allocations as of September 30,
2004 and 2003, by asset category are as follows:
Plan Assets
2004
2003
Equity securities
50
%
47
%
Debt securities
41
46
Real estate
8
4
Other
1
3
Total
100
%
100
%
The Company's targeted asset allocation is approximately
46% equity securities, 45% debt securities, and 9% real estate.
The Company believes that its long-term asset allocation on
average will approximate the targeted allocation. The Company
regularly reviews its actual asset allocation and periodically
rebalances its investments to its targeted allocation when
considered appropriate.
(b)
Defined contribution pension plans
The Company sponsors several defined contribution pension plans
for certain employees. The Company makes cash contributions to
certain plans based on the employee's age, compensation and
elected contributions. The Company also participates in a
multi-employer plan for certain employees. Cash contributions
are a function of hours worked times a negotiated contribution
rate. Prior to the reductions implemented in connection with its
restructured labor agreements and non-union wage and benefits
reductions in late 2004, the Company's contributions ranged
up to 12% of the employee's compensation. Expenses related
to these plans, excluding expenses related to the
US Airways Employee Stock Ownership Plan (ESOP) and
the US Airways pilot defined contribution plans (see
below), were approximately $52 million, $40 million,
$12 million, and $67 million for year ended
December 31, 2004, the nine months ended December 31,
2003, the three months ended March 31, 2003 and the year
ended December 31, 2002, respectively. See Note 5(d)
for information related to the Company's ESOP.
In connection with its previous reorganization under
Chapter 11 of the Bankruptcy Code, the Company terminated
the Retirement Income Plan for Pilots of US Airways, Inc.
(Pilot Retirement Plan) and the related nonqualified pilot plan
effective March 31, 2003. The Company implemented a
qualified and nonqualified defined contribution plan for pilots
effective April 1, 2003. The defined contribution amount
was individually determined based on a target normal retirement
date balance of approximately $1 million for a career
US Airways pilot. The target balance included the estimated
value of other retirement benefits including, but not limited
to, the estimated benefit pilots are expected to receive from
the PBGC, the trustee for the terminated pilot defined benefit
plan. Effective October 15, 2004, each pilot's
contribution rate became the lessor of the original rate or 10%
of eligible compensation. Expenses for this plan were
$134 million for each of the year ended December 31,
2004 and the nine months ended December 31, 2003.
(c)
Postemployment benefits
The Company provides certain postemployment benefits to its
employees. Such benefits include disability-related and
workers' compensation benefits and severance payments for
certain employees (See Note 16, Unusual Items). The Company
accrues for the cost of such benefit expenses once an
appropriate triggering event has occurred.
(d)
Employee stock ownership plan (ESOP)
In August 1989, US Airways established an ESOP. US Airways
Group sold 2,200,000 shares of its common stock to an
Employee Stock Ownership Trust (the Trust) to hold on behalf of
US Airways' employees, exclusive of officers, in accordance
with the terms of the Trust and the ESOP. The trustee placed
those shares in a suspense account pending their release and
allocation to employees. US Airways provided financing to the
Trust in the form of a
9
3
/
4
%
loan for $111 million for its purchase of shares and US
Airways contributed an additional $2 million to the Trust.
US Airways made a yearly contribution to the Trust sufficient to
cover the Trust's debt service requirement. The
contributions were made in amounts equal to the
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periodic loan payments as they came due, less dividends
available for loan payment. Since US Airways Group did not pay
dividends on any shares held by the Trust for the three months
ended March 31, 2003 or the year ended December 31,
2002, the Trust did not utilize dividends to service its debt
during those periods. The initial maturity of the loan was
30 years. As the loan was repaid over time, the trustee
systematically released shares of the common stock from the
suspense account and allocated them to participating employees.
Each participant's allocation was based on the
participant's compensation, the total compensation of all
ESOP participants and the total number of shares being released.
For each year after 1989, a minimum of 71,933 shares were
released from the suspense account and allocated to participant
accounts. Annual contributions made by US Airways, and therefore
loan repayments made by the Trust, were $9 million in 2003
and 2002. The interest portion of these contributions was
$7 million in 2003 and 2002. US Airways recognized
compensation expense related to the ESOP of $4 million in
2002 based on shares allocated to employees (the "shares
allocated" method). In June 2002, US Airways Group engaged
Aon Fiduciary Counselors (Aon) as an independent fiduciary of
the ESOP, with the authority to make all decisions related to
sale of the stock held in the ESOP. In September 2002, Aon sold
all shares that were allocated to participant accounts. All
unallocated shares in the ESOP were cancelled in accordance with
the Company's 2003 Plan. As a result, the Company
recognized a charge of $50 million in 2002 representing the
remaining unamortized deferred compensation to Reorganization
items, net on the Company's Consolidated Statement of
Operations. Effective March 31, 2003, the ESOP was
terminated as provided in the 2003 Plan. The note payable to US
Airways was cancelled under the provisions of the 2003 Plan.
Participant accounts were distributed by December 31, 2003.
(e)
Profit sharing plans
Under the Defined Contribution Retirement Program, US Airways
makes additional contributions to participant accounts for
certain employees when US Airways Group achieves certain
prescribed pre-tax margin levels. US Airways did not make any
profit sharing contributions relating to 2004, 2003 or 2002.
6.
Income Taxes
The Company accounts for income taxes according to the
provisions of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." The
Company files a consolidated federal income tax return with its
wholly owned subsidiaries.
In assessing the realizability of the deferred tax assets,
management considers whether it is more likely than not that
some portion or all of the deferred tax assets will be realized.
The Company recorded a valuation allowance against its net
deferred tax asset. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income
(including reversals of deferred tax liabilities) during the
periods in which those temporary differences will become
deductible.
The components of the Company's provision (credit) for
income taxes are as follows (in millions):
Successor Company
Predecessor Company
Nine Months
Three Months
Year Ended
Ended
Ended
Year Ended
December 31,
December 31,
March 31,
December 31,
2004
2003
2003
2002
Current provision:
Federal
$
(3
)
$
3
$
—
$
(252
)
State
(3
)
5
—
—
Total current
(6
)
8
—
(252
)
Deferred provision:
Federal
(1
)
—
—
—
State
(3
)
3
—
—
Total deferred
(4
)
3
—
—
Provision (credit) for income taxes
$
(10
)
$
11
$
—
$
(252
)
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The significant components of the deferred income tax provision
(credit) for the year ended December 31, 2004, the
nine months ended December 31, 2003, the three months ended
March 31, 2003 and the year ended December 31, 2002
are as follows (in millions):
Successor Company
Predecessor Company
Nine Months
Three Months
Year Ended
Ended
Ended
Year Ended
December 31,
December 31,
March 31,
December 31,
2004
2003
2003
2002
Deferred tax provision (exclusive of the other components listed
    below)
$
(237
)
$
415
$
356
$
(417
)
Increase (decrease) in the valuation allowance for deferred tax
    assets
233
(412
)
(356
)
417
Total
$
(4
)
$
3
$
—
$
—
A reconciliation of taxes computed at the statutory federal tax
rate on income (loss) before income taxes to the provision
(credit) for income taxes is provided below (in millions):
Successor Company
Predecessor Company
Nine Months
Three Months
Year Ended
Ended
Ended
Year Ended
December 31,
December 31,
March 31,
December 31,
2004
2003
2003
2002
Tax provision (credit) computed at federal statutory rate
$
(217
)
$
(57
)
$
572
$
(670
)
Book expenses not deductible for tax purposes
2
11
(203
)
15
State income tax provision, net of federal benefit
(4
)
5
—
—
Increase (decrease) in the federal valuation allowance
206
(307
)
(370
)
371
Reduction in net operating losses from discharge of indebtedness
—
351
—
—
Expiration of investment and foreign tax credits
6
19
—
25
Other
(3
)
(11
)
1
7
Provision (credit) for income taxes
$
(10
)
$
11
$
—
$
(252
)
Effective tax rate
2
%
7
%
—
%
13
%
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities
as of December 31, 2004 and 2003 are as follows (in
millions):
2004
2003
Deferred tax assets:
Employee benefits
$
1,162
$
1,141
Net operating loss carryforwards
313
30
Other deferred tax assets
195
184
AMT credit carryforward
24
27
Leasing transactions
10
10
Federal general business and foreign tax credit carryforwards
—
6
Valuation allowance
(825
)
(592
)
Net deferred tax assets
879
806
Deferred tax liabilities:
Depreciation and amortization
676
654
Sale and leaseback transactions
112
82
Other deferred tax liabilities
105
73
Total deferred tax liabilities
893
809
Net deferred tax liabilities
14
3
Less: current deferred tax liabilities
—
—
Noncurrent deferred tax liabilities
$
14
$
3
Included in the employee benefit deferred tax assets at
December 31, 2004 and 2003, among other items, are
$662 million and $632 million, respectively, related
to obligations of postretirement medical benefits.
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Table of Contents
As of December 31, 2004, the Company had a
$780 million federal net operating loss carryforward
expiring in 2024, $24 million of alternative minimum tax
credits which do not expire, and $1.8 billion of state net
operating loss carryforwards primarily expiring from 2006 to
2024. The Company filed for bankruptcy protection on
September 12, 2004. As a result, the tax attributes are
expected to be substantially reduced or eliminated by
cancellation of debt income that will result from the bankruptcy
proceedings. Additionally, the Company may have a change in
ownership upon emergence from bankruptcy, in which case Internal
Revenue Code Section 382 would substantially limit the
annual usage of any remaining tax attributes that were generated
prior to the change in ownership.
At December 31, 2003, the federal and state net operating
loss carryforwards were reduced by discharge of indebtedness
income of $1.2 billion that resulted from the August 2002
bankruptcy proceedings. In addition, an Internal Revenue Code
Section 382 change in ownership occurred upon emergence
from the Prior Bankruptcy and issuance of new common stock to
creditors. Section 382 substantially limited the annual
usage of the tax attributes that were generated prior to the
change in ownership.
The federal income tax returns of the Company through 2002 have
been examined and settled with the Internal Revenue Service. The
Company is not currently under examination.
The following table is a summary of pretax book income and
taxable income prior to net operating loss carryforwards for the
year ended December 31, 2004, the nine months ended
December 31, 2003, the three months ended March 31,
2003 and the year ended December 31, 2002 (in millions):
Successor Company
Predecessor Company
Nine Months
Three Months
Year Ended
Ended
Ended
Year Ended
December 31,
December 31,
March 31,
December 31,
2004
2003
2003
2002
Pretax book income (loss)
$
(621
)
$
(163
)
$
1,635
$
(1,915
)
Taxable income (loss)
(561
)
160
259
(1,102
)
The reasons for significant differences between taxable income
and pretax book income primarily relate to discharge of
indebtedness income, bankruptcy-related charges, employee
pension and postretirement benefit costs, employee-related
accruals and leasing transactions.
7.
Commitments and Contingencies
(a)
Commitments to purchase flight equipment
As of December 31, 2004, US Airways Group had 19
A320-family aircraft on firm order scheduled for delivery in the
years 2007 through 2009. US Airways Group also had ten A330-200
aircraft on firm order scheduled for delivery in the years 2007
through 2009. On February 3, 2005, the Bankruptcy Court
approved the Company's agreement with Airbus providing for,
among other things, delivery of the 19 A320-family aircraft in
years 2008 through 2010 and delivery of the ten A330-200
aircraft in years 2008 through 2009.
In December 2004, the Company reached aircraft leasing and
financing agreements with Embraer and Bombardier, which were
approved by the Bankruptcy Court in January 2005. Pursuant to
the agreement reached with Embraer, the Company purchased and
took delivery of three ERJ-170 aircraft in January 2005 and
committed to purchase and take delivery of three additional
ERJ-170 aircraft by March 31, 2005. The purchase of the
three ERJ-170s delivered in January 2005 was financed by Embraer
through a mortgage loan facility and the application of
$17 million of existing purchase deposits held by Embraer.
Additionally, $12 million of purchase deposits held by
Embraer will be used to fund an Embraer loan reserve. Embraer
will apply the reserve funds in the amounts and on the dates as
and when payments are due under the Embraer loans during the
period from October 1, 2004 through July 31, 2005 in
full satisfaction of the Company's payment obligation with
respect to such Embraer loans during such period. Upon delivery
of the first three ERJ-170s, which occurred in January 2005,
unless the Company assumes the Embraer aircraft purchase
agreement pursuant to Section 365 of the Bankruptcy Code,
no further obligations arise on the part of the Company or
Embraer with respect to the purchase and delivery of any
aircraft, other than those obligations that arise from or are
related to the purchase and delivery of the final three ERJ-170s
in March
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Table of Contents
2005. Embraer and the Company have agreed to negotiate a new
delivery schedule upon the Company's assumption of the
Embraer aircraft purchase agreement or upon the occurrence of
certain other events.
In the event that the Company fails to take delivery by
March 31, 2005 of the remaining three ERJ-170 aircraft ,
damages will accrue on account of the Company's failure to
take delivery of such aircraft from and after April 1, 2005
at the rate of $162,795 per month per aircraft until the
later of (i) 30 days after the Company emerges from
Chapter 11 and (ii) July 31, 2005, whereupon
Embraer's obligation to deliver such aircraft will
terminate and its damages with respect to such undelivered
aircraft may be as much as $10 million (rather than at the
rate of $162,795 per month), with Embraer having the right
to apply any remaining purchase deposits against Embraer's
aggregate damages.
Under the agreement reached with Bombardier, the Company
acquired three new CRJ-700 aircraft in January 2005. The
purchase was financed through the application of
$28 million of existing purchase deposits held by
Bombardier, $2 million in cash and a financed lease
facility with DVB Bank. Additionally $4 million of existing
purchase deposits held by Bombardier were used to satisfy
existing defaults and cure payments. So long as the Company
continues to operate under the protection of Chapter 11 in
compliance with the Bankruptcy Code, no obligations shall arise
on the part of the Company or Bombardier with respect to the
purchase and delivery of any aircraft.
(b)
Leases
The Company's airline subsidiaries lease certain aircraft,
engines and ground equipment, in addition to the majority of
their ground facilities. Ground facilities include executive
offices, maintenance facilities and ticket and administrative
offices. Public airports are utilized for flight operations
under lease arrangements with the municipalities or agencies
owning or controlling such airports. Substantially all leases
provide that the lessee must pay taxes, maintenance, insurance
and certain other operating expenses applicable to the leased
property. Some leases also include renewal and purchase options.
The Company subleases certain leased aircraft and ground
facilities under noncancelable operating leases expiring in
various years through the year 2023.
The following amounts related to capital leases are included in
Property and equipment as of December 31, 2004 and 2003 (in
millions):
2004
2003
Ground property
$
34
$
51
Less accumulated amortization
(3
)
(4
)
Total Net Book Value of Capital Leases
$
31
$
47
As of December 31, 2004, obligations under capital and
noncancelable operating leases for future minimum lease payments
were as follows (in millions):
Capital Leases
Operating Leases
2005
$
5
$
878
2006
5
774
2007
5
707
2008
5
629
2009
5
554
Thereafter
104
4,169
Total minimum lease payments
129
7,711
Less sublease rental receipts
—
(4
)
Total minimum operating lease payments
129
$
7,707
Less amount representing interest
(80
)
Present value of future minimum capital lease payments
49
Less current obligations under capital leases
(1
)
Long-term obligations under capital leases
$
48
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For the year ended December 31, 2004, the nine months ended
December 31, 2003, the three months ended March 31,
2003 and the year ended December 31, 2002, rental expense
under operating leases was $793 million, $591 million,
$194 million, and $861 million, respectively.
The Company's airline subsidiaries also lease certain owned
flight equipment to third parties under noncancelable operating
leases that expire in 2006. The future minimum rental receipts
associated with these leases are $3 million in 2005 and
$1 million in 2006.
The following amounts relate to aircraft leased under such
agreements as reflected in flight equipment as of
December 31, 2004 and 2003 (in millions):
2004
2003
Flight equipment
$
8
$
53
Less accumulated amortization
(3
)
(3
)
$
5
$
50
(c)
Regional jet capacity purchase agreements
US Airways has entered into capacity purchase agreements
with certain regional jet operators. The capacity purchase
agreements provide that all revenues (passenger, mail and
freight) go to US Airways. In return, US Airways
agrees to pay predetermined fees to the regional airlines for
operating an agreed number of aircraft, without regard to the
number of passengers onboard. In addition, these agreements
provide that certain variable costs, such as fuel and airport
landing fees, will be reimbursed 100% by US Airways.
US Airways controls marketing, scheduling, ticketing,
pricing and seat inventories. The regional jet capacity purchase
agreements have expirations from 2008 to 2013 and provide for
optional extensions at the Company's discretion. The future
minimum noncancelable commitments under the regional jet
capacity purchase agreements are $257 million in 2005,
$262 million in 2006, $268 million in 2007 and
$266 million in 2008, $202 million in 2009 and
$266 million thereafter.
(d)
Legal Proceedings
On September 12, 2004, US Airways Group and its
domestic subsidiaries, including its principal operating
subsidiary, US Airways, filed voluntary petitions for
relief under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the Eastern
District of Virginia, Alexandria Division (Case Nos.
04-13819-SSM through 03-13823-SSM). Each of the Debtors
continues to operate its business and manage its property as a
debtor-in-possession pursuant to Sections 1107 and 1108 of
the Bankruptcy Code. As a result of the current Chapter 11
filing, attempts to collect, secure or enforce remedies with
respect to prepetition claims against the Debtors are subject to
the automatic stay provisions of Section 362(a) of the
Bankruptcy Code.
On February 26, 2004, a company called I.A.P. Intermodal,
LLC filed suit against US Airways Group and its wholly
owned airline subsidiaries in the United States District Court
for the Eastern District of Texas alleging that the defendants
infringed upon three patents held by plaintiffs, all of which
patents are entitled, "Method to Schedule a Vehicle in
Real-Time to Transport Freight and Passengers." Plaintiff
seeks various injunctive relief as well as costs, fees and
treble damages. US Airways Group and the subsidiaries were
formally served with the complaint on June 21, 2004.
US Airways Group is unable to ascertain at this time the
likelihood or potential scale of liability. It should be noted
that on the same date, the same plaintiff filed what the Company
believes to be substantially similar cases against nine other
major airlines, including British Airways, Northwest Airlines
Corporation (Northwest), Korean Airlines Co., Ltd., Deutsche
Lufthansa AG, Air France, Air Canada, Singapore Airlines Ltd.,
Delta Airlines, Inc. (Delta), and Continental Airlines, Inc.,
and had filed a suit against the parent company of American
Airlines in December, 2003. This action was stayed as to
US Airways Group and its wholly owned subsidiaries as a
result of the bankruptcy filing on September 12, 2004.
The Port Authority of New York and New Jersey filed a proof of
claim against US Airways in the Prior Bankruptcy. The claim
was in the amount of $8.5 million and it alleged
environmental contamination and building deficiencies at
LaGuardia Airport. US Airways' liability and defenses
to such liability were
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unaffected by the Prior Bankruptcy. US Airways has received
no notice, inquiry or other communication from the Port
Authority other than in connection with the proof of claim, and
therefore is unable to evaluate at this time the validity of the
underlying claim, the degree to which US Airways might
share responsibility with other parties, or the cost of cleanup
or correction of the alleged building deficiencies.
On January 7, 2003, the Internal Revenue Service (IRS)
issued a notice of proposed adjustment to US Airways Group
proposing to disallow $573 million of capital losses that
US Airways Group sustained in the tax year 1999 on the sale
of stock of USLM Corporation (USLM). On February 5, 2003,
the IRS filed a proof of claim with the Bankruptcy Court in
connection with the Prior Bankruptcy asserting the following
claims with respect to USLM: (1) secured claims for
U.S. federal income tax and interest of $0.7 million;
(2) unsecured priority claims for U.S. federal income
tax of $68 million and interest of $14 million; and
(3) an unsecured general claim for penalties of
$25 million. On May 8, 2003, US Airways Group
reached a tentative agreement with the IRS on the amount of
U.S. federal income taxes, interest and penalties due
subject to final approval from the Joint Committee on Taxation.
By letter dated September 11, 2003, US Airways Group
was notified that the Joint Committee on Taxation had accepted
the tentative agreement with the IRS, including a settlement of
all federal income taxes through the end of 2002. Due to the
bankruptcy filing on September 11, 2004, which suspended
payment of prepetition liabilities, final payment terms under
the agreement have not been submitted to the Bankruptcy Court
for approval.
US Airways is named as a defendant along with most of the
major domestic airlines, several national carriers and a number
of international carriers, in a class action lawsuit on behalf
of all United States-based travel agents filed in federal court
in North Carolina. The complaint alleges violation of the
federal antitrust laws with respect to commission rate
reductions and/or commission cap reductions implemented by
various airlines in 1997, 1998, 1999, 2001 and 2002. Plaintiffs
seek unspecified damages for lost commissions, as well as
injunctive relief. On October 30, 2003, the federal court
granted a motion for summary judgment dismissing all claims
against airline defendants other than the carriers then in
bankruptcy, including US Airways, because proceedings had
been stayed against those bankrupt defendants. That grant of
summary judgment was affirmed by the Fourth Circuit Court of
Appeals. On January 28, 2004, the federal court in North
Carolina dismissed all claims against US Airways. The
plaintiffs in this proceeding had also filed a claim in
Bankruptcy Court for prepetition and continuing postpetition
damages. The Bankruptcy Court determined that the entire claim
was prepetition and unsecured, and the plaintiffs appealed this
decision to the District Court. The parties agreed to stay this
appeal pending the outcome of the plaintiffs' appeal of the
grant of summary judgment in the North Carolina action.
Following the Fourth Circuit's decision to affirm the
summary judgment ruling, the plaintiffs dismissed their appeal
of the Bankruptcy Court decision.
Williard, Inc. (Williard), together with the joint venture of
Williard and Len Parker Associates (Williard/ Parker), was
awarded construction contracts with US Airways for work to
be performed at the Philadelphia International Airport. On
May 29, 2002, US Airways terminated the largest
contract between the parties. Williard and Williard/ Parker sued
US Airways in Pennsylvania state court for over
$14 million in damages representing termination costs and
lost profits, along with other alleged contractual damage
claims. Subsequently, Limbach Company, LLC (Limbach) alleged
that it purchased the claims of Williard. After a trial, the
Bankruptcy Court, on June 7, 2004, determined the value of
the Limbach and Limbach/ Parker claims to be $2,542,843. Limbach
and Limbach/ Parker are challenging on appeal various rulings of
the Bankruptcy Court, including the amount of the claim and its
status as an unsecured claim. US Airways has also filed an
appeal. Limbach and Limbach/ Parker have filed an action in
state court against the City of Philadelphia (the City) and the
Philadelphia Authority for Industrial Development
(PAID) and received permission to include US Airways
as a co-defendant, provided that Limbach and Limbach/ Parker did
not make any claims against US Airways in that action. In
the lawsuit against the City and PAID, Limbach and Limbach/
Parker are seeking the same sums as in their earlier lawsuit and
proofs of claim against US Airways, but this time under the
equitable theories of third-party beneficiary, quantum meruit
and constructive trust. The court in the Philadelphia action
dismissed US Airways from the lawsuit and dismissed the
third-party beneficiary claims against the City and PAID. These
rulings are subject to appeal at a later date. On May 21,
2004, the City and PAID filed a Motion for Summary Judgment
seeking dismissal of the lawsuit. Should Limbach and/or Limbach/
Parker recover in the Philadelphia action against the City and
PAID, that award would be paid at 100 cents on the dollar.
US Airways may have an obligation to indemnify the City and
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PAID under its agreements related to the airport development,
which US Airways assumed as part of the Prior Bankruptcy.
Therefore, any recovery by Limbach and/or Limbach/ Parker
against the City and PAID could result in an indemnification
claim that US Airways may have to pay at full value.
Proceedings in the Bankruptcy Court were stayed by the
bankruptcy filing on September 12, 2004.
On October 4, 2004, the System Board of Adjustment (the
System Board) issued a ruling in which the Company's
outsourcing of heavy maintenance visits was deemed to be in
violation of the collective bargaining agreement between
US Airways and the IAM as the representative of Mechanic
and Related Employees. The System Board ordered the Company to
cease and desist from outsourcing the work, and ordered that
affected employees be made whole. The System Board did not
specify any particular monetary remedy and none has since been
decided or agreed upon by the parties. However, the Bankruptcy
Court's order granting in part the Company's motion
for relief under Section 1113(e) of the Bankruptcy Code
included relief from any restrictions on the Company's
right to outsource the work covered by this award through
February 15, 2005. Neither the Company's
Section 1113(e) motion nor the Bankruptcy Court's
order addressed the make-whole portion of this award. On
November 12, 2004, the Company filed a motion asking the
Bankruptcy Court for permission to reject the IAM collective
bargaining agreement under which the grievance had been filed.
On January 6, 2005, the Bankruptcy Court granted the
Company's motion. On January 21, 2005, the IAM
ratified a new collective bargaining agreement to replace the
one that had been rejected, and as part of the new agreement,
the IAM agreed not to pursue any claims for damages associated
with the rejection of the previous agreement.
The Company and US Airways have been named as defendants in two
lawsuits filed in federal district court for the Eastern
District of Michigan. Delta is also named as a defendant in both
actions, while Northwest and the Airlines Reporting Corporation
were sued separately in a third action. The complaints were
filed on behalf of a class of airline passengers who originated
or terminated their trips at the defendant carriers'
respective hubs. These passengers allege that they paid
excessive fares due to the respective airlines' enforcement
of ticketing rules that prohibit the use of a connecting segment
coupon that is part of a through-fare ticket where the passenger
does not fly or intend to fly the entire ticketed itinerary.
Plaintiffs allege monopolization and restraint of trade in
violation of federal antitrust laws. They seek recovery of
treble damages from all named defendants in the amount of
$390 million and an injunction prohibiting future
enforcement of the rules at issue. On May 16, 2002, the
court denied the defendant airlines' Motion for Summary
Judgment and granted the plaintiffs' Motion for
Class Certification in each of the cases. On May 31,
2002, the Company and US Airways filed a petition with the
United States Court of Appeals for the Sixth Circuit seeking a
discretionary review of the certification order. On
November 21, 2002, the petition for permission to appeal
the class certification decision was denied. On December 4,
2002, Delta and Northwest filed a rehearing petition seeking en
banc review of the initial Sixth Circuit denial. On
February 24, 2003, Northwest and Delta's petition for
rehearing en banc was denied. Notwithstanding the district
court's denial of summary judgment and the petition, the
Company and US Airways believe the claims are without merit and
intend to pursue a vigorous defense. The automatic stay under
Section 362(a) of the Bankruptcy Code was lifted when the
Company emerged from bankruptcy on March 31, 2003, but the
action was subsequently stayed once more as a result of the
Company's bankruptcy filing on September 12, 2004.
In May 1995, the Company, US Airways and the Retirement Plan for
Pilots of US Airways, Inc. (Pilot Retirement Plan) were sued in
federal district court for the District of Columbia by 481
active and retired pilots, alleging that defendants had
incorrectly interpreted the plan provisions and erroneously
calculated benefits under the Pilot Retirement Plan. The
plaintiffs sought damages in excess of $70 million. In May
1996, the court issued a decision granting US Airways'
Motion to Dismiss the majority of the complaint for lack of
jurisdiction, deciding that the dispute must be resolved through
the arbitration process under the Railway Labor Act because the
Pilot Retirement Plan was collectively bargained. The plaintiffs
appealed the district court's dismissal and in February
1999, the U.S. Court of Appeals upheld the district
court's decision originally granted in May 1996, in the
defendants' favor. In May 1999, the plaintiffs filed a
petition for certiorari with the U.S. Supreme Court. In
October 1999, the U.S. Supreme Court denied the
plaintiffs' petition for certiorari. The U.S. District
Court retained jurisdiction over one count of the complaint,
alleging violation of a disclosure requirement under ERISA. In
August 2000, the U.S. District Court dismissed the
remaining count without prejudice, giving plaintiffs the right
to reinstate their claims after completion of the
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arbitration. Certain of the plaintiffs filed a claim before the
US Airways Pilot Retirement Board, requesting arbitration of
their claim for benefits that they believe were erroneously
calculated, and the Retirement Board selected an arbitrator to
decide certain issues related to the plaintiffs' claims for
benefits. However, the Pilot Retirement Plan was terminated on
March 31, 2003, and on April 1, 2003 the PBGC became
trustee of the plan. Also, claims related to this matter were
expunged in the Prior Bankruptcy. Accordingly, the Company does
not believe there is any continuing risk of material liability
associated with this matter.
On September 29, 2000, US Airways intervened in a
proceeding that was originally brought on January 26, 1998,
by the Pennsylvania Department of Environment
Protection (DEP) against Allegheny County,
Pennsylvania and the Allegheny County Aviation Administration
(ACAA), alleging that a variety of airfield and aircraft
de-icing activities at Pittsburgh International Airport
(Airport) violated the requirements of (a) a 1994 Consent
Order and Adjudication issued to Allegheny County and air
carrier tenants at the Airport, (b) the Airport's
National Pollutant Discharge Elimination System Permit, and
(c) the Pennsylvania Clean Streams Law. The action was
brought before the Pennsylvania Environmental Hearing Board.
During March 2001, the Environmental Hearing Board approved
Allegheny County's Motion to Withdraw the Appeal without
Prejudice, thereby terminating the appeal. However, during the
course of settlement discussions leading to the termination of
the appeal, the DEP advised Allegheny County and US Airways
that DEP (i) will require additional measures to be taken
to control de-icing materials at the Airport, and (ii) will
assess a civil penalty against Allegheny County and
US Airways for the alleged violations described above. The
ACAA, US Airways and the DEP have continued to work
together with the goal of fashioning an ultimate resolution to
the de-icing issues. The Company does not believe that the
settlement of this matter will have a material adverse effect on
its financial condition, results of operations or liquidity.
(e)
Guarantees
US Airways guarantees the payment of principal and interest
on certain special facility revenue bonds issued by
municipalities to build or improve certain airport and
maintenance facilities which are leased to US Airways.
Under such leases, US Airways is required to make rental
payments through 2023, sufficient to pay maturing principal and
interest payments on the related bonds. As of December 31,
2004, the principal amount outstanding of these bonds was
$79 million.
The Company enters into real estate leases in substantially all
cities that it serves. It is common in such commercial lease
transactions for the Company as the lessee to agree to indemnify
the lessor and other related third parties for tort liabilities
that arise out of or relate to the Company's use or
occupancy of the leased premises. In some cases, this indemnity
extends to related liabilities arising from the negligence of
the indemnified parties, but usually excludes any liabilities
caused by their gross negligence or willful misconduct.
Additionally, the Company typically indemnifies such parties for
any environmental liability that arises out of or relates to its
use of the leased premises.
In aircraft financing agreements, the Company typically
indemnifies the financing parties, trustees acting on their
behalf and other related parties against liabilities that arise
from the manufacture, design, ownership, financing, use,
operation and maintenance of the aircraft and for tort
liability, whether or not these liabilities arise out of or
relate to the negligence of these indemnified parties, except
for their gross negligence or willful misconduct. In aircraft
financing transactions structured as leveraged leases, the
Company typically indemnifies the lessor with respect to adverse
changes in U.S. tax laws.
The Company expects that it would be covered by insurance
(subject to deductibles) for most tort liabilities and related
indemnities described above with respect to real estate leases
and aircraft it operates. The Company cannot estimate the
potential amount of future payments under the foregoing
indemnities and guarantees.
(f)
Concentration of credit risk
The Company invests available cash in money market securities of
various banks, commercial paper and asset-backed securities of
various financial institutions, other companies with high credit
ratings and securities backed by the U.S. Government.
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As of December 31, 2004, most of the Company's
receivables related to tickets sold to individual passengers
through the use of major credit cards or to tickets sold by
other airlines and used by passengers on the Company's
airline subsidiaries. These receivables are short-term, mostly
being settled within seven days after sale. Bad debt losses,
which have been minimal in the past, have been considered in
establishing allowances for doubtful accounts. The Company does
not believe it is subject to any significant concentration of
credit risk.
8.
Accumulated other comprehensive income (loss), net of income
    tax effect
Comprehensive income encompasses net income and "other
comprehensive income," which includes all other non-owner
transactions and events that change stockholders' equity.
The Company's other comprehensive income includes
unrealized gains (losses) on available-for-sale securities,
certain changes in the fair value of certain derivative
instruments and an adjustment for minimum pension liability,
each shown net of income tax effects.
As presented in the accompanying Consolidated Statements of
Stockholders' Equity (Deficit), the Company recognized
comprehensive loss of $654 million, including a net loss of
$611 million and other comprehensive loss of
$43 million, for the year ended December 31, 2004. For
the nine months ended December 31, 2003 the Company
recognized a comprehensive loss of $229 million, including
a net loss of $174 million and other comprehensive loss of
$55 million. The Company recognized comprehensive income of
$2.51 billion, including net income of $1.64 billion
and other comprehensive income of $870 million, for the
three months ended March 31, 2003. For the year ended
December 31, 2002, the Company recognized a comprehensive
loss of $2.36 billion, including a net loss of
$1.65 billion and other comprehensive loss of
$717 million.
The activity within Other comprehensive income (loss) and the
related income tax effects are as follows (in millions):
Successor Company
Predecessor Company
Nine Months
Three Months
Year Ended
Ended
Ended
Year Ended
December 31,
December 31,
March 31,
December 31,
2004
2003
2003
2002
Unrealized gain (loss) on available-for-sale securities
$
—
$
—
$
—
$
(2
)
Fuel cash flow hedges:
Reclassification adjustment for gains included in net income
    (loss) during the period
(75
)
(14
)
(16
)
(13
)
Change in fair value of hedges
66
45
5
40
Unrealized gain (loss), net of reclassification adjustment
(9
)
31
(11
)
25
Minimum pension liability adjustment
(34
)
(86
)
85
(742
)
Adjustments in connection with reorganization
—
—
796
—
Other comprehensive income (loss)
$
(43
)
$
(55
)
$
870
$
(717
)
There was no tax effect on any element of Other comprehensive
income (loss) during the year ended December 31, 2004, the
nine months ended December 31, 2003, the three months ended
March 31, 2003, and the year ended December 31, 2002.
9.
Stock-Based Compensation
(a)
Successor Company
Upon emergence from the Prior Bankruptcy , the Successor Company
adopted the fair value method of recording stock-based employee
compensation contained in SFAS 123 and accounted for this
change in accounting principle using the "prospective
method" as described by SFAS 148. Accordingly, the
fair value of all Successor Company stock option and warrant
grants, as determined on the date of grant, will be amortized as
compensation expense (an element of Personnel costs) in the
Consolidated Statement of Operations over the vesting period.
The Company has disclosed in Note 2(m) the effect on net
income (loss) and net earnings (loss) per common share as if the
fair value based recognition provisions of SFAS 123 had
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been applied to all outstanding and unvested stock option awards
in each Predecessor Company period presented.
23,028,687 shares of Class A Common Stock allocated to
employees pursuant to collective bargaining agreements were
valued at $169 million in the aggregate and were included
as deferred compensation as a reduction to Stockholders'
Equity (Deficit) upon emergence from the Prior Bankruptcy. The
Company records the deferred compensation as compensation
expense as the related shares vest.
As of December 31, 2004, there were 4,750,000 shares
of Class A Common Stock and 2,220,570 each of
Class A-1 Warrants and shares of Class A Preferred
Stock authorized to be granted to the Company's management
and 500,000 options to purchase Class A Common Stock
authorized to be granted to the Company's non-employee
directors. Through December 31, 2004, 3,962,593 shares
of Class A Common Stock, 2,118,490 each of Class A-1
warrants and Class A Preferred Stock, and 466,640 options
to purchase Class A Common Stock were granted to the
Company's management. Additionally, an aggregate of 91,397
options to purchase Class A Common Stock were granted to
the Company's non-employee directors. Grants of
Class A Common Stock, stock options and warrants generally
vest over four years. The Company records compensation expense
over the vesting period. The following table summarizes the
activity of the Company's stock options and warrants since
emergence from the Prior Bankruptcy:
Weighted
Weighted
Avg. Exercise
Avg. Exercise
Stock Options
Price
Warrants
Price
Granted
50,000
$
7.34
2,227,576
$
7.42
Canceled
—
—
(11,050
)
7.42
Balance at 12/31/03
50,000
7.34
2,216,526
7.42
Granted
513,037
1.53
56,023
7.42
Canceled
(114,250
)
1.77
(154,059
)
7.42
Balance at 12/31/04
448,787
$
2.11
2,118,490
$
7.42
The following table summarizes additional information regarding
the warrants and options outstanding as of December 31,
2004:
Number of
Weighted Avg. Remaining
Range of Exercise Prices
Options & Warrants
Contractual Life (years)
Exercisable
$
1.02 to $7.34
448,787
9.4
45,000
$
7.42
2,118,490
5.3
1,927,000
The Company granted 835,160 and 3,627,923 shares of
restricted Class A Common Stock during the year ended
December 31, 2004 and the nine months ended
December 31, 2003. There were 1,997,108 non-vested shares
of restricted stock outstanding as of December 31, 2004.
The weighted average fair value per share of US Airways Group
Class A Common Stock grants was $2 and $7 in the year ended
December 31, 2004 and the nine months ended
December 31, 2003, respectively. In order to calculate the
stock-based compensation for stock options and warrants using
the fair value method provisions in SFAS 123, US Airways
used the Black-Scholes stock option pricing model with the
following weighted-average assumptions:
Successor Company
Year Ended
Nine Months Ended
December 31, 2004
December 31, 2003
Stock volatility
65
%
65
%
Risk free interest rate
2.9
%
2.2
%
Expected life
4 years
3 years
Dividend yield
—
—
The Company recognized compensation expense related to
Class A Common Stock, stock option and stock warrant grants
to the Company's employees of $50 million and
$135 million for the year ended December 31, 2004 and
the nine months ended December 31, 2003, respectively.
The Company held approximately 753,000 and 81,000 shares of
Class A Common Stock in treasury as of December 31,
2004 and December 31, 2003, respectively. During 2004 and
2003, employees surrendered
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672,420 and 4,760,000 shares of Class A Common Stock
to the Company in lieu of cash payments to satisfy tax
withholding requirements related to the vesting of certain
Class A Common Stock grants, respectively.
The ultimate recovery, if any, to holders of the common stock
will not be determined until confirmation of a plan of
reorganization. The plan of reorganization could result in
holders of US Airways Group's common stock and related
equity securities receiving no distribution on account of their
interest and cancellation of the equity.
(b)
Predecessor Company
As of December 31, 2002, approximately 25.4 million
shares of common stock were reserved for future grants of common
stock or the possible exercise of stock options issued under the
Company's six stock option, stock purchase and incentive
plans. The Predecessor Company accounted for stock-based
compensation using the intrinsic value method as prescribed
under APB 25 and related interpretations. The Company
recognized compensation expense (an element of Personnel costs)
related to common stock grants of $1 million and
$3 million for the three months ended March 31, 2003,
and the year ended December 31, 2002, respectively.
Deferred compensation related to common stock grants was
$5 million as of December 31, 2002. Deferred
compensation was amortized as Personnel costs over the
applicable vesting period. The Company granted 0.8 million
shares of common stock during 2002. The weighted average fair
value per share of common stock granted in 2002 was $6.
A five-year labor contract between US Airways and its pilots
became effective January 1, 1998. A provision of the labor
contract established the 1998 Pilot Stock Option Plan of US
Airways Group, Inc. (1998 Plan). The 1998 Plan authorized the
Company to grant in six separate series 11.5 million
stock option awards to its pilots over the five-year life of the
labor contract (with exercise prices established based on the
fair market value of the Company's common stock over a time
period preceding each grant). Options granted under the first
series and second through fifth series were subject to a
two-year and one-year vesting period, respectively. Options
granted under the last series were not subject to any vesting
period. All awards under the 1998 Plan expired ten years after
grant. This plan was terminated and all outstanding awards were
cancelled upon emergence from bankruptcy on March 31, 2003.
The 1997 Stock Incentive Plan of US Airways Group, Inc. (1997
Plan) authorized the Company to grant common stock and stock
option awards to non-officer key employees provided that no more
than 3.0 million shares of common stock were issued as a
result of the awards. The 1996 Stock Incentive Plan of US
Airways Group, Inc. (1996 Plan), which encompassed the
Company's former 1988 Stock Incentive Plan of USAir Group,
Inc., authorized the Company to grant common stock and stock
option awards to key employees provided that no more than
18.4 million shares of common stock were issued as a result
of the awards. All stock option awards under the 1997 Plan and
1996 Plan expired after a period of ten years and one month from
date of grant. These plans were terminated and all outstanding
awards were cancelled upon emergence from bankruptcy on
March 31, 2003.
The US Airways Group, Inc. Nonemployee Director Stock Incentive
Plan (Director Plan) authorized the Company to grant stock
option awards to each nonemployee director provided that no more
than 160,000 shares of common stock were issued as a result
of the awards. All stock option awards under the Director Plan
expired after ten years from date of grant and were subject to a
one-year vesting period. This plan was terminated and all
outstanding awards were cancelled upon emergence from bankruptcy
on March 31, 2003.
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The following table summarizes stock option transactions
pursuant to the Company's various stock option and
incentive plans for the three months ended March 31, 2003,
and the year ended December 31, 2002 (stock options in
thousands):
Three Months Ended
Year Ended
March 31, 2003
December 31, 2002
Weighted
Weighted
Average
Average
Options
Exercise Price
Options
Exercise Price
Stock Options
Outstanding at beginning of year
17,223
$
27
15,143
$
35
Granted(1)
—
$
—
2,089
$
5
Granted(2)
—
$
—
1,844
$
5
Exercised
—
$
—
(13
)
$
5
Forfeited
(9
)
$
10
(1,291
)
$
42
Expired
—
$
—
(549
)
$
39
Terminated, March 31, 2003
(17,214
)
$
27
—
$
—
Outstanding at end of period
—
$
—
17,223
$
27
Exercisable at end of period
—
12,846
(1)
Exercise price was equal to the fair market value of a share of
    common stock at measurement date for grant.
(2)
Exercise price was greater than the fair market value of a share
    of common stock at measurement date for grant.
The weighted average fair value per stock option for stock
options which had an exercise price equal to the fair market
value of a share of common stock at the date of grant was $3 for
2002. There were no such grants in the three months ended
March 31, 2003. The weighted average fair value per stock
option for stock options which had an exercise price greater
than the fair market value of a share of common stock at the
date of grant was $3 for 2002. There were no such grants in the
three months ended March 31, 2003.
10.
Equity Structure of the Reorganized US Airways Group
US Airways Group's 2003 Plan became effective on
March 31, 2003, at which time the then-outstanding equity
securities of the Predecessor Company were cancelled. In
accordance with the 2003 Plan, the Successor Company adopted the
equity structure in the table below upon emergence. The equity
values were determined with the assistance of financial
advisors. See Note 13 for more information.
Long-term
Stockholders'
Debt, net of
Authorized
Allocated
Fair Value
Equity
Discount
Par Value
Shares
Shares
per Unit
(Millions)
(Millions)
Class A Common Stock
$
1.00
200,000,000
48,650,000
$
7.344
$
357
$
—
Class B Common Stock
$
1.00
5,000,000
5,000,000
$
7.344
37
—
Class A Preferred Stock
$
0.0001
25,000,000
16,729,430
$
—
—
—
Class B Preferred Stock
$
1,000
250,000
75,000
$
640
—
48
Class C Preferred Stock
$
1.00
10
10
$
—
—
—
Preferred Stock
$
0.01
24,749,990
—
$
—
—
—
Class A-1 Warrants
$
—
25,000,000
16,729,430
$
2.61
44
—
$
438
$
48
In exchange for its $240 million investment, RSA received
20,652,593 shares of Class A Common Stock,
5,000,000 shares of Class B Common Stock,
75,000 shares of Class B Preferred Stock (see below),
1,380,570 Class A-1 Warrants and 1,380,570 shares of
Class A Preferred Stock. The fair values reflected in the
above table as of March 31, 2003 related to RSA's
equity securities were as follows: $152 million for the
Class A Common Stock, $37 million for the Class B
Common Stock, $48 million for the Class B Preferred
Stock and $4 million for the Class A-1 Warrants.
The Class B Preferred Stock issued to RSA is subject to
mandatory redemption on its maturity date of March 31,
2011. The Company's policy is to classify equity
instruments with characteristics of liabilities and equity,
including those with mandatory redemption features, as
liabilities and corresponding dividends and accretion of
discounts are recorded as interest expense. Upon its maturity,
the Company will be required to
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redeem each share for $1,000, or $75 million in aggregate,
plus accrued and unpaid dividends. Class B Preferred Stock
holders are entitled to cumulative quarterly dividends at a rate
of 8% per annum paid in cash by the Company. After
March 31, 2006, the Company may redeem for cash each
Class B Preferred Share at a redemption price initially
equal to $1,025 declining ratably to par value through
March 31, 2010, plus accrued and unpaid dividends. See
Note 12 for further information regarding dividend payments
to RSA in 2003 and 2004.
Holders of Class A Common Stock, Class A Preferred
Stock and Class B Preferred Stock are entitled to cast one
vote per share on all matters voted on by stockholders. Holders
of Class B Common Stock are entitled to cast twenty votes
per share on all matters voted on by stockholders. The Air Line
Pilots Association, International; the International Association
of Machinists and Aerospace Workers; the Association of Flight
Attendants-Communication Workers of America; the Communication
Workers Association of America and the Transport Workers Union
of America hold the Class C Preferred Stock and are
entitled to designate and vote to elect four directors to the
Company's Board of Directors.
Holders of Class B Common Stock have the right to convert
shares of Class B Common Stock into the same number of
shares of Class A Common Stock at any time.
Each Class A-1 Warrant is exercisable for one share of
Class A Common Stock upon tender of the warrant, a share of
Class A Preferred Stock and payment of an exercise price of
$7.42 per share of Class A Common Stock. The exercise
price may be paid in cash, or, in certain instances, (a) by
delivery of shares of Class B Preferred Stock, valued at
their redemption price, (b) by delivery of additional
Class A-1 Warrants and shares of Class A Preferred
Stock or (c) by a combination of any of the foregoing. The
terms of the Class A-1 Warrants provide for customary
anti-dilution protections, which adjust the exercise price and
number of exercise shares upon certain events that may have a
dilutive effect on the Class A-1 Warrants, such as stock
splits, securities issuances or mergers. The voting power of the
Class A Preferred Stock is also subject to adjustment upon
any such anti-dilution adjustment so that the aggregate voting
power of the Class A Preferred Stock is equal to the
aggregate number of shares of Class A Common Stock into
which such Class A-1 Warrants are exercisable.
The other equity securities allocated to the Company's
creditors, debtors and employees in connection with the
Company's emergence from the Prior Bankruptcy were
27,997,407 shares of Class A Common Stock and
15,348,860 each of Class A-1 Warrants and shares of
Class A Preferred Stock. The fair values reflected in the
above table as of March 31, 2003 related to these equity
securities were $206 million for the Class A Common
Stock and $40 million for the Class A-1 Warrants.
A total of 23,028,687 shares of Class A Common Stock
allocated to employees pursuant to collective bargaining
agreements was valued at $169 million in the aggregate and
was included as deferred compensation as a reduction to
Stockholders' Equity (Deficit) upon emergence. The Company
records the deferred compensation as compensation expense as the
related shares vest.
See Note 9 for further discussion related to stock-based
compensation. The Company allocated 8,483,330 Class A-1
Warrants and 8,483,330 shares of Class A Preferred
Stock to participants in the ATSB Loan. These Class A-1
Warrants were valued at $22 million and reflected as a
discount to the carrying value of the $1 billion loan on
the Company's Consolidated Balance Sheet.
There were 3,750,000 shares of Class A Common Stock
and 2,220,570 each of Class A-1 Warrants and shares of
Class A Preferred Stock authorized to be granted to the
Company's management pursuant to the Company's 2003
Plan and 500,000 options to purchase Class A Common Stock
authorized to be granted to the Company's nonemployee
directors not listed in the above table. See Note 9 for
further information related to stock-based compensation.
11.
Operating Segments and Related Disclosures
The Company is managed as a single business unit that provides
air transportation for passengers and cargo. This allows it to
benefit from an integrated revenue pricing and route network
that includes US Airways, Piedmont, PSA and third-party
carriers that fly under capacity purchase agreements as part of
US Airways Express. The flight equipment of all these
carriers is combined to form one fleet which is
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deployed through a single route scheduling system. When making
resource allocation decisions, the chief operating decision
maker evaluates flight profitability data, which considers
aircraft type and route economics, but gives no weight to the
financial impact of the resource allocation decision on an
individual carrier basis. The objective in making resource
allocation decisions is to maximize consolidated financial
results, not the individual results of US Airways, Piedmont and
PSA.
Information concerning operating revenues in principal
geographic areas is as follows (in millions):
Successor Company
Predecessor Company
Year Ended
Nine Months Ended
Three Months Ended
Year Ended
December 31, 2004
December 31, 2003
March 31, 2003
December 31, 2002
United States
$
5,275
$
4,518
$
1,336
$
6,065
Foreign
1,842
794
198
912
Total
$
7,117
$
5,312
$
1,534
$
6,977
12.
Related Party Transactions
(a)
RSA
As of March 31, 2003, RSA held approximately 36.2%, on a
fully-diluted basis, of the Company's equity, had a voting
interest of approximately 71.6% and was entitled to designate
and vote to elect eight of 15 directors to Reorganized US
Airways Group's Board of Directors. Total amounts due to
RSA at December 31, 2004 and 2003 included $78 million
and $75 million, respectively, of Class B mandatorily
redeemable preferred stock and $54 million and
$73 million, respectively, of the initial $100 million
at-risk amount under the ATSB Loan. For the year ended
December 31, 2004, interest expense related to the
Class B Preferred Stock totaled $8 million, including
$6 million related to dividend requirements. For the nine
months ended December 31, 2003, interest expense related to
Class B Preferred Stock totaled $6 million, including
$5 million related to dividend requirements. Dividend
payments of $5 million and $3 million were made in
cash in the year ended December 31, 2004 and the nine
months ended December 31, 2003, respectively. Accrued and
unpaid dividends at December 31, 2004 totaled
$3 million, which is included in the carrying value of the
Class B Preferred Stock at December 31, 2004. The
Company is restricted from making further dividend payments
under the terms of the ATSB Loan. Interest expense on RSA's
portion of the ATSB Loan was $5 million with interest
payments of $5 million for the year ended December 31,
2004. See also Notes 2(b), 4 and 10 for additional
information with regard to the terms of RSA's investment,
Class B Preferred Stock and ATSB Loan.
(b)
Employees
During the year ended December 31, 2004, the nine months
ended December 31, 2003 and the year ended
December 31, 2002, employees surrendered
672,000 shares, 4,760,000 shares and
77,000 shares of common stock, respectively, to the Company
in lieu of cash payments to satisfy tax withholding requirements
related to the vesting of certain common stock grants (see also
Notes 9 and 10). There were no shares surrendered of common
stock during the three months ended March 31, 2003.
13.
Fresh-start Reporting
In connection with its emergence from the Prior Bankruptcy on
March 31, 2003, US Airways Group adopted fresh-start
reporting in accordance with SOP 90-7. Accordingly, the
Company valued its assets, liabilities and equity at fair value.
The excess of the reorganization value over tangible assets and
identifiable intangible assets has been reflected as Goodwill on
the Consolidated Balance Sheet. Estimates of fair value
represent the Company's best estimate based on independent
appraisals and valuations and, where the foregoing are not
available, industry trends and by reference to market rates and
transactions. The Company's equity value of
$438 million at March 31, 2003 was determined with the
assistance of financial advisors. In determining the equity
value, the financial advisors and the Company considered several
matters, including the following: (i) certain recent
financial information of the Company; (ii) certain
financial projections prepared by the Company in connection with
the ATSB Loan and RSA Investment Agreement including the
underlying assumptions; (iii) the equity transactions
encompassed by the RSA Investment Agreement; (iv) a
discounted cash flow analysis prepared on a going concern basis;
(v) current and historical market values of
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publicly traded companies that are in businesses reasonably
comparable to the Company and (vi) certain additional
economic and industry conditions. The Company received third
party appraisals for certain assets and liabilities subsequent
to March 31, 2003. Changes in the fair value of these
assets and liabilities from the previously estimated values had
an impact on the reported value of Goodwill. During the three
months ended March 31, 2004, the Company increased goodwill
and other accrued expenses by $15 million related to the
valuation of the Company's deferred tax liabilities.
14.
Valuation and Qualifying Accounts and Reserves (in
    millions)
Sales,
Balance at
Additions
Write-Offs
Retirements
Balance
Beginning
Charged to
(Net of
and
at End
of Period
Expense
Payments
Recoveries)
Transfers
Other
of Period
Year ended December 31, 2004
Allowance for obsolescence of inventories
$
5
$
12
$
—
$
—
$
—
$
—
$
17
Allowance for uncollectible accounts
18
7
—
(3
)
—
—
22
Reserves for workforce reduction(b)
10
5
(6
)
—
—
—
9
Nine months ended December 31, 2003
Allowance for obsolescence of inventories
—
5
—
—
—
—
5
Allowance for uncollectible accounts
19
6
—
(7
)
—
—
18
Reserves for workforce reduction(b)
46
3
(39
)
—
—
—
10
Three months ended March 31, 2003
Allowance for obsolescence of inventories
114
2
—
—
—
(116
)(c)
—
Allowance for uncollectible accounts
18
2
—
(1
)
—
—
19
Reserves for workforce reduction(b)
78
—
(32
)
—
—
—
46
Reserves for future rent payments — parked aircraft(b)
68
—
—
—
—
(68
)
—
Year ended December 31, 2002
Allowance for obsolescence of inventories
209
1
—
(6
)
(90
)
—
114
Allowance for uncollectible accounts
22
8
—
(12
)
—
—
18
Reserves for maintenance activities(a)
20
—
—
—
—
(20
)
—
Reserves for workforce reduction(b)
52
89
(59
)
—
—
(4
)
78
Reserves for future rent payments — parked aircraft(b)
70
—
(6
)
—
—
4
68
(a)
See also Note 2(n).
(b)
See also Note 16.
(c)
Allowance for obsolescence of inventories eliminated upon
    adoption of fresh-start reporting. See also Note 13.
15.
Selected Quarterly Financial Information (Unaudited)
Successor Company
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
(In millions, except per share amounts)
2004
Operating Revenues
$
1,701
$
1,957
$
1,799
$
1,660
Operating Income (Loss)
$
(143
)
$
83
$
(177
)
$
(142
)
Net Income (Loss)
$
(177
)
$
34
$
(232
)
$
(236
)
Income (Loss) per Common Share
Basic
$
(3.28
)
$
0.62
$
(4.22
)
$
(4.30
)
Diluted
$
(3.28
)
$
0.59
$
(4.22
)
$
(4.30
)
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Predecessor
Company
Successor Company
(In millions, except per share amounts)
2003
Operating Revenues
$
1,534
$
1,777
$
1,771
$
1,764
Operating Income (Loss)
$
(207
)
$
67
$
(37
)
$
(74
)
Income (Loss) Before Cumulative Effect of Accounting Change
$
1,635
$
13
$
(90
)
$
(98
)
Net Income (Loss)
$
1,635
$
13
$
(90
)
$
(98
)
Income (Loss) per Common Share
Basic
$
24.02
$
0.25
$
(1.69
)
$
(1.82
)
Diluted
$
24.02
$
0.25
$
(1.69
)
$
(1.82
)
The comparability of quarterly results in 2003 was impacted by
the emergence from the Prior Bankruptcy in March 2003 and
certain other unusual events. See also Note 16. The sum of
the four quarters may not equal the totals for the year due to
rounding.
16.
Unusual Items
(a)
Special Items
Special items included within operating expenses on the
Company's Consolidated Statements of Operations includes
the following components (dollars in millions):
Successor
Predecessor
Company
Company
Nine Months Ended
Year Ended
December 31, 2003
December 31, 2002
Aircraft order cancellation penalty
$
35
(a)
$
—
Aircraft impairments and related charges
—
392
(b)
Pension and postretirement benefit curtailments
—
(90
)(c)
Employee severance including benefits
(1
)(d)
(3
)(d)
Other
—
21
(e)
$
34
$
320
(a)
During the quarter ended June 30, 2003, the Company
    recorded a $35 million charge in connection with its
    intention not to take delivery of certain aircraft scheduled for
    future delivery.
(b)
During the fourth quarter of 2002, US Airways conducted an
    impairment analysis in accordance with SFAS 144 on its
    B737-300, B737-400, B757-200 and B767-200 aircraft fleets as a
    result of changes to the aircraft's recoverability periods
    (the planned conversion of owned aircraft to leased aircraft) as
    well as indications of possible material changes to the market
    values of these aircraft. The analysis revealed that estimated
    undiscounted future cash flows generated by these aircraft were
    less than their carrying values for four B737-300s,
    15 B737-400s, 21 B757-200s and three B767-200s. In
    accordance with SFAS 144, the carrying values were reduced
    to fair market value. This analysis resulted in a pretax charge
    of $392 million. Management estimated fair market value
    using third-party appraisals and recent leasing transactions.
(c)
During the fourth quarter of 2002, US Airways recorded a
    curtailment credit of $120 million related to certain
    postretirement benefit plans and a $30 million curtailment
    charge related to certain defined benefit pension plans.
(d)
In September 2001, US Airways announced that in connection
    with its reduced flight schedule it would terminate or furlough
    approximately 11,000 employees across all employee groups.
    Approximately 10,200 of the affected employees were terminated
    or furloughed on or prior to January 1, 2002. Substantially
    all the remaining affected employees were terminated or
    furloughed by May 2002. US Airways' headcount
    reduction was largely accomplished through involuntary
    terminations/furloughs. In connection with this headcount
    reduction, US Airways offered a voluntary leave program to
    certain employee groups. Voluntary leave program participants
    generally received extended benefits (e.g. medical, dental, life
    insurance) but did not receive any furlough pay benefit. In
    accordance with Emerging Issues Task Force Issue No. 94-3,
    US Airways recorded a pretax charge of $75 million
    representing the involuntary severance pay and the benefits for
    affected employees during the third quarter of 2001. In the
    fourth quarter of 2001, US Airways recognized a
    $10 million charge representing the estimated costs of
    extended benefits for those employees who elected to take
    voluntary leave and a $2 million reduction in accruals
    related to the involuntary severance as a result of employees
    electing to accept voluntary furlough. During the quarters ended
    June 30, 2003 and 2002, the Company recognized
    $1 million and $3 million, respectively, in reductions
    to severance pay and benefit accruals related to the involuntary
    termination or furlough of certain employees.
(e)
During the fourth quarter of 2002, US Airways recognized an
    impairment charge of $21 million related to capitalized
    gates at certain airports in accordance with SFAS 142. The
    carrying values of the affected gates were reduced to fair value
    based on a third party appraisal.
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(b)
Government Compensation
In April 2003, President George W. Bush signed into law the
Emergency Wartime Supplemental Appropriations Act (Emergency
Wartime Act), which included $2.4 billion for reimbursement
to the airlines for certain aviation-related security expenses.
Certain airlines that received the aviation-related assistance
were required to agree to limit the total cash compensation for
certain executive officers during the 12-month period beginning
April 1, 2003 to an amount equal to the annual salary paid
to that officer during the air carrier's fiscal year 2002.
Any violation of this agreement would require the carrier to
repay to the government the amount reimbursed for airline
security fees. The Company complied with this limitation on
executive compensation. The Company's security fee
reimbursement was $214 million, net of amounts due to
certain affiliates, and was recorded as a reduction to operating
expenses during the second quarter of 2003. In September 2003,
the Company received approximately $6 million of
compensation associated with flight deck door expenditures which
was recorded as an offset to capital costs.
(c)
Gain on Sale of Hotwire, Inc.
During the fourth quarter of 2003, US Airways recorded a
$30 million gain on the sale of its investment in Hotwire,
Inc. The gain is reflected in Other, net on the Company's
Consolidated Statement of Operations.
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Item 9.
Changes in and Disagreements With Accountants on Accounting
    and Financial Disclosure
None.
Item 9A.
Controls and Procedures
Section 404 of the Sarbanes-Oxley Act of 2002 requires
management to include in this Annual Report on Form 10-K a
report on management's assessment of the effectiveness of
the Company's internal control over financial reporting, as
well as an attestation report from the Company's
independent registered public accounting firm on
management's assessment of the effectiveness of the
Company's internal control over financial reporting.
Management's annual report on internal control over
financial reporting and the related attestation report from the
Company's independent registered public accounting firm are
located in Item 8. Consolidated Financial Statements of US
Airways Group and are incorporated herein by reference.
Disclosure
Controls and Procedures
The Company maintains a set of disclosure controls and
procedures designed to ensure that information required to be
disclosed by the Company in reports it files or submits under
the Securities Exchange Act of 1934, as amended (Exchange Act)
is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange
Commission's rules and forms. An evaluation was performed
under the supervision and with the participation of the
Company's management, including the Chief Executive Officer
(CEO) and Chief Financial Officer (CFO), of the effectiveness of
the design and operation of the Company's disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of December 31,
2004. Based on that evaluation, the Company's CEO and CFO
have concluded that the Company's disclosure controls and
procedures were effective as of such date.
Changes
in Internal Control over Financial Reporting
There have been no changes in the Company's internal
control over financial reporting during the quarter ended
December 31, 2004 that have materially affected or are
reasonably likely to materially affect the Company's
internal control over financial reporting.
Item 9B.
Other Information
None.
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PART III
Item 10.
Directors and Executive Officers of US Airways Group
Introduction
On August 11, 2002, US Airways Group and seven of its
domestic subsidiaries, which accounted for substantially all of
US Airways Group's operations, including
US Airways Group's principal operating subsidiary,
US Airways, filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Eastern District of
Virginia, Alexandria Division. US Airways Group emerged
from bankruptcy protection under the First Amended Joint Plan of
Reorganization of US Airways Group, Inc. and Affiliated
Debtors and Debtors-in-Possession, as modified (the 2003 Plan)
on March 31, 2003, which was confirmed pursuant to the
Bankruptcy Court's confirmation order on March 18,
2003 and, after each of the conditions precedent to consummation
was satisfied or waived, became effective on March 31, 2003.
In connection with the consummation of the 2003 Plan on
March 31, 2003, Retirement Systems of Alabama Holdings LLC
(RSA) made an equity investment in US Airways Group in the
amount of $240 million. In exchange for its
$240 million investment, RSA received
20,652,593 shares of Class A Common Stock,
5,000,000 shares of Class B Common Stock,
75,000 shares of Class B Preferred Stock, 1,380,570
Class A-1 Warrants and 1,380,570 shares of
Class A Preferred Stock, representing approximately 36.2%,
on a fully-diluted basis, of US Airways Group's equity
and approximately 71.6% of US Airways Group's
outstanding voting interests. RSA is the sole holder of
US Airways Group's Class B Common Stock and
Class B Preferred Stock.
At the time the 2003 Plan became effective, RSA was entitled,
pursuant to the terms of its investment agreement, to designate
eight of the 15 members of US Airways Group's Board of
Directors. RSA is also entitled, until September 26, 2007
and as long as it retains at least 50% of the shares of
Class A Common Stock acquired pursuant to its investment,
to nominate eight directors for election to the Board. The
investment agreement further provides that the remaining
nominees for director must consist of US Airways
Group's chief executive officer and two individuals who are
not employees or affiliates of US Airways Group or RSA, as
well as the four directors elected by the Class C Preferred
Stock, as described below. Until September 26, 2007, RSA
has agreed to vote all of its shares of voting capital stock
received in connection with the consummation of the 2003 Plan in
favor of all of the directors nominated in accordance with the
investment agreement at each annual meeting of US Airways
Group's stockholders or at any meeting of US Airways
Group's stockholders at which members of its Board of
Directors are to be elected.
On September 12, 2004, US Airways Group and its
domestic subsidiaries, which account for substantially all of
the operations of US Airways Group, including its principal
operating subsidiary, US Airways, filed voluntary petitions
for relief under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the Eastern
District of Virginia, Alexandria Division. US Airways Group
does not know what the capital and Board structures will be upon
consummation of a new plan of reorganization. As a result of the
Chapter 11 filings, the current capital and Board
structures may change.
Board of Directors
The Board of Directors currently consists of 14 members.
All of the directors, except Thomas R. Harter, George M. Philip
and Ronald E. Stanley, were elected by the Company's
stockholders at its 2004 Annual Meeting of Stockholders.
Mr. Stanley was elected to the Board of Directors on
May 19, 2004 to fill the seat previously held by Raymond W.
Smith, whose term expired at the 2004 Annual Meeting of
Stockholders. Mr. Stanley was subsequently appointed
Executive Vice President and Chief Financial Officer of
US Airways Group, Inc. and US Airways, Inc. in October
2004. Mr. Harter was elected to the Board of Directors on
August 27, 2004 to fill the seat previously held by Perry
L. Hayes and to serve as a representative of the Association of
Flight Attendants–Communications Workers of America
AFL-CIO, International and Transport Workers Union of America.
George M. Philip was elected to the Board of Directors on
October 25, 2004 to fill one of the two remaining vacancies
on the Board at that time. Directors are elected to hold office
for one year or until the election and qualification of their
successors. Ten of the Company's directors are also
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directors of its principal operating subsidiary,
US Airways. There are no family relationships among the
directors or the executive officers.
Of the 14 directors, Dr. Bronner, Ms. Krongard,
and Messrs. McKenna, Mirka, Simon, Stanley and Stephens are
seven of the eight directors designated by RSA in accordance
with the terms of its investment agreement with the Company. As
set forth in the investment agreement, the other three directors
are Mr. Lakefield, the Company's chief executive
officer, and Messrs. Johnson and Philip, the two directors
who may not be employees or affiliates of the Company or RSA.
There is currently one vacant seat remaining on the Board of
Directors. RSA is entitled to designate and elect a new director
to fill that vacant seat pursuant to the terms of its investment
agreement.
Pursuant to the Company's Amended and Restated Certificate
of Incorporation, four of its current directors were designated
by the series of Class C Preferred Stock as follows:
Series of Class C
Director
Preferred
Holder of Series
William D. Pollock
Series 1
Air Line Pilots Association
Joseph J. Mantineo
Series 2
International Association of Machinists and Aerospace Workers
Thomas R. Harter
Series 3
Association of Flight Attendants — Communications
    Workers of America AFL-CIO, International and Transport Workers
    Union of America
Magdelena Jacobsen
Series 4
Communications Workers of America
Each of the series of Class C Preferred Stock has the
ability, under the provisions of the Company's Amended and
Restated Certificate of Incorporation, to remove the director
elected by that series and designate and elect a new director to
fill that seat on the Board of Directors.
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Information Regarding Directors
Set forth below is certain information as of February 1,
2005, regarding the Company's directors, including their
ages and principal occupations (which have continued for at
least the past five years unless otherwise noted).
Served as
Director
Since
David G. Bronner, 60
Dr. Bronner has been the Chief Executive Officer of
    Retirement Systems of Alabama since 1973. He serves as Executive
    Director of the Public Education Employees' Health
    Insurance, and is a member of the State Employees'
    Insurance Board. He is a member of the Editorial Board, Southern
    Business & Economics Journal, Auburn University at
    Montgomery, a member of the Board of Visitors, University of
    Alabama School of Business, New Water Corporation and Children
    First. Dr. Bronner has been Chairman of US Airways
    Group's and US Airways' Board of Directors since April
    2003 and is a member of the Strategy and Finance Committee of
    the Board of Directors.
2003
Thomas R. Harter, 62
Mr. Harter is a Senior Vice President and Consultant of The
    Segal Company's Washington, DC office. Mr. Harter
    has been with The Segal Company since 1979. He became a Vice
    President of The Segal Company's Mid-Atlantic Division in
    1985, and a Senior Vice President in 1991. Mr. Harter has
    worked with labor organizations negotiating contracts at the
    national level and has made presentations at numerous
    Presidential Emergency Boards in the transportation sector on
    behalf of national unions of the AFL-CIO. Mr. Harter also
    served seven years as a systems and information manager with
    AARP. Mr. Harter has served as an instructor for courses in
    the Certified Employee Benefits Specialist programs sponsored by
    George Washington University and the George Meany Labor
    Institute. Mr. Harter is a member of the Safety and Social
    Responsibility Committees of the Board of Directors.
2004
Magdalena Jacobsen, 64
Ms. Jacobsen currently owns a private consulting firm,
    which she founded in September 2002. Ms. Jacobsen is the
    former Chairwoman and a board member of the National Mediation
    Board, in which positions she served from 1993 until 2002. She
    was also Commissioner of the Federal Mediation and Conciliation
    Service, Director of the Employee Relations division for the
    City and County of San Francisco, Manager of Labor
    Relations, Flight Department of Continental Airlines, and
    Secretary Treasurer and Local Officer of the Air Line Pilots
    Association, Flight Attendants Division. She is a member of the
    Corporate Governance and Nominating and Social Responsibility
    Committees of the Board of Directors.
2003
Robert L. Johnson, 58
Mr. Johnson has served the Chief Executive Officer of BET
    Holdings, Inc., a subsidiary of Viacom Inc. (media-entertainment
    holding company) from 1980 to the present. Mr. Johnson also
    serves as a Director of the Hilton Hotels Corporation, the
    American Film Institute, Johns Hopkins University, Strayer
    Education, Jazz @ Lincoln Center, and Lowe's
    Companies. He is a member of the Audit and Strategy and Finance
    Committees of the Board of Directors. He is also a director of
    US Airways.
1998
Cheryl G. Krongard, 49
Ms. Krongard retired in 2004 as a Senior Partner of Apollo
    Management, L.P. Ms. Krongard was the Chief Executive
    Officer of Rothschild Asset Management from 1994 to
    April 15, 2000. She served as Senior Managing Director for
    Rothschild North America from 1994 until 2000. She serves on the
    board of directors of the Iowa State University Foundation and
    is a lifetime governor elected in 1997. She is also chairperson
    of the Investment Committee for the Iowa State University
    Foundation. Ms. Krongard is also a member of the
    Dean's Advisory Council, Iowa State University College of
    Business, and a Trustee of the Mount Sinai Medical Center.
    Ms. Krongard also serves as a Director of the City Meals on
    Wheels and Educate, Inc., a publicly traded company engaged in
    tutoring and learning (formerly Sylvan Learning).
    Ms. Krongard is Chairman of the Corporate Governance and
    Nominating and Strategy and Finance Committees and a member of
    the Human Resources Committee of the Board of Directors. She is
    also a director of US Airways.
2003
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Served as
Director
Since
Bruce R. Lakefield, 61
Mr. Lakefield is President and Chief Executive Officer and
    a director of US Airways Group and US Airways.
    Mr. Lakefield served as Chairman and Chief Executive
    Officer of Lehman Brothers International from 1995 until 1999.
    He has served as a Senior Advisor to the Investment Policy
    Committee of HGK Asset Management since 2000. Mr. Lakefield
    serves as a Non-Executive Director of Constellation Corporation
    PLC and a member of the Board of Directors of Magic Media, Inc.
    He is a member of the Strategy and Finance Committee of the
    Board of Directors.
2003
Joseph J. Mantineo, 73
Mr. Mantineo is a retired Aircraft & Powerplant
    Mechanic with US Airways. In addition to being employed by
    US Airways from 1957 through 1996, he served on negotiating
    committees for the International Association of Machinists and
    Aerospace Workers, from 1957 until his retirement in 1996. He
    became full-time Assistant General Chairman for District
    Lodge 141-M, in 1991, until his retirement in November
    1996. He served as Secretary-Treasurer for twelve years in
    Lodge 1445, as well as worked on the mergers of
    Allegheny/Mohawk, USAir/PSA and USAir/Piedmont.
    Mr. Mantineo is a member of the Safety and Social
    Responsibility Committees of the Board of Directors.
2002
John A. McKenna, Jr., 37
Mr. McKenna has served as Director and Managing Director of
    Houlihan Lokey Howard & Zukin, Inc. since 1999. He
    served as Vice President of Wasserstein Perella & Co.
    during 1998 and 1999. Prior to 1998, he served in various
    capacities at Houlihan Lokey Howard & Zukin, Inc.
    Mr. McKenna has been a Panelist on restructuring and
    investment banking topics before the World Bank and the American
    Bankruptcy Institute. He is a member of the Audit and Strategy
    and Finance Committees of the Board of Directors. He is also a
    director of US Airways.
2003
Hans Mirka, 68
Mr. Mirka served as Senior Vice President, International
    Division for American Airlines, Inc. from 1992 until his
    retirement in 1998. He also served as Executive Vice President
    and General Manager for Pan American World Airways, Inc. from
    1984 until 1989 and Vice President, Field Sales and Services for
    Continental Airlines until 1984. He is Chairman of the Human
    Resources Committee and a member of the Safety and Strategy and
    Finance Committees of the Board of Directors. He is also a
    director of US Airways.
2003
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Served as
Director
Since
George M. Philip, 57
Mr. Philip has served as the Executive Director of the New
    York State Teachers' Retirement System since 1995. He has
    also served as Chief Investment Officer of the New York State
    Teachers' Retirement System since 1992. Mr. Philip
    served as the Assistant Executive Director of the New York State
    Teachers' Retirement System from 1992-1995 and as Chief
    Real Estate Investment Officer from 1988-1992. Mr. Philip
    has served in various positions with the New York State
    Teachers' Retirement System from 1971. Mr. Philip is
    the past President of the Executive Committee of the National
    Council on Teacher Retirement. Mr. Philip also serves as
    Chair of the University of Albany Council, the St. Peter's
    Hospital Board of Directors, the Catholic Health East Investment
    Committee, and the St. Peter's Hospital Investment
    Committee. Mr. Philip is a member of the Board of Directors
    of the Saratoga Performing Arts Center, the NYSE Pension
    Managers Advisory Committee and the State Academy of Public
    Administration. Mr. Philip is Chairman of the Audit
    Committee and a member of the Human Resources Committee of the
    Board of Directors. He is also a director of US Airways.
2004
William D. Pollock, 48
Capt. Pollock is Chairman of the US Airways Air Line Pilots
    Association (ALPA) Master Executive Council. An 19-year veteran
    of US Airways, he holds a captain position on the A320. His
    previous ALPA experience includes serving as MEC Vice Chairman
    for three years and MEC Legislative Affairs Committee Chairman
    for more than 12 years. As a veteran pilot for
    US Airways, Pollock has flown the F-100 and B-737. In the
    Navy, he served 21 years of combined active and reserve
    service and flew the P-3 Orion. Capt. Pollock is Chairman of the
    Safety Committee of the Board of Directors. He is also a
    director of US Airways.
2002
James M. Simon, Jr., 57
Mr. Simon has been Director of the Microsoft Institute for
    Advanced Technology in Governments since September 2004.
    Mr. Simon served as the President and Senior Founding
    Partner of Intelligence Enterprises, LLC from January 2003 to
    September 2004. He formerly served in the Office of the Deputy
    Director of Central Intelligence for Community Management from
    1999 until 2003. Mr. Simon serves as a member of the Board
    of Directors of United Devices, Inc. He is a member of the
    Corporate Governance and Nominating and Safety Committees of the
    Board of Directors.
2003
Ronald E. Stanley, 57
Mr. Stanley is the current Executive Vice President and
    Chief Financial Officer of US Airways Group and
    US Airways, in which position he has served since October
    2004. Mr. Stanley has served as a Director of Scholefield,
    Turnbull & Partners, a business travel consulting firm
    based in London, England since 2000. Mr. Stanley also
    serves as a director of Decatur Foundry, Inc., a private
    company. Mr. Stanley served as Chief Operating Officer and
    a member of the Executive Committee and Board of Directors of
    HSBC Equator from 2000 until 2002. He served as Senior Vice
    President & General Manager of Royal Bank of Canada
    (RBC) Group, Chairman and CEO of Royal Bank of Canada Europe
    Limited and a member of the Executive Committee of RBC Dominion
    Securities from 1995 to 1999. He is also a director of
    US Airways.
2004
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Served as
Director
Since
William T. Stephens, 61
Mr. Stephens has served as General Counsel of the
    Retirement Systems of Alabama since 2000, and previously from
    1980 to 1998. From 1998 to 2000, Mr. Stephens served as
    Deputy Director resident in the Montgomery, Alabama headquarters
    of Retirement Systems of Alabama. Mr. Stephens is a
    Director of New Water Street Corporation, a director of the
    American Village Citizenship Trust, a member of the Alumni
    Advisory Council and Auburn University School of Engineering. He
    is Chairman of the Social Responsibility Committee and is a
    member of the Strategy and Finance Committee of the Board of
    Directors. He is also a director of US Airways.
2003
Audit Committee and Audit Committee Financial Expert
The Audit Committee of the Board of Directors, in consultation
with the Company's financial officers and the
Company's independent auditors, assists in establishing the
scope of the annual audit. The Audit Committee (1) reviews
annual and quarterly financial statements and periodic reports
filed with the Securities and Exchange Commission (SEC),
(2) appoints, ensures the independence of, and oversees the
performance of the Company's independent auditors,
(3) reviews the annual programs of the internal audit staff
and (4) reviews programs designed to protect and maintain
the Company's assets, including insurance, internal
controls and internal security programs. The Audit Committee has
been established in accordance with Section 3(a)(58)(A) of
the Securities Exchange Act of 1934, as amended. The Audit
Committee operates under a charter approved by the Board of
Directors. The charter is posted on the Company's website
at
www.usairways.com.
The Audit Committee is composed of
Messrs. Philip, Johnson and McKenna, and Mr. Philip is
the Chairman of the Committee. The Board has determined that
Mr. Philip is the audit committee financial expert
currently serving on the Audit Committee and that
Mr. Philip is independent as defined in NASDAQ listing
standards.
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Information Regarding Executive Officers
The following individuals are the executive officers of US
Airways Group and US Airways as of February 1, 2005:
Name
Age
Position
Bruce R. Lakefield
61
President and Chief Executive Officer, US Airways Group and US
    Airways
Ronald E. Stanley
57
Executive Vice President and Chief Financial Officer,
    US Airways Group and US Airways
N. Bruce Ashby
44
Executive Vice President — Marketing and Planning of
    US Airways and President — US Airways Express
Alan W. Crellin
58
Executive Vice President — Operations, US Airways
Elizabeth K. Lanier
53
Executive Vice President — Corporate Affairs, General
    Counsel and Secretary, US Airways Group and US Airways
Anita P. Beier
49
Senior Vice President — Finance and Controller,
    US Airways Group and US Airways
Christopher L. Chiames
45
Senior Vice President — Corporate Affairs of
    US Airways
Jerrold A. Glass
50
Senior Vice President — Employee Relations of
    US Airways
Andrew P. Nocella
35
Senior Vice President — Planning of US Airways
John Prestifilippo
47
Senior Vice President — Maintenance of US Airways
Mr. Ashby joined US Airways as Vice President —
Financial Planning and Analysis from April 1996 until his
election as Senior Vice President — Planning of US
Airways in January 1998. In June 1999, Mr. Ashby was
elected Senior Vice President — Corporate Development
of US Airways Group and US Airways. Mr. Ashby served
as Senior Vice President — Alliances of US Airways
Group and US Airways and President — US Airways
Express from March 2003 to January 2005. In January 2005,
Mr. Ashby was elected Executive Vice President —
Marketing and Planning and will continue as
President — US Airways Express. He previously served
as Vice President — Marketing Development at Delta Air
Lines from June 1995 to April 1996, and in several management
positions at United from January 1989 to June 1995, including
Vice President — Financial Planning and Analysis and
Vice President and Treasurer.
Mr. Crellin joined US Airways in 1988 as a result of the
acquisition of Pacific Southwest Airlines. He was promoted to
serve as Vice President — Ground Services of US
Airways in 1995. Mr. Crellin served as Senior Vice
President — Customer Service of US Airways from 2000
until his election as Executive Vice President —
Operations in January 2002. Prior to joining US Airways,
Mr. Crellin held a variety of management positions with
Pacific Southwest Airlines from 1971 to 1988, including Vice
President — Customer Service.
Ms. Lanier joined US Airways Group and US Airways in March
2003 as Executive Vice President — Corporate Affairs
and General Counsel, and was appointed as Secretary of US
Airways Group and US Airways in January 2004. Previously,
Ms. Lanier was Senior Vice President — General
Counsel for Trizec Properties, Inc. from April to December 2002,
and prior to that, Vice President — General Counsel
for General Electric Power Systems from 1998 to 2002, and Vice
President and Chief of Staff for Cinergy Corporation from 1996
to 1998. Ms. Lanier has been a member of the board of
directors of Patina Oil & Gas Corporation since 1998.
She serves as a member of the audit committee and chair of the
corporate governance and nominating committee of Patina.
Ms. Lanier was associated with Davis Polk &
Wardwell and was an associate and partner of Frost &
Jacobs, now Frost Brown Todd, LLC.
Ms. Beier joined US Airways in June 1999 from CSX
Corporation as Vice President — Finance and
Controller. In May 2004, Ms. Beier was promoted to Senior
Vice President — Finance and Controller, and she is
responsible for the management of all accounting functions for
US Airways Group and its subsidiaries and for monitoring the
Company's restructuring. At CSX Corporation, Ms. Beier
held a number of positions
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in financial management, including Vice President —
Financial Planning. Prior to being named Vice
President — Financial Planning at CSX Corporation in
September 1998, Ms. Beier was Chief Financial Officer of
American Commercial Lines in 1997-1998. Ms. Beier served in
a variety of financial positions in economic and financial
analysis, budgeting and accounting at CSX Corporation from 1981
to 1997.
Mr. Chiames joined US Airways in May 2002 as Senior Vice
President — Corporate Affairs. Mr. Chiames is
responsible for US Airways' government relations and
corporate communications functions. Mr. Chiames has almost
15 years of airline industry experience, including
leadership of Burson-Marsteller's transportation and
tourism public affairs practice from 2001 to 2002 and Managing
Director of Public Relations at American Airlines, Inc. from
1996 to 2001.
Mr. Glass joined US Airways in April 2002 as Senior Vice
President — Employee Relations and is a recognized
expert in airline and railroad labor and employee relations
issues. Mr. Glass joined US Airways from J. Glass and
Associates, of which he was the founder and where he served as
President from 1989 until April 2002. At US Airways, he is
responsible for labor relations, human resources policy and
development, compensation, corporate learning and development,
recruiting and benefits.
Mr. Nocella joined US Airways in April 2002 as Vice
President — Planning and Scheduling. He served as Vice
President — Revenue Management and Pricing of US
Airways from December 2002 to June 2003. Mr. Nocella served
as Vice President — Network and Revenue Management
from June 2003 until his election as Senior Vice
President — Planning in January 2005. At US Airways,
he is responsible for route planning, scheduling, pricing and
yield management functions. Prior to joining US Airways,
Mr. Nocella served as Vice President, Planning and
Scheduling of America West Airlines from April 1997 to April
2002, and in several management positions at Continental
Airlines from December 1993 to March 1997.
Mr. Prestifilippo joined US Airways in August 2002 as
Senior Vice President — Maintenance. With nearly
20 years of airline maintenance management experience,
Mr. Prestifilippo previously held the position of Vice
President — Technical Services and Operations for
Continental Express Airlines from 1986 to 2001 and other
senior-level management positions for Continental Express and
Continental Airlines.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Exchange Act and regulations of the
SEC thereunder require the Company's directors, officers
and persons who own more than 10% of the Company's
Class A Common Stock, as well as certain affiliates of such
persons, to file initial reports of their ownership of the
Company's Class A Common Stock and subsequent reports
of changes in such ownership with the SEC. Directors, officers
and persons owning more than 10% of the Company's
Class A Common Stock are required by SEC regulations to
furnish the Company with copies of all Section 16(a)
reports they file. Based solely on the Company's review of
the copies of such reports received by the Company and
information provided to the Company by its directors and
officers, the Company believes that during the fiscal year ended
December 31, 2004, the Company's directors, officers
and owners of more than 10% of the Company's Class A
Common Stock complied with all applicable filing requirements
except for: (1) the award of director deferred stock units
and director stock options by the Company to George M. Philip on
October 26, 2004, reported late on Form 4 on
October 29, 2004; (2) the award of restricted shares
of Class A Common Stock and stock options by the Company to
David M. Davis on May 18, 2004, reported late on
Form 4 on May 24, 2004; and (3) the award of
restricted shares of Class A Common Stock and stock options
by the Company to Anita P. Beier on May 18, 2004, reported
late on Form 4 on May 24, 2004.
Code of Ethics
The Company has a code of ethics that applies to all employees,
officers, directors and agents of US Airways Group and its
wholly owned subsidiaries, including its principal executive
officer, principal financial officer and principal accounting
officer. A copy of this code, the "Business Conduct and
Ethics Policy," is available on the Company's website
at
usairways.com
(under the "About US
Airways — Investor Relations" caption). The
Company intends to disclose any changes in or waivers from its
code of ethics by posting such information on its website or by
filing a Report on Form 8-K.
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Item 11.
Executive Compensation
Compensation of Directors
The annual retainer payable to non-employee directors in 2004
was $12,000, plus an additional annual amount of $10,000 for the
Audit Committee Chairman, $10,000 for the Human Resources
Committee Chairman, $5,000 for the Corporate Governance and
Nominating Committee Chairman, $5,000 for the Safety Committee
Chairman, $5,000 for the Social Responsibility Chairman, and
$5,000 for the Strategy and Finance Committee Chairman. Each
non-employee director also receives $5,000 for each regularly
scheduled Board meeting attended, $2,000 for each other Board
meeting attended, $2,000 for each Audit Committee meeting
attended and $1,000 for each meeting of any other Board
committee attended by such non-employee director. Pursuant to
the terms of the US Airways Group, Inc. 2003 Nonemployee
Director Deferred Stock Unit Plan (described below), the
directors may be permitted to elect to receive all or a portion
of their retainer and meeting fees in the form of deferred stock
units. During 2004, directors who were also employees received
their compensation in their capacities as employees of US
Airways Group and US Airways and received no additional
compensation as directors of US Airways Group and US Airways.
Mr. Stephens and Dr. Bronner waived all director
compensation for 2004. All directors are also reimbursed for
reasonable out-of-pocket expenses incurred in connection with
attending Board and committee meetings upon the submission of
receipts.
Each director, director's spouse and the director's
dependent children, as well as a limited number of non-eligible
family members and unrelated persons, are provided free
transportation on US Airways and reimbursement for federal and
state income taxes incurred thereon. Additionally, these
benefits are provided for retired directors. During 2004,
non-employee directors received the following benefits under
this program: Dr. Bronner – $0.00;
Mr. Harter – $3,490.17;
Ms. Jacobsen – $7,037.72;
Mr. Johnson – $2,214.27;
Ms. Krongard – $4,255.25;
Mr. Mantineo – $693.92;
Mr. McKenna – $1,019.73;
Mr. Mirka – $3,861.12;
Mr. Philip – $967.20; Mr. Simon –
$4,133.62; and Mr. Stephens – $0.00. Former
directors received the following benefits under this program
during 2004: Mathias J. DeVito – $2,030.64; Rono
Dutta – $273.16; Peter M. George –
$2,648.13; Robert L. LeBuhn – $8,430.40; John G.
Medlin, Jr. – $1,438.64; Thomas H.
O'Brien – $2,999.72; Hilda
Ochoa-Brillembourg – $8,157.53; Richard B.
Priory – $2,153.76; and Raymond W. Smith –
$9,950.51. Directors emeriti received the following benefits
under this program during 2004: Gilbert T. Bowman –
$134.94; Edwin I. Colodny – $7,747.22; George J. W.
Goodman – $4,566.18; John W. Harris –
$6,423.81; Edward A. Horrigan, Jr. – $4,111.76;
David C. Jones – $1,401.36; and J. Warren
McClure – $1,214.12.
The compensation for non-employee directors consists of cash and
flight benefits as described above, and stock-based
compensation. Each year active non-employee directors receive a
grant of 5,000 stock options pursuant to the US Airways Group,
Inc. 2003 Nonemployee Director Stock Incentive Plan, as amended,
and $10,000 worth of deferred stock units pursuant to the US
Airways Group, Inc. 2003 Nonemployee Director Deferred Stock
Unit Plan, as amended. Using stock-based compensation for
directors is intended to more closely align directors'
financial interests with that of the Company's
stockholders. The ultimate recovery, if any, to holders of the
common stock will not be determined until confirmation of a plan
of reorganization. The plan of reorganization could result in
holders of US Airways Group's common stock and related
equity securities receiving no distribution on account of their
interest and cancellation of the equity.
The US Airways Group, Inc. 2003 Nonemployee Director Stock
Incentive Plan, as amended (the NDSIP) is administered by US
Airways Group's Human Resources Committee, which has the
power to interpret the NDSIP and to determine rules and
procedures under the NDSIP. As of December 31, 2004, there
were a total of 500,000 shares of Class A Common Stock
reserved for issuance under the NDSIP, of which
91,397 shares were subject to outstanding options and
408,603 shares were available for future option grants. As
of December 31, 2004, there were 11 directors eligible
to participate in the NDSIP. The directors eligible for grants
under the NDSIP are those who are not employees of US Airways
Group or its subsidiaries on the date that an option would be
granted. Eligible directors receive an option to
purchase 5,000 shares of stock on the first business
day following US Airways Group's annual stockholders
meeting. In addition, newly elected or appointed eligible
directors receive a portion of the 5,000 share annual grant
upon commencement of service, prorated for the remaining period
until the next annual stockholders meeting. The exercise price of
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options under the NDSIP is the fair market value (generally, the
closing price on the most recent date preceding the date of
grant for which a price was reported) of a share of Class A
Common Stock on the date of grant of the option, and is payable
in cash. Each option becomes exercisable on the earliest to
occur of: (i) the first anniversary of the date of grant,
(ii) the director's death, disability, or completion
of the last term of office to which the director was elected, or
(iii) a "change of control" of US Airways Group
(described below). Upon termination of the director's
service, options that have not become exercisable terminate, and
options that are exercisable remain exercisable for two years
after the date of termination of the director's service, or
such other period as the Human Resources Committee may
determine. Options expire ten years after the date of grant and
are not transferable except by the laws of descent and
distribution. No options may be granted under the NDSIP more
than ten years after its effective date. The Board may alter,
amend, suspend or terminate the NDSIP at any time, but any such
action may not affect a director's rights under the NDSIP
without his or her consent.
The US Airways Group, Inc. 2003 Nonemployee Director Deferred
Stock Unit Plan, as amended (the DSUP) is administered by US
Airways Group's Human Resources Committee, which has the
power to interpret the DSUP and to determine rules and
procedures under the DSUP. As of December 31, 2004, there
were a total of 77,804.7 shares of Class A Common
Stock subject to outstanding deferred stock units. As of
December 31, 2004, there were 11 directors eligible to
participate in the DSUP. The directors eligible for grants under
the DSUP are those who are not employees of US Airways Group or
its subsidiaries on the date that a deferred stock unit is
granted. Deferred stock units under the DSUP are reflected in a
bookkeeping account until distributed to the director, and
reflect an unsecured promise for US Airways Group to pay
benefits under the DSUP. On the first business day following US
Airways Group's annual stockholders meeting, eligible
directors are credited with a number of deferred stock units
equal to the quotient obtained by dividing $10,000 by the fair
market value (generally, the closing price on the most recent
date preceding the date of grant for which a price was reported)
of a share of Class A Common Stock on the date of grant. In
addition, newly elected or appointed eligible directors receive
a portion of the $10,000 grant upon commencement of service,
prorated for the remaining period until the next annual
stockholders meeting. The Committee may also permit eligible
directors to defer receipt of their annual retainers and meeting
fees and in exchange receive deferred stock units on such terms
and conditions as the Human Resources Committee deems
appropriate. Each deferred stock unit (other than deferred stock
units issued upon the deferral of retainers and meeting fees,
which are always fully vested) becomes vested and nonforfeitable
on the director's termination of service as a member of the
Board. Upon payment of a dividend on Class A Common Stock,
each bookkeeping account under the DSUP will be credited with an
additional number of deferred stock units equal to the product
of the dividend per share multiplied by the number of deferred
stock units in the account on the dividend record date, divided
by the fair market value of a share of Class A Common Stock
on the dividend payment date. On the
February 1st immediately following termination of the
director's service as a non-employee director, the director
will generally receive a lump-sum cash payment equal to the
number of deferred stock units credited to the director's
account multiplied by the average of the fair market value of a
share of Class A Common Stock for the five business days
immediately preceding such February 1st; however, a
director may elect instead to receive payment in up to four
annual installments. If the termination of service is after a
change of control (described below): (i) payment will be
made as soon as practicable following termination of the
director's service, rather than on the next
February 1st; (ii) installment payments will not be
available; (iii) the director's payment will be based
on the number of shares in his or her account immediately prior
to the change of control; and (iv) with respect to the fair
market value used to determine the value of stock units for
payment, no averaging will be used and fair market value will
generally be the closing price on the immediately preceding date
for which a price was reported, except that if consideration is
received by US Airways Group's stockholders in the change
of control transaction, the fair market value of a share of
stock will be the value of per-share consideration received by
stockholders pursuant to the change of control transaction. If
the director was a member of the Board for at least five years
prior to termination of service, or if the director terminated
service due to death or disability, at the time of payment of
benefits under the DSUP the director will recei ve an additional
tax-gross up payment such that the net amount of the gross-up
payment after deduction of federal, state and local income tax
on the gross-up payment equals the total federal, state and
local income tax owed by the director on the DSUP distribution
payment. Deferred
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stock units are not transferable except by the laws of descent
and distribution. No deferred stock units may be granted under
the DSUP more than ten years after its effective date. The Board
may alter, amend, suspend or terminate the DSUP at any time, but
any such action may not affect a director's rights under
the DSUP without his or her consent.
Change of control is defined under the NDSIP and the DSUP as any
of the following events: (i) an individual, entity or group
acquires 30% or more of either the then-outstanding shares of US
Airways Group's common stock (the Outstanding Common Stock)
or the combined voting power of US Airways Group's
then-outstanding voting securities entitled to vote generally in
the election of directors (the Outstanding Voting Securities),
excluding: (A) acquisitions from US Airways Group,
(B) certain acquisitions by groups related to US Airways
Group and its stockholders, (C) acquisitions following
which the holders of Outstanding Common Stock and Outstanding
Voting Securities prior to the acquisition own, in substantially
the same proportions as their ownership immediately prior to the
acquisition, more than 85% of the common stock and voting
securities, respectively, of the acquiring corporation, and
(D) acquisitions where the acquirer reports its beneficial
ownership of Outstanding Common Stock and Outstanding Voting
Securities on Schedule 13G pursuant to Rule 13d-1 of
the Exchange Act; (ii) incumbent board members and
individuals whose nomination or election is approved by a
majority of the incumbent board members (or their
incumbent-approved successors) cease to constitute a majority of
the Board; (iii) a reorganization, merger or consolidation
is consummated under which the beneficial owners of the
Outstanding Common Stock or Outstanding Voting Securities
immediately prior to such event beneficially own less than 85%
of the resulting shares of common stock or voting securities,
respectively, following the transaction, in substantially the
same proportions as their ownership prior to the transaction;
(iv) approval by US Airways Group's stockholders of a
complete liquidation or dissolution of US Airways Group; or
(v) consummation of the sale or other disposition of all or
substantially all of US Airways Group's assets, other than
to a corporation with respect to which beneficial owners of the
Outstanding Common Stock and Outstanding Voting Securities
before the transaction own more than 85% of the resulting shares
of common stock or voting securities, respectively, in
substantially the same proportions as their ownership prior to
the transaction.
Compensation of Executive Officers
The following Summary Compensation Table sets forth the total
compensation paid for the fiscal years ended December 31,
2004, 2003 and 2002 to the individuals who served as Chief
Executive Officer of US Airways Group and US Airways during
the 2004 fiscal year, each of the four other most highly
compensated executive officers who were serving as executive
officers as of December 31, 2004 of US Airways Group,
US Airways or any other subsidiary of US Airways Group and
one additional individual for whom disclosures would have been
provided but who was not serving as an executive officer as of
December 31, 2004 of US Airways Group, US Airways or
any other subsidiary of US Airways Group (collectively referred
to as the "named executive officers").
The amounts shown in the table below for Restricted Stock Awards
reflect amounts granted since US Airways Group and its
subsidiaries emerged from the prior Chapter 11
reorganization on March 31, 2003. The ultimate recovery, if
any, to holders of the common stock will not be determined until
confirmation of a plan of reorganization. The plan of
reorganization could result in holders of US Airways
Group's common stock and related equity securities
receiving no distribution on account of their interest and
cancellation of the equity. The named executive officers also
had previous restricted stock awards granted by US Airways
Group's predecessor company, but these shares were
cancelled as a part of the 2003 Plan and the named executive
officers received no consideration for this cancellation. The
prior awards are described in the footnotes to the table.
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Summary Compensation Table
Annual Compensation
Long-Term Compensation
Securities
Restricted
Underlying
Name and Principal
Other Annual
Stock
Options/
All Other
Position(1)
Year
Salary
Bonus(2)
Compensation
Awards(3)
Warrants (#)
Compensation(19)
Bruce R. Lakefield
2004
$
286,058
—
$
81,369
(4)
$
687,952
(11)
288,800
(18)
$
46,882
President and
2003
—
—
$
77,399
(4)
$
10,000
(11)
5,000
(18)
—
Chief Executive Officer
2002
—
—
—
—
—
—
Alan W. Crellin
2004
$
346,928
—
$
219,940
(5)
—
—
$
354,550
Executive Vice
2003
$
352,750
$
72,915
$
227,368
(5)
$
1,469,530
(12)
111,600
(18)
$
376,256
President — Operations
2002
$
392,962
$
102,081
$
19,116
(5)
(12)
25,000
(18)
$
75,375
Elizabeth K. Lanier
2004
$
345,966
—
$
183,178
(6)
—
—
$
249,732
Executive Vice
2003
$
284,914
$
250,000
$
184,492
(6)
$
1,382,856
(13)
111,600
(18)
$
267,266
President — Corporat
e 2002
—
—
—
—
—
—
Affairs, General Counsel and Secretary
Jerrold A. Glass
2004
$
313,405
—
$
169,581
(7)
—
—
$
239,379
Senior Vice President —
2003
$
319,550
—
$
181,174
(7)
$
1,382,856
(14)
111,600
(18)
$
270,023
Employee Relations
2002
$
248,769
$
192,500
$
4,887
(7)
(14)
100,000
(18)
$
32,673
B. Ben Baldanza
2004
$
347,246
—
$
196,946
(8)
—
—
$
270,027
Former Senior Vice
2003
$
352,750
—
$
201,880
(8)
$
1,382,856
(15)
111,600
(18)
$
285,191
President — Marketing
2002
$
397,212
—
$
17,041
(8)
—
—
$
54,454
and Planning
David N. Siegel
2004
$
198,462
—
$
538,835
(9)
—
—
$
5,654,000
Former President and
2003
$
600,000
—
$
49,935
(9)
$
8,297,136
(16)
669,600
(18)
$
48,955
Chief Executive Officer
2002
$
533,654
$
750,000
$
47,637
(9)
(16)
750,000
(18)
$
115,465
Neal S. Cohen
2004
$
128,889
—
$
59,161
(10)
—
—
$
1,607,670
Former Executive Vice
2003
$
394,250
—
$
256,684
(10)
$
2,765,712
(17)
223,200
(18)
$
364,081
President — Finance and
2002
$
306,923
$
435,000
$
40,523
(10)
(17)
300,000
(18)
$
46,099
Chief Financial Officer
(1)
Mr. Lakefield was appointed as President and Chief
    Executive Officer of US Airways Group and US Airways on
    April 19, 2004 following the departure of Mr. Siegel
    on that date. Mr. Cohen terminated his employment effective
    April 30, 2004. Mr. Baldanza served as Senior Vice
    President — Marketing and Planning through
    December 31, 2004, but terminated his employment effective
    January 15, 2005.
(2)
Amounts reflected for Mr. Crellin were earned in 2001 and
    paid in 12 monthly installments beginning in June 2002.
    Amounts reflected for Ms. Lanier and Messrs. Siegel
    and Cohen were paid in connection with their commencement of
    employment by US Airways and in lieu of foregone compensation
    from prior employers due to the change of employment. Awards for
    Mr. Glass were paid in connection with his commencement of
    employment by US Airways.
(3)
The figures in this column for 2004 and 2003 reflect the value
    of shares of US Airways Group's Class A Common Stock
    subject to certain restrictions (Restricted Stock) on the date
    of grant using the per share value of the stock on the date of
    grant, as further described in footnotes 11 through 17
    below. Additionally, in connection with US Airways Group's
    and its subsidiaries' Prior Bankruptcy, under the 2003 Plan
    all outstanding shares of common stock of US Airways
    Group's predecessor corporation were cancelled on
    March 31, 2003, the effective date of the 2003 Plan.
    Consequently, all shares of predecessor corporation restricted
    stock granted to the named executive officers in 2002 have been
    cancelled, as further described below. The aggregate number of
    shares of Restricted Stock held by each of Ms. Lanier and
    Messrs. Lakefield, Crellin, Glass, Baldanza, Siegel and
    Cohen on December 31, 2004, and the respective fair market
    value of the stock on such date were, respectively:
    Mr. Lakefield – 471,200 shares, $537,168;
    Mr. Crellin – 188,400 shares, $214,776;
    Ms. Lanier – 188,400 shares, $214,776;
    Mr. Glass – 188,400 shares, $214,776;
    Mr. Baldanza – 188,400 shares, $214,776;
    Mr. Siegel – 0 shares, $0; and
    Mr. Cohen – 1,594 shares, $1,817. The
    Restricted Stock is entitled to the same dividends, if any,
    payable on outstanding shares of Class A Common Stock. The
    ultimate recovery, if any, to holders of the common stock will
    not be determined until confirmation of a plan of
    reorganization. The plan of reorganization could result in
    holders of US Airways Group's common stock and related
    equity securities receiving no distribution on account of their
    interest and cancellation of the equity.
(4)
Amount disclosed for 2004 includes $29,371 for tax liability
    related to temporary living expenses, $9,835 in income and tax
    liability payments related to personal travel provided by US
    Airways, $2,663 for tax liability payments related to premiums
    paid by US Airways on a life insurance policy (as described in
    footnote 19) and $39,500 for director fees paid for
    service as a member of the Board of Directors through
    April 19, 2004, which consists of fees paid for board and
    committee meeting attendance. Amount disclosed for 2003 includes
    $73,250 for director fees paid for service as a member of the
    Board of Directors, which amount includes an annual retainer,
    fees paid for board and committee meeting attendance, and
    service as Chairman of the Human Resources and Strategy and
    Finance Committees, and $4,149 in income and tax liability
    payments related to personal travel provided by US Airways.
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(5)
Amount disclosed for 2004 includes $9,000 paid for automobile
    expenses, $7,668 in income and tax liability payments related to
    personal travel provided by US Airways, $4,386 for tax liability
    payments related to premiums paid by US Airways on a life
    insurance policy (as described in footnote 19) and
    $198,886 for tax liability payments related to company
    contributions under the US Airways Funded Executive Defined
    Contribution Plan (as described in footnote 19). Amount
    disclosed for 2003 includes $9,000 paid for automobile expenses,
    $1,081 in income and tax liability payments related to personal
    travel provided by US Airways, $2,730 for tax liability payments
    related to premiums paid by US Airways on a life insurance
    policy and $214,557 for tax liability payments related to
    company contributions under the US Airways Funded Executive
    Defined Contribution Plan. Amount disclosed for 2002 includes
    $10,229 in income and tax liabilities incurred in connection
    with certain compensation related expenses, $8,250 paid for
    automobile expenses and $637 for income and tax liability
    payment related to personal travel provided by US Airways.
(6)
Amount disclosed for 2004 includes $33,908 for tax liability
    related to temporary living expenses, $9,000 paid for automobile
    expenses, $16,904 in income and tax liability payments related
    to personal travel provided by US Airways, $2,346 for tax
    liability payments related to premiums paid by US Airways
    on a life insurance policy (as described in
    footnote 19) and $121,020 for tax liability payments
    related to company contributions under the US Airways Funded
    Executive Defined Contribution Plan (as described in
    footnote 19). Amount disclosed for 2003 includes $30,345
    for tax liability related to temporary living expenses, $6,750
    paid for automobile expenses, $20,650 in income and tax
    liability payments related to personal travel provided by US
    Airways, $2,275 for tax liability payments related to premiums
    paid by US Airways on a life insurance policy and $124,472 for
    tax liability payments related to company contributions under
    the US Airways Funded Executive Defined Contribution Plan.
(7)
Amount disclosed for 2004 includes $710 for tax and financial
    planning services, $9,000 paid for automobile expenses, $11,686
    in income and tax liability payments related to personal travel
    provided by US Airways, $2,116 for tax liability payments
    related to premiums paid by US Airways on a life insurance
    policy (as described in footnote 19) and $146,069 for
    tax liability payments related to company contributions under
    the US Airways Funded Executive Defined Contribution Plan (as
    described in footnote 19). Amount disclosed for 2003
    includes $1,055 for tax and financial planning services, $5,250
    paid for automobile expenses, $13,272 in income and tax
    liability payments related to personal travel provided by US
    Airways, $1,606 for tax liability payments related to premiums
    paid by US Airways on a life insurance policy and $159,991
    for tax liability payments related to company contributions
    under the US Airways Funded Executive Defined Contribution Plan.
    Amount disclosed for 2002 includes $4,887 for income and tax
    liability payments related to personal travel provided by
    US Airways.
(8)
Amount disclosed for 2004 includes $10,000 for tax and financial
    planning services, $9,000 paid for automobile expenses, $7,788
    in income and tax liability payments related to personal travel
    provided by US Airways, $1,020 for tax liability payments
    related to premiums paid by US Airways on a life insurance
    policy (as described in footnote 19) and $169,138 for
    tax liability payments related to company contributions under
    the US Airways Funded Executive Defined Contribution Plan (as
    described in footnote 19). Amount disclosed for 2003
    includes $10,000 for tax and financial planning services, $5,250
    paid for automobile expenses, $3,229 in income and tax liability
    payments related to personal travel provided by US Airways,
    $1,187 for tax liability payments related to premiums paid by
    US Airways on a life insurance policy and $182,214 for tax
    liability payments related to company contributions under the US
    Airways Funded Executive Defined Contribution Plan. Amount
    disclosed for 2002 includes $13,884 in income and tax
    liabilities incurred in connection with certain compensation
    related expenses and $3,157 for income and tax liability payment
    related to personal travel provided by US Airways.
(9)
Amount disclosed for 2004 includes $12,000 for tax and financial
    planning services, $6,000 paid for automobile expenses, $26,815
    in income and tax liability payments related to personal travel
    provided by US Airways, $579 for tax liability payments related
    to premiums paid by US Airways on a life insurance policy (as
    described in footnote 19) and $493,441 for tax
    liability payments related to company contributions under the US
    Airways Funded Executive Defined Contribution Plan (as described
    in footnote 19). Amount disclosed for 2003 includes $8,570
    for tax and financial planning services, $18,000 paid for
    automobile expenses, $1,996 for tax liability payments related
    to premiums paid by US Airways on a life insurance policy
    and $21,369 in income and tax liability payments related to
    personal travel provided by US Airways. Amount disclosed for
    2002 includes $31,663 for tax liability related to relocation
    and moving expenses, $13,500 paid for automobile expenses and
    $2,474 in income and tax liability payments related to personal
    travel provided by US Airways.
(10)
Amount disclosed for 2004 includes $2,517 for tax liability
    related to temporary living expenses, $3,000 paid for automobile
    expenses, $8,710 in income and tax liability payments related to
    personal travel provided by US Airways, $350 for tax liability
    payments related to premiums paid by US Airways on a life
    insurance policy (as described in footnote 19) and
    $44,584 for tax liability payments related to company
    contributions under the US Airways Funded Executive Defined
    Contribution Plan (as described in footnote 19). Amount
    disclosed for 2003 includes $1,500 for tax and financial
    planning services, $31,465 for tax liability related to
    temporary living expenses, $9,000 paid for automobile expenses,
    $13,701 in income and tax liability payments related to personal
    travel provided by US Airways, $1,211 for tax liability payments
    related to premiums paid by US Airways on a life insurance
    policy and $199,807 for tax liability payments related to
    company contributions under the US Airways Funded Executive
    Defined Contribution Plan. Amount disclosed for 2002 includes
    $31,392 for tax liability related to temporary living expenses,
    $6,000 paid for automobile expenses and $3,131 for income and
    tax liability payments related to personal travel provided by US
    Airways.
(11)
Amount disclosed for 2004 reflects an award of
    471,200 shares of Restricted Stock to Mr. Lakefield
    effective May 19, 2004 based on a per share value of $1.46
    on the grant date, vesting 25% on each of April 19, 2005,
    2006, 2007 and 2008. Amount disclosed for 2003 reflects an award
    of 1,362.4 deferred stock units granted to Mr. Lakefield
    effective July 31, 2003, under the 2003 Nonemployee
    Director Deferred Stock Unit Plan, based on a per share value of
    $7.34 on the grant date. The deferred stock units are payable
    solely in cash upon termination of service as a member of the
    Board. The deferred stock units are entitled to dividend
    equivalents if any dividends are paid on the Class A Common
    Stock.
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(12)
The amount disclosed for 2003 reflects an award of
    (a) 102,584 shares of Restricted Stock effective
    July 31, 2003, vesting 50% on June 30, 2005 and 50% on
    January 1, 2006, based on a per share value of $7.34 on the
    grant date, and (b) 85,816 shares of Restricted Stock
    effective October 16, 2003, vesting 100% on January 1,
    2006, based on a per share value of $8.35 on the grant date.
    Because US Airways Group's Class A Common Stock was
    not listed on the grant dates, the $7.34 per share value is
    based on the per share value determined pursuant to the 2003
    Plan and also subsequently paid in a private placement of US
    Airways Group's Class A Common Stock in August 2003,
    and the $8.35 per share value is based on the weighted
    average trading price on the over-the-counter bulletin board for
    the five preceding days, due to the low trading volume on
    October 16, 2003. Mr. Crellin had shares of restricted
    stock of US Airways Group's predecessor corporation which
    were canceled on March 31, 2003, the effective date of the
    2003 Plan, and Mr. Crellin received no payment with respect
    to such cancellation. These cancelled shares were received
    pursuant to (a) an award effective January 16, 2002 of
    10,000 shares of restricted common stock of US Airways
    Group's predecessor corporation, vesting 25% on each of
    January 16, 2003 and the three succeeding anniversaries
    thereafter, with a value of $56,100 based on the closing price
    ($5.61) on the grant date; and (b) an award effective
    October 16, 2001 of 15,000 shares of restricted common
    stock of US Airways Group's predecessor corporation,
    vesting 25% on November 15, 2001, 25% on December 1,
    2002 and 25% on each of October 16, 2003 and
    October 16, 2004, with a value of $80,400 based on the
    closing price ($5.36) on the grant date.
(13)
Amount disclosed for 2003 reflects an award of
    188,400 shares of Restricted Stock effective July 31,
    2003, vesting 50% on June 30, 2005 and 50% on
    January 1, 2006, based on a per share value of $7.34 on the
    grant date. Because US Airways Group's Class A Common
    Stock was not listed on the grant date, the $7.34 per share
    value is based on the per share value determined pursuant to the
    2003 Plan and also subsequently paid in a private placement of
    US Airways Group's Class A Common Stock in August 2003.
(14)
The amount disclosed for 2003 reflects an award of
    188,400 shares of Restricted Stock effective July 31,
    2003, vesting 50% on June 30, 2005 and 50% on
    January 1, 2006, based on a per share value of $7.34 on the
    grant date. Because US Airways Group's Class A Common
    Stock was not listed on the grant date, the $7.34 per share
    value is based on the per share value determined pursuant to the
    2003 Plan and also subsequently paid in a private placement of
    US Airways Group's Class A Common Stock in August
    2003. Mr. Glass also had shares of restricted stock of US
    Airways Group's predecessor corporation which were canceled
    on March 31, 2003, the effective date of the 2003 Plan, and
    Mr. Glass received no payment with respect to such
    cancellation. These cancelled shares were received pursuant to
    an award effective April 8, 2002 of 25,000 shares of
    restricted common stock of US Airways Group's predecessor
    corporation, vesting 34% on April 8, 2003 and 33% on each
    of April 8, 2004 and April 8, 2005, with a value of
    $151,000 based on the closing price ($6.04) on the grant date.
(15)
The amount disclosed for 2003 reflects an award of
    188,400 shares of Restricted Stock effective July 31,
    2003, vesting 50% on June 30, 2005 and 50% on
    January 1, 2006, based on a per share value of $7.34 on the
    grant date. Because US Airways Group's Class A Common
    Stock was not listed on the grant date, the $7.34 per share
    value is based on the per share value determined pursuant to the
    2003 Plan and also subsequently paid in a private placement of
    US Airways Group's Class A Common Stock in August
    2003. All of Mr. Baldanza's shares of Restricted Stock
    were forfeited upon his termination of employment on
    January 15, 2005. Mr. Baldanza had shares of
    restricted stock of US Airways Group's predecessor
    corporation which were canceled on March 31, 2003, the
    effective date of the 2003 Plan, and Mr. Baldanza received
    no payment with respect to such cancellation. These cancelled
    shares were received pursuant to an award effective
    October 16, 2001 of 15,000 shares of restricted common
    stock of US Airways Group's predecessor corporation,
    vesting 25% on November 15, 2001, 25% on December 1,
    2002 and 25% on each of October 16, 2003 and
    October 16, 2004, with a value of $80,400 based on the
    closing price ($5.36) on the grant date.
(16)
The amount disclosed for 2003 reflects an award of
    1,130,400 shares of Restricted Stock to Mr. Siegel,
    based on a per share value of $7.34 on the grant date, vesting
    no later than January 1, 2006. Upon his termination of
    employment on April 19, 2004, the shares became fully
    vested. Because US Airways Group's Class A Common
    Stock was not listed on the grant date, the $7.34 per share
    value is based on the per share value determined pursuant to the
    2003 Plan and also subsequently paid in a private placement of
    US Airways Group's Class A Common Stock in August
    2003. Mr. Siegel also had shares of restricted stock of US
    Airways Group's predecessor corporation which were
    cancelled on March 31, 2003, the effective date of US
    Airways Group's 2003 Plan, and Mr. Siegel received no
    payment with respect to such cancellation. These cancelled
    shares were received pursuant to an award effective
    March 11, 2002 of 350,000 shares of restricted common
    stock of US Airways Group's predecessor corporation,
    vesting 100% on March 11, 2005, with a value of $2,359,000
    based on the closing price ($6.74) on the grant date.
(17)
The amount disclosed for 2003 reflects an award of
    376,800 shares of Restricted Stock effective July 31,
    2003, vesting 50% on January 1, 2005 and 50% on
    January 1, 2006, based on a per share value of $7.34 on the
    grant date. Upon his termination of employment on April 30,
    2004, the shares became fully vested. Because US Airways
    Group's Class A Common Stock was not listed on the
    grant date, the $7.34 per share value is based on the per
    share value determined pursuant to the 2003 Plan and also
    subsequently paid in a private placement of US Airways
    Group's Class A Common Stock in August 2003.
    Mr. Cohen had shares of restricted stock of US Airways
    Group's predecessor corporation which were canceled on
    March 31, 2003, the effective date of the 2003 Plan, and
    Mr. Cohen received no payment with respect to such
    cancellation. These cancelled shares were received pursuant to
    an award effective April 8, 2002 of 100,000 shares of
    restricted common stock of US Airways Group's predecessor
    corporation, vesting 34% on April 8, 2003, and 33% on each
    of April 8, 2004 and April 8, 2005, with a value of
    $604,000 based on the closing price ($6.04) on the grant date.
(18)
Amounts shown for 2004 reflect options granted in 2004, as
    described under "Option Grants" below. Amounts shown
    for 2003 for all named executive officers other than
    Mr. Lakefield reflect Class A-1 Warrants (Warrants)
    granted in 2003 with an exercise price of $7.42 per share.
    Amounts shown for 2003 for Mr. Lakefield include options
    exercisable for 5,000 shares of Class A Common Stock
    granted pursuant to the 2003 Nonemployee Director Stock
    Incentive Plan. Amounts shown for 2002 reflect options
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exercisable for shares of common
    stock of US Airways Group's predecessor corporation, all of
    which were cancelled on March 31, 2003, the effective date
    of the 2003 Plan. The respective officer did not receive any
    payment in connection with the cancellation of the options.
(19)
As further described herein,
    amounts disclosed include the value of life insurance benefits
    for the named executive officers and contributions to various
    defined contribution pension plans. Under the US Airways
    life insurance plan, individual life insurance coverage is
    available to executive officers, with US Airways paying the
    premium associated with this coverage. The following amounts
    reflect the dollar value of premiums paid by US Airways on life
    insurance policies in 2004 for its named executives:
    Mr. Lakefield – $3,805;
    Mr. Crellin – $6,321; Ms. Lanier –
    $3,381; Mr. Glass – $3,050;
    Mr. Baldanza – $1,470;
    Mr. Siegel – $780; and Mr. Cohen –
    $500. Amounts disclosed for 2004 include US Airways
    contributions to the US Airways Funded Executive Defined
    Contribution Plan and accruals under the US Airways Unfunded
    Executive Defined Contribution Plan, which were adopted during
    2003 to replace supplemental retirement arrangements in effect
    before US Airways Group and US Airways' prior bankruptcy
    reorganization, and which provide supplemental retirement
    benefits to the executives. The US Airways Funded Executive
    Defined Contribution Plan also provides for full funding of the
    benefits in a secular trust. The following amounts reflect the
    value of the benefits accrued under the US Airways Unfunded
    Executive Defined Contribution Plan during 2004 to the named
    executives: Mr. Lakefield – $0;
    Mr. Crellin – $73,580;
    Ms. Lanier – $32,786; Mr. Glass –
    $34,614; Mr. Baldanza – $34,991;
    Mr. Siegel – $91,714; and
    Mr. Cohen – $8,988. The following amounts reflect
    the value of the benefits contributed to the US Airways Funded
    Executive Defined Contribution Plan during 2004 to the named
    executives: Mr. Lakefield – $0;
    Mr. Crellin – $274,649;
    Ms. Lanier – $167,122; Mr. Glass –
    $201,715; Mr. Baldanza – $233,566;
    Mr. Siegel – $681,419; and
    Mr. Cohen – $61,568. During 2004, US Airways also
    made contributions to Mr. Siegel's accounts in US
    Airways' tax-qualified defined contribution plans, in the
    amount of $14,677. The other named executives did not receive
    company contributions under US Airways' tax-qualified
    defined contribution plans during 2004. The amount reflected for
    2004 also includes $43,077 in temporary living expenses for
    Mr. Lakefield, $46,443 in temporary living expenses for
    Ms. Lanier and $3,581 in temporary living expenses for
    Mr. Cohen. As a result of his termination of employment
    with US Airways Group and US Airways, Mr. Siegel was paid a
    cash severance payment in the amount of $4,725,410 and $75,000
    for accrued but unused vacation time, each of which is included
    in the 2004 amount. In addition, Mr. Siegel was paid
    $681,419 in settlement of his benefits under the US Airways
    Funded Executive Defined Contribution Plan. This amount has been
    previously included, as described above, and is not separately
    shown in the total in the column. Also included in the 2004
    amount is $65,000 paid to Mr. Siegel as reimbursement for
    legal fees incurred in connection with his separation
    agreements. As a result of his termination of employment with US
    Airways Group and US Airways, Mr. Cohen was paid a cash
    severance payment in the amount of $1,520,000 and $3,033 for
    accrued but unused vacation time, each of which is included in
    the 2004 amount. In addition, Mr. Cohen was paid $338,458
    in settlement of his benefits under the US Airways Funded
    Executive Defined Contribution Plan. This amount has been
    previously included in the Summary Compensation Table and is not
    separately shown in the total included in the column. Also
    included in the 2004 amount is $10,000 paid to Mr. Cohen as
    reimbursement for legal fees incurred in connection with his
    separation agreement.
Option Grants
The following table sets forth information regarding the number
and terms of options granted to the named executive officers
pursuant to US Airways Group's 2003 Stock Incentive Plan,
as amended and restated, during the fiscal year ended
December 31, 2004.
Option Grants in Last Fiscal Year
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Number of Shares
Percent of Total
Option Term(3)
Underlying
Options Granted to
Exercise or
Expiration
Name
Options Granted(1)
Employees in 2004(2)
Base Price
Date
5% ($)
10% ($)
Bruce R. Lakefield
288,800
61.1
%
$
1.59
06/19/14
$
288,783
$
731,834
Alan W. Crellin
—
—
—
—
—
—
Elizabeth K. Lanier
—
—
—
—
—
—
Jerrold A. Glass
—
—
—
—
—
—
B. Ben Baldanza
—
—
—
—
—
—
David N. Siegel
—
—
—
—
—
—
Neal S. Cohen
—
—
—
—
—
—
(1)
The options vest 25% on each anniversary of April 19, 2004.
(2)
The total number of stock options granted to employees in 2004
    was 472,340.
(3)
Amounts represent hypothetical gains assuming exercise at the
    end of the option term and assuming rates of stock price
    appreciation of 5% and 10% compounded annually from the date the
    options were granted to their expiration date. The 5% and 10%
    assumed rates of appreciation are mandated by the rules of the
    SEC. These assumptions are not intended to forecast future
    appreciation of US Airways Group's stock price. The
    potential realizable value computation does not take into
    account federal or state income tax consequences of option
    exercises or sales of appreciated stock. The actual gains, if
    any, on the option exercises will depend on the
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future performance of US Airways
    Group's Class A Common Stock, the option holder's
    continued employment through applicable vesting periods and the
    date on which the options are exercised and the underlying
    shares are sold. The closing price of US Airways
    Group's Class A Common Stock on February 18, 2005
    was $1.16 per share. The ultimate recovery, if any, to
    holders of the common stock will not be determined until
    confirmation of a plan of reorganization. The plan of
    reorganization could result in holders of US Airways
    Group's common stock and related equity securities
    receiving no distribution on account of their interest and
    cancellation of the equity.
Option and Warrant Exercises
There were no option or Warrant exercises by the named executive
officers during the fiscal year ended December 31, 2004.
The following table sets forth (i) the number of shares
covered by options and Warrants (both exercisable and
unexercisable) as of December 31, 2004 and (ii) the
respective value for "in-the-money" options and
Warrants, which represents the positive spread between the
exercise price of existing options and Warrants and the fair
market value of US Airways Group's Class A Common
Stock at December 31, 2004.
Aggregate Option/ Warrant Exercises in Last Fiscal Year
and
Fiscal Year-End Option/ Warrant Values
Number of Shares
Value of Unexercised
Underlying Unexercised
In-The-Money
Options/Warrants at
Options/Warrants at
Shares
Year-End (#)
Year-End (#)
Acquired
Value
Name
on Exercise (#)
Realized ($)
Exercisable
Unexercisable
Exercisable
Unexercisable
Bruce R. Lakefield
—
$
—
—
288,800
$
—
$
—
Alan W. Crellin
—
—
111,600
—
—
—
Elizabeth K. Lanier
—
—
111,600
—
—
—
Jerrold A. Glass
—
—
111,600
—
—
—
B. Ben Baldanza
—
—
111,600
—
—
—
David N. Siegel
—
—
669,600
—
—
—
Neal S. Cohen
—
—
223,200
—
—
—
Retirement Benefits
Qualified Retirement Plan.
US Airways previously
maintained a defined benefit retirement plan (the Retirement
Plan) for its salaried employees which provided noncontributory
benefits based upon years of service and the employee's
highest three-year average annual compensation during the last
ten calendar years of service. The Retirement Plan was frozen in
1991, but benefits accrued as of the date the plan was frozen
remain outstanding until they are paid to participants. Under
the Retirement Plan, benefits were generally payable commencing
at age 65. However, the Retirement Plan provided reduced
early retirement benefits commencing as early as age 55.
Benefits under the Retirement Plan were integrated with the
Social Security program. Compensation under the Retirement Plan
included the employee's total compensation as reported on
Form W-2, plus exclusions from income due to employee
elections under Sections 401(k), 125 and 132(f)(4) of the
Internal Revenue Code of 1986, as amended (the Internal Revenue
Code), minus any imputed income due to the exercise of stock
options, income resulting from group term insurance, income
imputed due to air pass privileges, expense reimbursements and
deferred compensation received in the form of a lump sum
distribution. This definition of compensation excludes the
following items reported as compensation under the Summary
Compensation Table: (i) imputed income from stock options,
(ii) income resulting from group term insurance,
(iii) income imputed due to air pass privileges, and
(iv) certain expense reimbursements. On November 12,
2004, US Airways filed a motion requesting a determination from
the Bankruptcy Court that US Airways satisfied the financial
requirements for a "distress termination" of the
Retirement Plan, which the Bankruptcy Court approved on
January 6, 2005. The Retirement Plan was terminated
effective January 17, 2005, by agreement between the PBGC
and US Airways. Effective February 1, 2005, the PBGC was
appointed trustee for the plan. Other than Mr. Crellin,
none of the named executive officers participated in the
Retirement Plan. Mr. Crellin has two years of Credited
Service under the Retirement Plan. Assuming retirement effective
January 1, 2005 and payment in the form of a single life
annuity under the Retirement Plan, Mr. Crellin would
receive payments of $1,896.85 per month through
January 31, 2009, reduced to $1,799.48 per month from
February 1, 2009 through November 30, 2013, and
further reduced to
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$1,755.22 per month on and after December 1, 2013. If the
payment were made in the form of a joint and 50% survivor
annuity with Mr. Crellin's spouse as beneficiary under
the Retirement Plan, Mr. Crellin would receive payments of
$1,701.47 per month through January 31, 2009, reduced
to $1,614.13 per month from February 1, 2009 through
November 30, 2013, and further reduced to
$1,574.43 per month on and after December 1, 2013, and
upon Mr. Crellin's death his surviving spouse would
receive 50% of the monthly payment amounts for her life. As a
result of the termination of the Retirement Plan,
Mr. Crellin's benefits may be reduced.
Executive Defined Contribution Plans.
Messrs. Crellin, Glass and Baldanza and Ms. Lanier
receive a defined contribution benefit under the US Airways
Funded Executive Defined Contribution Plan and the
US Airways Unfunded Executive Defined Contribution Plan
(the Executive Plans), and Mr. Siegel and Mr. Cohen
received benefits under the Executive Plans in connection with
the termination of their employment during 2004. Under the
Executive Plans, a contribution is credited to each participant
each year, the amount of which is individually determined based
upon age, service and projected earnings (including target
annual bonus) such that the annual contribution to the Executive
Plans and an assumed 8% investment return will achieve a target
annual benefit of 50% of final average earnings (based on total
cash compensation) at normal retirement age (age 62) when
combined with the executive's benefits under the
tax-qualified retirement plans maintained by US Airways. The
annual contribution to the Funded Executive Defined Contribution
Plan may not exceed 64% of the executive's earnings for the
year, and the annual allocation to the Unfunded Executive
Defined Contribution Plan may not exceed 16% of the
executive's earnings for the year. Under the Executive
Plans, contributions for disabled executives will continue
during the period of disability benefits, and contributions
continue for the first twelve months following an executive
starting an absence from work due to the birth, adoption or
caring for a child after birth or adoption, or due to pregnancy.
Furthermore, upon termination of an executive on or after the
occurrence of a change in control (as defined in the Executive
Plans), US Airways will make an additional contribution or
allocation to the Executive Plans for the year in which the
termination of employment occurs, in the amount equal to the
allocations that US Airways would have had to make during the
years for which US Airways would be required to continue to
provide such benefits under the executive's employment
agreement or severance agreement. Participants in the Executive
Plans do not receive employer contributions under the
tax-qualified retirement plans sponsored by US Airways
(including the 401(k) and money purchase pension plans) or under
any other nonqualified defined contribution plans associated
with the tax-qualified retirement plans.
Messrs. Crellin, Glass and Baldanza and Ms. Lanier
receive a benefit based upon three years of credited service for
each of the first five years of service (beginning on date of
hire), and thereafter two years of credited service for each
actual year of service up to a maximum of 30 years of
credited service. Contributions and allocations are fully
vested. In connection with his termination of employment on
January 15, 2005, Mr. Baldanza received his benefits
under the Executive Plans in accordance with the terms of the
respective plans, as described below.
Eighty percent (80%) of the target benefit amount is calculated
under the Funded Executive Defined Contribution Plan and reduced
to present value based on actuarial assumption under that plan,
which amount, less the maximum amount of 401(k) contributions
permitted for the year, is contributed to a secular trust on a
monthly basis, subject to certain limitations on the total
amount that can be contributed on an annual basis. Participants
also receive a payment to cover any income tax liabilities
incurred in connection with the contributions to the secular
trust. The remainder of the target benefit amount is unfunded
and is credited to an account with an assumed annual 8% rate of
return. Under letter agreements entered into with
Ms. Lanier, Mr. Baldanza, Mr. Crellin and
Mr. Glass on October 20, 2004, contributions under the
Executive Plans after October 11, 2004 are subject to a 25%
reduction. Distributions from the Funded Executive Defined
Contribution Plan will be made to participants upon termination
of employment in a single lump sum payment in cash.
Distributions from the Unfunded Executive Defined Contribution
Plan will be made to participants in a single lump sum payment
in cash after the later of termination of employment or
attainment of age 62.
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Employment and Severance Agreements
US Airways has entered into employment agreements with Bruce R.
Lakefield and Elizabeth K. Lanier. In addition, US Airways is a
party to severance agreements, which in substance are employment
agreements as well, with Alan W. Crellin, Jerrold A. Glass and
B. Ben Baldanza. The Company has entered into a Separation
Agreement and Supplemental Separation Agreement with David N.
Siegel and a Separation and Consulting Agreement with Neal S.
Cohen. All employment-related agreements with
Mr. Lakefield, Mr. Crellin, Ms. Lanier and
Mr. Glass have not yet been assumed and are subject to
modification prior to the Company's emergence from
bankruptcy.
Employment Agreement with Bruce R. Lakefield
US Airways Group and US Airways entered into an Employment
Agreement with Mr. Lakefield April 19, 2004, which is
filed as Exhibit 10.6 to US Airways' Quarterly Report
on Form 10-Q for the quarter ended September 30, 2004.
Term of Employment.
The agreement provides for
Mr. Lakefield to serve as US Airways' Chief Executive
Officer and President on an at-will basis. Upon a change of
control, the agreement will become effective for a two-year term
and terminate at the end of the two-year period.
Salary and Benefits.
Under the agreement,
Mr. Lakefield is entitled to an annual base salary of not
less than $425,000, subject to annual increases consistent with
those provided to other key employees. Under the agreement,
Mr. Lakefield received 471,200 shares of restricted
stock and a nonqualified option to
purchase 288,800 shares of Class A Common Stock
at a price of $1.59 per share, each under the 2003 Stock
Incentive Plan, which awards vest in 25% increments on each
April 19, beginning in 2005. In addition to base salary,
the agreement provides that Mr. Lakefield will be awarded
an annual bonus in accordance with US Airways Group's
Incentive Compensation Plan (ICP) (or successor plan) and will
be eligible to participate in the Long-Term Incentive Plan
(LTIP), each as determined by the Board or the Human Resources
Committee. Mr. Lakefield waived his participation in the
ICP and the LTIP until US Airways returns to profitability.
Mr. Lakefield also waived participation in the Executive
Plans and in all tax-qualified retirement plans and nonqualified
retirement or deferred compensation plans sponsored by US
Airways Group or US Airways. Mr. Lakefield is entitled
to participate in all welfare benefit and fringe benefit plans
provided to other officers. At the time the agreement was
executed, those benefits included on-line first class, positive
space travel privileges for business and pleasure for
Mr. Lakefield and his eligible family members, as well as a
limited number of non-eligible family members and unrelated
persons, a gross-up payment (up to a maximum of $10,000) to
cover his tax liability resulting from such travel, free access
to US Airways Club facilities for him and his eligible family
members and certain temporary living expenses.
Termination of Employment.
Mr. Lakefield's
employment may be terminated at any time by mutual agreement,
and terminates automatically upon his death. US Airways or US
Airways Group may also terminate the agreement upon ten
days' written notice upon Mr. Lakefield's
disability, or immediately at any time for "cause" (as
defined in the agreement). Mr. Lakefield may voluntarily
terminate his employment, which may constitute termination for
"good reason" upon certain events defined in the
agreement. In the event of any termination by US Airways or US
Airways Group for cause or by Mr. Lakefield for good
reason, the terminating party must give written notice that
indicates the specific termination provision in the agreement
that is relied upon and sets forth in reasonable detail the
facts and circumstances that are the basis for the termination,
as well as the termination date, which may not be more than
15 days after the notice date.
Obligations Upon Termination.
After two years of service
with US Airways Group, including as a member of the Board,
Mr. Lakefield will become vested in lifetime on-line, first
class, positive space travel privileges for business and
pleasure for him and his eligible family members. If
Mr. Lakefield's employment is terminated for cause,
due to death or disability, or is voluntarily terminated by
Mr. Lakefield without "good reason,"
Mr. Lakefield is entitled to receive all salary and
vacation accrued through the date of termination, within
30 days of the date of termination. If
Mr. Lakefield's employment is terminated due to death
or disability, US Airways must also pay a prorated annual bonus
if annual bonuses are paid to executives for the year in which
termination occurs. If, prior to a change of control, US Airways
or
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US Airways Group terminates Mr. Lakefield's
employment other than for cause or if Mr. Lakefield
terminates his employment for good reason,
(i) Mr. Lakefield is entitled to receive all salary
and vacation accrued through the date of termination, within
30 days of the date of termination, and US Airways must pay
a prorated annual bonus if annual bonuses are paid to executives
for the year in which termination occurs, and (ii) Mr.
Lakefield may negotiate a separate severance agreement providing
severance pay and/or additional benefits, subject to his
execution of a general release and covenant not to sue the
company. If, within two years after a change of control, US
Airways or US Airways Group terminates Mr. Lakefield's
employment other than for cause or if Mr. Lakefield
terminates his employment for good reason, Mr. Lakefield is
entitled to: (i) accrued but unpaid base salary and
vacation; (ii) three times base salary (unreduced for any
reductions then in effect) plus target annual bonus for the year
in which termination occurs; (iii) three times the greater
of 125% of unreduced base salary or the target LTIP award that
would have been paid for the period ending in the year of
termination; (iv) continuation of medical, dental, vision
and prescription drug coverages for Mr. Lakefield and his
dependents for 24 months on the same premium and coverage
basis as active officers (or an equivalent payment);
(v) continuation of life insurance coverage for
24 months (or an equivalent payment); and (vi) on-line
travel privileges to Mr. Lakefield and his eligible family
members for life.
Other Obligations.
In the event that any of
Mr. Lakefield's compensation (whether required under
the agreement or otherwise) would be subject to an excise tax
under Internal Revenue Code Section 4999, US Airways
is required to pay Mr. Lakefield an additional gross-up
payment, such that after payment of all taxes, including
interest or penalties, on the gross-up payment,
Mr. Lakefield will retain an amount of the gross-up payment
equal to the excise tax (and any penalties and interest on the
excise tax). Mr. Lakefield agreed to hold US Airways
Group's and US Airways' secret or confidential
information, knowledge or data as confidential, including after
termination of employment, and agreed to nonsolicitation of
customers and employees for one year after termination.
Employment Agreement with Elizabeth K. Lanier
US Airways' Employment Agreement with Ms. Lanier is
dated as of March 1, 2003 and is filed as Exhibit 10.5
to US Airways' Annual Report on Form 10-K for the year
ended December 31, 2003. The Employment Agreement was
amended by a letter agreement dated October 20, 2004, which
is filed as Exhibit 10.38 to US Airways Annual Report on
Form 10-K for the year ended December 31, 2004.
Term of Employment.
The agreement provides for
Ms. Lanier to serve as US Airways' Executive Vice
President — Corporate Affairs and General Counsel.
Ms. Lanier will serve for an initial term of three years,
to be extended each year by one additional year unless either US
Airways or Ms. Lanier provides notice that the term will
not be extended, or, if a shorter period, until the first day of
the month following Ms. Lanier's 65th birthday (which
is defined in the agreement as Ms. Lanier's
"normal retirement date"). Upon a "change of
control" (as defined in the agreement), the term of the
agreement is automatically extended through the third
anniversary of the date of the change of control or through
Ms. Lanier's normal retirement date, whichever is
earlier.
Salary and Benefits.
Under the agreement, Ms. Lanier
is entitled to an annual base salary of not less than $425,000
for the initial 12 months of the term, subject to a 17%
salary reduction. Ms. Lanier is entitled to salary
increases in accordance with increases awarded to other key
employees and her salary generally may not be decreased, except
that pursuant to a letter agreement that amended the employment
agreement, Ms. Lanier is currently subject to an additional
10% salary reduction. In addition to base salary, the agreement
provides that Ms. Lanier will be awarded an annual bonus
determined by the Board or the Human Resources Committee in
accordance with US Airways Group's ICP (or successor plan).
Ms. Lanier's target percentage under the annual ICP
each year will be no less than 60% of her base salary, and her
maximum bonus opportunity each year will be no less than 120% of
base salary. Ms. Lanier is eligible to participate in the
LTIP with a target percentage no less than 80% of her base
salary, and a maximum percentage no less than 160% of base
salary. The agreement provides that Ms. Lanier will receive
supplemental executive retirement benefits (which she now
receives through participation in the Company's Executive
Plans, subject to a 25% reduction provided in the letter
agreement that amended the employment agreement), and is
entitled to equity awards consistent with those provided to
other Executive Vice Presidents. Ms. Lanier is also entitled
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to participate in all incentive, savings, retirement and welfare
benefit plans provided to other key employees. Under the
agreement, Ms. Lanier is entitled to fringe benefits,
office and support staff, and paid vacation, all in accordance
with the most favorable practices with respect to other key
employees. During 2004, those benefits included on-line first
class, positive space travel privileges for business and
pleasure for Ms. Lanier and her eligible family members, as
well as a limited number of non-eligible family members and
unrelated persons, a gross-up payment (up to a maximum of
$10,000) to cover her tax liability resulting from such travel,
free access to US Airways Club facilities for her and her
eligible family members, an annual car allowance, and certain
relocation benefits including up to 24 months of reasonable
temporary living expenses.
Termination of Employment.
Ms. Lanier's
employment may be terminated at any time by mutual agreement,
and terminates automatically upon her death. US Airways may also
terminate the agreement upon written notice after six months of
Ms. Lanier's continuous total and permanent
disability, if Ms. Lanier does not return to work within
90 days after the written notice. US Airways may also
terminate the agreement at any time for "cause" (as
defined in the agreement). Ms. Lanier may voluntarily
terminate her employment, which may constitute termination for
"good reason" upon certain events defined in the
agreement. In the event of any termination by US Airways for
cause or by Ms. Lanier for good reason, the terminating
party must give written notice that indicates the specific
termination provision in the agreement that is relied upon and
sets forth in reasonable detail the facts and circumstances that
are the basis for the termination, as well as the termination
date, which may not be more than 15 days after the notice
date. In the event of a dispute regarding termination, the
agreement and compensation continue in effect until the earlier
of the resolution of the dispute or the end of the term of the
agreement.
Obligations Upon Termination.
If Ms. Lanier's
employment is terminated for cause, due to death or disability,
or is voluntarily terminated by Ms. Lanier without
"good reason," US Airways must pay all salary
(disregarding any impermissible salary decrease), deferred
compensation and vacation accrued through the date of
termination within 30 days of the date of termination. If
Ms. Lanier's employment is terminated due to death or
disability, or is voluntarily terminated by Ms. Lanier
without "good reason," US Airways must also pay a
prorated annual bonus based on the amount of
Ms. Lanier's annual bonus for the previous fiscal
year. If, prior to a change of control and not in connection
with a change of control, US Airways terminates
Ms. Lanier's employment other than for cause,
disability or death or if Ms. Lanier terminates her
employment for good reason: (i) US Airways will pay to
Ms. Lanier a lump sum in cash within five days after the
date of termination equal to the aggregate of
Ms. Lanier's accrued but unpaid base salary
(disregarding any impermissible reductions), a prorated annual
bonus (based on the higher of the target bonus applicable under
the agreement, the bonus paid during, or the bonus paid with
respect to, the most recent fiscal year), two times the sum of
such annual base salary and Ms. Lanier's target annual
bonus for the year in which the termination occurs, any
previously deferred compensation, and any accrued vacation pay;
and (ii) for two years after the date of termination, US
Airways will continue benefits to Ms. Lanier and/or her
family as if the agreement had continued. If, after a change of
control or prior to a change in control and in connection with a
change of control, US Airways terminates Ms. Lanier's
employment other than for cause, disability or death or if
Ms. Lanier terminates her employment for good reason:
(i) US Airways will pay to Ms. Lanier a lump sum in
cash within five days after the date of termination equal to the
aggregate of Ms. Lanier's accrued but unpaid base
salary (disregarding any impermissible reductions), a prorated
annual bonus (based on the higher of the target bonus applicable
under the agreement, the bonus paid during, or the bonus paid
with respect to, the most recent fiscal year), three times the
sum of such annual base salary and such annual bonus, any
previously deferred compensation, any accrued vacation pay, and
an amount equal to the amount of additional benefits
Ms. Lanier would receive under all US Airways retirement
plans if Ms. Lanier continued employment through the term
of the agreement; (ii) for purposes of eligibility for
retiree benefits, Ms. Lanier shall be considered to have
remained employed and retired on the last day of the term of the
agreement; (iii) for three years after the date of
termination, US Airways will continue benefits to
Ms. Lanier and/or her family as if the agreement had
continued; and (iv) at the end of the three-year period, US
Airways will continue health insurance and on-line travel
privileges to Ms. Lanier for life. In addition, as a
participant in the LTIP, upon a change of control, she would be
eligible for a payment for each three-year performance period
under the LTIP that has not yet been completed in an amount that
would have been payable to her if target performance had been
met for each performance period. Further, upon termination of
Ms. Lanier's
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employment for any reason following the completion of at least
5 years of service, US Airways will continue to provide
Ms. Lanier with on-line travel privileges for life.
Other Obligations.
US Airways agreed to pay
Ms. Lanier's reasonable legal fees and expenses
incurred as a result of any contest by US Airways or others of
the validity or enforceability of, or liability under the
agreement, plus interest. In addition, in the event that any of
Ms. Lanier's compensation (whether required under the
agreement or otherwise) would be subject to an excise tax under
Internal Revenue Code Section 4999, US Airways is required
to pay Ms. Lanier an additional gross-up payment, such that
after payment of all taxes, including interest or penalties, on
the gross-up payment, Ms. Lanier will retain an amount of
the gross-up payment equal to the excise tax (and any penalties
and interest on the excise tax). Ms. Lanier agreed to hold
US Airways Group's and US Airways' secret or
confidential information, knowledge or data as confidential,
including after termination of employment.
Severance Agreement with Alan W. Crellin
US Airways' Severance Agreement with Mr. Crellin is
dated as of June 26, 2002 and is filed as Exhibit 10.9
to US Airways' Annual Report on Form 10-K for the year
ended December 31, 2002. The Severance Agreement was
amended by letter agreements dated July 25, 2002 and
October 20, 2004, which are filed as Exhibits 10.17 to
US Airways' Annual Report on Form 10-K for the year
ended December 31, 2002 and Exhibit 10.37 to US
Airways Annual Report on Form 10-K for the year ended
December 31, 2004, respectively
Term of Employment.
The agreement provides for
Mr. Crellin to serve as Executive Vice President of US
Airways for an initial term of three years, to be extended each
year by one additional year unless either US Airways or
Mr. Crellin provides notice that the term will not be
extended, or, if a shorter period, until the first day of the
month following Mr. Crellin's 65th birthday (which is
defined in the agreement as Mr. Crellin's "normal
retirement date"). Upon a "change of control" (as
defined in the agreement), the term of the agreement is
automatically extended to the third anniversary of the date of
the change of control or through Mr. Crellin's normal
retirement date, whichever is earlier.
Salary and Benefits.
The agreement does not specify
Mr. Crellin's salary and benefits prior to the date of
a change of control. However, pursuant to the letter agreements
that amended the severance agreement, Mr. Crellin became
subject to a 17% and an additional 10% salary reduction and a
25% reduction in retirement plan contributions effective
October 11, 2004. Beginning on the date of a change of
control and continuing for a period of three years thereafter,
or until Mr. Crellin's normal retirement date, if
earlier, the agreement provides for minimum salary and benefits
that must be provided to Mr. Crellin. US Airways will pay
Mr. Crellin a base salary for the first 12 months of
such period at a rate not less than his base salary in effect on
the date of the change of control. Mr. Crellin's
salary may not be decreased thereafter and must be increased in
accordance with pay increases provided to other executive vice
president level employees. In addition, Mr. Crellin will be
awarded an annual bonus determined by the Board or the Human
Resources Committee in accordance with US Airways Group's
ICP or successor plan. In addition to base salary and annual
bonus, Mr. Crellin will be entitled to participate in all
incentive, savings, retirement and welfare benefit plans
applicable to executive vice president level employees, under
terms at least as favorable as the most favorable plans provided
during the 90-day period prior to the change of control.
Mr. Crellin will also be entitled to fringe benefits,
including but not limited to space positive and space available
travel privileges in all classes of service and cabins on all
air carriers owned by US Airways and any of its affiliates,
including all carriers owned by any individual, entity or group
that has entered into an agreement that constitutes a change of
control, and to paid vacation under terms at least as favorable
as the most favorable travel privileges and vacation program
provided during the 90-day period prior to the change of
control. Mr. Crellin will continue to be entitled to all of
the foregoing compensation and benefits, if applicable, during
the first six months of Mr. Crellin's total and
permanent disability.
Termination of Employment.
Mr. Crellin's
employment may be terminated at any time by mutual agreement,
and terminates automatically upon his death. US Airways may also
terminate the agreement upon written notice after six months of
Mr. Crellin's continuous total and permanent
disability, if Mr. Crellin does not return to work within
90 days after the written notice. US Airways may also
terminate the agreement at
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any time for "cause" (as defined in the agreement).
Mr. Crellin may voluntarily terminate his employment, which
may constitute termination for "good reason" upon
certain events defined in the agreement. In the event of any
termination by US Airways for cause or by Mr. Crellin for
good reason within three years after a change of control and
before Mr. Crellin's normal retirement date, the
terminating party must give written notice that indicates the
specific termination provision in the agreement that is relied
upon and sets forth in reasonable detail the facts and
circumstances that are the basis for the termination, as well as
the termination date, which may not be more than 15 days
after the notice date. For post-change of control terminations,
in the event of a dispute regarding termination, the agreement
and compensation continue in effect until the earlier of the
resolution of the dispute, Mr. Crellin's normal
retirement date, or the third anniversary of the date of the
change of control.
Obligations Upon Termination.
If Mr. Crellin's
employment is terminated for cause, due to death or disability,
or is voluntarily terminated by Mr. Crellin without
"good reason," US Airways must pay all salary,
deferred compensation and vacation accrued through the date of
termination within 30 days of the date of termination. If
termination is due to death or disability and occurs within
three years after a change of control and before
Mr. Crellin's normal retirement date, US Airways must
also pay a prorated annual bonus based on the amount of
Mr. Crellin's annual bonus for the previous fiscal
year. If, prior to a change of control and not in connection
with a change of control, US Airways terminates
Mr. Crellin's employment other than for cause,
disability or death or if Mr. Crellin terminates his
employment for good reason, US Airways will pay to
Mr. Crellin in a lump sum in cash within 30 days after
the date of termination the aggregate of Mr. Crellin's
accrued but unpaid base salary, deferred compensation and
benefits, plus an amount equal to two times the sum of his
annual rate of base salary and his target annual bonus. If,
after a change of control, or prior to a change of control but
in connection with a change of control, US Airways terminates
Mr. Crellin's employment other than for cause,
disability or death or if Mr. Crellin terminates his
employment for good reason: (i) US Airways will pay to
Mr. Crellin a lump sum in cash within 30 days after
the date of termination equal to the aggregate of
Mr. Crellin's accrued but unpaid base salary
(disregarding any impermissible reductions in
Mr. Crellin's salary), a prorated annual bonus (based
on the higher of the target bonus immediately in effect prior to
the change of control, the bonus paid during, or the bonus paid
with respect to, the most recent fiscal year ending after the
change of control), three times the sum of such annual base
salary and such annual bonus, any previously deferred
compensation, and any accrued vacation pay; (ii) for three
years after the date of termination, US Airways will
continue benefits to Mr. Crellin and/or his family as if
the agreement had continued; (iii) for purposes of
eligibility for retirement, Mr. Crellin shall be considered
to have remained employed until the third anniversary of the
date of termination; and (iv) US Airways will provide
continuation of travel privileges for life. In addition, as a
participant in the LTIP, upon a change of control, he would be
eligible for a payment for each three-year performance period
under the LTIP that has not yet been completed in an amount that
would have been payable to him if target performance had been
met for each performance period. Upon termination of
Mr. Crellin's employment for any reason following the
fifth anniversary of his date of employment, he will be entitled
to lifetime travel privileges.
Other Obligations.
US Airways agreed to pay
Mr. Crellin's reasonable legal fees and expenses
incurred as a result of any contest by US Airways or others
of the validity or enforceability of, or liability under the
agreement, plus interest. In the case of a contest regarding
(i) payments upon termination of Mr. Crellin's
employment prior to a change of control and not in connection
with a change of control other than for cause, disability or
death or termination by Mr. Crellin for good reason, or
(ii) lifetime travel privileges following
Mr. Crellin's fifth anniversary of employment,
US Airways is only required to make such payments if
Mr. Crellin prevails on at least one material issue in such
contest. In addition, in the event that any of
Mr. Crellin's compensation (whether required under the
agreement or otherwise) would be subject to an excise tax under
Section 4999 of the Internal Revenue Code, US Airways
is required to pay Mr. Crellin an additional gross-up
payment, such that after payment of all taxes, including
interest or penalties, on the gross-up payment, Mr. Crellin
will retain an amount of the gross-up payment equal to the
excise tax (and any penalties and interest on the excise tax).
Mr. Crellin agreed to hold US Airways Group's and
US Airways' confidential and proprietary information
as confidential, including after termination of employment. If
Mr. Crellin violates this confidentiality agreement, any
payments due under the agreement are forfeited.
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First Amendment to Severance Agreement.
US Airways
entered into a First Amendment to Mr. Crellin's
Severance Agreement on March 31, 2003 that is filed as
Exhibit 10.3 to US Airways' Quarterly Report on
Form 10-Q for the quarterly period ended March 31,
2003. The Amendment provides that (1) no change of control
will be deemed to have occurred in connection with transactions
under the RSA investment agreement or in connection with
US Airways' emergence from the Prior Bankruptcy and
(2) any relocation of US Airways' headquarters
outside of the Washington, D.C. metropolitan area will
constitute good reason for Mr. Crellin to terminate his
employment.
Severance Agreement with Jerrold A. Glass
US Airways' Severance Agreement with Mr. Glass is
dated as of April 8, 2002 and is filed as
Exhibit 10.10 to US Airways' Annual Report on
Form 10-K for the year ended December 31, 2002. The
Severance Agreement was amended by letter agreements dated
July 25, 2002 and October 20, 2004, which are filed as
which are filed as Exhibit 10.18 to US Airways'
Annual Report on Form 10-K for the year ended
December 31, 2002 and Exhibit 10.40 to
US Airways' Annual Report on Form 10-K for the
year ended December 31, 2004, respectively.
Term of Employment.
The agreement provides for
Mr. Glass to serve as Senior Vice President of
US Airways for an initial term of three years, to be
extended each year by one additional year unless either
US Airways or Mr. Glass provides notice that the term
will not be extended, or, if a shorter period, until the first
day of the month following Mr. Glass's
65th birthday (which is defined in the agreement as
Mr. Glass's "normal retirement date"). Upon
a "change of control" (as defined in the agreement),
the term of the agreement is automatically extended to the third
anniversary of the date of the change of control or through
Mr. Glass's normal retirement date, whichever is
earlier.
Salary and Benefits.
The agreement does not specify
Mr. Glass's salary and benefits prior to the date of a
change of control. However, pursuant to the letter agreements
that amended the severance agreement, Mr. Glass became
subject to a 17% and an additional 10% salary reduction and
a 25% reduction in retirement plan contributions effective
October 11, 2004. Beginning on the date of a change of
control and continuing for a period of three years thereafter,
or until Mr. Glass's normal retirement date, if
earlier, the agreement provides for minimum salary and benefits
that must be provided to Mr. Glass. US Airways will
pay Mr. Glass a base salary for the first 12 months of
such period at a rate not less than his base salary in effect on
the date of the change of control. Mr. Glass's salary
may not be decreased thereafter and must be increased in
accordance with pay increases provided to other senior vice
president level employees. In addition, Mr. Glass will be
awarded an annual bonus determined by the Board or the Human
Resources Committee in accordance with US Airways
Group's ICP or successor plan. In addition to base salary
and annual bonus, Mr. Glass will be entitled to participate
in all incentive, savings, retirement and welfare benefit plans
applicable to senior vice president level employees, under terms
at least as favorable as the most favorable plans provided
during the 90-day period prior to the change of control.
Mr. Glass will also be entitled to fringe benefits,
including but not limited to space positive and space available
travel privileges in all classes of service and cabins on all
air carriers owned by US Airways and any of its affiliates,
including all carriers owned by any individual, entity or group
that has entered into an agreement that constitutes a change of
control, and to paid vacation under terms at least as favorable
as the most favorable travel privileges and vacation program
provided during the 90-day period prior to the change of
control. Mr. Glass will continue to be entitled to all of
the foregoing compensation and benefits, if applicable, during
the first six months of Mr. Glass's total and
permanent disability.
Termination of Employment.
Mr. Glass's
employment may be terminated at any time by mutual agreement,
and terminates automatically upon his death. US Airways may
also terminate the agreement upon written notice after six
months of Mr. Glass's continuous total and permanent
disability, if Mr. Glass does not return to work within
90 days after the written notice. US Airways may also
terminate the agreement at any time for "cause" (as
defined in the agreement). Mr. Glass may voluntarily
terminate his employment, which may constitute termination for
"good reason" upon certain events defined in the
agreement. In the event of any termination by US Airways
for cause or by Mr. Glass for good reason within three
years after a change of control and before Mr. Glass's
normal retirement date, the terminating party must give written
notice that indicates the specific termination provision in the
agreement that is relied upon and sets forth in
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reasonable detail the facts and circumstances that are the basis
for the termination, as well as the termination date, which may
not be more than 15 days after the notice date. For
post-change of control terminations, in the event of a dispute
regarding termination, the agreement and compensation continue
in effect until the earlier of the resolution of the dispute,
Mr. Glass's normal retirement date, or the third
anniversary of the date of the change of control.
Obligations Upon Termination.
If Mr. Glass's
employment is terminated for cause, due to death or disability,
or is voluntarily terminated by Mr. Glass without
"good reason," US Airways must pay all salary,
deferred compensation and vacation accrued through the date of
termination within 30 days of the date of termination. If
termination is due to death or disability and occurs within
three years after a change of control and before
Mr. Glass's normal retirement date, US Airways
must also pay a prorated annual bonus based on the amount of
Mr. Glass's annual bonus for the previous fiscal year.
If, prior to a change of control and not in connection with a
change of control, US Airways terminates
Mr. Glass's employment other than for cause,
disability or death or if Mr. Glass terminates his
employment for good reason, US Airways will pay to
Mr. Glass in a lump sum in cash within 30 days after
the date of termination the aggregate of Mr. Glass's
accrued but unpaid base salary, deferred compensation and
benefits, plus an amount equal to two times the sum of his
annual rate of base salary and his target annual bonus. If,
after a change of control, or prior to a change of control but
in connection with a change of control, US Airways
terminates Mr. Glass's employment other than for
cause, disability or death or if Mr. Glass terminates his
employment for good reason: (i) US Airways will pay to
Mr. Glass a lump sum in cash within 30 days after the
date of termination equal to the aggregate of
Mr. Glass's accrued but unpaid base salary
(disregarding any impermissible reductions in
Mr. Glass's salary), a prorated annual bonus (based on
the higher of the target bonus immediately in effect prior to
the change of control, the bonus paid during, or the bonus paid
with respect to, the most recent fiscal year ending after the
change of control), three times the sum of such annual base
salary and such annual bonus, any previously deferred
compensation, and any accrued vacation pay; (ii) for three
years after the date of termination, US Airways will
continue benefits to Mr. Glass and/or his family as if the
agreement had continued; (iii) for purposes of eligibility
for retirement, Mr. Glass shall be considered to have
remained employed until the third anniversary of the date of
termination; and (iv) US Airways will provide
continuation of travel privileges for life. In addition, as a
participant in the LTIP, upon a change of control, he would be
eligible for a payment for each three-year performance period
under the LTIP that has not yet been completed in an amount that
would have been payable to him if target performance had been
met for each performance period. Upon termination of
Mr. Glass's employment for any reason following the
fifth anniversary of his date of employment, he will be entitled
to lifetime travel privileges.
Other Obligations.
US Airways agreed to pay
Mr. Glass's reasonable legal fees and expenses
incurred as a result of any contest by US Airways or others
of the validity or enforceability of, or liability under the
agreement, plus interest. In the case of a contest regarding
(i) payments upon termination of Mr. Glass's
employment prior to a change of control and not in connection
with a change of control other than for cause, disability or
death or termination by Mr. Glass for good reason, or
(ii) lifetime travel privileges following
Mr. Glass's fifth anniversary of employment,
US Airways is only required to make such payments if
Mr. Glass prevails on at least one material issue in such
contest. In addition, in the event that any of
Mr. Glass's compensation (whether required under the
agreement or otherwise) would be subject to an excise tax under
Section 4999 of the Internal Revenue Code, US Airways
is required to pay Mr. Glass an additional gross-up
payment, such that after payment of all taxes, including
interest or penalties, on the gross-up payment, Mr. Glass
will retain an amount of the gross-up payment equal to the
excise tax (and any penalties and interest on the excise tax).
Mr. Glass agreed to hold US Airways Group's and
US Airways' confidential and proprietary information
as confidential, including after termination of employment. If
Mr. Glass violates this confidentiality agreement, any
payments due under the agreement are forfeited.
First Amendment to Severance Agreement.
US Airways
entered into a First Amendment to Mr. Glass's
Severance Agreement on March 31, 2003 that is filed as
Exhibit 10.33 to US Airways' Annual Report on
Form 10-K for the year ended December 31, 2004. The
Amendment provides that (1) no change of control will be
deemed to have occurred in connection with transactions under
the RSA investment agreement or in connection with
US Airways' emergence from the Prior Bankruptcy and
(2) any relocation of US Airways'
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headquarters outside of the Washington, D.C. metropolitan
area will constitute good reason for Mr. Glass to terminate
his employment.
Severance Agreement with B. Ben Baldanza
US Airways' Severance Agreement with Mr. Baldanza
is dated as of June 26, 2002 and is filed as
Exhibit 10.14 to US Airways' Annual Report on
Form 10-K for the year ended December 31, 2003. The
Severance Agreement was amended by letter agreements dated
July 25, 2002 and October 20, 2004, which are filed as
Exhibits 10.18 to Amendment No. 1 to
US Airways' Annual report on Form 10-K for the
year ended December 31, 2002) and Exhibit 10.35 to
US Airways Annual Report on Form 10-K for the year
ended December 31, 2004, respectively. The Severance
Agreement was also amended by a First Amendment on
March 31, 2003, which is filed as Exhibit 10.15 to
US Airways' Annual Report on Form 10-K for the
year ended December 31, 2003. The Amendment provided that
(1) no change of control was deemed to have occurred in
connection with transactions under the RSA investment
agreement or in connection with US Airways' emergence
from the Prior Bankruptcy and (2) any relocation of
US Airways' headquarters outside of the
Washington, D.C. metropolitan area will constitute good
reason for Mr. Baldanza to terminate his employment.
Mr. Baldanza terminated his employment with the Company
effective January 15, 2005, and the Company does not intend
to assume the Severance Agreement, as amended, in connection
with the Chapter 11 proceedings.
Term of Employment, Salary and Benefits.
The agreement
provided for Mr. Baldanza to serve as Senior Vice President
of US Airways for an initial term of three years, to be
extended each year by one additional year unless either
US Airways or Mr. Baldanza provided notice that the
term will not be extended. The agreement also provided that
Mr. Baldanza's employment could be terminated at any
time by mutual agreement, and terminated automatically upon his
death. US Airways had the right terminate the agreement in
the event of Mr. Baldanza's continuous total and
permanent disability or for "cause" (as defined in the
agreement), and Mr. Baldanza had the right to terminate his
employment for "good reason" upon certain events
defined in the agreement. Mr. Baldanza's voluntary
termination of his agreement effective January 15, 2005 was
not for "good reason."
The agreement did not specify Mr. Baldanza's salary
and benefits prior to the date of a change of control. However,
pursuant to the letter agreements that amended the severance
agreement, Mr. Baldanza had been subject to a 17% and
became subject to an additional 10% salary reduction and a
25% reduction in retirement plan contributions effective
October 11, 2004. Beginning on the date of a change of
control and continuing for a period of three years thereafter,
or until Mr. Baldanza's normal retirement date, if
earlier, the agreement provided for minimum salary and benefits
that must be provided to Mr. Baldanza.
Obligations Upon Termination.
The agreement provided for
various payments to Mr. Baldanza upon termination for
cause, for good reason, upon death or disability or due to a
change of control, which are described in detail in
US Airways Group's proxy statement for its 2004 annual
meeting of shareholders. Due to his voluntary termination
without good reason, these provisions no longer apply. As
provided in the agreement, upon voluntary termination of the
agreement by Mr. Baldanza without good reason,
US Airways paid all salary, deferred compensation and
vacation accrued by Mr. Baldanza through the date of
termination.
Other Obligations.
Upon termination of
Mr. Baldanza's employment for any reason following the
fifth anniversary of his date of employment, he was entitled to
lifetime travel privileges. US Airways also agreed to pay
Mr. Baldanza's reasonable legal fees and expenses
incurred as a result of any contest by US Airways or others
of the validity or enforceability of, or liability under the
agreement, plus interest. In the case of a contest regarding
(i) payments upon termination of Mr. Baldanza's
employment prior to a change of control and not in connection
with a change of control other than for cause, disability or
death or termination by Mr. Baldanza for good reason, or
(ii) lifetime travel privileges following
Mr. Baldanza's fifth anniversary of employment,
US Airways is only required to make such payments if
Mr. Baldanza prevails on at least one material issue in
such contest. In addition, in the event that any of
Mr. Baldanza's compensation (whether required under
the agreement or otherwise) would be subject to an excise tax
under Section 4999 of the Internal Revenue Code,
US Airways is required to pay Mr. Baldanza an
additional gross-up payment, such that after payment of all
taxes, including interest or penalties, on the gross-up payment,
Mr. Baldanza will
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retain an amount of the gross-up payment equal to the excise tax
(and any penalties and interest on the excise tax).
Mr. Baldanza agreed to hold US Airways Group's
and US Airways' confidential and proprietary
information as confidential, including after termination of
employment. If Mr. Baldanza violates this confidentiality
agreement, any payments due under the agreement are forfeited.
The obligations set forth in this paragraph will no longer apply
if the Company does not assume the Severance Agreement, as
amended, in connection with the Chapter 11 proceedings.
Separation Agreement with David N. Siegel
US Airways Group and US Airways entered into a
Separation Agreement with Mr. Siegel dated April 23,
2004, which is filed as Exhibit 10.10 to
US Airways' Quarterly Report on Form 10-Q for the
quarter ended June 30, 2004.
The agreement provided that Mr. Siegel's service as
President and Chief Executive Officer of Airways was terminated
by Mr. Siegel for "good reason" on April 19,
2004. The agreement provided for a cash severance payment of
$4,725,410, which was paid in a single lump sum. In addition,
669,600 outstanding Warrants held by Mr. Siegel became
fully vested and remain exercisable until April 1, 2010.
1,130,400 shares of restricted stock held by
Mr. Siegel became fully vested under the agreement.
Mr. Siegel is also entitled to continue participating in
certain employee benefits for three years. The agreement
required US Airways to reimburse Mr. Siegel up to
$15,000 for his legal fees incurred in connection with the
separation agreement. The agreement requires Mr. Siegel to
protect US Airways' and US Airways Group's
confidential information for three years and not to solicit
customers, clients or employees for six months. The agreement
provided for mutual general releases of claims.
Supplemental Separation Agreement with David N. Siegel
US Airways Group and US Airways entered into a
Supplemental Separation Agreement with Mr. Siegel dated
May 19, 2004, which is filed as Exhibit 10.11 to
US Airways' Quarterly Report on Form 10-Q for the
quarter ended June 30, 2004. The Supplemental Separation
Agreement supplemented the initial Separation Agreement
described above, and in particular, provided the supplemental
executive retirement benefits for Mr. Siegel.
Under the agreement, Mr. Siegel became entitled to benefits
under the Executive Plans. The total contribution under the
Funded Executive Defined Contribution Plan for Mr. Siegel
was $681,419, which was paid to Mr. Siegel as provided in
the plan. In addition, Mr. Siegel received a tax gross-up
payment of $493,441. The allocation under the Unfunded Executive
Defined Contribution Plan for Mr. Siegel was $91,714, which
is distributable to Mr. Siegel in accordance with the terms
of that plan. The agreement required Mr. Siegel to
cooperate with US Airways and US Airways Group for six
months after the date of his termination of employment and to
reasonably assist on all matters related to his employment and
the conduct of business, including any litigation.
US Airways agreed to reimburse Mr. Siegel up to an
additional $50,000 for his legal fees incurred in connection
with the separation agreement and supplemental separation
agreement. The agreement also entitled Mr. Siegel to
receive $75,000 for accrued but unused vacation time.
Mr. Siegel also agreed not to solicit customers, clients or
employees for six months, and the agreement provided for mutual
general releases of claims.
Employment Agreement with David N. Siegel
US Airways' Employment Agreement with Mr. Siegel
was dated as of March 11, 2002 and was filed as
Exhibit 10.41 to US Airways' Annual Report on
Form 10-K for the year ended December 31, 2001. In
addition, a letter agreement between US Airways and
Mr. Siegel dated as of March 11, 2002, which
supplemented the employment agreement, was filed as
Exhibit 10.49 to US Airways' Annual Report on
Form 10-K for the year ended December 31, 2001.
Mr. Siegel's employment agreement and the
supplementary letter agreement were terminated and superseded by
the separation agreement and supplemental separation agreement
described above, except that the following provisions of the
employment agreement survived: (i) US Airways agreed
to pay Mr. Siegel's reasonable legal fees and expenses
incurred as a result of any contest by US Airways or others
of the validity or enforceability of, or liability under, the
separation agreement and supplemental separation agreement, plus
interest, and (ii) in the event that any of
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Mr. Siegel's compensation would be subject to an
excise tax under Internal Revenue Code Section 4999,
US Airways is required to pay Mr. Siegel an additional
gross-up payment, such that after payment of all taxes,
including interest or penalties, on the gross-up payment,
Mr. Siegel will retain an amount of the gross-up payment
equal to the excise tax (and any penalties and interest on the
excise tax).
Separation and Consulting Agreement with Neal S. Cohen
US Airways Group and US Airways entered into a
Separation and Consulting Agreement with Mr. Cohen dated
April 30, 2004, which is filed as Exhibit 10.12 to
US Airways' Quarterly Report on Form 10-Q for the
quarter ended June 30, 2004.
The agreement provided that Mr. Cohen's service as
Executive Vice President and Chief Financial Officer of Airways
was terminated by Mr. Cohen for "good reason" on
April 30, 2004. The agreement provided for a cash severance
payment of $1,523,033, which was paid in a single lump sum. In
addition, 223,200 outstanding Warrants held by
Mr. Cohen were fully vested and remain exercisable until
April 1, 2010. 376,800 shares of restricted stock held
by Mr. Cohen became fully vested under the agreement. The
agreement provided that Mr. Cohen would provide consulting
services for three months, which could be extended by mutual
written agreement. For the consulting services, Mr. Cohen
received $50,000 per month, plus $20,000 per month in
future first class travel on Airways at a value of $200 per
domestic flight round trip, $400 per Caribbean flight round
trip and $600 per European flight round trip, prorated for
partial months. The agreement required US Airways to
reimburse Mr. Cohen up to $10,000 for his legal fees
incurred in connection with the separation agreement. The
agreement requires Mr. Cohen to protect
US Airways' and US Airways Group's
confidential information for one year, and not to solicit
customers, clients or employees for nine months. The agreement
provided for mutual general releases of claims.
Severance Agreement with Neal S. Cohen
US Airways' Severance Agreement with Mr. Cohen
was dated as of April 8, 2002 and was filed as
Exhibit 10.8 to US Airways' Annual Report on
Form 10-K for the year ended December 31, 2002.
Mr. Cohen's severance agreement was terminated and
superseded by the separation agreement described above.
Compensation Committee Interlocks and Insider
Participation
None of the Company's executive officers or directors
serves as a member of the board of directors or compensation
committee of any entity that has one or more of its executive
officers serving as a member of the Company's Board of
Directors or Human Resources Committee.
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Item 12.
Security Ownership of Certain Beneficial Owners and
    Management
Equity Compensation Plan Information
The following table gives information about the Company's
Class A Common Stock, Options, Restricted Stock and
Warrants that may be issued under all of its existing equity
compensation plans as of December 31, 2004, which include:
•
2004 Omnibus Stock Incentive Plan of US Airways Group, Inc.
•
2003 Stock Incentive Plan, as amended and restated, of
    US Airways Group, Inc.
•
2003 Nonemployee Director Stock Incentive Plan, as amended
•
Shares of restricted Class A Common Stock issued to
    employees in accordance with the terms of the 2003 Plan and the
    Company's collective bargaining agreements with certain
    labor groups.
The 2003 Stock Incentive Plan, as amended and restated, was
approved by the Company's stockholders at the Annual
Meeting of Stockholders held May 19, 2004. The other plans
above have not previously been specifically approved by the
Company's stockholders. The allocation of shares for the
grants to employees were approved by the bankruptcy court as
part of the Company's 2003 Plan, which under
Section 303 of the Delaware General Corporation Law has
like effect to stockholder approval.
As a result of the current Chapter 11 proceedings, the
plans listed above will either be terminated or modified in
connection with the confirmation of a plan of reorganization.
The ultimate recovery, if any, to holders of the equity
securities granted under these plans will not be determined
until such confirmation. The plan of reorganization could result
in holders of US Airways Group's common stock and
related equity securities receiving no distribution on account
of their interest and cancellation of the equity.
(c) Number of Securities
(a) Number of
Remaining Available
Securities to be Issued
(b) Weighted-Average
for Future Issuance Under
Upon Exercise of
Exercise Price of
Equity Compensation
(d) Total of Securities
Outstanding Options,
Outstanding Options,
Plans (Excluding Securities
Reflected in
Plan Category
Warrants and Rights
Warrants and Rights(4)
Reflected in Column (a))
Columns (a) and (c)
Equity Compensation Plans Approved by Stockholders
15,644,347
(1)(2)
$
6.57
532,097
16,176,444
Equity Compensation Plans Not Approved by Stockholders
86,397
(3)
$
4.18
2,208,063
(5)
500,000
TOTAL
15,730,744
2,740,160
16,676,444
(1)
Includes all shares of restricted Class A Common Stock
    allocated to the various labor groups under the Company's
    2003 Plan, as described below, that had not vested as of
    December 31, 2004. As noted above, the allocation of
    securities for the grants to employees were approved by the 2003
    Plan, which has the same effect as stockholder approval.
(2)
Includes the following securities granted under the
    Company's 2003 Stock Incentive Plan, as amended and
    restated: 1,997,108 shares of restricted Class A
    Common Stock that had not vested as of December 31, 2004;
    2,118,490 Warrants exercisable for shares of Class A
    Common Stock; and 357,390 options exercisable for shares of
    Class A Common Stock. All Warrants are issued with a
    corresponding number of shares of Class A Preferred Stock
    equal to the number of shares of Class A Common Stock for
    which the Warrants are exercisable.
(3)
Includes 86,397 stock options exercisable for shares of
    Class A Common Stock granted under the 2003 Nonemployee
    Director Stock Incentive Plan, as amended.
(4)
Does not include the shares of restricted Class A Common
    Stock included in column (a), due to the fact that the
    restricted stock does not have an exercise price.
(5)
Includes 408,603 shares of Class A Common Stock under
    the Company's 2003 Nonemployee Director Stock Incentive
    Plan, as amended and 1,800,000 shares of Class A
    Common Stock under the Company's 2004 Omnibus Stock
    Incentive Plan.
2004 Omnibus Stock Incentive Plan
The Board of Directors of US Airways Group, Inc. adopted
the US Airways Group, Inc. 2004 Omnibus Stock Incentive
Plan (the "Omnibus Plan") on August 4, 2004, to
replace the 2003 Stock Incentive Plan. As noted above, due to
the current Chapter 11 proceedings, the Omnibus Plan will
either be terminated or
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modified in connection with the confirmation of a plan of
reorganization. The Board of Directors has reserved a total of
1,800,000 shares of Class A Common Stock for issuance
under the Omnibus Plan. Pursuant to the Omnibus Plan, no further
awards may be granted under the 2003 Stock Incentive Plan. Under
the Omnibus Plan, employees of US Airways Group and its
affiliates are eligible to receive grants of qualified and
nonqualified stock options, reload options, stock appreciation
rights, restricted stock, restricted stock units,
performance-based shares and units, Class A-1 Warrants
coupled with shares of Class A Preferred Stock and/or cash
awards. A committee appointed by US Airways Group's
Board of Directors will select award recipients, determine the
terms of each award, and interpret the plan. Awards become
vested as determined by the committee, but all awards generally
become immediately vested upon the participant's death,
disability or retirement after age 62, and upon a change in
control of US Airways Group, although vesting is
accelerated for performance-based awards on a pro rata basis.
2003 Nonemployee Director Stock Incentive Plan
The US Airways Group, Inc. 2003 Nonemployee Director Stock
Incentive Plan has not been approved by the Company's
stockholders. See Item 11. Executive
Compensation — Compensation of Directors above for a
description of the material terms of the plan.
Restricted Class A Common Stock
Under the terms of the 2003 Plan and collective bargaining
agreements, US Airways Group was required to issue a total
of 23,028,687 shares of restricted stock to individuals
designated by various labor groups. The restricted stock is
subject to restrictions on sale, assignment, transfer and other
encumbrance prior to vesting, but holders of the restricted
shares otherwise have all of the rights of a stockholder. The
restricted stock generally became vested and nonforfeitable with
respect to 50% of each grant on July 31, 2003, and an
additional 25% was scheduled to vest on each of January 1,
2005 and January 1, 2006. These vesting provisions are
subject to the provisions of the Notices of Restricted Stock
Grant as described below for each union. Except as provided in
the Notices of Restricted Stock Grant for each union, a holder
of restricted stock must be employed by US Airways on each
vesting date in order for the shares of restricted stock to
vest. The IAM, CWA, AFA and the TWU dispatchers agreed to
postpone the January 1, 2005 vesting to June 30, 2005.
Shares held by members of the ALPA and the TWU flight crew
training instructors and flight simulator engineers vested, and
income tax withholding payments were either deducted from the
paychecks of active employees or invoiced to in-active
employees, with the shares subject to forfeit if the withholding
tax is not paid. Any shares forfeited are re-allocated as
directed by the applicable union.
The Notices of Restricted Stock Grant for shares issued pursuant
to the collective bargaining agreement between US Airways and
the IAM provide that an employee who retires or dies prior to
full vesting will receive the next 25% of vesting as of the
vesting date immediately after retirement or death, but will not
vest in any additional shares thereafter. Employees who retired
before June 1, 2003 received 25% vesting. Employees who
retired before July 31, 2003 received 50% vesting. An
employee who resigns or is terminated for cause will forfeit any
unvested shares, except that an employee who resigned or was
terminated for cause between June 1, 2003 and July 31,
2003 received the first 25% of vesting. Employees who take a
leave of absence or are furloughed continue to vest on the same
schedule as active employees, and are taxed on all remaining
shares granted but not yet vested on the first vesting date
after the furlough begins. Except as described in the preceding
sentences, upon termination of employment, all unvested shares
are forfeited.
The Notices of Restricted Stock Grant for shares issued pursuant
to the collective bargaining agreement between US Airways and
the CWA provide that in order for the employees' shares of
restricted stock to vest on any vesting date, the individual
must have been on the CWA Passenger Service Employees seniority
list as of September 17, 2002. In addition, in order to
receive the first 50% vesting on July 31, 2003, the
employee (i) must have worked as a Passenger Service
Employee on at least one date between September 17, 2002
and July 31, 2003, and (ii) must continue to be on the
Passenger Service Employees seniority list as of July 31,
2003. Individuals who met those eligibility criteria as of
May 31, 2003, but were not on the seniority list as of
July 31, 2003, vested in 25% of their restricted stock and
the remainder was forfeited. In order to receive the next 25%
vesting on January 1, 2005, the eligible employee
(i) must have worked as a Passenger Service Employee on at
least one date between August 1, 2003 and December 31,
2004, and (ii) must continue to be
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on the Passenger Service Employees seniority list as of
January 1, 2005. In order to receive the final 25% vesting
on January 1, 2006, the eligible employee (i) must
have worked as a Passenger Service Employee on at least one date
between January 1, 2005 and December 31, 2005, and
(ii) must continue to be on the Passenger Service Employees
seniority list as of January 1, 2006. Upon termination of
employment, all unvested shares are forfeited, and upon each
vesting date, all shares which do not vest are forfeited.
The Notices of Restricted Stock Grant for shares issued pursuant
to the collective bargaining agreement between US Airways and
the AFA provide that all eligible employees on each vesting date
will receive an equal number of whole shares from the
union's vested pool on that vesting date. Shares remaining
from the July 31, 2003 and January 1, 2005 vesting
dates will go into a pool for distribution among eligible
employees upon the final vesting date. After the final vesting
date, once all employees have received an equal number of whole
shares, any remaining shares will be distributed to employees in
order of seniority. An employee who resigns, retires, is
terminated or dies will forfeit any unvested shares. Employees
whose status reflects Involuntary Furlough, Long-Term
Disability, Long Term Disability — Social Security
Award, Supervisor, Training Instructor, Company Business or AFA
Union Business National on the January 1, 2005 or
January 1, 2006 vesting dates will not participate in the
vesting pool on those dates. The union will provide US Airways
Group with a list of employees eligible to receive an allocation
from the pool and the number of shares to be allocated to each
employee no later than November 1, 2005. Except as
described in the preceding sentences, upon termination of
employment, all unvested shares are forfeited.
The Notices of Restricted Stock Grant for shares issued pursuant
to the collective bargaining agreement between US Airways and
ALPA provide that a pilot who retired before July 31, 2003
became fully vested on that date and an employee whose
"normal retirement date" falls prior to full vesting
will become fully vested as of the vesting date immediately
preceding the normal retirement date. Pilots who took early
retirement between July 31, 2003 and January 1, 2005
became vested in an additional 25% on January 1, 2005, and
forfeited the remaining 25% of the restricted stock grant.
Pilots who take early retirement after January 1, 2005 will
become fully vested on January 1, 2006.
A pilot who died before July 31, 2003 became fully vested
on that date, and a pilot who dies after July 31, 2003 but
before January 1, 2006, will become fully vested on the
date of death. A pilot who resigns or is terminated for cause
(as determined by the US Airways System Board of Adjustment)
forfeits any unvested shares.
One group of Notices of Restricted Stock Grant for shares issued
pursuant to the collective bargaining agreement between US
Airways and the Transportation Workers Union provides that an
instructor who retired before July 31, 2003 became 50%
vested on that date, but will not vest in any additional shares
thereafter. An employee who retires before fully vesting will
receive the next 25% of vesting on the next vesting date, but
will not vest further. Employees on furlough continue to vest on
the same schedule as active employees, and are taxed on all
remaining shares granted but not yet vested on the first vesting
date after the furlough begins. Except as described in the
preceding sentences, upon termination of employment, all
unvested shares are forfeited. A second group of Notices of
Restricted Stock Grant for shares issued pursuant to the
collective bargaining agreement between US Airways and the
Transportation Workers Union provide that a dispatcher who was
active (as defined in the agreement) between the 32nd day
preceding June 1, 2003 and the 32nd day preceding
July 31, 2003 but retired, was furloughed or died before
July 31, 2003, became vested in 50% of the restricted stock
grant on July 31, 2003. Thereafter, an employee who is
active on the date 32 days before the vesting date but
retires, is furloughed or dies before that vesting date will
receive the applicable vesting on that date. Except as described
in the preceding sentences, upon termination of employment, all
unvested shares are forfeited. A third group of Notices of
Restricted Stock Grant for shares issued pursuant to the
collective bargaining agreement between US Airways and the
Transportation Workers Union provides that a flight simulator
engineer employee who retired before July 31, 2003 became
25% vested on that date, but will not vest in any additional
shares thereafter. An employee who retires before fully vesting
will receive the next 25% of vesting on the next vesting date,
but will not vest further. Employees who die prior to becoming
fully vested will become fully vested on the next vesting date.
Employees on furlough continue to vest on the same schedule as
active employees, and are taxed on all remaining shares granted
but not yet vested on the first
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vesting date after the furlough begins. Except as described in
the preceding sentences, upon termination of employment, all
unvested shares are forfeited.
Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth information regarding the
beneficial ownership of the Company's Class A Common
Stock and Class A Preferred Stock as of February 1,
2005, by (i) each of the Company's directors,
(ii) each of the Company's executive officers named in
the Summary Compensation Table herein and (iii) all of the
Company's directors and executive officers as a group,
based in each case on information furnished to the Company by
such persons. Each share of Class A Preferred Stock is
issued with a corresponding Warrant that is exercisable for
Class A Common Stock. The Warrants do not have voting
rights but the corresponding Class A Preferred Stock issued
with each Warrant entitles the holder to one vote per share of
Class A Preferred Stock (subject to adjustment in certain
circumstances). Each Warrant is only exercisable, redeemable or
transferable when delivered together with the corresponding
shares of Class A Preferred Stock. In no event will a
holder be entitled to vote both the shares of Class A
Preferred Stock corresponding to the Warrant and the shares of
Class A Common Stock that may be issued to the holder upon
exercise of the Warrant. Therefore, the information in the table
below regarding beneficial ownership of Class A Common
Stock excludes the shares of Class A Common Stock that are
deemed to be beneficially owned by holders of Warrants due to
the fact that the Warrants are exercisable within 60 days
of February 1, 2005, since the holders of Warrants must
surrender their Class A Preferred Stock prior to receiving
the shares of Class A Common Stock. This excluded
beneficial ownership information is disclosed in the footnotes.
We believe that each of the named individuals and each director
and executive officer included in the group has sole voting and
investment power with regard to the shares shown, except as
otherwise noted. The ultimate recovery, if any, to holders of
the common stock will not be determined until confirmation of a
plan of reorganization. The plan of reorganization could result
in holders of US Airways Group's common stock and related
equity securities receiving no distribution on account of their
interest and cancellation of the equity.
Class A Common Stock
Class A Preferred Stock
Beneficially Owned(1)
Beneficially Owned(1)(2)
Number
Percent
Number
Percent
Name and Title
of Shares
of Class
of Shares
of Class
Bruce R. Lakefield
476,200
(3)
*
—
—
President, Chief Executive Officer and Director,
US Airways Group and US Airways
Ronald E. Stanley
—
(4)
—
—
—
Executive Vice President, Chief Financial Officer
and Director, US Airways Group and US Airways
Alan W. Crellin
188,400
(5)
*
111,600
(5)
*
Executive Vice President — Operations, US
    Airways
Elizabeth K. Lanier
188,400
(7)
*
111,600
(7)
*
Executive Vice President — Corporate Affairs,
General Counsel and Secretary, US Airways
Group and US Airways
Jerrold Glass
188,400
(6)
*
111,600
(6)
*
Senior Vice President — Employee Relations,
US Airways
David N. Siegel
—
(8)
—
669,600
(8)
*
Former President, Chief Executive Officer and
Director, US Airways Group and US Airways
Neal S. Cohen
1,594
(9)
*
223,200
(9)
*
Former Executive Vice President — Finance and
Chief Financial Officer, US Airways Group and
US Airways
B. Ben Baldanza
—
(10)
*
111,600
(10)
*
Former Senior Vice President — Marketing and
Planning, US Airways
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Class A Common Stock
Class A Preferred Stock
Beneficially Owned(1)
Beneficially Owned(1)(2)
Number
Percent
Number
Percent
Name and Title
of Shares
of Class
of Shares
of Class
William D. Pollock
2,643
*
—
—
Director
David G. Bronner
—
—
—
—
Chairman of the Board
Thomas R. Harter
—
—
—
—
Director
Magdalena Jacobsen
5,000
(11)
—
—
—
Director
Robert L. Johnson
5,000
(11)
—
—
—
Director
Cheryl G. Krongard
5,000
(11)
—
—
—
Director
Joseph J. Mantineo
5,000
(11)
—
—
—
Director
John A. McKenna, Jr.
5,000
(11)
—
—
—
Director
Hans Mirka
5,000
(11)
—
—
—
Director
George M. Philip
1,000
—
—
—
Director
James M. Simon
5,000
(11)
—
—
—
Director
William T. Stephens
—
—
—
—
Director
Directors and executive officers of US Airways Group as a group
    (25 persons)
1,479,400
1,578,600
*
Represents less than 1% of the class.
(1)
The number shown reflects the number of Class A Common
    Stock and Class A Preferred Stock owned beneficially as of
    February 1, 2005, based on information furnished by the
    persons named, public filings and the Company's records. A
    person is deemed to be a beneficial owner if such person, either
    alone or with others, has the power to vote or to dispose of
    such common shares. Except as otherwise indicated below and
    subject to applicable community property laws, the Company
    believes each owner has sole voting and sole investment
    authority with respect to the shares listed. Except as indicated
    in the notes below, shares of Class A Common Stock
    beneficially owned by a person include shares of which the
    person has the right to acquire beneficial ownership within
    60 days after February 1, 2005. There were
    51,643,527 shares of Class A Common Stock and
    18,847,894 shares of Class A Preferred Stock
    outstanding as of February 1, 2005.
(2)
Each share of Class A Preferred Stock is issued with a
    corresponding Warrant that is exercisable for Class A
    Common Stock. The Warrants do not have any voting rights. Each
    Warrant is only exercisable, redeemable or transferable when
    delivered together with the corresponding shares of Class A
    Preferred Stock. Therefore, a holder of Class A Preferred
    Stock will be entitled either to (i) vote the shares of
    Class A Preferred Stock, or (ii) upon exercise of the
    Warrants and the required surrender of the corresponding number
    of shares of Class A Preferred Stock, vote the number of
    shares of Class A Common Stock received upon exercise. In
    no event will a holder be entitled to vote both the shares of
    Class A Preferred Stock corresponding to the Warrant and
    the shares of Class A Common Stock that may be issued to
    the holder upon exercise of the Warrant.
(3)
The Class A Common Stock Beneficially Owned excludes 1362.4
    deferred stock units and includes 5,000 vested stock options
    exercisable for shares of Class A Common Stock, each of
    which was received by Mr. Lakefield under the
    Company's director compensation programs for service as a
    non-employee director until April 19, 2004.
(4)
The Class A Common Stock Beneficially Owned excludes
    6,849.3 deferred stock units received by Mr. Stanley under
    the Company's director compensation programs for service as
    a non-employee director until October 25, 2004.
(5)
The Class A Common Stock Beneficially Owned excludes
    Warrants to purchase 111,600 shares of our
    Class A Common Stock that are immediately exercisable.
    Please see Note 2 above regarding the surrender of
    Class A Preferred Stock upon the exercise of the Warrants,
    which is required to receive the underlying Class A Common
    Stock.
(6)
The Class A Common Stock Beneficially Owned excludes
    Warrants to purchase 111,600 shares of our
    Class A Common Stock that are immediately exercisable.
    Please see Note 2 above regarding the surrender of
    Class A Preferred Stock upon the exercise of the Warrants,
    which is required to receive the underlying Class A Common
    Stock.
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(7)
The Class A Common Stock Beneficially Owned excludes
    Warrants to purchase 111,600 shares of our
    Class A Common Stock that are immediately exercisable.
    Please see Note 2 above regarding the surrender of
    Class A Preferred Stock upon the exercise of the Warrants,
    which is required to receive the underlying Class A Common
    Stock.
(8)
The Class A Common Stock Beneficially Owned excludes
    Warrants to purchase 669,600 shares of our
    Class A Common Stock that are immediately exercisable.
    Please see Note 2 above regarding the surrender of
    Class A Preferred Stock upon the exercise of the Warrants,
    which is required to receive the underlying Class A Common
    Stock.
(9)
The Class A Common Stock Beneficially Owned excludes
    Warrants to purchase 223,200 shares of our
    Class A Common Stock that are immediately exercisable.
    Please see Note 2 above regarding the surrender of
    Class A Preferred Stock upon the exercise of the Warrants,
    which is required to receive the underlying Class A Common
    Stock.
(10)
The Class A Common Stock Beneficially Owned excludes
    Warrants to purchase 111,600 shares of our
    Class A Common Stock that are immediately exercisable.
    Please see Note 2 above regarding the surrender of
    Class A Preferred Stock upon the exercise of the Warrants,
    which is required to receive the underlying Class A Common
    Stock.
(11)
Consists of 5,000 vested stock options exercisable for shares of
    Class A Common Stock received under the Company's 2003
    Nonemployee Director Stock Incentive Plan.
Set forth below are the number of deferred stock units held by
each non-employee director who participates in the
Company's director compensation programs. See Item 11.
Executive Compensation-Compensation of Directors above. Although
each deferred stock unit represents the economic equivalent of a
share of Class A Common Stock, no voting rights or other
rights of a stockholder of US Airways Group attach to the
deferred stock units. Although David G. Bronner and William T.
Stephens, as non-employee members of the Board, are entitled to
receive deferred stock units, each waived all director
compensation.
Number of
Owner
Deferred Stock Units
Directors
Thomas R. Harter
3,880.0
Magdalena Jacobsen
8,211.7
Robert L. Johnson
8,211.7
Cheryl G. Krongard
8,211.7
Joseph J. Mantineo
8,211.7
John A. McKenna, Jr.
8,211.7
Hans Mirka
8,211.7
George M. Philip
5,506.3
James M. Simon
8,211.7
The following table sets forth information regarding the
beneficial ownership of the Company's Class A Common
Stock, Class B Common Stock, Class A Preferred Stock
and Class B Preferred Stock as of the date indicated for
each person, other than the Company's officers and
directors, known to it to be the beneficial owner of more than
5% of its outstanding Class A Common Stock, Class B
Common Stock, Class A Preferred Stock and Class B
Preferred Stock.
Amount and Nature of
Percent
Name and Address of Beneficial Owner
Title of Class
Beneficial Ownership
of Class
Retirement Systems of Alabama Holdings LLC
Class A Common Stock
22,669,412
(1)
42.25%
135 South Union Street
Class B Common Stock
5,000,000
(1)
100.00%
Montgomery, Alabama 36104(1)
Class A Preferred Stock
2,016,819
(1)
10.70%
Class B Preferred Stock
75,000
100.00%
ATSB Securities Trust u/a/d March 31, 2003
Class A Common Stock
7,635,000
(2)
12.88%
1120 Vermont Avenue, Suite 970
Class A Preferred Stock
7,635,000
(2)
40.51%
Washington, DC 20005(6)
(1)
The amount shown and the following information was provided in a
    Schedule 13D filed by RSA on August 25, 2003 reporting
    beneficial ownership on May 13, 2003. RSA reported
    beneficial ownership with sole voting power and sole dispositive
    power of 22,669,412 shares of Class A Common Stock
    (which includes 2,016,819 shares of Class A Preferred
    Stock that must be surrendered upon exercise of the Warrants)
    and 5,000,000 shares of Class B Common Stock. The
    Schedule 13D was filed by RSA, on behalf of
    (i) itself, (ii) The Teachers' Retirement System
    of Alabama (TRSA) and (iii) The Employees'
    Retirement System of Alabama (ERSA), for the purpose of
    disclosing the acquired beneficial ownership pursuant to
    (a) an investment agreement by and between US Airways Group
    and RSA, dated as of September 26, 2002, as amended by that
    certain Amendment No. 1 by and among US Airways Group, TRSA
    and RSA, dated as of January 17, 2003, and as further
    amended by that certain Amendment No. 2 by and among US
    Airways Group, TRSA and RSA, dated as of March 30, 2003 and
    (b) the 2003 Plan. TRSA is one of two members of RSA, and
    has
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a
    66
2
/
3
%
    interest in RSA. ERSA is the other member of RSA, and has a
    33
1
/
3
%
    interest in RSA. By reason of these relationships, TRSA and ERSA
    may be deemed to beneficially own and have shared voting and
    dispositive power over the Class A Common Stock and
    Class B Common Stock owned by RSA. TRSA and ERSA disclaim
    beneficial ownership of the shares of Class A Common Stock
    and Class B Common Stock beneficially owned by RSA or by
    ERSA and TRSA, respectively. By reason of TRSA's and
    ERSA's ownership of RSA, TRSA, ERSA and RSA may be deemed
    to constitute a group within the meaning of
    Section 13d-5(b) of the Securities Exchange Act of 1934, as
    amended (the "Exchange Act"). However, RSA, TRSA and
    ERSA each disclaims the existence of a group.
The Amount and Nature of Beneficial Ownership for the
Class A Common Stock includes Warrants to
purchase 2,016,819 shares of our Class A Common
Stock that are exercisable within sixty days of February 1,
2005.
(2)
The ATSB Securities Trust beneficially owns
    7,635,000 shares of Class A Common Stock through its
    ownership of 7,635,000 Warrants. As disclosed above, the
    Warrants are issued with a corresponding number of shares of
    Class A Preferred Stock, which has voting rights. The ATSB
    Securities Trust holds 7,635,000 shares of Class A
    Preferred Stock, which must be surrendered upon exercise of the
    Warrants. The Warrants have an exercise price of $7.42 per
    share and are immediately exercisable. In addition, the ATSB
    Securities Trust, under certain interpretations of
    Rule 13d-5 of the Exchange Act, may be deemed to possess
    shared investment power with respect to 14,456,815 shares
    of Class A Common Stock owned by RSA pursuant to the terms
    of an Undertaking Agreement entered into by RSA for the benefit
    of the ATSB Securities Trust. The ATSB Securities Trust
    expressly disclaims that it is the beneficial owner of any
    securities except to the extent of its pecuniary interest in
    shares of Class A Common Stock.
Item 13.
Certain Relationships and Related Transactions
ATSB Securities Trust u/a/d March 31, 2003.
As part
of its reorganization under the Prior Bankruptcy, US Airways
received the $900 million ATSB Guarantee under the Air
Transportation Safety and System Stabilization Act from the ATSB
in connection with the $1 billion ATSB Loan that was funded
on March 31, 2003. The Company required this loan and
related guarantee in order to provide the additional liquidity
necessary to carry out its 2003 Plan. US Airways is the
primary obligor under the ATSB Loan, which is guaranteed by
US Airways Group and each of its other domestic
subsidiaries. The ATSB Loan is secured by substantially all of
the present and future assets of the US Airways Group and
its subsidiaries not otherwise encumbered, other than certain
specified assets, including assets which are subject to other
financing agreements. As of December 31, 2004,
$718 million was outstanding under the ATSB Loan.
The ATSB Loan bears interest as follows: (i) 90% of the
ATSB Loan (Tranche A) was funded through a participating
lender's commercial paper conduit program and bears
interest at a rate equal to the conduit provider's weighted
average cost related to the issuance of certain commercial paper
notes and other short-term borrowings plus 0.30%, and
(ii) 10% of the ATSB Loan (Tranche B) bears interest
at LIBOR plus 4.0%. In addition, US Airways is charged an
annual guarantee fee in respect of the ATSB Guarantee currently
equal to 4.1% of the ATSB's guaranteed amount (initially
$900 million) under the ATSB Guarantee, with such guarantee
fee increasing by ten basis points annually. Due to the
Company's September 2004 bankruptcy filing and subsequent
loss of regional jet financing, the guarantee fee increased by
2% per annum and the interest rate on Tranche A and
Tranche B each increased by an additional 2% and
4% per annum, respectively, for an effective increase in
the interest rate on the loan balance of 4%.
In connection with the ATSB Loan, US Airways Group issued to
ATSB Securities Trust u/a/d March 31, 2003, 7,635,000
Warrants to purchase its Class A Common Stock, together
with 7,635,000 shares of Class A Preferred Stock,
which makes ATSB Securities Trust u/a/d March 31, 2003 a
beneficial owner of more than five percent of the Class A
Common Stock and the Class A Preferred Stock. The ATSB
Securities Trust was established to hold these securities for
the benefit of the United States Department of Treasury and to
take action with respect to these securities at the direction of
the ATSB.
In November 2003, the Company made a required prepayment of
$24 million on the ATSB Loan in connection with the sale of
its investment in Hotwire, Inc. Effective March 12, 2004,
the Company entered into an amendment to the ATSB Loan that
provided for a partial prepayment of the loan and modifications
of financial covenants for the measurement periods beginning
June 30, 2004 through December 31, 2005. In connection
with this amendment, US Airways made an immediate voluntary
prepayment of $250 million, which reduced, pro rata, all
future scheduled principal payments of the ATSB Loan (rather
than shortening the remaining life of the loan).
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Effective May 21, 2004, US Airways again amended the ATSB
Loan to permit use of its regional jets financed by GE utilizing
mortgage debt as cross collateral for other obligations of US
Airways to GE. In consideration for this amendment, US Airways
agreed to certain revised covenants and conditions and made a
prepayment of $5 million.
Effective June 30, 2004, US Airways and the ATSB
amended the ATSB Loan to remove the uncertainty relating to the
Company's ability to satisfy its financial covenant tests
for the second quarter of 2004. In consideration for this
amendment, the Company agreed to change the loan amortization
schedule, by increasing each of the first six principal
repayment installments commencing on October 1, 2006 by
approximately $16 million, and reducing the last principal
repayment installment on October 1, 2009 by
$94 million.
The Company has entered into a Cash Collateral Agreement, which
has been subsequently extended, with the approval of the
Bankruptcy Court, for the continued use of the cash securing the
ATSB Loan. The initial agreement was extended until
January 15, 2005 and the current agreement, subject to
certain conditions and limitations will expire on June 30,
2005. Under the Cash Collateral Agreement, the Company is
required to maintain a certain amount of unrestricted cash each
week. For more information about the Cash Collateral Agreement,
see Part I, Item 7. "Management's Discussion
and Analysis of Financial Condition and Results of
Operation — Liquidity and Capital Resources."
Retirement Systems of Alabama Holdings LLC.
In connection
with the consummation of the 2003 Plan, RSA made an equity
investment in US Airways Group equal to $240 million.
In exchange for the $240 million investment, RSA received
20,652,593 shares of Class A Common Stock,
5,000,000 shares of Class B Common Stock,
75,000 shares of Class B Preferred Stock, 1,380,570
Warrants and 1,380,570 shares of Class A Preferred
Stock, representing approximately 36.2%, on a fully-diluted
basis, of US Airways Group's equity. As of February 1,
2005, in connection with its investment, RSA held a voting
interest of approximately 71.7% in US Airways Group and is
entitled to designate and vote to elect eight of the
15 directors on US Airways Group's board of
directors. Additionally, Dr. David G. Bronner and
Mr. William T. Stephens, two of the Company's
directors, are the Manager and Secretary of RSA, respectively.
Until September 26, 2007, RSA has agreed to vote all of the
shares of voting capital stock received in connection with the
consummation of the 2003 Plan and then owned by it in favor of
all of the directors nominated in accordance with the investment
agreement between US Airways Group and RSA, which directors
include the Company's chief executive officer, four
directors nominated by the various unions and their affiliates,
and two directors identified by the Company's chief
executive officer, neither of whom is an employee or affiliate
of the Company, at each annual meeting of US Airways
Group's stockholders or at any meeting of the stockholders
at which members of the Board of Directors are to be elected.
RSA funded $75 million of the non-guaranteed portion of the
ATSB Loan. In connection with RSA's partial funding, it
received 636,249 additional Warrants and 636,249 additional
shares of Class A Preferred Stock. With respect to the
prepayments of the ATSB Loan, RSA, as one of the lenders under
the ATSB Loan, has received prepayments totaling
$21 million through December 31, 2004, which
represented its pro rata portion of the prepayment amount based
on the percentage of the original aggregate amount of the ATSB
Loan that RSA funded. As of December 31, 2004,
$54 million was outstanding under RSA's portion of the
ATSB Loan.
Additionally, in connection with the execution and delivery of
the ATSB Loan, RSA executed an undertaking for the benefit of
the ATSB. RSA agreed that until April 1, 2005, it shall not
transfer any of its shares of Class A Common Stock, other
than pursuant to or in connection with certain approved
transactions specified in the undertaking. Notwithstanding
restrictions against transfer set forth above, RSA may make one
or more transfers of securities, provided that the aggregate
number of securities subject to such transfers may in no event
exceed 6,195,778 shares of Class A Common Stock; this
number of shares represents 30% of its Class A Common Stock
and will be adjusted for stock splits, reverse stock splits and
other similar actions.
RSA also agreed that for so long as it holds any shares of
Class B Common Stock, it will not, directly or indirectly,
in any manner effect or seek, offer or propose to effect, or
cause or participate in or in any way assist any other person to
effect or seek, offer or propose to effect or participate in
(i) any acquisition of all
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or substantially all of the Company's assets, (ii) any
tender or exchange offer, merger or other business combination
involving the Company, or (iii) any recapitalization,
restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the Company, in any of the foregoing
cases where the transaction provides or would provide for
disparate consideration or economic rights between the holders
of the Class A Common Stock and the Class B Common
Stock. This provision terminates in certain circumstances, as
more fully described in the undertaking.
Item 14.
Principal Accountant Fees and Services
Audit and Non-Audit Fees
Aggregate fees for professional services rendered for the
Company by KPMG LLP as of or for the fiscal years ended
December 31, 2004 and 2003 are set forth below. The
aggregate fees included in the Audit category are fees
for
the fiscal years for the audit of the Company's annual
financial statements and review of quarterly financial
statements and statutory and regulatory filings or engagements.
The aggregate fees included in each of the other categories are
fees billed
in
the fiscal years.
Fiscal Year
Fiscal Year
2004
2003
Audit Fees
$
2,332,895
$
2,015,000
Audit-Related Fees
$
562,801
$
714,300
Tax Fees
$
597,698
$
745,578
All Other Fees
$
—
$
—
Total
$
3,493,394
$
3,474,878
Audit Fees
for the fiscal years ended December 31,
2004 and 2003 were for professional services rendered for the
audits of the annual financial statements, the audit of internal
control over financial reporting (2004) and quarterly
review of the financial statements included in the Quarterly
Reports on Form 10-Q, including bankruptcy related
transactions and the adoption of fresh start reporting (2003).
Audit fees also include statutory audits and consents to the use
of audit reports in SEC filings.
Audit-Related Fees
as of the fiscal years ended
December 31, 2004 and 2003 were for audits of employee
benefit plans and other audit related services.
Tax Fees
as of the fiscal years ended December 31,
2004 and 2003 were for tax compliance advice related primarily
to bankruptcy matters, change of ownership and review of tax
returns.
There were no fees which fall into the classification of
All
Other Fees
as of the fiscal years ended December 31,
2004 and 2003.
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Policy on Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services
Commencing in May 2003, with the effectiveness of new rules
adopted under the Sarbanes-Oxley Act of 2002, the Audit
Committee established a practice of pre-approving all services
(audit and non-audit) provided by the Company's independent
auditors and is responsible for determining whether these
services are consistent with the auditor's independence.
The Audit Committee adopted a pre-approval policy in May 2003
that provides guidelines for the audit, audit-related, tax and
other non-audit services that may be provided to the Company by
its independent auditors. The policy requires the pre-approval
of all services at a meeting of the Audit Committee or through
the following detailed process:
•
submission by the independent auditors of a detailed description
    of the audit or non-audit service being requested by management,
    including an engagement fee or range of fees for the service;
•
the Company's analysis and certification that the services
    are not prohibited services under the Sarbanes-Oxley Act of 2002
    and related rules or regulations;
•
the Company's certification that the services are
    compatible with the auditors' independence requirements;
•
the review and approval of one authorized member of management
    (either the General Counsel or the Executive Vice
    President — Finance and Chief Financial Officer)
    before submitting the proposal to the Chairman of the Audit
    Committee;
•
the analysis and verification by the independent auditor that
    the services are not prohibited services under the
    Sarbanes-Oxley Act of 2002 and related rules or regulations;
•
the verification by the independent auditor that the services
    are compatible with the auditors' independence requirements;
•
the review and approval by the lead engagement partner before
    submitting the proposal to the Chairman of the Audit Committee;
•
the approval by the Chairman of the Audit Committee; and
•
informing the full Audit Committee of such approval in a timely
    manner.
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PART IV
Item 15.
Exhibits and Financial Statement Schedules
The following documents are filed as part of this report:
Consolidated Financial Statements
The following consolidated financial statements of
US Airways Group, Inc. are included in Part II,
Item 8 of this report:
•
Consolidated Statements of Operations for the year ended
    December 31, 2004, the nine months ended December 31,
    2003 (Successor Company), the three months ended March 31,
    2003 and the year ended December 31, 2002 (Predecessor
    Company)
•
Consolidated Balance Sheets as of December 31, 2004 and
    December 31, 2003 (Successor Company)
•
Consolidated Statements of Cash Flows for the year ended
    December 31, 2004, the nine months ended December 31,
    2003 (Successor Company), the three months ended March 31,
    2003 and the year ended December 31, 2002 (Predecessor
    Company)
•
Consolidated Statements of Stockholders' Equity (Deficit)
    for the year ended December 31, 2004, the nine months ended
    December 31, 2003 (Successor Company), the three months
    ended March 31, 2003 and the year ended December 31,
    2002 (Predecessor Company)
•
Notes to Consolidated Financial Statements
Consolidated Financial Statement Schedules
All financial statement schedules have been omitted because they
are not applicable or not required, or because the required
information is either incorporated herein by reference or
included in the financial statements or notes thereto included
in this report.
Exhibits
Exhibits required to be filed by Item 601 of
Regulation S-K. Where the amount of securities authorized
to be issued under any of the Company's long-term debt
agreements does not exceed 10 percent of the Company's
assets, pursuant to paragraph (b)(4)(iii) of
Item 601 of Regulation S-K, in lieu of filing such as
an exhibit, the Company hereby agrees to furnish to the
Commission upon request a copy of any agreement with respect to
such long-term debt.
Designation
Description
2
.1
First Amended Joint Plan of Reorganization of US Airways Group
    and Its Affiliated Debtors and Debtors-in-Possession, As
    Modified (incorporated by reference to Exhibit 2.1 to
    US Airways Group's Current Report on Form 8-K
    dated March 18, 2003)
2
.2
Findings of Fact, Conclusions of Law, and Order
    Under 11 U.S.C. Secs. 1129 (a) and (b)
    and Fed. R. Bankr. P. 3020 Confirming the First
    Amended Joint Plan of Reorganization of US Airways Group,
    Inc. and Its Affiliated Debtors and Debtors-in-Possession, As
    Modified (incorporated by reference to Exhibit 2.2 to US
    Airways Group's Current Report on Form 8-K dated
    March 18, 2003)
3
.1
Amended and Restated Certificate of Incorporation of
    US Airways Group, Inc., effective as of March 31, 2003
    (incorporated by reference to Exhibit 3.1 to US Airways
    Group's Registration Statement on Form 8-A filed on
    May 14, 2003)
3
.2
Amended and Restated Bylaws of US Airways Group, Inc.,
    effective as of March 31, 2003 (incorporated by reference
    to Exhibit 3.2 to US Airways Group's Registration
    Statement on Form 8-A filed on May 14, 2003)
4
.1
US Airways Group, Inc. Class A-1 Warrant to purchase shares
    of Class A Common Stock, dated March 31, 2003, issued
    to General Electric Capital Corporation (incorporated by
    reference to Exhibit 4.1 to US Airways Group's
    Registration Statement on Form 8-A filed on May 14,
    2003)
131
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Designation
Description
4
.2
US Airways Group, Inc. Class A-1 Warrant to purchase
    shares of Class A Common Stock, dated March 31, 2003,
    issued to Bank of America, N.A. (incorporated by reference to
    Exhibit 4.2 to US Airways Group's Registration
    Statement on Form 8-A filed on May 14, 2003)
4
.3
US Airways Group, Inc. Class A-1 Warrant to purchase
    shares of Class A Common Stock, dated March 31, 2003,
    issued to Retirement Systems of Alabama Holdings LLC
    (incorporated by reference to Exhibit 4.3 to US Airways
    Group's Registration Statement on Form 8-A filed on
    May 14, 2003)
4
.4
US Airways Group, Inc. Class A-1 Warrant to purchase shares
    of Class A Common Stock, dated March 31, 2003, issued
    to Retirement Systems of Alabama Holdings LLC (incorporated by
    reference to Exhibit 4.4 to US Airways Group's
    Registration Statement on Form 8-A filed on May 14,
    2003)
4
.5
US Airways Group, Inc. Class A-1 Warrant to purchase shares
    of Class A Common Stock, dated March 31, 2003, issued
    to ATSB Securities Trust u/a/d March 31, 2003 (incorporated
    by reference to Exhibit 4.5 to US Airways Group's
    Registration Statement on Form 8-A filed on May 14,
    2003)
4
.6
Form of Class A-1 Warrants (incorporated by reference to
    Exhibit 4.3 to US Airways Group's Registration
    Statement on Form S-8 filed on July 31, 2003)
10
.1
Loan Agreement dated March 31, 2003 among US Airways,
    Inc. and Phoenix American Financial Services, Inc., Bank of
    America, N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit 10.5 to US
    Airways' Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2003)
10
.2
Amendment No. 1 dated December 18, 2003 to Loan
    Agreement dated March 31, 2003 among US Airways, Inc.
    and Phoenix American Financial Services, Inc., Bank of America,
    N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit 10.1 to US
    Airways' Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2004)
10
.3
Amendment No. 2 dated March 12, 2004 to Loan Agreement
    dated March 31, 2003 among US Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board. (incorporated by
    reference to Exhibit 10.2 to US Airways'
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2004)
10
.4
Amendment No. 3 dated May 21, 2004 to Loan Agreement
    dated March 31, 2004 among US Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board (incorporated by
    reference to Exhibit 10.1 to US Airways'
    Quarterly Report for the quarter ended June 30, 2004)
10
.5
Amendment No. 4 dated July 13, 2004 to Loan Agreement
    dated March 31, 2004 among US Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board (incorporated by
    reference to Exhibit 10.2 to US Airways'
    Quarterly Report for the quarter ended June 30, 2004)
10
.6
Final Order (I) Authorizing Debtors' Use of Cash
    Collateral and (II) Providing Adequate Protection Pursuant
    to Bankruptcy Rules 4001 (b) and 4001 (d)
    (incorporated by reference to Exhibit 99.1 to
    US Airways Group's Current Report on Form 8-K
    dated October 14, 2004)
10
.7
Motion to Authorize and Approve (1) The Primary
    Tranche A Lender Assignment, (2) The Alternate
    Tranche A Lender Assignment, and (3) Amendment
    No. 5 to the Loan Agreement pursuant to 11 U.S.C.
    Sections 105, 363, 1108, and Bankruptcy Rules 4001 and
    6004) (incorporated by reference to Exhibit 99.1 to
    US Airways Group's Current Report on Form 8-K
    dated December 28, 2004)
10
.8
Order Approving (1) The Primary Tranche A Lender
    Assignment, (2) The Alternate Tranche A Lender
    Assignment, and (3) Amendment No. 5 to Loan Agreement
    pursuant to 11 U.S.C. Sections 105, 363, 1108, and
    Bankruptcy Rules 4001 and 6004 (incorporated by reference
    to Exhibit 99.2 to US Airways Group's Current
    Report on Form 8-K dated December 28, 2004)
132
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Designation
Description
10
.9
Master Memorandum of Understanding among US Airways Group, Inc.,
    US Airways, Inc., and General Electric Capital Corporation
    acting through its agent GE Capital Aviation Services, Inc. and
    General Electric Company, GE Transportation Component (portions
    of this exhibit have been omitted pursuant to a request for
    confidential treatment and filed separately with the SEC)
10
.10
A319/ A320/ A321 Purchase Agreement dated as of October 31,
    1997 between US Airways Group and AVSA, S.A.R.L. (AVSA), an
    affiliate of aircraft manufacturer Airbus Industrie G.I.E.
    (incorporated by reference to Exhibit 10.1 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the three months ended September 30, 1997) (portions of
    this exhibit were omitted pursuant to a request for confidential
    treatment and filed separately with the United States Securities
    and Exchange Commission (SEC))
10
.11
Amendment No. 1 dated as of June 10, 1998 to A319/
    A320/ A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.2 to US Airways Group's Annual
    Report on Form 10-K for the year ended December 31,
    1998) (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)
10
.12
Amendment No. 2 dated as of January 19, 1999 to A319/
    A320/ A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.3 to US Airways Group's Annual
    Report on Form 10-K for the year ended December 31,
    1998) (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)
10
.13
Amendment No. 3 dated as of March 31, 1999 to A319/
    A320/ A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Quarterly Report on Form 10-Q for the three months ended
    September 30, 1999) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)
10
.14
Amendment No. 4 dated as of August 31, 1999 to A319/
    A320/ A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.2 to US Airways Group's
    Quarterly Report on Form 10-Q for the three months ended
    September 30, 1999) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)
10
.15
Amendment No. 5 dated as of October 29, 1999 to A319/
    A320/ A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.6 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 1999) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)
10
.16
Amendment No. 6 dated as of April 19, 2000 to A319/
    A320/ A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Quarterly Report on Form 10-Q for the three months ended
    March 31, 2000) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)
10
.17
Amendment No. 7 dated as of June 29, 2000 to A319/
    A320/ A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Quarterly Report on Form 10-Q for the three months ended
    June 30, 2000) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)
10
.18
Amendment No. 8 dated as of November 27, 2000 to A319/
    A320/ A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.9 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2000) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)
133
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Designation
Description
10
.19
Amendment No. 9 dated as of December 29, 2000 to A319/
    A320/ A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.10 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2000) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)
10
.20
Amendment No. 10 dated as of April 9, 2001 to A319/
    A320/ A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Quarterly Report on Form 10-Q for the three months ended
    March 31, 2001) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)
10
.21
Amendment No. 11 dated as of July 17, 2002 to A319/
    A320/ A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit 10.1 to US Airways
    Group's Quarterly Report on Form 10-Q for the three
    months ended June 30, 2002) (portions of this exhibit have
    been omitted pursuant to a request for confidential treatment
    and filed separately with the SEC)
10
.22
Amendment No. 12 dated as of March 29, 2003 to A319/
    A320/ A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit 10.1 to US Airways
    Group's Quarterly Report on Form 10-Q for the three
    months ended March 31, 2003) (portions of this exhibit have
    been omitted pursuant to a request for confidential treatment
    and filed separately with the SEC)
10
.23
Amendment No. 13 dated August 30, 2004 to the Airbus
    A319/ A320/ A321 Purchase Agreement dated October 31, 1997
    between US Airways Group, Inc. and AVSA, S.A.R.L (portions
    of this document have been omitted pursuant to a request for
    confidential treatment and filed separately with the SEC)
    (incorporated by reference to Exhibit 10.2 to
    US Airways' Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004)
10
.24
A330/ A340 Purchase Agreement dated as of November 24, 1998
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.4 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 1998) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)
10
.25
Amendment No. 1 dated as of March 23, 2000 to A330/
    A340 Purchase Agreement dated November 24, 1998 between
    US Airways Group and AVSA (incorporated by reference to
    Exhibit 10.2 to US Airways Group's Quarterly
    Report on Form 10-Q for the three months ended
    March 31, 2000) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)
10
.26
Amendment No. 2 dated as of June 29, 2000 to A330/
    A340 Purchase Agreement dated November 24, 1998 between
    US Airways Group and AVSA (incorporated by reference to
    Exhibit 10.2 to US Airways Group's Quarterly
    Report on Form 10-Q for the three months ended
    June 30, 2000) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)
10
.27
Amendment No. 3 dated as of November 27, 2000 to A330/
    A340 Purchase Agreement dated November 24, 1998 between
    US Airways Group and AVSA (incorporated by reference to
    Exhibit 10.14 to US Airways Group's Annual Report
    on Form 10-K for the year ended December 31, 2000)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)
10
.28
Amendment No. 4 dated as of September 20, 2001 to
    A330/ A340 Purchase Agreement dated November 24, 1998
    between US Airways Group and AVSA (incorporated by reference to
    Exhibit 10.16 to US Airways Group's Annual Report
    on Form 10-K for the year ended December 31, 2001)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)
134
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Designation
Description
10
.29
Amendment No. 5 dated as of July 17, 2002 to A330/
    A340 Purchase Agreement dated November 24, 1998 between
    US Airways Group and AVSA, S.A.R.L. (incorporated by
    reference to Exhibit 10.2 to US Airways Group's
    Quarterly Report on Form 10-Q for the three months ended
    June 30, 2002) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)
10
.30
Amendment No. 6 dated as of March 29, 2003 to A330/
    A340 Purchase Agreement dated November 24, 1998 between
    US Airways Group and AVSA, S.A.R.L. (incorporated by
    reference to Exhibit 10.2 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2003) (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)
10
.31
Amendment No. 7 dated August 30, 2004 to the Airbus
    A330/ A340 Purchase Agreement dated November 24, 1998
    between US Airways Group, Inc. and AVSA, S.A.R.L
    (incorporated by reference to Exhibit 10.3 to
    US Airways' Quarterly Report for the quarter ended
    September 30, 2004) (portions of this document have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)
10
.32
Letter Agreement dated December 17, 2004 between
    US Airways Group, Inc. and US Airways, Inc. and Airbus
    North America Sales Inc (incorporated by reference to
    Exhibit 99.2 to US Airways Group's Current Report
    on Form 8-K dated February 3, 2005)
10
.33
Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.1
    to US Airways Group's Quarterly Report on
    Form 10-Q for the three months ended June 30, 2003)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)
10
.34
Amendment No. 1 dated as of November 4, 2003 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to
    Exhibit 10.22 to US Airways Group's Annual Report on
    Form 10-K for the year ended December 31, 2003)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)
10
.35
Amendment No. 2 dated as of November 21, 2003 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to
    Exhibit 10.23 to US Airways Group's Annual Report on
    Form 10-K for the year ended December 31, 2003)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)
10
.36
Amendment No. 1 dated January 6, 2004 to the Letter
    Agreement DCT-022/03 dated May 9, 2003 between
    US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.5
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2004)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)
10
.37
Amendment No. 3 dated as of February 9, 2004 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.4
    to US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2004) (portions of this
    exhibit have been omitted pursuant to a request for confidential
    treatment and filed separately with the SEC)
10
.38
Amendment No. 4 dated as of August 4, 2004 to Embraer
    Aircraft Purchase Agreement dated as of May 9, 2003 between
    US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.4
    to US Airways' Quarterly Report for the quarter ended
    September 30, 2004) (portions of this document have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)
135
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Designation
Description
10
.39
Amendment No. 5 dated as of September 3, 2004 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (portions of this document have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC) (incorporated by reference to
    Exhibit 10.5 to US Airways' Quarterly Report for
    the quarter ended September 30, 2004)
10
.40
Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May 9, 2003 between US Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit 10.2
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2003)
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)
10
.41
Contract Change Order 1 dated January 27, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May 9, 2003 between US Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit 10.6
    to US Airways Group's Quarterly Report for the quarter
    ended March 31, 2004) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)
10
.42
Contract Change Order 2 dated February 9, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May 9, 2003 between US Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit 10.7
    to US Airways Group's Quarterly Report for the quarter
    ended March 31, 2004) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)
10
.43
Contract Change Order 3 dated February 26, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May 9, 2003 between US Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit 10.8
    to US Airways Group's Quarterly Report for the quarter
    ended March 31, 2004) (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)
10
.44
Investment Agreement, dated as of September 26, 2002, by
    and between the Retirement Systems of Alabama and
    US Airways Group, Inc. (incorporated by reference to
    Exhibit 10.1 to US Airways Group's Quarterly
    Report on Form 10-Q for the three months ended
    September 30, 2002)
10
.45
Amendment No. 1 dated as of January 17, 2003 to the
    Investment Agreement, entered into as of September 26, 2002
    and amended and restated as of January 17, 2003 by and
    between the Retirement Systems of Alabama and US Airways
    Group, Inc. (incorporated by reference to Exhibit 10.37 to
    US Airways Group's Annual Report on Form 10-K for
    the year ended December 31, 2002)
10
.46
Amendment No. 2, dated as of March 30, 2003, to the
    Investment Agreement, dated as of September 26, 2002, by
    and among The Retirement Systems of Alabama, Retirement Systems
    of Alabama Holdings, LLC and US Airways Group, Inc.
    (incorporated by reference to Exhibit 10.1 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the three months ended September 30, 2003)
10
.47
Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and Retirement Systems of Alabama Holdings LLC (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Registration Statement on Form 8-A filed on May 14,
    2003)
10
.48
Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc. and
    ATSB Securities Trust u/a/d March 31, 2003
    (incorporated by reference to Exhibit 10.2 to
    US Airways Group's Registration Statement on
    Form 8-A filed on May 14, 2003)
10
.49
First Amendment dated as of June 25, 2003 to the
    Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and ATSB Securities Trust u/a/d March 31, 2003
    (incorporated by reference to Exhibit 10.6 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the three months ended June 30, 2003)
136
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Designation
Description
10
.50
Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and General Electric Capital Corporation (incorporated by
    reference to Exhibit 10.3 to US Airways Group's
    Registration Statement on Form 8-A filed on May 14,
    2003)
10
.51
Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and Bank of America, N.A. (incorporated by reference to
    Exhibit 10.4 to US Airways Group's Registration
    Statement on Form 8-A filed on May 14, 2003)
10
.52
2003 Stock Incentive Plan of US Airways Group, as amended
    and restated (incorporated by reference to Exhibit 4.4 of
    US Airways Group's Registration Statement on Form S-8
    filed on June 3, 2004)
10
.53
US Airways Group, Inc. 2003 Nonemployee Director Stock Incentive
    Plan (incorporated by reference to Exhibit 10.4 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended June 30, 2003)
10
.54
First Amendment to the US Airways Group, Inc. 2003
    Nonemployee Director Stock Incentive Plan
10
.55
US Airways Group, Inc. 2003 Nonemployee Director Deferred Stock
    Unit Plan (incorporated by reference to Exhibit 10.5 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended June 30, 2003)
10
.56
First Amendment to the US Airways Group, Inc. 2003
    Nonemployee Director Deferred Stock Unit Plan (incorporated by
    reference to Exhibit 10.10 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2004)
10
.57
Second Amendment to the US Airways Group, Inc. 2003
    Nonemployee Director Deferred Stock Unit Plan
10
.58
US Airways Funded Executive Defined Contribution Plan
    (incorporated by reference to Exhibit 10.1 to
    US Airways' Annual Report on Form 10-K for the
    year ended December 31, 2003)
10
.59
First Amendment to the US Airways Funded Executive Defined
    Contribution Plan dated January 26, 2004 (incorporated by
    reference to Exhibit 10.4 to US Airways'
    Quarterly Report for the quarter ended June 30, 2004)
10
.60
Second Amendment to the US Airways Funded Executive Defined
    Contribution Plan (incorporated by reference to
    Exhibit 10.5 to US Airways' Quarterly Report for
    the quarter ended June 30, 2004)
10
.61
Third Amendment to the US Airways Funded Executive Defined
    Contribution Plan (incorporated by reference to
    Exhibit 10.6 to US Airways' Quarterly Report for
    the quarter ended June 30, 2004)
10
.62
US Airways Unfunded Executive Defined Contribution Plan
    (incorporated by reference to Exhibit 10.2 to
    US Airways' Annual Report on Form 10-K for the
    year ended December 31, 2003)
10
.63
First Amendment to the US Airways Unfunded Executive
    Defined Contribution Plan dated January 26, 2004
    (incorporated by reference to Exhibit 10.7 to
    US Airways' Quarterly Report for the quarter ended
    June 30, 2004)
10
.64
Second Amendment to the US Airways Unfunded Executive
    Defined Contribution Plan (incorporated by reference to
    Exhibit 10.8 to US Airways' Quarterly Report for
    the quarter ended June 30, 2004)
10
.65
Third Amendment to the US Airways Unfunded Executive
    Defined Contribution Plan (incorporated by reference to
    Exhibit 10.9 to US Airways' Quarterly Report for
    the quarter ended June 30, 2004)
10
.66
Employment Agreement between US Airways Group, Inc. and
    US Airways, Inc. and its President and Chief Executive
    Officer effective May 19, 2004 (incorporated by reference
    to Exhibit 10.6 to US Airways' Quarterly Report
    for the quarter ended September 30, 2004)
137
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Designation
Description
10
.67
Employment Agreement between US Airways and David N.
    Siegel effective March 11, 2002 (incorporated by reference
    to Exhibit 10.41 to US Airways' Annual Report on
    Form 10-K for the year ended December 31, 2001)
10
.68
First Amendment effective March 31, 2003 to the Employment
    Agreement dated March 11, 2002 between US Airways and
    David N. Siegel (incorporated by reference to
    Exhibit 10.1 to US Airways' Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2003)
10
.69
Separation Agreement between U.S. Airways Group, Inc.,
    U.S. Airways, Inc. and David N. Siegel dated
    April 23, 2004 (incorporated by reference to
    Exhibit 10.10 to US Airways' Quarterly Report for
    the quarter ended June 30, 2004)
10
.70
Supplemental Separation Agreement between US Airways Group,
    Inc., US Airways, Inc. and David N. Siegel dated
    May 19, 2004 (incorporated by reference to
    Exhibit 10.11 to US Airways' Quarterly Report for
    the quarter ended June 30, 2004)
10
.71
Employment Agreement between US Airways and its Executive
    Vice President — Corporate Affairs and General Counsel
    effective March 1, 2003 (incorporated by reference to
    Exhibit 10.5 to US Airways' Annual Report on
    Form 10-K for the year ended December 31, 2003)
10
.72
Severance Agreement between US Airways and Neal S. Cohen
    effective April 8, 2002 (incorporated by reference to
    Exhibit 10.8 to US Airways' Annual Report on
    Form 10-K for the year ended December 31, 2002)
10
.73
First Amendment effective March 31, 2003 to the Severance
    Agreement dated April 8, 2002 between US Airways and
    Neal S. Cohen (incorporated by reference to
    Exhibit 10.2 to US Airways' Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2003)
10
.74
Separation and Consulting Agreement between US Airways
    Group, Inc., US Airways, Inc. and Neal S. Cohen effective
    April 30, 2004 (incorporated by reference to
    Exhibit 10.12 to US Airways' Quarterly Report for
    the quarter ended June 30, 2004)
10
.75
Severance Agreement between US Airways and its Executive
    Vice President — Operations effective July 26,
    2002 (incorporated by reference to Exhibit 10.9 to
    US Airways' Annual Report on Form 10-K for the
    year ended December 31, 2002)
10
.76
First Amendment effective March 31, 2003 to the Severance
    Agreement dated June 26, 2002 between US Airways and
    the Executive Vice President-Operations (incorporated by
    reference to Exhibit 10.3 to US Airways'
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2003)
10
.77
Severance Agreement between US Airways and the Senior Vice
    President — Marketing effective June 26, 2002
    (incorporated by reference to Exhibit 10.14 to
    US Airways' Annual Report on Form 10-K for the
    year ended December 31, 2003)
10
.78
First Amendment effective March 31, 2003 to the Severance
    Agreement dated June 26, 2002 between US Airways and
    the Senior Vice President-Marketing (incorporated by reference
    to Exhibit 10.15 to US Airways' Annual Report on
    Form 10-K for the year ended December 31, 2003)
10
.79
Agreement between US Airways and David N. Siegel with
    respect to certain employment arrangements effective
    March 11, 2002 (incorporated by reference to
    Exhibit 10.49 to US Airways' Annual Report on
    Form 10-K for the year ended December 31, 2001)
10
.80
Severance Agreement between US Airways and its Senior Vice
    President — Employee Relations effective April 8,
    2002 (incorporated by reference to Exhibit 10.10 to
    US Airways' Annual Report on Form 10-K for the
    year ended December 31, 2002)
10
.81
First Amendment dated March 31, 2003 to the Severance
    Agreement dated as April 8, 2002 between US Airways
    and its Senior Vice President — Labor Relations
    (incorporated by reference to Exhibit 10.33 to
    US Airways' Annual Report on Form 10-K for the
    year ended December 31, 2004)
10
.82
Agreement between US Airways and its Senior Vice
    President — Labor Relations with respect to certain
    employment arrangements effective July 25, 2002
    (incorporated by reference to Exhibit 10.18 to
    US Airways' Annual Report on Form 10-K for the
    year ended December 31, 2002)
138
Table of Contents
Designation
Description
10
.83
Agreement between US Airways and its Senior Vice
    President — Marketing with respect to certain
    employment arrangements effective July 25, 2002
    (incorporated by reference to Exhibit 10.18 to Amendment
    No. 1 to US Airways' Annual Report on
    Form 10-K for the year ended December 31, 2003)
10
.84
Agreement between US Airways and its Senior Vice
    President — Marketing with respect to certain
    employment arrangements effective October 20, 2004
    (incorporated by reference to Exhibit 10.35 to
    US Airways' Annual Report on Form 10-K for the
    year ended December 31, 2004)
10
.85
Agreement between US Airways and its Executive Vice
    President — Operations with respect to certain
    employment arrangements effective July 25, 2002
    (incorporated by reference to Exhibit 10.17 to
    US Airways' Annual Report on Form 10-K for the
    year ended December 31, 2002)
10
.86
Agreement between US Airways and its Executive Vice
    President — Operations with respect to certain
    employment arrangements effective October 20, 2004
    (incorporated by reference to Exhibit 10.37 to
    US Airways' Annual Report on Form 10-K for the
    year ended December 31, 2004)
10
.87
Agreement between US Airways and its Executive Vice
    President — Corporate Affairs, General Counsel and
    Secretary with respect to certain employment arrangements
    effective October 20, 2004 (incorporated by reference to
    Exhibit 10.38 to US Airways' Annual Report on
    Form 10-K for the year ended December 31, 2004)
10
.88
Agreement between US Airways and its Senior Vice
    President — Labor Relations with respect to certain
    employment arrangements effective October 20, 2004
    (incorporated by reference to Exhibit 10.40 to
    US Airways' Annual Report on Form 10-K for the
    year ended December 31, 2004)
18
.1
Letter from KPMG LLP re change in accounting principle
    (incorporated by reference to Exhibit 18 to US Airways
    Group's Quarterly Report on Form 10-Q for the three
    months ended March 31, 2002)
21
.1
Subsidiaries of US Airways Group
23
.1
Consent of Independent Registered Public Accounting Firm of
    US Airways Group to the incorporation of their report
    concerning certain financial statements contained in this report
    in certain registration statements
24
.1
Powers of Attorney signed by the directors of US Airways
    Group, authorizing their signatures on this report
31
.1
Certification of the Principal Executive Officer pursuant to
    Rule 13a-14(a) or Rule 15d-14(a) (Section 302 of
    the Sarbanes-Oxley Act of 2002)
31
.2
Certification of the Principal Financial Officer pursuant to
    Rule 13a-14(a) or Rule 15d-14(a) (Section 302 of
    the Sarbanes-Oxley Act of 2002)
32
.1
Certifications pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002
99
.1
Disclosure Statement with Respect to First Amended Joint Plan of
    Reorganization of US Airways Group, Inc. and Its Affiliated
    Debtors and Debtors-in-Possession (incorporated by reference to
    Exhibit 99.2 to US Airways Group's Current Report
    on Form 8-K dated on January 31, 2003)
139
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on February 28, 2005.
US Airways Group, Inc. (registrant)
By:
/s/ Bruce R. Lakefield
Bruce R. Lakefield,
Director, President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of US Airways Group in the capacities indicated, on
February 28, 2005.
SIGNATURE
By:
/s/ Bruce R. Lakefield
-----------------------------------------------------------
Bruce R. Lakefield
Director, President and Chief Executive Officer
(Principal Executive Officer)
By:
/s/ Ronald E. Stanley
-----------------------------------------------------------
Ronald E. Stanley
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
By:
/s/ Anita P. Beier
-----------------------------------------------------------
Anita P. Beier
Senior Vice President — Finance and Controller
(Chief Accounting Officer)
By:
*
-----------------------------------------------------------
Dr. David G. Bronner
Director and Chairman
By:
*
-----------------------------------------------------------
Thomas R. Harter
Director
By:
*
-----------------------------------------------------------
Magdalena Jacobsen
Director
By:
*
-----------------------------------------------------------
Robert L. Johnson
Director
By:
*
-----------------------------------------------------------
Cheryl G. Krongard
Director
140
Table of Contents
SIGNATURE
By:
*
-----------------------------------------------------------
Joseph J. Mantineo
Director
By:
*
-----------------------------------------------------------
John A. McKenna, Jr.
Director
By:
*
-----------------------------------------------------------
Hans Mirka
Director
By:
*
-----------------------------------------------------------
George M. Philip
Director
By:
*
-----------------------------------------------------------
William D. Pollock
Director
By:
*
-----------------------------------------------------------
James M. Simon
Director
By:
*
-----------------------------------------------------------
William T. Stephens
Director
By:
/s/ Ronald E. Stanley
-----------------------------------------------------------
Ronald E. Stanley
Attorney-In-Fact
*
Signed pursuant to power of attorney filed herewith.
141
Table of Contents
ANNEX A-2
US Airways Group, Inc.'s Quarterly Report on
Form 10-Q for the three months ended March 31, 2005
A-2
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
For the transition period
    from           to
US Airways Group, Inc.
(Debtor-in-Possession)
(Exact name of registrant as specified in its charter)
State of Incorporation: Delaware
2345 Crystal Drive, Arlington, Virginia 22227
(Address of principal executive offices, including zip
code)
(703) 872-7000
(Registrant's telephone number, including area code)
(Commission file number: 1-8444)
(I.R.S. Employer Identification No.: 54-1194634)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days.     Yes
þ
No
o
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange
Act).     Yes
þ
No
o
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12,
13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a
court.
Yes
þ
No
o
As of April 22, 2005, there were outstanding approximately
51,621,000 shares of US Airways Group, Inc. Class A
common stock and 5,000,000 shares of US Airways Group, Inc.
Class B common stock.
US Airways Group, Inc.
(Debtor-in-Possession)
Form 10-Q
Quarterly Period Ended March 31, 2005
TABLE OF CONTENTS
Page
Part I.  Financial Information
Item 1.
Financial Statements — US Airways Group, Inc.
Condensed Consolidated Statements of
    Operations — Three Months Ended March 31, 2005
    and 2004
1
Condensed Consolidated Balance
    Sheets — March 31, 2005 and December 31,
    2004
2
Condensed Consolidated Statements of Cash
    Flows — Three Months Ended March 31, 2005 and
    2004
3
Notes to Condensed Consolidated Financial
    Statements
4
Item 2.
Management's Discussion and Analysis
    of Financial Condition and Results of Operations
12
Item 3.
Quantitative and Qualitative Disclosures
    about Market Risk
22
Item 4.
Controls and Procedures
22
Part II.  Other
    Information
Item 1.
Legal Proceedings
II-1
Item 3.
Defaults Upon Senior Securities
II-1
Item 6.
Exhibits
II-1
Signature
II-1
II-3
Table of Contents
US Airways Group, Inc.
(Debtor-in-Possession)
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2005 and 2004
(unaudited)
(in millions, except share and per share amounts)
2005
2004
Operating Revenues
Passenger transportation
$
1,447
$
1,513
Cargo and freight
21
34
Other
160
154
Total Operating Revenues
1,628
1,701
Operating Expenses
Personnel costs
477
641
Aviation fuel
368
233
US Airways Express capacity purchases
202
188
Other rent and landing fees
123
127
Aircraft rent
115
109
Selling expenses
103
104
Aircraft maintenance
86
90
Depreciation and amortization
56
55
Other
299
297
Total Operating Expenses
1,829
1,844
Operating Loss
(201
)
(143
)
Other Income (Expense)
Interest income
3
3
Interest expense, net
(78
)
(58
)
Reorganization items, net
(2
)
—
Other, net
(4
)
21
Other Income (Expense), Net
(81
)
(34
)
Loss Before Income Taxes
(282
)
(177
)
Income Tax Provision
—
—
Net Loss
$
(282
)
$
(177
)
Loss per Common Share
Basic
$
(5.13
)
$
(3.28
)
Diluted
$
(5.13
)
$
(3.28
)
Weighted Average Shares Used for Computation (000)
Basic
54,862
53,972
Diluted
54,862
53,972
See accompanying Notes to Condensed Consolidated Financial
Statements.
1
Table of Contents
US Airways Group, Inc.
(Debtor-in-Possession)
Condensed Consolidated Balance Sheets
March 31, 2005 (unaudited) and December 31,
2004
(in millions)
March 31,
December 31,
2005
2004
ASSETS
Current Assets
Cash and cash equivalents
$
513
$
738
Restricted cash
130
99
Receivables, net
318
252
Materials and supplies, net
171
177
Prepaid expenses and other
179
147
Total Current Assets
1,311
1,413
Property and Equipment
Flight equipment
3,298
3,176
Ground property and equipment
365
372
Less accumulated depreciation and amortization
(356
)
(316
)
3,307
3,232
Purchase deposits for flight equipment
76
138
Total Property and Equipment
3,383
3,370
Other Assets
Goodwill
2,490
2,490
Other intangibles, net
524
532
Restricted cash
636
527
Other assets, net
83
90
Total Other Assets
3,733
3,639
$
8,427
$
8,422
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities
Current maturities of debt, capital leases and debtor in
    possession financing
$
820
$
721
Accounts payable
431
353
Traffic balances payable and unused tickets
1,003
820
Accrued aircraft rent
14
51
Accrued salaries, wages and vacation
224
162
Other accrued expenses
347
276
Total Current Liabilities
2,839
2,383
Noncurrent Liabilities and Deferred Credits
Long-term debt and capital lease obligations, net of current
    maturities
78
—
Deferred gains and credits, net
42
44
Postretirement benefits other than pensions
2
2
Employee benefit liabilities and other
250
248
Total Noncurrent Liabilities and Deferred Credits
372
294
Liabilities Subject to Compromise
5,814
6,179
Commitments and Contingencies
Stockholders' Deficit
Class A Common Stock
51
51
Class B Common Stock
5
5
Paid-in capital
410
410
Accumulated deficit
(1,067
)
(785
)
Common stock held in treasury, at cost
(3
)
(3
)
Deferred compensation
(10
)
(14
)
Accumulated other comprehensive income (loss)
16
(98
)
Total Stockholders' Deficit
(598
)
(434
)
$
8,427
$
8,422
See accompanying Notes to Condensed Consolidated Financial
Statements.
2
Table of Contents
US Airways Group, Inc.
(Debtor-in-Possession)
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2005 and 2004
(unaudited)
(in millions)
2005
2004
Net cash provided by (used for) operating activities before
    reorganization items
$
(98
)
$
75
Reorganization items, net
(11
)
—
Net cash provided by (used for) operating activities
(109
)
75
Cash flows from investing activities
Capital expenditures and purchase deposits for flight equipment,
    net
(39
)
(2
)
Proceeds from dispositions of property
4
1
Decrease in short-term investments
—
358
Increase in restricted cash and investments
(139
)
(113
)
Other
—
2
Net cash provided by (used for) investing activities
(174
)
246
Cash flows from financing activities
Proceeds from issuance of debt
55
23
Proceeds from debtor in possession financings
75
—
Principal payments on debt and capital lease obligations
(72
)
(295
)
Net cash provided by (used for) financing activities
58
(272
)
Net increase (decrease) in Cash and cash equivalents
(225
)
49
Cash and cash equivalents at beginning of period
738
929
Cash and cash equivalents at end of period
$
513
$
978
Non-cash investing and financing activity
Flight and ground equipment acquired through issuance of debt
    and capital leases
$
53
$
79
Supplemental Information
Interest paid during the period
$
76
$
79
See accompanying Notes to Condensed Consolidated Financial
Statements.
3
Table of Contents
US Airways Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1.
Chapter 11 Proceedings
On September 12, 2004, US Airways Group, Inc. (US Airways
Group and collectively with its consolidated subsidiaries, the
Company) and its domestic subsidiaries, including its principal
operating subsidiary, US Airways, Inc. (US Airways)
(collectively, the Debtors), filed voluntary petitions for
relief under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the Eastern District of
Virginia, Alexandria Division (Bankruptcy Court) (Case Nos.
04-13819-SSM through 04-13823-SSM). Each of the Debtors in these
cases had previously filed a voluntary petition for relief under
Chapter 11 on August 11, 2002 (the Prior Bankruptcy).
The Debtors emerged from the Prior Bankruptcy under the First
Amended Joint Plan of Reorganization of US Airways Group, Inc.
and Affiliated Debtors and Debtors-in-Possession, As Modified
(the 2003 Plan), which was confirmed pursuant to an order of the
Bankruptcy Court on March 18, 2003 and became effective on
March 31, 2003.
Each of the Debtors continues to operate its business and manage
its property as a debtor in possession pursuant to
Sections 1107 and 1108 of the Bankruptcy Code. At hearings
held on September 13, 2004, the Bankruptcy Court granted
the Company's first day motions for relief designed to
stabilize its operations and business relationships with
customers, vendors, employees and others and entered orders
granting permission to the Debtors to, among other things:
(a) pay employee wages and continue benefits, such as
medical and dental insurance; (b) honor prepetition
obligations to customers and continue customer programs,
including US Airways' Dividend Miles program; (c) pay
for fuel under existing supply contracts, and honor existing
fuel supply, distribution and storage agreements;
(d) assume certain contracts related to interline
agreements with other airlines; (e) pay prepetition
obligations to certain foreign vendors, foreign service
providers and foreign governments; and (f) continue
maintenance of existing bank accounts and existing cash
management systems.
As a result of the Chapter 11 filings, realization of
assets and liquidation of liabilities are subject to significant
uncertainty. While operating as a debtor in possession under the
protection of Chapter 11, and subject to Bankruptcy Court
approval or otherwise as permitted in the normal course of
business, the Company may sell or otherwise dispose of assets
and liquidate or settle liabilities for amounts other than those
reflected in the financial statements. Further, a plan of
reorganization could materially change the amounts and
classifications reported in the historical financial statements,
which do not give effect to any adjustments to the carrying
value of assets or amounts of liabilities that might be
necessary as a consequence of confirmation of a plan of
reorganization.
To exit Chapter 11 successfully, the Company must obtain
confirmation by the Bankruptcy Court of a plan of
reorganization. The Company currently has the exclusive right to
file a plan of reorganization until May 31, 2005 and
solicit acceptance of the plan through August 31, 2005.
Under the terms of an agreement reached with General Electric
Capital Aviation Services (GECAS), the Company previously agreed
to a deadline of April 29, 2005 to file a plan of
reorganization. The deadline has been extended and the Company
remains in discussion with GE to determine a revised deadline. A
plan of reorganization would, among other things, resolve all
prepetition obligations, set forth a revised capital structure
and establish the corporate governance subsequent to exiting
from bankruptcy. The Company is currently working towards
emerging from Chapter 11 mid-year 2005, but that timing is
dependent upon, among other things, the timely and successful
confirmation and implementation of a plan of reorganization. The
ultimate recovery to creditors and/or holders of the common
stock, if any, will not be determined until after a plan of
reorganization is confirmed. No assurance can be given as to
what values, if any, will be ascribed in the Chapter 11
cases to these constituencies or what type or amount of
distributions, if any, they would receive. A plan of
reorganization could result in holders of the Company's
common stock receiving no distribution and cancellation of
existing stock.
4
Table of Contents
On April 22, 2005, the Company confirmed that it is in
discussions with America West Holdings Corp., regarding a
potential strategic transaction. The Company emphasized that
there is no assurance that the discussions will lead to a
definitive agreement. The Company does not intend to make any
further announcements until a definitive agreement is reached or
discussions are terminated. It is the Company's intention
that if a transaction is consummated, that the transaction would
become an integral component of the plan of reorganization.
The Company notified all known or potential creditors of the
Chapter 11 filing for the purposes of identifying and
quantifying all prepetition claims. The Chapter 11 filing
triggered defaults on substantially all debt and lease
obligations. Subject to certain exceptions under the Bankruptcy
Code, the Chapter 11 filing automatically stayed the
continuation of any judicial or administrative proceedings or
other actions against the Debtors or their property to recover
on, collect or secure a claim arising prior to
September 12, 2004. The deadline for filing proofs of claim
with the Bankruptcy Court was February 3, 2005 (General Bar
Date), with a limited exception for governmental entities, which
had until March 11, 2005. The Debtors' claims agent
received approximately 4,800 timely-filed proofs of claims as of
the General Bar Date totaling approximately $26.0 billion
in the aggregate, and approximately 350 proofs of claims
timely-filed by governmental entities totaling approximately
$13.4 billion in the aggregate. As is typical in
reorganization cases, differences between amounts scheduled by
the Debtors and claims by creditors are being investigated and
resolved in connection with the claims resolution process. The
aggregate amount of claims filed with the Bankruptcy Court far
exceeds the Debtors' estimate of such liability. The
Debtors believe that many of these claims are duplicative,
including those filed alleging joint and several liability
against each of the Debtors, based upon contingencies that have
not occurred, or otherwise are overstated, and are therefore
invalid. In light of the number of creditors of the Debtors, the
claims resolution process may take considerable time to
complete. Accordingly, the ultimate number and amount of allowed
claims is not presently known.
Financing during the Chapter 11 Proceedings
As part of its reorganization under the Prior Bankruptcy, US
Airways received a $900 million loan guarantee under the
Air Transportation Safety and System Stabilization Act from the
Air Transportation Stabilization Board (ATSB) in connection
with a $1 billion term loan financing (ATSB Loan). US
Airways is the primary obligor under the ATSB Loan, which is
guaranteed by US Airways Group and each of its other domestic
subsidiaries. In connection with the September 12, 2004
Chapter 11 filing, the ATSB and the lenders under the
ATSB Loan agreed to authorize the Company to continue to
use cash collateral securing the ATSB Loan on an interim basis.
Therefore, the Company has access to the cash collateralizing
the ATSB Loan as working capital, subject to certain on-going
conditions and limitations. This interim agreement was approved
by the Bankruptcy Court on September 13, 2004 as part of
the first day motions, and was scheduled to expire on
October 15, 2004. The Bankruptcy Court approved two
subsequent agreements extending the Company's ability to
use the cash collateral, including an agreement approved on
January 13, 2005 extending the Company's use of cash
collateral through June 30, 2005, subject to certain
conditions and limitations. Under the current agreement (the
Cash Collateral Agreement), the Company may continue to access
such cash collateral to support daily operations so long as it
maintains an agreed minimum amount of cash on hand each week.
This minimum amount declines from approximately
$500 million at the end of January to $341 million on
June 30, 2005, with weekly cash levels permitted as low as
$325 million in March 2005. The Company must also maintain
and achieve certain cumulative earnings levels during the
period, as defined in the agreement. Further, the Company must
comply with restrictions on its ability to make capital
expenditures. In light of continued high fuel prices and
downward pressure on its fares, there can be no assurance that
the Company can continue to comply with the Cash Collateral
Agreement.
The ATSB Loan also contains covenants that limit, among other
things, the Company's ability to pay dividends, make
additional corporate investments and acquisitions, enter into
mergers and consolidations and modify certain concessions
obtained as part of the Prior Bankruptcy. The ATSB Loan contains
certain mandatory prepayment events including, among other
things, (i) the occurrence of certain asset sales and the
issuance of certain debt or equity securities and (ii) the
decrease in value of the collateral pledged in respect of the
ATSB Loan below specified coverage levels. During the three
months ended March 31, 2005, the
5
Table of Contents
Company made approximately $6 million in prepayments on the
ATSB Loan with proceeds received from asset sales.
As of March 31, 2005, $712 million was outstanding
under the ATSB Loan. The ATSB Loan is reflected as a current
liability on the accompanying balance sheet at a book value of
$697 million, which is net of $15 million of
unamortized discount, and is not subject to compromise. As of
March 31, 2005, the Company's $513 million in
unrestricted cash and cash equivalents was available to support
daily operations, subject to certain conditions and limitations
under the Cash Collateral Agreement.
On February 18, 2005, the Company announced that it reached
an agreement with Eastshore Aviation, LLC, an investment entity
owned by Air Wisconsin Airlines Corporation and its shareholders
(Air Wisconsin), on a $125 million financing commitment to
provide equity funding for a plan of reorganization. The
$125 million facility is in the form of a debtor in
possession term loan. After receiving approval from the
Bankruptcy Court, $75 million was drawn under the facility
on March 1, 2005. The first of two $25 million
increments was drawn on April 4, 2005. This loan is second
only to the ATSB Loan with regard to the Company's assets
that are pledged as collateral. Upon emergence from
Chapter 11, the $125 million financing package would
then convert to equity in the reorganized US Airways Group. The
interest on the facility is LIBOR plus 6.5% as determined as of
the draw date of each increment. Interest is payable quarterly
in arrears. As part of this agreement, US Airways and Air
Wisconsin also entered into a regional jet services agreement
under which Air Wisconsin may, but is not required to, provide
regional jet service under a US Airways Express code share
arrangement. On April 8, 2005, Air Wisconsin notified the
Company of its intention to deploy 70 regional jets, the maximum
number provided for in the agreement, into the US Airways
Express network.
On March 14, 2005, the Company announced that it reached an
agreement with Republic Airways Holding, Inc. (Republic) and its
majority shareholder, Wexford Capital LLC (Wexford), on an
equity and financing package that includes a $125 million
equity investment upon emergence from Chapter 11 and
options for obtaining $110 million of other liquidity
enhancements prior to emergence. The implementation of
transactions under the agreement was approved by the Bankruptcy
Court on March 31, 2005. The investment agreement is
subject to certain conditions that include the Company and
Wexford reaching an agreement on a business plan for the
reorganized US Airways Group and the requirement that the
Company receive aggregate cash equity investments of not less
than $350 million upon emergence from Chapter 11.
The agreement with Republic and Wexford also provides that US
Airways may exercise an option to obtain $110 million of
additional liquidity through the sale of certain assets,
including ten currently owned EMB-170 regional aircraft, three
EMB-170 regional jet aircraft currently scheduled for delivery,
other regional jet related assets such as a flight simulator and
other items and certain commuter slots at Reagan National
Airport and LaGuardia Airport. US Airways also has the option to
assign the leases for an additional 15 EMB-170 regional jet
aircraft. Upon the sale and assignment of the leases for the
aircraft, Republic would enter into a regional jet services
agreement with the Company that would continue the operation of
the aircraft as US Airways Express. Republic would lease
back the slots to US Airways and US Airways would have the
right to repurchase the slots at a predetermined price. In the
event that the Company does not exercise the slot sale/leaseback
option, Republic has the option to purchase and assume the debt
and leases for all of the Company's Embraer regional jets
and fly them as US Airways Express.
Transformation Plan
Since filing for bankruptcy on September 12, 2004, the
Company has achieved cost-savings agreements with its principal
collective bargaining groups. Effective January 2005, US Airways
terminated its three mainline defined benefit plans and has
recognized a curtailment gain of $24 million and a
$91 million minimum pension liability adjustment in the
first quarter of 2005 in connection with the termination, which
is included in Reorganization items in the Statement of
Operations. The Pension Benefit Guaranty Corporation
(PBGC) was appointed trustee of the plans effective
February 1, 2005. The Company continues to carry a
liability of $948 million related to the three terminated
plans, classified within Liabilities Subject to Compromise on
the Balance Sheet. The liability will be adjusted at such time
that the amount of the PBGC
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claim approved by the Bankruptcy Court is known. Also in January
2005, the Bankruptcy Court approved settlement agreements
between US Airways and its unions and the court-appointed
Section 1114 Committee, representing retirees other than
those represented by the International Association of Machinists
and Aerospace Workers (IAM) and the Transport Workers Union
(TWU), to begin the significant curtailment of postretirement
benefits. As a result of the curtailment of these benefits, the
Company recognized a gain of $183 million in the first
quarter of 2005, which is included in Reorganization items in
the Statement of Operations.
Pursuant to the Company's Transformation Plan and newly
ratified collective bargaining agreements, the Company
implemented voluntary furlough and termination programs across
several of its employee groups. In the first quarter of 2005,
the Company recognized a $51 million charge, which is
included in Reorganization items in the Statement of Operations,
associated with termination payments and health care benefits
for approximately 2,300 employees participating in these
voluntary programs. The majority of employees expected to
participate in voluntary terminations notified the Company by
March 31, 2005.
In connection with the outsourcing of a portion of the
Company's aircraft maintenance and certain fleet service
operations, the closing of its Pittsburgh reservation center,
and the closing of certain airport clubs and city ticket
offices, the Company involuntarily terminated or furloughed
approximately 2,300 employees. In the first quarter of 2005, the
Company recognized a $44 million charge, which is included
in Reorganization items in the Statement of Operations,
associated with contractual severance payments and healthcare
benefits for those employees. Notification for the majority of
planned involuntary terminations was completed in the first
quarter of 2005.
The Company expects to make $79 million of termination and
benefit payments during the remainder of 2005, $9 million
in 2006 and approximately $1 million per year in the years
2007 through 2013.
Aircraft Financing
The Company has reached agreements with certain of its lessors
and lenders restructuring existing aircraft lease and debt
financings. On November 19, 2004, the Bankruptcy Court
approved the Company's agreements for the continued use and
operation of substantially all of its mainline and Express
fleet. The Company reached a comprehensive agreement with GECAS
and GE Engine Service (GEES) (the GE Master Memorandum of
Understanding or Master MOU) on aircraft leasing and financing
and engine services, which provides the Company with short-term
liquidity, reduced debt, lower aircraft ownership costs,
enhanced engine maintenance services, and operating leases for
new regional jets.
Pursuant to the Regional Jet Leasing Term Sheet under the Master
MOU, General Electric Credit Corporation (GECC) or its
affiliates have agreed to provide leases for up to 31 regional
jet aircraft. These aircraft will consist of 70- to 100-seat
regional jet aircraft manufactured by Bombardier, Inc.
(Bombardier) and/or EMBRAER-Empresa Brasileria de Aeronautica SA
(Embraer) in a mix and subject to such other terms to be agreed
mutually by GECC and US Airways. During the first quarter
of 2005, GECC leased six CRJ-700s to US Airways with terms
expiring on the earlier of the Debtors' emergence from
Chapter 11 and June 30, 2005. These leases may be
extended. To effectuate the contemplated regional jet leasing,
US Airways and GECC reinstated that portion of the RJ Lease
Transaction and Debt Financing Agreement, dated as of
December 18, 2003 (RJ Lease Agreement), pursuant to which
GECC has agreed to provide single investor lease transactions
(provided that the obligations under the reinstated RJ Lease
Agreement will not be afforded administrative expense status),
with certain additional terms and conditions. Each such lease
will be a postpetition agreement, but only rent payable through
June 30, 2005 (as such date may be extended) and return
obligations thereunder will be offered administrative expense
status. All other claims under each such lease, including
rejection damages, will be unsecured prepetition claims.
In December 2004, the Company reached aircraft leasing and
financing agreements with Embraer and Bombardier, which were
approved by the Bankruptcy Court in January 2005. Pursuant to
the agreement reached with Embraer, the Company purchased and
took delivery of three EMB-170 aircraft in January 2005 and
committed to purchase and take delivery of three additional
EMB-170 aircraft by March 31, 2005. The purchase of the
three EMB-170s delivered in January 2005 was financed by Embraer
through a mortgage
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loan facility and the application of $17 million of
existing purchase deposits held by Embraer. As discussed below,
the Company did not take delivery of the second three aircraft
in March 2005. Additionally, $12 million of purchase
deposits held by Embraer will be used to fund an Embraer loan
reserve. Embraer will apply the reserve funds in the amounts and
on the dates as and when payments are due under the Embraer
loans during the period from October 1, 2004 through
July 31, 2005 in full satisfaction of the Company's
payment obligations with respect to such Embraer loans during
such period. Upon delivery of the first three EMB-170s, which
occurred in January 2005, unless the Company assumes the Embraer
aircraft purchase agreement pursuant to Section 365 of the
Bankruptcy Code, no further obligations arise on the part of the
Company or Embraer with respect to the purchase and delivery of
any aircraft, other than those obligations that arise from or
are related to the purchase and delivery of the final three
EMB-170s scheduled for March 2005. Embraer and the Company have
agreed to negotiate a new delivery schedule upon the
Company's assumption of the Embraer aircraft purchase
agreement.
Due to the Company's failure to take delivery by
March 31, 2005 of the remaining three EMB-170 aircraft,
damages accrue from and after April 1, 2005 until the
delivery of the aircraft at the rate of $162,795 per month
per aircraft. If the aircraft are not delivered by July 31,
2005, Embraer's obligation to deliver such aircraft will
terminate and its damages with respect to such undelivered
aircraft may be as much as $10 million for all three
aircraft (rather than at the rate of $162,795 per month per
aircraft), with Embraer having the right to apply any remaining
purchase deposits against Embraer's aggregate damages. The
Company is currently working to secure financing for these
aircraft and recorded a charge of $2 million in the first
quarter of 2005, which is included in Reorganization items in
the Statement of Operations, associated with penalties expected
to be incurred.
Under the agreement reached with Bombardier, the Company
acquired three new CRJ-700 aircraft in January 2005. The
purchase was financed through the application of
$28 million of existing purchase deposits held by
Bombardier, $2 million in cash and a financed lease
facility with DVB Bank AG. Additionally, $4 million of
existing purchase deposits held by Bombardier were used to
satisfy existing defaults and cure payments. So long as the
Company continues to operate under the protection of
Chapter 11 in compliance with the Bankruptcy Code, no
obligations will arise on the part of the Company or Bombardier
with respect to the purchase and delivery of any aircraft.
As of March 31, 2005, aircraft manufacturers held purchase
deposits of $76 million related to the acquisition of
aircraft.
2.
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements
should be read in conjunction with the Consolidated Financial
Statements contained in US Airways Group's Annual Report to
the Securities and Exchange Commission on Form  10-K
for the year ended December 31, 2004. The accompanying
Condensed Consolidated Financial Statements include the accounts
of US Airways Group and its wholly owned subsidiaries. Principal
subsidiaries include US Airways, Allegheny Airlines, Inc.,
Piedmont Airlines, Inc. and PSA Airlines, Inc. Effective
July 1, 2004, Allegheny Airlines merged with Piedmont
Airlines, with Piedmont Airlines as the surviving entity. All
significant intercompany accounts and transactions have been
eliminated. Certain prior year amounts have been reclassified to
conform with the 2005 presentation.
Management believes that all adjustments, consisting of normally
recurring items, necessary for a fair presentation of results
have been included in the Condensed Consolidated Financial
Statements for the interim periods presented, which are
unaudited. The preparation of financial statements in conformity
with accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The principal areas
of judgment relate to impairment of goodwill, impairment of
long-lived assets and intangible assets, passenger revenue
recognition, frequent traveler programs, and pensions and other
postretirement benefits.
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3.
Reorganization Items and Liabilities Subject to Compromise
(a)
Reorganization items
The accompanying consolidated financial statements have been
prepared in accordance with AICPA Statement of
Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" (SOP 90-7)
and on a going-concern basis. SOP 90-7 requires that the
financial statements for periods following the Chapter 11
filing through emergence distinguish transactions and events
that are directly associated with the reorganization from the
ongoing operations of the business. Accordingly, revenues,
expenses, realized gains and losses and provisions for losses
directly associated with the reorganization and restructuring of
the business are reported separately as Reorganization items in
the Statements of Operations. Reorganization items, net as shown
on the Statement of Operations consisted of the following for
the three months ended March 31, 2005 (in millions):
Gain related to curtailment of postretirement benefits(a)
$
183
Gain related to curtailment of pension plans(a)
24
Interest on accumulated cash
2
Severance including benefits(b)
(95
)
Minimum pension liability adjustment(a)
(91
)
Professional fees
(15
)
Damage and deficiency claims(c)
(8
)
Aircraft order penalties(d)
(2
)
Reorganization items, net
$
(2
)
(a)
In January 2005, the Bankruptcy Court approved settlement
    agreements between US Airways and its unions and the
    court-appointed Section 1114 Committee, representing
    retirees other than those represented by the IAM and TWU, to
    begin the significant curtailment of postretirement medical
    benefits. The Company recognized a gain of $183 million in
    connection with this curtailment. Also in January 2005, US
    Airways terminated its three mainline defined benefit plans. The
    Company recognized a curtailment gain of $24 million and a
    $91 million minimum pension liability adjustment in
    connection with the terminations. See also Notes 1 and 6.
(b)
In connection with the Transformation Plan and new labor
    agreements, approximately 4,600 employees across several of the
    Company's labor groups were involuntarily terminated or
    participated in voluntary furlough and termination programs. See
    also Note 1.
(c)
Damage and deficiency claims arise as a result of the
    Company's election to restructure, abandon or reject
    aircraft debt and leases during the bankruptcy proceedings.
(d)
As a result of the Company's bankruptcy filing in September
    2004, the Company does not expect to be able to secure the
    financing necessary to take on-time delivery of three scheduled
    regional jet aircraft and therefore accrued penalties of
    $2 million in the first quarter of 2005. See also
    Note 1.
(b)
Liabilities Subject to Compromise
SOP 90-7 also requires that prepetition liabilities subject
to compromise should be distinguished from both prepetition
liabilities that are not subject to compromise and postpetition
liabilities. Liabilities subject to compromise are reported at
the amounts expected to be allowed by the Bankruptcy Court, even
if they may be settled for lesser amounts. The following table
summarizes the components of Liabilities Subject to Compromise
as of March 31, 2005 (in millions):
Debt and capital leases
$
2,387
Postretirement and other employee related expenses
2,607
Other accrued expenses
548
Accounts payable
188
Aircraft-related accruals and deferrals
84
Total Liabilities Subject to Compromise
$
5,814
4.
Earnings (Loss) per Common Share
Basic Earnings (Loss) per Common Share (EPS) is computed by
dividing net income (loss) by the weighted average number of
shares of common stock outstanding during the period. Diluted
EPS reflects the
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maximum dilution that would result after giving effect to
dilutive stock options, warrants, and non-vested restricted
stock. The number of additional shares is calculated by assuming
that outstanding, in-the-money stock options and warrants were
exercised and the proceeds from such exercises were used to buy
back shares of common stock at the average market price for the
reporting period.
For the three months ended March 31, 2005,
21.1 million stock options, warrants and non-vested shares
of restricted stock have been excluded from the computation of
diluted EPS because of the antidilutive effect on EPS.
For the three months ended March 31, 2004,
22.3 million stock options, warrants and non-vested shares
of restricted stock have been excluded from the computation of
diluted EPS because of the antidilutive effect on EPS.
5.
Income Taxes
The Company recorded no income tax provision for the first
quarter of 2005 or 2004. The Company continues to record a full
valuation allowance against its net deferred tax asset due to
the uncertainty regarding the ultimate realization of the asset.
In the event that the Company were to experience a change in
ownership, as defined by Internal Revenue Code Section 382,
upon emergence from the current Chapter 11 filing, the
annual usage of any remaining tax attributes that were generated
prior to the change in ownership would be substantially limited.
The amount of limitation will be determinable at the time of
emergence from the current Chapter 11 reorganization.
6.
Employee Benefit Plans
Components of the net and total periodic benefit cost for the
three months ended March 31, 2005 and March 31, 2004
include the following (in millions):
Other
Pension
Postretirement
Benefits
Benefits
2005
2004
2005
2004
Service cost
$
2
$
10
$
6
$
12
Interest cost
7
38
15
25
Expected return on plan assets
(5
)
(32
)
—
—
Amortization of:
Prior service benefit
—
—
(13
)
(4
)
Actuarial gain
—
—
(3
)
—
Net periodic cost
4
16
5
33
Curtailment gain
(24
)
—
(183
)
—
Total (income) cost
$
(20
)
$
16
$
(178
)
$
33
On November 12, 2004, US Airways filed a motion requesting
a determination from the Bankruptcy Court that US Airways
satisfied the financial requirements for a "distress
termination" of the Retirement Plan for Flight Attendants
in the Service of US Airways, Inc. (AFA Plan), the Pension Plan
for Employees of US Airways, Inc. Who Are Represented by the
International Association of Machinists and Aerospace Workers
(IAM Plan), and the Retirement Plan for Certain Employees of US
Airways, Inc. (CE Plan) under section 4041(c)(2)(B)(ii)(IV)
of the Employee Retirement Security Act of 1974, as amended
(ERISA), and approval of each such plan's termination.
These plans were projected to have benefit obligations and plan
assets aggregating $2.7 billion and $1.7 billion,
respectively, as of September 30, 2004, the most recent
valuation date. On January 6, 2005, the Bankruptcy Court
entered an order (i) finding that the financial
requirements under section 4041(c)(2)(B)(ii)(IV) of ERISA
for a distress termination of the plans had been met and
(ii) approving termination of the plans. The AFA Plan and
the IAM Plan were terminated effective January 10, 2005, by
agreement between the PBGC and US Airways. The CE Plan was
terminated effective
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January 17, 2005, by agreement between the PBGC and US
Airways. Effective February 1, 2005, the PBGC was appointed
trustee for each of the three plans.
Upon termination of the plans, the Company recognized a
curtailment gain of $24 million and a $91 million
minimum pension liability adjustment, included in Reorganization
items, net in the Statement of Operations. The PBGC has filed
claims totaling approximately $13 billion. The Company
believes these claims may potentially be reduced. The Company
continues to carry a liability of $948 million related to
the three terminated plans, classified within Liabilities
Subject to Compromise on the Balance Sheet. The liability will
be adjusted at such time that the amount of the PBGC claim
approved by the Bankruptcy Court is known.
During hearings in late 2004 and January 2005, the Bankruptcy
Court approved various settlement agreements between US Airways
and its unions, and between US Airways and the court-appointed
Section 1114 Committee (representing retirees not
represented by the unions) to begin the significant curtailments
of postretirement benefits. Effective March 1, 2005, those
benefits were significantly reduced. US Airways re-measured its
obligations downward by approximately $1.1 billion and
recognized a curtailment gain of $183 million. Since the
re-measurement created a significant unrecognized prior service
gain, US Airways expects to recognize net periodic other
postretirement benefit income until the time of emergence from
bankruptcy. At that time all unrecognized items will be
recognized under SOP 90-7.
7.
Comprehensive Income (Loss)
Comprehensive income (loss) was $(168) million and
$(156) million for the three months ended March 31,
2005 and 2004, respectively. Comprehensive income encompasses
net income and "other comprehensive income," which
includes all other non-owner transactions and events that change
stockholders' equity. Other comprehensive income includes
changes in the fair value of certain derivative financial
instruments and adjustments for minimum pension liabilities.
8.
Recent Accounting Pronouncements and Changes
In December 2004, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards
No. 123(R), "Share-Based Payment"
(SFAS 123(R)), which establishes standards for transactions
in which an entity exchanges its equity instruments for goods or
services. This standard requires a public entity to measure the
cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the
award. This eliminates the exception to account for such awards
using the intrinsic method previously allowable under Accounting
Principle Board Opinion No. 25. The Company previously
adopted the fair value recognition provisions of SFAS 123,
"Accounting for Stock-Based Compensation," upon
emergence from the Prior Bankruptcy on March 31, 2003.
Accordingly, the Company believes SFAS 123(R) will not have
a material impact on its financial statements. The Company
currently expects to adopt SFAS 123(R) upon the earlier of
emergence from Chapter 11 or January 1, 2006, the new
effective date.
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Item 2.
Management's Discussion and Analysis of Financial
    Condition and Results of Operations
General Information
Part I, Item 2 of this report should be read in
conjunction with Part II, Item 7 of US Airways Group,
Inc.'s Annual Report on Form 10-K for the year ended
December 31, 2004. The information contained herein is not
a comprehensive discussion and analysis of the financial
condition and results of operations of the Company, but rather
updates disclosures made in the aforementioned filing.
Certain of the statements contained herein should be considered
"forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, which reflect
the current views of the Company with respect to current events
and financial performance. You can identify these statements by
forward-looking words such as "may," "will,"
"expect," "intend," "anticipate,"
"believe," "estimate," "plan,"
"could," "should," and "continue"
or similar words. These forward-looking statements may also use
different phrases. Such forward-looking statements are and will
be, as the case may be, subject to many risks, uncertainties and
factors relating to the Company's operations and business
environment which may cause the actual results of the Company to
be materially different from any future results, express or
implied, by such forward-looking statements. Factors that could
cause actual results to differ materially from these
forward-looking statements include, but are not limited to, the
following: the ability of the Company to continue as a going
concern; the ability of the Company to obtain and maintain any
necessary financing for operations and other purposes, whether
debtor in possession financing or other financing; the ability
of the Company to maintain adequate liquidity; the ability of
the Company to absorb escalating fuel costs; the Company's
ability to obtain court approval with respect to motions in the
Chapter 11 proceedings prosecuted by it from time to time;
the ability of the Company to develop, prosecute, confirm and
consummate one or more plans of reorganization with respect to
the Chapter 11 proceedings; risks associated with third
parties seeking and obtaining court approval to terminate or
shorten the exclusivity period for the Company to propose and
confirm one or more plans of reorganization, to appoint a
Chapter 11 trustee or to convert the cases to
Chapter 7 cases; the ability of the Company to obtain and
maintain normal terms with vendors and service providers; the
Company's ability to maintain contracts that are critical
to its operations; the potential adverse impact of the
Chapter 11 proceedings on the Company's liquidity or
results of operations; the ability of the Company to operate
pursuant to the terms of its financing facilities (particularly
the financial covenants); the ability of the Company to fund and
execute its Transformation Plan during the Chapter 11
proceedings and in the context of a plan of reorganization and
thereafter; the ability of the Company to attract, motivate
and/or retain key executives and associates; the ability of the
Company to attract and retain customers; the ability of the
Company to maintain satisfactory labor relations; demand for
transportation in the markets in which the Company operates;
economic conditions; labor costs; financing availability and
costs; security-related and insurance costs; competitive
pressures on pricing (particularly from lower-cost competitors)
and on demand (particularly from low-cost carriers and
multi-carrier alliances); weather conditions; government
legislation and regulation; impact of continued military
activities in Iraq; other acts of war or terrorism; and other
risks and uncertainties listed from time to time in the
Company's reports to the SEC. There may be other factors
not identified above of which the Company is not currently aware
that may affect matters discussed in the forward-looking
statements, and may also cause actual results to differ
materially from those discussed. The Company assumes no
obligation to update such estimates to reflect actual results,
changes in assumptions or changes in other factors affecting
such estimates other than as required by law. Similarly, these
and other factors, including the terms of any reorganization
plan ultimately confirmed, can affect the value of the
Company's various prepetition liabilities, common stock
and/or other equity securities. Accordingly, the Company urges
that the appropriate caution be exercised with respect to
existing and future investments in any of these liabilities
and/or securities.
Introduction
On September 12, 2004, US Airways Group and its domestic
subsidiaries, which account for substantially all of the
operations of the Company, including its principal operating
subsidiary, US Airways,
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filed voluntary petitions for relief under Chapter 11 of
the Bankruptcy Code. Each of the Debtors in these cases had
previously filed a voluntary petition for relief under
Chapter 11 on August 11, 2002. The Debtors emerged
from the Prior Bankruptcy under the First Amended Joint Plan of
Reorganization of US Airways Group, Inc. and Affiliated Debtors
and Debtors-in-Possession, As Modified (the 2003 Plan), which
was confirmed pursuant to an order of the Bankruptcy Court on
March 18, 2003 and became effective on March 31, 2003.
For the first quarter of 2005, the Company's operating
revenues were $1.63 billion, operating loss was
$201 million and diluted loss per common share was $5.14 on
a net loss of $282 million. Operating revenues were
$1.70 billion, operating loss was $143 million and the
diluted loss per common share was $3.28 on a net loss of
$177 million for the same period in 2004. As discussed in
"Results of Operations" below, operating results for
the quarter reflect high fuel prices and the continued weak
revenue environment in the Company's primary operating
region.
Chapter 11
Proceedings
Each of the Debtors continues to operate its business and manage
its property as a debtor in possession pursuant to
Sections 1107 and 1108 of the Bankruptcy Code. At hearings
held on September 13, 2004, the Bankruptcy Court granted
the Company's first day motions for relief designed to
stabilize its operations and business relationships with
customers, vendors, employees and others and entered orders
granting permission to the Debtors to, among other things:
(a) pay employee wages and continue benefits, such as
medical and dental insurance; (b) honor prepetition
obligations to customers and continue customer programs,
including US Airways' Dividend Miles program; (c) pay
for fuel under existing supply contracts, and honor existing
fuel supply, distribution and storage agreements;
(d) assume certain contracts related to interline
agreements with other airlines; (e) pay prepetition
obligations to certain foreign vendors, foreign service
providers and foreign governments; and (f) continue
maintenance of existing bank accounts and existing cash
management systems.
As a result of the Chapter 11 filings, realization of
assets and liquidation of liabilities are subject to significant
uncertainty. While operating as a debtor in possession under the
protection of Chapter 11, and subject to Bankruptcy Court
approval or otherwise as permitted in the normal course of
business, the Company may sell or otherwise dispose of assets
and liquidate or settle liabilities for amounts other than those
reflected in the financial statements. Further, a plan of
reorganization could materially change the amounts and
classifications reported in the historical financial statements,
which do not give effect to any adjustments to the carrying
value of assets or amounts of liabilities that might be
necessary as a consequence of confirmation of a plan of
reorganization.
To exit Chapter 11 successfully, the Company must obtain
confirmation by the Bankruptcy Court of a plan of
reorganization. The Company currently has the exclusive right to
file a plan of reorganization until May 31, 2005 and
solicit acceptance of the plan through August 31, 2005.
Under the terms of an agreement reached with GECAS, the Company
previously agreed to a deadline of April 29, 2005 to file a
plan of reorganization. The deadline has been extended and the
Company remains in discussion with GE to determine a revised
deadline. A plan of reorganization would, among other things,
resolve all prepetition obligations, set forth a revised capital
structure and establish the corporate governance subsequent to
exiting from bankruptcy. The Company is currently working
towards emerging from Chapter 11 mid-year 2005, but that
timing is dependent upon, among other things, the timely and
successful confirmation and implementation of a plan of
reorganization. The ultimate recovery to creditors and/or
holders of the common stock, if any, will not be determined
until after a plan of reorganization is confirmed. No assurance
can be given as to what values, if any, will be ascribed in the
Chapter 11 cases to these constituencies or what type or
amount of distributions, if any, they would receive. A plan of
reorganization could result in holders of the Company's
common stock receiving no distribution and cancellation of
existing stock.
On April 22, 2005, the Company confirmed that it is in
discussions with America West Holdings Corp., regarding a
potential strategic transaction. The Company emphasized that
there is no assurance that the discussions will lead to a
definitive agreement. The Company does not intend to make any
further
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announcements until a definitive agreement is reached or
discussions are terminated. It is the Company's intention
that if a transaction is consummated, that the transaction would
become an integral component of the plan of reorganization.
The Company notified all known or potential creditors of the
Chapter 11 filing for the purposes of identifying and
quantifying all prepetition claims. The Chapter 11 filing
triggered defaults on substantially all debt and lease
obligations. Subject to certain exceptions under the Bankruptcy
Code, the Chapter 11 filing automatically stayed the
continuation of any judicial or administrative proceedings or
other actions against the Debtors or their property to recover
on, collect or secure a claim arising prior to
September 12, 2004. The deadline for filing proofs of claim
with the Bankruptcy Court was February 3, 2005 (General Bar
Date), with a limited exception for governmental entities, which
had until March 11, 2005. The Debtors' claims agent
received approximately 4,800 timely-filed proofs of claims as of
the General Bar Date totaling approximately $26.0 billion
in the aggregate, and approximately 350 proofs of claims
timely-filed by governmental entities totaling approximately
$13.4 billion in the aggregate. As is typical in
reorganization cases, differences between amounts scheduled by
the Debtors and claims by creditors are being investigated and
resolved in connection with the claims resolution process. The
aggregate amount of claims filed with the Bankruptcy Court far
exceeds the Debtors' estimate of such liability. The
Debtors believe that many of these claims are duplicative,
including those filed alleging joint and several liability
against each of the Debtors, based upon contingencies that have
not occurred, or otherwise are overstated, and are therefore
invalid. In light of the number of creditors of the Debtors, the
claims resolution process may take considerable time to
complete. Accordingly, the ultimate number and amount of allowed
claims is not presently known.
Transformation
Plan
Since filing for bankruptcy on September 12, 2004, the
Company has achieved cost-savings agreements with its principal
collective bargaining groups. Effective January 2005, US Airways
terminated its three mainline defined benefit plans and has
recognized a curtailment gain of $24 million and a
$91 million minimum pension liability adjustment in the
first quarter of 2005 in connection with the termination, which
is included in Reorganization items in the Statement of
Operations. The Pension Benefit Guaranty Corporation (PBGC) was
appointed trustee of the plans effective February 1, 2005.
The Company continues to carry a liability of $948 million
related to the three terminated plans, classified within
Liabilities Subject to Compromise on the Balance Sheet. The
liability will be adjusted at such time that the amount of the
PBGC claim approved by the Bankruptcy Court is known. Also in
January 2005, the Bankruptcy Court approved settlement
agreements between US Airways and its unions and the
court-appointed Section 1114 Committee, representing
retirees other than those represented by the International
Association of Machinists and Aerospace Workers (IAM) and the
Transport Workers Union (TWU), to begin the significant
curtailment of postretirement benefits. As a result of the
curtailment of these benefits, the Company recognized a gain of
$183 million in the first quarter of 2005, which is
included in Reorganization items in the Statement of Operations.
Pursuant to the Company's Transformation Plan and newly
ratified collective bargaining agreements, the Company
implemented voluntary furlough and termination programs across
several of its employee groups. In the first quarter of 2005,
the Company recognized a $51 million charge, which is
included in Reorganization items in the Statement of Operations,
associated with termination payments and health care benefits
for approximately 2,300 employees participating in these
voluntary programs. The majority of employees expected to
participate in voluntary terminations notified the Company by
March 31, 2005.
In connection with the outsourcing of a portion of the
Company's aircraft maintenance and certain fleet service
operations, the closing of its Pittsburgh reservation center,
and the closing of certain airport clubs and city ticket
offices, the Company involuntarily terminated or furloughed
approximately 2,300 employees. In the first quarter of 2005, the
Company recognized a $44 million charge, which is included
in Reorganization items in the Statement of Operations,
associated with contractual severance payments and healthcare
benefits for those employees. Notification for the majority of
planned involuntary terminations was completed in the first
quarter of 2005.
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The Company expects to make $79 million of termination and
benefit payments during the remainder of 2005, $9 million
in 2006 and approximately $1 million per year in the years
2007 through 2013.
Results of Operations
The following section pertains to activity included in the
Company's Condensed Consolidated Statements of Operations
and in "Selected Operating and Financial Statistics"
below. Except where noted, operating statistics referred to
below are for scheduled service only.
Three Months Ended March 31, 2005
Compared with the
Three Months Ended March 31, 2004
Operating Revenues
—
Passenger
transportation
revenues decreased $66 million, or 4.4%.
This was due to a 12.7% decrease in yield, which reduced revenue
by $211 million, partially offset by a 9.6% increase in
revenue passenger miles (RPMs), which increased revenue by
$145 million.
Cargo and freight
revenue decreased
$13 million, or 38.2%, due to the temporary suspension of
mail delivery and lower volume of transatlantic freight during
the first quarter of 2005.
Other
operating revenues
increased 3.9% primarily due to revenue generated through
airline partner travel after the Company joined the Star
Alliance in May 2004.
Operating Expenses
— Operating expenses
decreased $15 million, or 0.8%, on a capacity increase of
5.1% (as measured by available seat miles or ASMs).
Personnel
costs
decreased 25.6% primarily due to lower wage and
benefits rates as a result of the implementation of the
cost-savings agreements achieved with each of the collective
bargaining groups, including the termination of the
Company's defined benefit plans and the curtailment of
postretirement benefits, as well as lower headcount as compared
to the period in 2004. These reductions were partially offset by
increases to the workers compensation and pilots' long-term
disability liabilities.
Aviation fuel
increased 57.9% due
primarily to a 48.1% increase in average fuel prices and a small
increase in consumption.
US Airways Express capacity
purchases
increased 7.4% due to higher fuel prices that are
paid by US Airways on capacity purchases, partially offset by a
decrease in purchased ASMs.
Aircraft rent
increased 5.5%
due to new aircraft leases for regional jets delivered
throughout 2004 and the first quarter of 2005.
Selling
expenses
decreased 1.0% due to decreases in commissions and
computer reservation fees offset by increases in advertising
expense.
Depreciation and amortization
increased slightly
due to depreciation associated with new regional jets offset by
reduced amortization associated with capitalized software costs.
Other
operating expenses increased $2 million, or
less than 1%, due to increases in expenses associated with the
redemption of Dividend Miles on partner airlines and passenger
compensation expense partially offset by decreases in expense
related to outside services, ordinary course legal fees and
general insurance expense.
Other Income (Expense)
— Other Income
(Expense), net increased by $47 million. See Note 3(a)
to the Condensed Consolidated Financial Statements for
additional information on the components of
Reorganization
items, net.
Interest income
was flat due to higher
average interest rates, offset by the classification of
$2 million of interest income as a reorganization item.
Interest expense, net
increased 34.5% as a result of
interest associated with new regional jets and increased
interest expense on the ATSB Loan, including penalty interest
incurred as a result of the current Chapter 11 proceedings.
Other, net
for the three months ended March 31, 2005
decreased as compared to the same period in 2004 as a result of
mark-to-market adjustments on certain stock options held by the
Company.
Other, net
for the three month period ended
March 31, 2004 included a credit of $13 million
related to a business interruption insurance recovery.
Provision for Income Taxes
— The Company
recorded no income tax provision for the first quarter of 2005
or 2004 and continues to record a full valuation allowance
against its net deferred tax asset.
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Selected Operating and Financial Statistics(1)
Three Months Ended
March 31,
2005
2004
Revenue passenger miles (millions):*
System
11,048
10,079
Mainline
9,645
9,119
Available seat miles (millions):*
System
15,519
14,769
Mainline
13,185
12,988
Total available seat miles (millions):
System
15,520
14,771
Mainline
13,186
12,990
Passenger load factor(2):*
System
71.2
%
68.2
%
Mainline
73.2
%
70.2
%
Yield(3):*
System
13.10¢
15.01¢
Mainline(4)
11.74¢
13.27¢
Passenger revenue per available seat mile(5):*
System
9.32¢
10.24¢
Mainline(4)
8.59¢
9.32¢
Revenue passengers (thousands):*
System
14,068
12,700
Mainline
10,252
9,851
Mainline revenue per available seat mile(6)
9.91¢
10.62¢
Mainline cost per available seat mile (Mainline CASM)(7)
10.89¢
11.68¢
Mainline average stage length (miles)*
768
773
Mainline cost of aviation fuel per gallon(8)
$
1.472
$
0.994
Mainline cost of aviation fuel per gallon (excluding fuel taxes)
$
1.417
$
0.938
Mainline gallons of aviation fuel consumed (millions)
218
216
Mainline number of aircraft in operating fleet at period-end
279
283
Mainline full-time equivalent employees at period end
23,696
26,854
*
Scheduled service only (excludes charter service).
(1)
Operating statistics include free frequent travelers and the
    related miles flown. System statistics encompass all wholly
    owned airline subsidiaries of US Airways Group, including US
    Airways, Allegheny Airlines (through June 2004), Piedmont
    Airlines and PSA Airlines as well as operating and financial
    results from capacity purchase agreements with Mesa Airlines,
    Chautauqua Airlines and Trans States Airlines. For purposes of
    Mainline statistical calculations and to provide better
    comparability between periods, Mainline statistics exclude
    revenue and expenses associated with US Airways capacity
    purchase arrangements with certain affiliated airlines and US
    Airways' regional jet division, MidAtlantic Airways
    (MidAtlantic).
(2)
Percentage of aircraft seating capacity that is actually
    utilized (RPMs/ ASMs).
(3)
Passenger transportation revenue divided by RPMs.
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(4)
Mainline passenger revenue excludes US Airways Express and
    MidAtlantic passenger revenue of $314 million and
    $303 million for the three months ended March 31, 2005
    and 2004, respectively.
(5)
Passenger transportation revenue divided by ASMs (a measure of
    unit revenue).
(6)
Mainline operating revenues divided by ASMs (a measure of unit
    revenue). Mainline operating revenues exclude US Airways Express
    and MidAtlantic operating revenues of $315 million and
    $304 million for the three months ended March 31, 2005
    and 2004, respectively.
(7)
Mainline operating expenses divided by mainline ASMs (a measure
    of unit cost). Mainline operating expenses exclude US Airways
    capacity purchases of $327 million and $313 million
    for the three months ended March 31, 2005 and 2004,
    respectively, and MidAtlantic operating expenses of
    $41 million for the three months ended March 31, 2005.
(8)
Includes fuel taxes and transportation charges and excludes
    service fees.
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Liquidity and Capital Resources
As of March 31, 2005, the Company's Cash and cash
equivalents totaled $513 million compared to
$738 million as of December 31, 2004. The decline in
cash during the first quarter is a result of continued net
losses during seasonally weak winter months and aircraft debt
and lease payments of $317 million on aircraft essential to
the Transformation Plan. The airline industry continues to be
adversely effected by the historically high aircraft fuel prices
and the continued downward pressure on domestic revenue.
As part of its reorganization under the Prior Bankruptcy, US
Airways received a $900 million loan guarantee under the
Air Transportation Safety and System Stabilization Act from the
ATSB in connection with a $1 billion term loan financing
(ATSB Loan). In connection with the September 12, 2004
Chapter 11 filing, the ATSB and the lenders under the ATSB
Loan agreed to authorize the Company to continue to use cash
collateral securing the ATSB Loan on an interim basis.
Therefore, the Company has access to the cash collateralizing
the ATSB Loan as working capital, subject to certain on-going
conditions and limitations. This interim agreement was approved
by the Bankruptcy Court on September 13, 2004 as part of
the first day motions, and was scheduled to expire on
October 15, 2004. The Bankruptcy Court approved two
subsequent agreements extending the Company's ability to
use the cash collateral, including an agreement approved on
January 13, 2005 extending the Company's use of cash
collateral through June 30, 2005, subject to certain
conditions and limitations. Under the current agreement, the
Company may continue to access such cash collateral to support
daily operations so long as it maintains an agreed minimum
amount of cash on hand each week. This minimum amount declines
from approximately $500 million at the end of January to
$341 million on June 30, 2005, with weekly cash levels
permitted as low as $325 million in March 2005. The Company
must also maintain and achieve certain cumulative earnings
levels during the period, as defined in the agreement. Further,
the Company must comply with restrictions on its ability to make
capital expenditures. In light of continued high fuel prices and
downward pressure on its fares, there can be no assurance that
the Company can continue to comply with the Cash Collateral
Agreement.
The ATSB Loan also contains covenants that limit, among other
things, the Company's ability to pay dividends, make
additional corporate investments and acquisitions, enter into
mergers and consolidations and modify certain concessions
obtained as part of the Prior Bankruptcy. The ATSB Loan contains
certain mandatory prepayment events including, among other
things, (i) the occurrence of certain asset sales and the
issuance of certain debt or equity securities and (ii) the
decrease in value of the collateral pledged in respect of the
ATSB Loan below specified coverage levels. During the three
months ended March 31, 2005, the Company made approximately
$6 million in prepayments on the ATSB Loan with proceeds
received from asset sales.
As of March 31, 2005, $712 million was outstanding
under the ATSB Loan. The ATSB Loan is reflected as a current
liability on the accompanying balance sheet at a book value of
$697 million, which is net of $15 million of
unamortized discount, and is not subject to compromise. As of
March 31, 2005, the Company's $513 million in
unrestricted cash and cash equivalents was available to support
daily operations, subject to certain conditions and limitations
under the Cash Collateral Agreement.
On February 18, 2005, the Company announced that it reached
an agreement with Eastshore Aviation, LLC, an investment entity
owned by Air Wisconsin Airlines Corporation and its shareholders
(Air Wisconsin), on a $125 million financing commitment to
provide equity funding for a plan of reorganization. The
$125 million facility is in the form of a debtor in
possession term loan. After receiving approval from the
Bankruptcy Court, $75 million was drawn under the facility
on March 1, 2005. The first of two $25 million
increments was drawn on April 4, 2005. This loan is second
only to the ATSB Loan with regard to the Company's assets
that are pledged as collateral. Upon emergence from
Chapter 11, the $125 million financing package would
then convert to equity in the reorganized US Airways Group. The
interest on the facility is LIBOR plus 6.5% as determined as of
the draw date of each increment. Interest is payable quarterly
in arrears. As part of this agreement, US Airways and Air
Wisconsin also entered into a regional jet services agreement
under which Air Wisconsin may, but is not required to, provide
regional jet service under a US Airways Express code share
arrangement. On April 8, 2005, Air Wisconsin notified the
Company of its
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intention to deploy 70 regional jets, the maximum number
provided for in the agreement, into the US Airways Express
network.
On March 14, 2005, the Company announced that it reached an
agreement with Republic Airways Holding, Inc. (Republic) and its
majority shareholder, Wexford Capital LLC (Wexford), on an
equity and financing package that includes a $125 million
equity investment upon emergence from Chapter 11 and
options for obtaining $110 million of other liquidity
enhancements prior to emergence. The implementation of
transactions under the agreement was approved by the Bankruptcy
Court on March 31, 2005. The investment agreement is
subject to certain conditions that include the Company and
Wexford reaching an agreement on a business plan for the
reorganized US Airways Group and the requirement that the
Company receive aggregate cash equity investments of not less
than $350 million upon emergence from Chapter 11.
The agreement with Republic and Wexford also provides that US
Airways may exercise an option to obtain $110 million of
additional liquidity through the sale of certain assets,
including ten currently owned EMB-170 regional aircraft, three
EMB-170 regional jet aircraft currently scheduled for delivery,
other regional jet related assets such as a flight simulator and
other items and certain commuter slots at Reagan National
Airport and LaGuardia Airport. US Airways also has the option to
assign the leases for an additional 15 EMB-170 regional jet
aircraft. Upon the sale and assignment of the leases for the
aircraft, Republic would enter into a regional jet services
agreement with the Company that would continue the operation of
the aircraft as US Airways Express. Republic would lease
back the slots to US Airways and US Airways would have the right
to repurchase the slots at a predetermined price. In the event
that the Company does not exercise the slot sale/leaseback
option, Republic has the option to purchase and assume the debt
and leases for all of the Company's Embraer regional jets
and fly them as US Airways Express.
General Electric
GE is the Company's largest creditor. Together with GEES
and other affiliates, GE directly financed or leased a
substantial portion of the Company's aircraft prior to the
current Chapter 11 filing. In November 2001, US Airways
obtained a $404 million credit facility from GE (2001 GE
Credit Facility). The 2001 GE Credit Facility is secured by
collateral including 11 A320-family aircraft and 28 spare
engines.
In addition to the 2001 GE Credit Facility, GE has provided
financing or guarantees on a significant number of the
Company's current operating aircraft. It also maintains the
engines on the Company's B737-family aircraft, A320-family
aircraft, B767 aircraft, EMB-170 aircraft and CRJ-200 aircraft.
In connection with its Prior Bankruptcy, the Company reached a
settlement with GE that resolved substantially all aircraft,
aircraft engine and loan-related issues and the Company obtained
additional financing from GE in the form of a liquidity facility
of up to $360 million (2003 GE Liquidity Facility).
Borrowings under the liquidity facility bear interest at LIBOR
plus 4.25%. Every obligation of the Company to GE is generally
cross-defaulted to the 2001 GE Credit Facility, the 2003 GE
Liquidity Facility, the GE regional jet leases and the GE
regional jet mortgage financings. All of the Company's
obligations to GE are generally cross-collateralized and
cross-defaulted with all other obligations owed by any Debtor to
GECC or any of its affiliates (collectively, the GE Obligations).
In November 2004, the Company reached a comprehensive agreement
with GE and its affiliates as described in the Master MOU that
was approved by the Bankruptcy Court on December 16, 2004.
The Master MOU and the transactions contemplated by the term
sheets will provide the Company with short-term liquidity,
reduced debt, lower aircraft ownership costs, enhanced engine
maintenance services and operating leases for new regional jets,
while preserving the vast majority of US Airways' mainline
fleet owned by GECAS. The key aspects of the Master MOU are as
follows: (i) agreements providing for continued use by the
Company of certain Airbus, Boeing and regional jet aircraft, and
the return to GECC of certain other leased Airbus and Boeing
aircraft (the Aircraft Lease Term Sheet); (ii) GECC will
provide a bridge facility of up to approximately
$56 million for use by the Debtors during the pendency of
the Chapter 11 proceedings (the Bridge Facility Term
Sheet); (iii) GECC will purchase and immediately leaseback
to US Airways (a) the assets securing the 2001 GE Credit
Facility and the 2003 GE Liquidity Facility (collectively, the
2001 Credit Facility Assets), and other GE obligations,
consisting of 11 Airbus aircraft and 28 spare engines and engine
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stands, and (b) ten regional jet aircraft currently debt
financed by GECC; (iv) the balance of the 2001
GE Credit Facility will be restructured to provide
additional liquidity of approximately $10 million, subject
to the pledge of certain collateral to secure the 2001 GE Credit
Facility; (v) subject to the Company's satisfaction of
certain financial tests and other conditions, GECC will provide
lease financing for up to 31 additional regional jet
aircraft (the Regional Jet Leasing Term Sheet);
(vi) certain of US Airways' engine maintenance
agreements with GEES will be modified and assumed; and
(vii) upon emergence from bankruptcy, convertible notes of
the reorganized US Airways will be issued to GECC in the
aggregate principal amount of $125 million (the Convertible
Note Term Sheet).
The Bridge Facility Term Sheet provides for a loan facility of
up to $56 million made available by GECC to the Debtors in
a series of drawdowns commencing on December 20, 2004, and
ending on or before June 30, 2005 (the Bridge Facility).
The Company and GECC entered into the Bridge Facility on
December 20, 2004, at which time $20 million was drawn
down under the facility. As of March 31, 2005, the Company
has drawn $42 million under the facility. Interest on the
Bridge Facility accrues at the rate of LIBOR plus 4.25% and will
be payable in cash or in kind at the option of the Debtors. The
Bridge Facility matures on the date the Company emerges from
Chapter 11 and will be satisfied by the issuance of
Convertible Notes. The Bridge Facility is cross-collateralized
and cross-defaulted with all other GE obligations owed by
any Debtor to GECC or any of its affiliates and will be granted
status as an administrative expense claim with priority over all
other administrative claims other than for aircraft financing
deferrals, which are pari passu, and subordinate only to
(i) the super-priority administrative expense claim of the
ATSB and the ATSB Lenders as defined and provided for in the
Cash Collateral Agreement, (ii) postpetition wages and
benefits, and (iii) any other new money debtor in
possession financing.
Under the terms of the Master MOU, the Company previously agreed
to a deadline of April 29, 2005 to file a plan of
reorganization. The deadline has been extended and the Company
remains in discussion with GE to determine a revised deadline.
No other transactions contemplated by the Master MOU have been
implemented in 2005, except as described above related to the
Bridge Facility, and there can be no assurance that additional
transactions contemplated by the Master MOU will occur.
Aircraft Financing
The Company has reached agreements with certain of its lessors
and lenders restructuring existing aircraft lease and debt
financings. On November 19, 2004, the Bankruptcy Court
approved the Company's agreements for the continued use and
operation of substantially all of its mainline and Express
fleet. Under the Master MOU, the Company reached a comprehensive
agreement with GECAS and GEES on aircraft leasing and financing
and engine services, which provides the Company with short-term
liquidity, reduced debt, lower aircraft ownership costs,
enhanced engine maintenance services, and operating leases for
new regional jets.
Pursuant to the Regional Jet Leasing Term Sheet under the Master
MOU, GECC or its affiliates have agreed to provide leases for up
to 31 regional jet aircraft. These aircraft will consist of 70-
to 100-seat regional jet aircraft manufactured by Bombardier
and/or Embraer in a mix and subject to other terms to be agreed
mutually upon by GECC and US Airways. During the first quarter
of 2005, GECC leased six CRJ-700s to US Airways with terms
expiring on the earlier of the Debtors' emergence from
Chapter 11 and June 30, 2005. These leases may be
extended. To effectuate the contemplated regional jet leasing,
US Airways and GECC reinstated that portion of the RJ Lease
Transaction and Debt Financing Agreement, dated as of
December 18, 2003 (RJ Lease Agreement), pursuant to which
GECC has agreed to provide single investor lease transactions
(provided that the obligations under the reinstated RJ Lease
Agreement will not be afforded administrative expense status),
with certain additional terms and conditions. Each such lease
will be a postpetition agreement, but only rent payable through
June 30, 2005 (as such date may be extended) and return
obligations thereunder will be offered administrative expense
status. All other claims under each such lease, including
rejection damages, will be unsecured prepetition claims.
In December 2004, the Company reached aircraft leasing and
financing agreements with Embraer and Bombardier, which were
approved by the Bankruptcy Court in January 2005. Pursuant to
the agreement
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reached with Embraer, the Company purchased and took delivery of
three EMB-170 aircraft in January 2005 and committed to purchase
and take delivery of three additional EMB-170 aircraft by
March 31, 2005. The purchase of the three EMB-170s
delivered in January 2005 was financed by Embraer through a
mortgage loan facility and the application of $17 million
of existing purchase deposits held by Embraer. As discussed
below, the Company did not take delivery of the second three
aircraft in March 2005. Additionally, $12 million of
purchase deposits held by Embraer will be used to fund an
Embraer loan reserve. Embraer will apply the reserve funds in
the amounts and on the dates as and when payments are due under
the Embraer loans during the period from October 1, 2004
through July 31, 2005 in full satisfaction of the
Company's payment obligations with respect to such Embraer
loans during such period. Upon delivery of the first three
EMB-170s, which occurred in January 2005, unless the Company
assumes the Embraer aircraft purchase agreement pursuant to
Section 365 of the Bankruptcy Code, no further obligations
arise on the part of the Company or Embraer with respect to the
purchase and delivery of any aircraft, other than those
obligations that arise from or are related to the purchase and
delivery of the final three EMB-170s scheduled for March 2005.
Embraer and the Company have agreed to negotiate a new delivery
schedule upon the Company's assumption of the Embraer
aircraft purchase agreement.
Due to the Company's failure to take delivery by
March 31, 2005 of the remaining three EMB-170 aircraft,
damages accrue from and after April 1, 2005 until the
delivery of the aircraft at the rate of $162,795 per month
per aircraft. If the aircraft are not delivered by July 31,
2005, Embraer's obligation to deliver such aircraft will
terminate and its damages with respect to such undelivered
aircraft may be as much as $10 million for all three
aircraft (rather than at the rate of $162,795 per month per
aircraft), with Embraer having the right to apply any remaining
purchase deposits against Embraer's aggregate damages. The
Company is currently working to secure financing for these
aircraft and recorded a charge of $2 million in the first
quarter of 2005, which is included in Reorganization items in
the Statement of Operations, associated with penalties expected
to be incurred.
Under the agreement reached with Bombardier, the Company
acquired three new CRJ-700 aircraft in January 2005. The
purchase was financed through the application of
$28 million of existing purchase deposits held by
Bombardier, $2 million in cash and a financed lease
facility with DVB Bank AG. Additionally, $4 million of
existing purchase deposits held by Bombardier were used to
satisfy existing defaults and cure payments. So long as the
Company continues to operate under the protection of
Chapter 11 in compliance with the Bankruptcy Code, no
obligations will arise on the part of the Company or Bombardier
with respect to the purchase and delivery of any aircraft.
As of March 31, 2005, aircraft manufacturers held purchase
deposits of $76 million related to the acquisition of
aircraft.
Statement of Cash Flows Narrative
For the first three months of 2005, the Company's operating
activities before reorganization items used net cash of
$98 million, compared to operating activities for the three
months ended March 31, 2004 which provided cash of
$75 million. Operating cash flows during the first quarter
of 2005 included the use of $11 million for reorganization
items. Cash flows for 2005 were adversely affected by the same
factors that affected financial results, including continued
reductions in unit revenue and significant increases in fuel
prices.
For the first three months of 2005, net cash used by investing
activities was $174 million due primarily to the increase
in restricted cash of $139 million. The increase in
restricted cash reflects additional collateral deposits related
to the Company's third-party credit card processors. The
Company, in the ordinary course of business, withholds from
employees and collects from passengers funds that are required
to be paid to applicable governmental authorities, which include
withholding for payroll taxes, transportation excise taxes,
passenger facility charges, transportation security charges and
other related fees, and has established trust accounts to fund
these obligations. Net cash flows from investing activities in
the first quarter of 2005 also includes $39 million in
capital expenditures, primarily related to the acquisition of
new regional jets.
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For the first three months of 2004, investing activities
included net cash outflows of $2 million related to capital
expenditures and net equipment purchase deposit activity.
Capital expenditures reflects the early return of aircraft
purchase deposits by an aircraft manufacturer of
$31 million. The decrease in short-term investments in the
first quarter of 2004 reflects a shift in the investment
portfolio to investments with maturities less than 90 days
as of March 31, 2004. Investing activities in 2004 also
included an increase in restricted cash of $113 million.
Net cash provided by financing activities during the three
months ended March 31, 2005 was $58 million. Principal
payments on debt and capital lease obligations of
$72 million includes $6 million in prepayments on the
ATSB Loan with proceeds from sales of assets. On March 1,
2005, the Company made the first draw of $75 million under
the debtor in possession loan provided by Air Wisconsin. Net
cash used by financing activities for the three months ended
March 31, 2004 was $272 million. Principal payments on
long-term debt and capital lease obligations of
$295 million included the $250 million prepayment made
in connection with the ATSB Loan amendment in March 2004.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Prices and availability of all petroleum products are subject to
political, economic and market factors that are generally
outside of the Company's control. Accordingly, the price
and availability of aviation fuel, as well as other petroleum
products, can be unpredictable. Because the operations of the
Company are dependent upon aviation fuel, significant increases
in aviation fuel costs materially and adversely affect the
Company's liquidity, results of operations and financial
condition. Given forecasted fuel consumption of approximately
1.14 billion gallons per year for US Airways Group, a one
cent per gallon increase in fuel price results in a
$1 million per month increase in expense.
The Company has utilized financial derivatives, including fixed
price swap agreements, collar structures and other similar
instruments to manage some of the risk associated with changes
in aviation fuel prices. As of March 31, 2005, the Company
had no open fuel hedge positions in place. The Company
previously liquidated hedges representing approximately 4% of
its 2005 anticipated fuel requirements and recognized a
$6 million reduction to fuel expense for the three months
ended March 31, 2005. The Company will continue to
recognize a $2 million reduction to expense per month
through December 2005. The Company had $16 million of
unrealized gains related to fuel hedge positions recorded in
Accumulated other comprehensive income, net of income tax
effect, on its Balance Sheet at March 31, 2005.
There have been no other material changes to the Company's
disclosures related to certain market risks as reported under
Part II, Item 7A, "Quantitative and Qualitative
Disclosures About Market Risk", in the Company's
Annual Report on Form 10-K for the year ended
December 31, 2004.
Item 4.
Controls and Procedures
Disclosure
Controls and Procedures
The Company maintains disclosure controls and procedures
designed to ensure that information required to be disclosed by
the Company in reports it files or submits under the Securities
Exchange Act of 1934, as amended (Exchange Act) is recorded,
processed, summarized and reported within the time periods
specified in the SEC's rules and forms. An evaluation was
performed under the supervision and with the participation of
the Company's management, including the Chief Executive
Officer (CEO) and Chief Financial Officer (CFO), of the
effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of March 31, 2005.
Based on that evaluation, the Company's CEO and CFO have
concluded that the Company's disclosure controls and
procedures were effective as of such date.
Changes
in Internal Control over Financial Reporting
There have been no changes in the Company's internal
control over financial reporting during the three months ended
March 31, 2005 that have materially affected or are
reasonably likely to materially affect the Company's
internal control over financial reporting.
22
Table of Contents
PART II.
OTHER INFORMATION
Item 1.
Legal Proceedings
On September 12, 2004, US Airways Group and its domestic
subsidiaries, including its principal operating subsidiary, US
Airways, filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Eastern District of
Virginia, Alexandria Division (Case Nos. 04-13819-SSM through
03-13823-SSM). Each of the Debtors continues to operate its
business and manage its property as a debtor in possession
pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
As a result of the current Chapter 11 filing, attempts to
collect, secure or enforce remedies with respect to prepetition
claims against the Debtors are subject to the automatic stay
provisions of Section 362(a) of the Bankruptcy Code. No new
material legal proceedings have commenced during the time period
covered by this interim report. In addition, there have been no
significant developments in the pending legal proceedings as
previously reported in the Company's Annual Report on
Form 10-K for the year ended December 31, 2004.
Item 3.
Defaults Upon Senior Securities
(a) The initiation of the Chapter 11 proceedings
constituted a default under the agreements governing the
Company's debt and lease obligations incurred prior to the
Petition Date.
(b) Dividends on Class B Preferred Stock held by the
Retirement Systems of Alabama Holdings LLC aggregating
$4.5 million as of March 31, 2005 have not been paid
as a result of the Chapter 11 proceedings and in accordance
with the ATSB Loan.
Item 6.
Exhibits
Designation
Description
10
.1
First Supplemental Order(I) Authorizing Debtors' Use
    of Cash Collateral (II) Providing Adequate Protection
    Pursuant to Bankruptcy Rules 4001(b) and 4001(d)
    (incorporated by reference to Exhibit 99.1 to US Airways
    Group's Current Report on Form 8-K dated
    January 13, 2005)
10
.2
Junior Secured Debtor-in-Possession Credit Facility Agreement
    dated as of February 18, 2005 among US Airways, Inc., a
    Debtor and Debtor-in-Possession under Chapter 11 of the
    Bankruptcy Code as Borrower, US Airways Group, Inc., PSA
    Airlines, Inc., and Material Services, Inc., Debtors and
    Debtors-in-Possession under Chapter 11 of the Bankruptcy
    Code as Guarantors, and Eastshore Aviation, LLC, as Lender
    (incorporated by reference to Exhibit 99 to US Airways
    Group's Current Report on Form 8-K dated
    February 28, 2005)
10
.3
Investment Agreement dated as of March 15, 2005, among
    Wexford Capital LLC, Republic Airways Holdings Inc., US Airways
    Group, Inc. and US Airways, Inc. (portions of this exhibit have
    been omitted pursuant to a request for confidential treatment
    and filed separately with the SEC)
10
.4
Amendment No. 14, to the A319/ A320/ A321 Purchase
    Agreement dated as of October 31, 1997 between AVSA,
    S.A.R.L., and US Airways Group, Inc., executed on
    December 22, 2004 (portions of this exhibit have been
    omitted pursuant to a request for confidential treatment and
    filed separately with the SEC)
10
.5
Amendment No. 15 to the A319/ A320/ A321 Purchase Agreement
    dated as of October 31, 1997 between AVSA, S.A.R.L., and US
    Airways Group, Inc., executed on January 17, 2005 (portions
    of this exhibit have been omitted pursuant to a request for
    confidential treatment and filed separately with the SEC)
10
.6
Amendment No. 8 to the A330/ A340 Purchase Agreement dated
    as of November 24, 1998 between AVSA, S.A.R.L., and US
    Airways Group, Inc., executed on December 22, 2004
    (portions of this exhibit have been omitted pursuant to a
    request for confidential treatment and filed separately with the
    SEC)
II-1
Table of Contents
Designation
Description
10
.7
Amendment No. 9 to the A330/ A340 Purchase Agreement dated
    as of November 24, 1998, between AVSA, S.A.R.L., and US
    Airways Group, Inc., executed on January 17, 2005 (portions
    of this exhibit have been omitted pursuant to a request for
    confidential treatment and filed separately with the SEC)
10
.8
Post-Petition Purchase Agreement Modification and Aircraft
    Financing Term Sheet between US Airways, Inc. and
    EMBRAER — Empresa Brasileira de Aeronautica S.A.,
    executed on December 16, 2005
10
.9
Amendment No. 6 dated as of January 24, 2005 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment and filed
    separately with the SEC)
31
.1
Certification of the Principal Executive Officer pursuant to
    Rule 13a-14(a) or Rule 15d-14(a) (Section 302 of
    the Sarbanes-Oxley Act of 2002)
31
.2
Certification of the Principal Financial Officer pursuant to
    Rule 13a-14(a) or Rule 15d-14(a) (Section 302 of
    the Sarbanes-Oxley Act of 2002)
32
.1
Certifications pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002
II-2
Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
US AIRWAYS GROUP, INC. (Registrant)
By:
/s/
Anita P. Beier
Anita P. Beier
Senior Vice President-Finance and Controller
(Chief Accounting Officer)
Date: May 3, 2005
II-3
Table of Contents
ANNEX B-1
America West Holdings Corporation's Annual Report on
Form 10-K
for the year ended December 31, 2004
B-1
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
þ
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-12649
America West Holdings Corporation
(Exact name of registrant as specified in its charter)
Delaware
86-0847214
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
111 West Rio Salado Parkway
(480) 693-0800
Tempe, Arizona 85281
(Address of principal executive offices)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
Title of Each Class
Name of Each Exchange on Which Registered:
Class B Common Stock, $.01 par value
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the
Act: None
COMMISSION FILE NUMBER 0-12337
America West Airlines, Inc.
(Exact name of registrant as specified in its charter)
Delaware
86-0418245
(State or other jurisdiction of incorporation or
    organization)
(I.R.S. Employer Identification No.)
4000 E. Sky Harbor Boulevard
(480) 693-0800
Phoenix, Arizona 85034-3899
(Registrant's telephone number, including area code)
(Address of principal executive offices)
Securities registered pursuant to Section 12(b) of the
Act: None
Securities registered pursuant to Section 12(g) of the
Act: None
(Title of Class)
Indicate by check mark whether each of the registrants:
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.    Yes
þ
No
o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of each
of the registrants' knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this
Form 10-K.
þ
Indicate by check mark whether the registrants are accelerated
filers (as defined in Exchange Act Rule 12b-2)
America West Holdings
Corporation    Yes
þ
No
o
America West Airlines,
Inc.    Yes
o
No
þ
As of June 30, 2004, there were 35,204,800 shares of
America West Holdings Corporation Class B common stock,
$.01 par value issued and outstanding. As of such date,
based on the closing sales price as quoted by the New York Stock
Exchange, 35,029,271 shares of Class B common stock,
having an aggregate market value of approximately $318,065,781
were held by non-affiliates. For purposes of the above statement
only, all directors and executive officers of the registrants
are assumed to be affiliates. As of June 30, 2004, all
outstanding equity securities of America West Airlines, Inc.
were owned by America West Holdings Corporation.
As of March 14, 2005, there were 859,117 shares of
America West Holdings Corporation Class A common stock and
35,316,871 shares of America West Holdings Corporation
Class B common stock outstanding. As of March 14,
2005, all outstanding equity securities of America West
Airlines, Inc. were owned by America West Holdings Corporation.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement related to America West Holdings
Corporation's 2005 annual meeting of stockholders, which
proxy statement will be filed under the Securities Exchange Act
of 1934 within 120 days of the end of America West Holdings
Corporation's fiscal year ended December 31, 2004, are
incorporated by reference into Part III of this Annual
Report on Form 10-K.
America West Airlines, Inc. meets the conditions set forth in
General Instruction I(1)(A) and (B) and is therefore
filing this form with reduced disclosure format pursuant to
General Instruction I(2).
TABLE OF CONTENTS
Page
PART I
Item 1.
Business
2
Item 2.
Properties
19
Item 3.
Legal Proceedings
19
Item 4.
Submission of Matters to a Vote of Security
    Holders
20
PART II
Item 5.
Market for Registrants' Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities
21
Item 6.
Selected Consolidated Financial Data
23
Item 7.
Management's Discussion and Analysis
    of Financial Condition and Results of Operations
25
Item 7A.
Quantitative and Qualitative Disclosures
    About Market Risk
44
Item 8A.
Consolidated Financial Statements and
    Supplementary Data — America West Holdings
    Corporation
45
Item 8B.
Consolidated Financial Statements and
    Supplementary Data — America West Airlines,
    Inc.
76
Item 9.
Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure
103
Item 9A.
Controls and Procedures
103
Item 9B.
Other Information
106
PART III
Item 10.
Directors and Executive Officers of the
    Registrants
106
Item 11.
Executive Compensation
107
Item 12.
Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters
107
Item 13.
Certain Relationships and Related
    Transactions
107
Item 14.
Principal Accountant Fees and Services
107
PART IV
Item 15.
Exhibits and Financial Statement
    Schedules
107
Table of Contents
This combined Annual Report on Form 10-K is filed by both
America West Holdings Corporation ("Holdings" or the
"Company") and its wholly owned subsidiary, America
West Airlines, Inc. ("AWA" or the "Airline").
Note Concerning Forward-Looking Information
This report contains various forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act,
as amended (the "Exchange Act"). These statements are
based on management's beliefs as well as assumptions made
by and information currently available to management. When used
in this document, the words "anticipate,"
"estimate," "expect," "project"
and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those
anticipated, estimated, projected or expected. Among the key
factors that may have a direct bearing on our results are:
•
general economic conditions;
•
the impact of global instability caused by military actions,
    terrorism, disease outbreaks and natural disasters;
•
limitations on our flexibility in responding to industry
    conditions due to high fixed costs and restrictions imposed by
    our debt instruments;
•
changes in federal and state laws and regulations;
•
changes in prevailing interest rates and the availability of and
    terms of financing to fund our business;
•
the ability to attract and retain qualified personnel;
•
the cyclical nature of the airline industry;
•
competitive practices in the airline industry;
•
the impact of changes in fuel prices; and
•
relations with unionized employees generally and the impact and
    outcome of labor negotiations.
For additional discussion of these factors and other risks, see
"Business — Risk Factors Relating to the
Company and Industry Related Risks"
included in
Item 1 of this Annual Report. In light of these risks,
uncertainties and assumptions, the forward-looking events
described in this annual report on Form 10-K might not
occur. Any forward-looking statements speak only as of the date
of this Annual Report.
1
Table of Contents
PART I
Item 1.
Business
Overview
Holdings, a Delaware corporation formed in 1996, is a holding
company that owns all of the stock of AWA, a Delaware
corporation formed in 1981. AWA accounted for most of the
Company's revenues and expenses in 2004. Based on 2004
operating revenues and available seat miles, or
"ASMs", AWA is the eighth largest passenger airline
and the second largest low cost carrier in the United States.
AWA is the largest low-cost carrier that operates a
hub-and-spoke network, with large hubs in both Phoenix, Arizona
and Las Vegas, Nevada. Since 2003, AWA has also offered limited
point-to-point service in certain major transcontinental
markets. At the end of 2004, AWA operated a fleet of 138
aircraft with an average age of 10.7 years and served 63
destinations in North America, including eight in Mexico, three
in Canada and one in Costa Rica. Through regional alliance and
code share arrangements with other airlines, AWA served an
additional 51 destinations in North America and the Middle East.
In 2004, AWA flew approximately 21.1 million passengers and
generated revenues of approximately $2.3 billion.
Through its America West Vacations division, AWA also sells
individual and group travel packages, including air
transportation on AWA and Hawaiian Airlines, hotel
accommodations, car rentals, cruise packages and other travel
products, directly to consumers as well as through retail travel
agencies in the United States, Canada, Mexico and Costa Rica.
General information about us can be found at
www.americawest.com/aboutawa
under the investor relations
link. Our annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K, as well as
any amendments or exhibits to those reports, are available free
of charge through our website as soon as reasonably practicable
after we file them with, or furnish them to, the Securities and
Exchange Commission or "SEC."
Restatement of Previously Reported Amounts
Derivative Instruments
In February 2005, management undertook a review of AWA's
accounting for its fuel hedging transactions. As a result of
this review, management concluded that AWA's fuel hedging
transactions did not qualify for hedge accounting under
U.S. generally accepted accounting principles and that the
Company's financial statements for prior periods required
restatement to reflect the fair value of fuel hedging contracts
in the balance sheets and statements of stockholders equity and
comprehensive income of Holdings and AWA. See Note 2,
"Restatement of Previously Reported Amounts"
and Note 16,
"Quarterly Financial Data
(Unaudited)"
in Holdings' and Note 2,
"Restatement of Previously Reported Amounts"
and Note 15,
"Quarterly Financial Data
(Unaudited)"
in AWA's consolidated financial
statements for the financial impact of the restatements. The
Company concluded that these accounting errors were the result
of deficiencies in its internal control over financial
reporting, from the lack of effective reviews of hedge
transaction documentation and of quarterly mark-to-market
accounting entries on open fuel hedging contracts by personnel
at an appropriate level.
Developments in 2004
During 2004, extremely high jet fuel prices and excess capacity
throughout the domestic air system began to negatively impact
the low cost segment of the airline industry. As a result,
several low cost carriers that had previously operated
profitably, including AWA, experienced declining earnings. AWA
reported a net loss of $85.3 million for 2004.
In 2004, the Company reported a net loss of $89.0 million
compared to net income of $57.4 million in 2003. See
Item 7 —
"Management's Discussion
and Analysis of Financial Condition and Results of
Operations"
for further discussion of the 2004
financial performance.
2
Table of Contents
Airline Operations
Our operations and business strategy have traditionally been
focused around our Phoenix and Las Vegas based route-network
(supplemented by regional airline alliances and strategic
relationships with other carriers), our low cost structure and
our emphasis on customer service.
Our Route Network
We operate our route system through a hub-and-spoke network
centered in our Phoenix and Las Vegas hubs. As of
December 31, 2004, we were the leading airline serving
Phoenix based on ASMs and takeoffs and landings and ranked
second in Las Vegas based on the same measures. Our operations
have focused on the Phoenix and Las Vegas markets and expanding
our reach beyond those markets through strategic relationships
with other carriers, including a regional alliance with Mesa
Airlines or "Mesa," and code-sharing arrangements with
other carriers. See
"Regional Airline Alliance"
and
"Alliances with Other Airlines"
below.
In addition to our operations through our hubs, we initiated
point-to-point service in certain transcontinental markets in
October 2003. With continued high jet fuel prices and
substantial competitive reaction to our transcontinental
service, which resulted in increased capacity and decreased
fares, we scaled back our transcontinental flying in late 2004.
Non-stop services from New York City's John F. Kennedy
International (JFK) and Logan International Airport
(BOS) airports to San Francisco International Airport
(SFO) were suspended in November 2004. We also suspended
service between BOS and Los Angeles International Airport
(LAX) and LAX and Washington Dulles International Airport
in early 2005. Service between LAX and JFK remains in place with
once daily scheduled service. We expect to increase our LAX to
JFK service to twice-daily for the summer peak period from June
through the Labor Day weekend, 2005.
Separately, we commenced limited international point-to-point
flying on the west coast. In June 2004, we commenced daily
services from LAX to Vancouver and Edmonton, Canada as well as
Mazatlan and Puerto Vallarta, Mexico. In October 2004, flights
from San Diego to Cabo San Lucas and Puerto Vallarta
were also added. All of the flights to Mexico are flown by Mesa
on our behalf. In addition, we commenced non-stop flights from
San Diego to Vancouver in March 2005.
Cost Control
We remain committed to maintaining a low cost structure, which
we believe offers a significant competitive advantage over other
major hub-and-spoke airlines in the United States. See
Item 7 —
"Management's Discussion
and Analysis of Financial Condition and Results of
Operations"
for further discussion of the 2004
financial performance.
Revised Pricing Structure
In addition to the comprehensive changes made to our pricing
structure in March 2002, we changed our pricing structure in
February 2004 to make flying first class more affordable for
both business and leisure travelers. This new first class fare
structure features nonrefundable first class fares that are up
to 70% lower than the industry's traditional first class
fares. Although some airlines also have initiated pricing
changes, industry competitive reaction still is unclear at this
time but there is potential for negative revenue impact on the
industry and AWA. As other airlines continue to make changes to
their pricing structures, we will continue to evaluate the best
solution for AWA. See Item 7 —
"Management's Discussion and Analysis of Financial
Condition and Results of Operations"
for further
discussion of the revised pricing structure.
Customer Service
Continued emphasis on customer service is essential to growing
our business and leisure traffic. Therefore, we are committed to
building a successful airline by taking care of our customers.
During 2004,
3
Table of Contents
we improved and expanded upon a series of customer service and
reliability initiatives. These initiatives make it easier and
more convenient for customers to travel on AWA.
•
Our "Buy on Board" meal program was expanded to all
    departure segments with a flight duration of
    3
1
/
2
hours or greater.
•
Our day of departure first class upgrade program also was
    expanded in 2004 to allow for purchase up to 24 hours prior
    to departure on americawest.com and through our reservation
    centers. This program provides a simple and affordable way to
    upgrade to first class.
•
Our Web Check-in product was modified in 2004 to allow customers
    to self check-in and obtain a boarding pass 36 hours prior
    to departure. This was later modified to 24 hours prior to
    departure to meet objectives set forth in a Transportation
    Security Administration or "TSA," security directive
    to all carriers. In December 2004, Web check-in represented
    almost 7% of all passenger check-ins.
•
Throughout 2004, we significantly expanded the availability of
    self-service check-in kiosks across our system (218 units
    deployed in 43 of our airport facilities). In December 2004,
    self-service check-in represented nearly 50% of all boarding
    passes in stations with kiosks.
•
Over the year we expanded the number of interline e-ticket
    agreements with other carriers from three (Continental, United
    and American Airlines) to five (now including Delta and
    Hawaiian). In early 2005, we added Northwest Airlines to our
    interline e-ticket agreement list of carriers. These agreements
    make travel easier for customers who need to utilize multiple
    airlines in their itinerary.
•
We were the first airline to introduce an alternative payment
    method called "Bill Me Later®", making it easier
    for customers to budget for their travel plans. Customers who
    make purchases online at americawest.com with Bill Me
    Later®, have at least 90 days to pay the balance in
    full with no interest.
•
Customers now can give the gift of travel with an America West
    Gift Card. Gift cards in $50, $100 or $250 denominations are
    available for purchase online at americawest.com or by calling
    our reservation center. Gift cards also can be purchased in $50
    and $100 denominations at many grocery, convenience and drug
    stores.
•
In addition to the initiatives mentioned above, we emphasize
    improving our handling of customer re-accommodations during
    irregular operations (flight cancellations and delays). Although
    our goal is to operate every flight and depart on time, there
    are circumstances such as weather and Air Traffic Control or
    "ATC," delays that cause disruption to planned flight
    activity. During 2004, we initiated several new programs and
    improved automation to speed the process of re-accommodating
    customers to alternative flight arrangements during these
    circumstances.
Regional Airline Alliance
We have a regional airline alliance agreement with Mesa. Mesa,
operating as America West Express, provides regional feeder
service to and from our Phoenix and Las Vegas hubs to
destinations in the western United States, Canada and northern
Mexico operating regional jets and large turboprop aircraft.
Through this arrangement with Mesa, we offered America West
Express service to an additional 33 destinations as of
December 31, 2004.
In 2004, we entered 16 86-seat CRJ-900 regional jets into
America West Express service. Additionally, we completed a
reconfiguration program that converted the CRJ-900 aircraft from
a dual class 80-seat configuration to a single class,
86-seat configuration. At December 31, 2004, the America
West Express fleet operated by Mesa included 49 aircraft
comprised of 25 CRJ-900s, 18 50-seat CRJ-200s and six 37-seat
Dash 8 turboprop aircraft.
4
Table of Contents
Alliances with Other Airlines
AWA maintains alliance agreements with several leading domestic
and international carriers to give customers a greater choice of
destinations. Airline alliance agreements provide an array of
benefits that vary by partner. By code sharing, each airline is
able to offer additional destinations to its customers under its
flight designator code without materially increasing operating
expenses and capital expenditures. Frequent flyer arrangements
provide members with extended networks for earning and redeeming
credits on partner carriers. Lounge arrangements provide lounge
members with access to partner carriers' lounges.
AWA's alliance agreement with British Airways allows
British Airways to code share on flights operated by AWA
connecting to and from British Airways' Phoenix,
San Francisco, Los Angeles, Dallas, Boston and New York
services. The agreement also allows AWA FlightFund members to
earn credit for travel on British Airways and for frequent flyer
benefits earned by AWA customers to be redeemed for travel on
British Airways' system.
Relationships with Northwest Airlines or "Northwest,"
and EVA Airways or "EVA," provide connecting service
on AWA from those airlines' Pacific routes to Las Vegas and
Phoenix. The frequent flyer agreement with Northwest also
provides for AWA FlightFund members to earn and redeem credit on
Northwest's transpacific flights. In addition, AWA lounge
members have access to Northwest's WorldClub lounges in the
United States and EVA's lounge in Taipei, Taiwan.
AWA's alliance agreement with Virgin Atlantic Airways or
"Virgin," allows Virgin to code share on flights
operated by AWA connecting to and from Virgin's Las Vegas,
San Francisco and Los Angeles services. The agreement also
allows AWA FlightFund members to earn credit for travel on
Virgin and for frequent flyer benefits earned by AWA customers
to be redeemed for travel on Virgin's system.
Relationships with ALIA/ Royal Jordanian Airlines or "Royal
Jordanian," and Hawaiian Airlines or "Hawaiian,"
allow each carrier to code share flights operated by the other
carrier. AWA's alliance with Royal Jordanian offers
connecting service from Royal Jordanian's Chicago, Detroit
and New York services. The agreement also allows AWA FlightFund
members to earn credit for travel on Royal Jordanian and for
frequent flyer benefits earned by AWA customers to be redeemed
for travel on Royal Jordanian's system. In addition, AWA
lounge members have access to Royal Jordanian's VIP Clubs
in Amman and Aqaba, Jordan. AWA's agreement with Hawaiian
offers connecting service to and from Hawaiian's nonstop
Phoenix to Honolulu service and beyond to the other islands of
Hawaii. AWA FlightFund members can earn and redeem credit for
travel on Hawaiian.
AWA's alliance agreement with Big Sky Airlines or "Big
Sky," allows AWA to code share on Big Sky's services
from Spokane, Washington, Boise, Idaho, and Billings, Montana to
Big Sky's destinations in Montana, North Dakota and
Washington State. AWA FlightFund members can earn and redeem
credit for travel on Big Sky.
Airline Marketing
In 2004, we launched the airline industry's first gift card
program. Gift cards have proven highly successful in the
traditional retailer environment where they account for an
increasing share of consumer purchases, particularly around the
holiday season. We partnered with intermediary companies to
launch gift cards at several large retailers, including Staples,
Rite Aid, 7-Eleven and others, and cards are due to be available
at approximately 10,000 stores nationwide by the first quarter
of 2005. Gift cards also are available for purchase at
americawest.com and currently may be redeemed by calling AWA
reservations. It is anticipated that online redemption will be
available during 2005.
Airline Competition
The airline industry and most of the markets we serve are highly
competitive. We compete on the basis of pricing, scheduling
(frequency and flight times), on-time performance, type of
equipment, cabin configuration, amenities provided to
passengers, frequent flyer programs, the automation of travel
agent reservation systems, on-board products and other services.
We compete with all of the major full service
5
Table of Contents
airlines on medium and long haul routes to, from and through our
hubs and in our transcontinental markets and with a number of
carriers for short haul flights at our Phoenix and Las Vegas
hubs.
In addition, we compete with a growing number of low cost
carriers at our Phoenix and Las Vegas hubs and across our route
system. The low cost carrier sector is growing and for the
12 months ended December 31, 2004, low cost carrier
capacity (as measured by available seat miles) represented 23.6%
of all domestic mainline service, an increase of 1.1 points from
the 12 months ended December 31, 2003, when low cost
carrier marketshare accounted for 22.5% of all domestic mainline
service. We compete with other low cost carriers primarily on
the basis of pricing. However, we believe our full service
amenities (for example, first class seating, an award winning
frequent flyer program and assigned seating) provide us with a
competitive advantage against other low cost carriers without
such amenities.
Price competition occurs on a market-by-market basis through
price discounts, changes in pricing structures, fare matching,
target promotions and frequent flyer initiatives. Most airlines
will quickly match price reductions in a particular market and
certain airlines have in the past engaged in retaliatory
activities, including steep pricing discounts in certain markets
and termination of alliance agreements, in response to changes
in our pricing structure. Our ability to compete on the basis of
price is limited by our fixed costs and depends on our ability
to maintain low operating costs. Our principal competitor,
Southwest Airlines, and certain other low cost carriers have
lower operating cost structures than we do. In addition, the
consolidation of existing carriers, the entry of additional
carriers including new low cost carriers, the creation of low
fare airline divisions by several major airlines and the
revision of traditional pricing structures by our competitors in
many of our markets (as well as increased services by
established carriers) has resulted in increased pressure on our
pricing. For additional discussion of industry competition and
related government regulation, see
"Risk Factors
Relating to America West and Industry Related Risks —
The airline industry and the markets we serve are highly
competitive and we may be unable to compete effectively against
carriers with substantially greater resources or lower cost
structures"
and, generally,
"Government
Regulations."
Frequent Flyer Program
All major United States airlines offer frequent flyer programs
to encourage travel on their respective airlines and customer
loyalty. AWA offers the FlightFund program, which allows members
to earn mileage credit by flying AWA and America West Express,
by flying on certain partner airlines and by using the services
of a wide variety of other program participants such as hotels,
rental car agencies and other specialty services. AWA also sells
mileage credits to credit card companies, telephone companies,
hotels, car rental agencies and others that participate in the
FlightFund program.
Through the FlightFund program accumulated mileage credits can
be redeemed for free travel on AWA, America West Express and
certain partner airlines and for first class upgrades on AWA.
Use of mileage credits is subject to industry standard
restrictions including availability and blackout dates. AWA must
purchase space on other airlines to accommodate FlightFund
redemption travel on those airlines.
In 2004, the FlightFund program added new partnerships with
Ameritrade, NetBank, Awards for Mortgage and Real Estate and
Royal Jordanian Airlines.
We account for the FlightFund program under the incremental cost
method whereby travel awards are valued at the incremental cost
of carrying one passenger based on expected redemptions. Those
incremental costs are based on expectations of expenses to be
incurred on a per passenger basis and include fuel, liability
insurance, food, beverages, supplies and ticketing costs that
are accrued as FlightFund members accumulate mileage credits. No
profit or overhead margin is included in the accrual for those
incremental costs. Transportation-related revenue from the sale
of mileage credits is deferred and recognized when
transportation is provided. Non-revenue FlightFund travel
accounted for 1.5%, 2.1% and 2.7% of total revenue passenger
miles for the years ended December 31, 2004, 2003 and 2002,
respectively. We do not believe that non-revenue FlightFund
travel results in any significant displacement of revenue
passengers.
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America West Vacations
As of January 1, 2004, The Leisure Company merged into AWA
and continued to operate as the America West Vacations or
"AWV," division of AWA. AWV sells individual and group
travel packages including air transportation on AWA, America
West Express and Hawaiian Airlines, hotel accommodations, car
rentals and other travel products directly to consumers and
through retail travel agencies in the United States, Canada,
Mexico and Costa Rica. AWV is one of the largest tour packagers
to Las Vegas in the United States, contracting for volume blocks
of rooms with 31 Las Vegas hotels and resorts in 2004.
AWV is focused on high-volume leisure travel products that have
traditionally provided high profit margins. AWV negotiated
several strategic partnerships with hotels, Internet travel
sites and media companies to capitalize on the continued growth
in online travel sales. AWV sells vacation packages and hotel
rooms through its call center, via the Internet and its
websites, AmericaWestVacations.com, AWVTravelAgents.com and
AWVCruise.com, through global distribution systems Sabre
TourGuide and WorldSpan Tour Source and through third-party
websites on a co-branded or private-label basis. In 2004,
approximately 55% of AWV's total bookings were made
electronically compared to 43% in 2003.
AWV competes in a fragmented travel industry, which is highly
competitive, price sensitive and has relatively low barriers to
entry. AWV competes for customers with other wholesale travel
companies, consolidators and E-travel companies through national
mass media, preferred supplier agreements and Internet
distribution agreements.
During 2004, AWV operated co-branded websites for 15 partner
companies, including Costco Travel, BestFares.com, Vegas.com,
MandalayBay.com, and Aladdin.com. These co-branded sites allow
AWV to gain a retail presence via distribution channels such as
Costco wholesale warehouses and other company websites where AWA
and AWV may not otherwise be a part of the consumers'
consideration set. AWV intends to continue to add new co-branded
websites as opportunities present themselves.
The Airline's Fleet
AWA began the year 2004 with 139 aircraft. In 2004, AWA retired
seven 737-200 aircraft (returned five leased aircraft; parked
one leased aircraft; sold one owned aircraft) and took delivery
of one new A319 aircraft and five new A320 aircraft for a net
total of 138 aircraft by the end of 2004 with an average age of
10.7 years. AWA's fleet at the end of 2004 and as
currently planned for the end of 2005 is described in the table
below:
Qty as of 12/31
Average Age as of 12/31
Approx.
Aircraft Types
No. Seats
2004
2005
2004
2005
737-200
113
1
—
22.6
N/A 1
737-300
132
37
37
16.9
17.9
757-200
190
13
13
18.2
19.2
A319
124
33
37
4.2
4.7
A320
150
54
61
8.5
8.5
Totals
138
148
10.7
10.8
(1)
The last 737-200 aircraft was retired in January 2005
In August 2004, AWA amended its aircraft purchase contract with
AVSA S.A.R.L., an affiliate of Airbus Industrie or
"AVSA," to acquire 22 Airbus A320 family aircraft
(thirteen A320s and nine A319s), all powered by V2500 engines
from International Aero Engines. Of the 22 aircraft, it is
anticipated that 18 will be purchased directly from the
manufacturer and four have been leased under noncancelable
leases from various lessors for aircraft to be delivered in
2005. In the context of this incremental order, AWA also secured
extensive flexibility from Airbus with respect to its existing
A318 order, allowing AWA to better react to market conditions by
enabling it to amend its 15 A318 delivery positions to A319s and
A320s, if it so desires, or to take no additional aircraft under
certain conditions.
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The following table illustrates AWA's committed orders,
scheduled lease expirations, and lessor call and put options as
of December 31, 2004.
2005
2006
2007
2008
2009
Firm orders remaining (EOY)
13
1
—
—
—
Lessor put options
2
4
—
—
—
Lease terminations:
Scheduled expirations
8
9
21
15
5
Lessor call options
9
7
7
1
—
In January 2005, AWA retired its one remaining 737-200 aircraft.
While this is the only forecasted 2005 retirement, AWA has the
ability to return five additional leased Boeing 737-300 aircraft
and one leased Airbus A320, and retire five owned Boeing 737-300
aircraft, if market conditions necessitate such a response. In
February 2005, AWA renewed the lease on one Airbus A320 for an
additional three years. These eleven aircraft exclude the
exercise of two lessor put options on two aircraft that could
require AWA to renew the leases for approximately 15 months
beyond the current natural lease expiration date. In 2004, one
put option on a Boeing 737-300 aircraft was exercised resulting
in a lease extension of 33 months. No call options were
exercised in 2004. Assuming the exercise of all put options, as
of December 31, 2004, 52 aircraft have lease expirations
prior to the end of 2008.
Aircraft Jet Fuel
Jet fuel costs were our second-largest operating expense in
2004. Our average cost of jet fuel over the past five years was
as follows:
Average Cost
Percent of
Year
Cost (Millions)
per Gallon
Operating Expenses
2000
$
373
$
0.88
15.8
%
2001
$
336
$
0.81
13.6
%
2002
$
299
$
0.73
13.6
%
2003
$
376
$
0.89
16.8
%
2004
$
557
$
1.24
23.4
%
In addition, the Company incurs fuel expense for our regional
airline alliance with Mesa. For the years ended
December 31, 2004, 2003 and 2002, total fuel expense for
the Mesa alliance was $102.1 million, $61.2 million
and $46.3 million, respectively.
The price and supply of jet fuel are unpredictable and fluctuate
based on events outside our control including geopolitical
developments, regional production patterns and environmental
concerns. Price escalations or reductions in the supply of jet
fuel will increase our operating expenses and cause our
operating results and net income to decline. See
"Risk
Factors Relating to the Company and Industry Related
Risks — Fluctuations in jet fuel costs could adversely
affect our operating expenses and results."
Employees and Labor Relations
The Company's businesses are labor intensive with wages,
salaries and benefits representing approximately 28% of the
Company's operating expenses during 2004.
As of December 31, 2004, the Company employed
10,712 full-time and 2,576 part-time employees, for a
full-time equivalent of 11,893 employees.
A large majority of the employees of the major airlines in the
United States are represented by labor unions. In addition, on
August 18, 2004, the National Mediation Board certified the
IBT as the collective bargaining representative for the
Company's passenger service employees, which includes the
Company's customer service agents, reservations agents and
customer relations agents. Negotiations are expected to begin in
April 2005. As illustrated in the table below, the majority of
employees have selected union representation and/or negotiated
collective bargaining agreements with AWA. Although there are
few remaining employee
8
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groups who could engage in organization efforts, we cannot
predict the outcome of any future efforts to organize those
remaining employees or the terms of any future labor agreements
or the effect, if any, on the Company's or AWA's
operations or financial performance. For more discussion, see
"Risk Factors Relating to the Company and Industry
Related Risks — Negotiations with labor unions could
divert management attention and disrupt operations and new
collective bargaining agreements or amendments to existing
collective bargaining agreements could increase our labor costs
and operating expenses."
Approx. No.
Contract
Contract
Employee Group
of Employees
Union
Effective
Amendable
Pilots
1,857
Air Line Pilots Association
December 2003
December 2006
Dispatchers
38
Transport Workers Union
September 2004
April 2008(1)
Mechanics and related personnel*
844
International Brotherhood of Teamsters
October 1998
October 2003*(2)
Flight Attendants*
2,580
Association of Flight Attendants —
Communications Workers of America
May 1999
May 2004*(3)
Fleet Service
2,221
Transport Workers Union
June 2000
June 2005
Stock Clerks
68
International Brotherhood of Teamsters
April 2003
April 2008
*
In contract negotiations.
(1)
On September 10, 2004, the Company's dispatchers,
    represented by the Transport Workers Union, voted to ratify a
    second contract, becoming amendable in April 2008.
(2)
Negotiations with the International Brotherhood of
    Teamsters — Airline Division or "IBT," on a
    second contract covering the Company's mechanics and
    related employees commenced on October 9, 2003 and are
    ongoing.
(3)
Negotiations with the Association of Flight
    Attendants — Communications Workers of America or
    "AFA," on a second contract covering the
    Company's flight attendants commenced on February 4,
    2004 and are ongoing.
The Company's Facilities
The Company's principal facilities include administrative
office space located in Tempe and Phoenix, Arizona; reservations
centers and other call centers located in Tempe, Arizona and
Reno, Nevada; and airport and airport related facilities
associated with the Airline's hubs in Phoenix and Las
Vegas. The following table describes the Company's
principal properties:
Approximate
Internal Floor
Principal Properties
Description
Area (sq. ft)
Nature of Ownership
Tempe, AZ Headquarters
Nine story complex housing headquarters for Holdings and AWA
225,000
Lease expires April 2014
Terminal 4, Phoenix Sky Harbor International Airport
42 gates, ticket counter space and administrative offices
330,000
Airport Use Agreement expires June 2016. Gate use governed by
    month-to-month rates and charges program
Las Vegas McCarran International Airport
17 gates, ticket counter space and concourse areas
115,000
Lease expires June 2007
Maintenance and technical support facility at Phoenix Sky Harbor
    International Airport
Four hangar bays, hangar shops, office space, warehouse and
    commissary facilities
375,000
Facilities and land leased from the City of Phoenix. Lease
    expires September 2019
Flight Training and Systems Operations Control Center, Phoenix,
    AZ
Complex accommodates training facilities, systems operation
    control and crew scheduling functions
164,000
Facilities and land leased from the City of Phoenix. Lease
    expires February 2031
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In addition, we have leased an aggregate of approximately
260,000 square feet of office and warehouse space in Tempe
and Phoenix. Space for ticket counters, gates and back offices
has been obtained at each of the other airports operated by AWA,
either by lease from the airport operator or by sublease from
another airline. Space and facilities at certain airports where
AWA's operation is managed by Mesa is provided by Mesa as
part of AWA's ground handling arrangement.
Government Regulations
The airline industry is highly regulated as more fully described
below.
DOT Oversight
AWA operates under a certificate of public convenience and
necessity issued by the Department of Transportation or
"DOT". Although the Airline Deregulation Act of 1978
abolished regulation of domestic routes and fares, the DOT
retains the authority to alter or amend AWA's certificate
or to revoke that certificate for intentional failure to comply
with the terms and conditions of the certificate. In addition,
the DOT has jurisdiction over international tariffs and pricing,
international routes, computer reservation systems, code share
agreements and economic and consumer protection matters such as
advertising, denied boarding compensation and smoking and has
the authority to impose civil penalties for violation of the
United States Transportation Code or DOT regulations.
FAA Funding
In 1997, new aviation taxes were imposed through
September 30, 2007 to provide funding for the Federal
Aviation Administration or "FAA". Effective
January 1, 2005, these taxes include a domestic excise tax
of 7.5%, a domestic segment tax of $3.20 and an international
departure and arrival tax of $14.10 (each way). The legislation
also included a 7.5% excise tax on certain amounts paid to an
air carrier for the right to provide mileage and similar awards
(e.g., purchase of frequent flyer miles by a credit card
company). As a result of competitive pressures, AWA and other
airlines have been limited in their ability to pass on the cost
of these taxes to passengers through fare increases.
Passenger Facility Charges
During 1990, Congress enacted legislation to permit airport
authorities, with prior approval from the DOT, to impose
passenger facility charges or "PFCs," as a means of
funding local airport projects. These charges, which are
intended to be collected by the airlines from their passengers,
are limited to $4.50 per enplanement and no more than
$18.00 per round trip. As a result of competitive pressure,
AWA and other airlines have been limited in their ability to
pass on the cost of the PFCs to passengers through fare
increases.
Additional Security and Safety Measures
On November 19, 2001, the President signed into law the
Aviation and Transportation Security Act or "ATSA."
This law enhances aviation security measures and federalizes
many aspects of civil aviation security. The ATSA established a
new Transportation Security Administration, now within the
Department of Homeland Security. Under the ATSA, substantially
all security screeners at airports are federal employees and a
significant number of other airport security functions are
overseen and performed by federal employees, including federal
security managers, federal law enforcement officers and federal
air marshals. The ATSA mandated that beginning on
January 18, 2002, all checked baggage at United States
airports be screened using explosive detection systems or, where
such systems are not yet available, using other screening
techniques such as positively matching baggage to a passenger
who has boarded an aircraft. The ATSA required all checked
baggage to be screened by explosive detection systems by
December 31, 2003. Other requirements in the ATSA that
directly affect airline operations include the strengthening of
cockpit doors, deploying federal air marshals on board certain
flights, improving airline crew security training and expanding
use of criminal background checks of employees. Implementation
of these and other requirements of the ATSA resulted in
increased costs for air carriers and may result in delays and
disruptions to air travel. Under
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the ATSA, funding for the new federal security system is
provided by a $2.50 per enplanement ticket tax, not to
exceed $5.00 per one-way trip, and by imposing additional
direct fees on air carriers. In 2004 and 2003, the
Company's cost of compliance with the security requirements
of the ATSA was approximately $14.4 million and
$13.2 million, respectively. The estimated cost to the
Company of compliance with the security requirements of the ATSA
for 2005 is approximately $17.0 million under current law.
Under the proposed White House budget released February 7,
2005, this ticket tax for security fees would increase from
$2.50 per leg to $5.50, with a cap of $8.00 per
one-way trip with multiple legs and $16.00 for a round trip.
This budget proposal is subject to approval of Congress. As a
result of competitive pressure, AWA and other airlines may be
unable to recover all of these additional security costs from
passengers through increased fares. In addition, we cannot
forecast what new security and safety requirements may be
imposed in the future or the costs or financial impact of
complying with any such requirements.
The Company is subject to various other federal, state and local
laws and regulations related to occupational health and safety,
including Occupational Health and Safety Administration and Food
and Drug Administration regulations.
War Risk Insurance
Since September 11, 2001, AWA and other airlines have been
unable to obtain third party war risk (terrorism) insurance
at reasonable rates from the commercial insurance market and
have been obtaining this insurance through a special program
administered by the FAA. Under the recently enacted Vision
100-Century of Aviation Reauthorization Act or "Vision
100," the President may continue the insurance program
until March 30, 2008. Currently the program has been
extended through August 31, 2005. Should the federal
insurance program terminate, competitive pressures could limit
AWA and other airlines' ability to pass these additional
costs on to passengers and the increase in costs could be
material to AWA's financial condition and results of
operations.
Slot Restrictions
At New York City's John F. Kennedy International Airport
and LaGuardia Airport, and at Washington D.C.'s Ronald
Reagan National Airport, which are designated "High Density
Airports" by the FAA, there are restrictions on the number
of aircraft that may land and take-off during peak hours. At the
New York airports, slot restrictions are abolished after
January 1, 2007. In addition, the FAA may impose
restrictions at any airport to manage excessive congestion and
air safety. In 2004, certain air carriers, at the request of the
FAA, voluntarily agreed to reduce flights at Chicago O'Hare
International Airport and other operators, including AWA, agreed
not to increase operations there during certain hours. In the
future takeoff and landing time restrictions and other
restrictions on the use of various airports and their facilities
may result in further curtailment of services by, and increased
operating costs for, individual airlines, including AWA,
particularly in light of the increase in the number of airlines
operating at such airports. In general, the FAA rules relating
to allocated slots at High Density Airports contain provisions
requiring the relinquishment of slots for non-use and permit
carriers, under certain circumstances, to sell, lease or trade
their slots to other carriers. All slots must be used on 80% of
the dates during each two-month reporting period. Failure to
satisfy the 80% use rate will result in loss of the slot and
reversion to the FAA for reassignment through a lottery
arrangement.
AWA currently utilizes five slots at Kennedy Airport and eight
slots at National Airport during the restricted periods. AWA
exceeds the requisite 80% use rate for these slots.
Perimeter Rule at Washington D.C.'s Ronald Reagan
    National Airport
There is a federal prohibition on flights exceeding
1,250 miles operating to or from National Airport. This
"perimeter rule" generally prevents AWA from flying
nonstop to and from National Airport and its principal hubs of
Phoenix and Las Vegas. In 2000, Congress passed legislation that
authorized the DOT to grant exceptions to the 1,250-mile
perimeter rule for up to 12 slots per day. AWA was authorized
six of these slots to operate two daily Phoenix to National
Airport round trips and one daily Las Vegas to National
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Airport round trip. Vision 100, among other things, authorized
the DOT to grant 12 additional slots exempted from the perimeter
rule. AWA was authorized two additional slots to operate an
additional daily round trip between Phoenix and National Airport
which the Company began flying on June 1, 2004.
Noise Abatement and Other Restrictions
Numerous airports served by AWA, including those in Boston,
Burbank, Denver, Long Beach, Los Angeles, Minneapolis-St. Paul,
New York City, Orange County, San Diego,
San Francisco, San Jose and Washington, D.C.,
have imposed restrictions such as curfews, limits on aircraft
noise levels, mandatory flight paths, runway restrictions and
limits on the number of average daily departures, which limit
the ability of air carriers to provide service to, or increase
service at, such airports. AWA's Boeing 757-200s, Boeing
737-300s and Airbus A319s and A320s all comply with the current
noise abatement requirements of the airports listed above.
Aircraft Maintenance and Operations
AWA is subject to the jurisdiction of the FAA with respect to
aircraft maintenance and operations, including equipment,
dispatch, communications, training, flight personnel and other
matters affecting air safety. The FAA has the authority to issue
new or additional regulations and to impose civil penalties for
violations of the United States Transportation Code or FAA
regulations. To ensure compliance with its regulations, the FAA
conducts regular safety audits and requires AWA to obtain
operating, airworthiness and other certificates, which are
subject to suspension or revocation for cause. In addition, a
combination of FAA and Occupational Safety and Health
Administration or "OSHA," regulations on both federal
and state levels apply to all of AWA's ground-based
operations and to in-flight cabin attendants.
AWA also is subject to the jurisdiction of the Department of
Defense with respect to its voluntary participation in their
Commercial Passenger Airlift program administered by the Air
Force's Air Mobility Command.
Aging Aircraft Maintenance
The FAA issued several Airworthiness Directives or
"ADs," in 1990 mandating changes to older aircraft
maintenance programs. These ADs were issued to ensure that the
oldest portion of the nation's aircraft fleet remains
airworthy and to require structural modifications to, or
inspections of, those aircraft. All of AWA's currently
affected aircraft are in compliance with the aging aircraft
mandates. AWA constantly monitors its fleet of aircraft to
ensure safety levels that meet or exceed those mandated by the
FAA and the DOT. The FAA may in the future issue additional ADs
requiring additional maintenance or modifications to various
aircraft types operated by AWA.
Environmental Matters
The Company is subject to regulation under major environmental
laws administered by federal, state and local agencies,
including laws governing air, water and waste management and
disposal activities. While the Company strives to comply with
environmental laws and regulations, it has incurred and will
continue to incur costs to comply with applicable environmental
laws, including soil and groundwater cleanup and other related
response costs. We believe, however, that under current
environmental laws and regulations these costs will not have a
material adverse effect on the Company's financial
condition or results of operations.
The Comprehensive Environmental Response Compensation and
Liability Act of 1980, also known as Superfund, and comparable
state laws impose liability without regard to fault on certain
classes of persons that may have contributed to the release or
threatened release of a "hazardous substance" into the
environment. These persons include the owner or operator of a
facility and persons that disposed or arranged for the disposal
of hazardous substances. Many airports in the United States,
including Phoenix Sky Harbor International Airport, are the
subject of Superfund investigations or state implemented
groundwater investigations. AWA occupies facilities at some of
these affected airports and is a member of a fuel-handling
consortium that has experienced a fuel leak into ground water at
Phoenix Sky Harbor International Airport.
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AWA does not believe that its operations have been included
within the scope of any of these investigations and does not
believe that its expenses associated with the fuel leak at
Phoenix Sky Harbor International Airport will be material.
The trend in environmental regulation is to increasingly place
more restrictions and limitations on activities that may affect
the environment and we expect that the costs of compliance will
continue to increase.
Other
We are also subject to the jurisdiction of the Federal
Communications Commission with respect to the use of radio
facilities and the United States Postal Service with respect to
carriage of United States mail.
Risk Factors Relating to the Company and Industry Related
Risks
We caution the reader that these risk factors may not be
exhaustive. We operate in a continually changing business
environment and new risk factors emerge from time to time.
Management cannot predict such new risk factors, nor can it
assess the impact, if any, of such new risk factors on our
business or the extent to which any factor or combination of
factors may impact our business.
We have sustained, and may continue to sustain significant
    operating losses.
For the year ended December 31, 2004, we incurred an
operating loss of $43.8 million. In addition, we incurred
operating losses for the years ended December 31, 2001 and
2002 resulting primarily from the decrease in revenue and
passenger demand and the increase in operating costs after the
terrorist attacks of September 11, 2001. Recently, the
operating losses resulted primarily from a substantial increase
in the cost of jet fuel and excess domestic industry capacity
resulting in lower revenue per available seat mile. We expect
the threat of further terrorist attacks and continued
instability in oil producing regions to continue to negatively
impact our revenues and costs in the near-term. We may not be
able to effectively counteract increasing costs through our cost
reduction initiatives, customer service initiatives and revised
pricing structures. Moreover, our liquidity and borrowing
options are limited and we may not be able to survive a
prolonged economic downturn, decreases in demand for air travel
or further increases in jet fuel costs. The inability to sustain
profitability may impair our ability to satisfy our obligations
as they become due, obtain future equity or debt financing,
respond to competitive developments and otherwise sustain or
expand our business.
Global instability, caused by events such as terrorism,
    has had and may in the future have a material impact on the
    airline industry and, as a result, our financial condition,
    operations and prospects.
Over the past several years, global instability, caused by
military action, terrorism, disease outbreaks and natural
disasters, has had a profound impact on the airline industry.
The terrorist attacks of September 11, 2001 resulted in a
severe strain on our and the other airlines' liquidity as
the government temporarily suspended all flights, passenger
demand dropped precipitously and financial institutions tried to
reduce their exposure by restricting the industry's access
to capital. In addition, the terrorist attacks led to a decrease
in the value of aircraft and aircraft-related equipment and
facilities and cost increases for enhanced security measures,
aviation insurance, airport rents and landing fees. Subsequent
to the terrorist attacks, other events, such as military action
in Iraq and Afghanistan, general political and economic
instability in oil producing regions, and the Severe Acute
Respiratory Syndrome or "SARS," outbreak in Asia,
continued to adversely impact passenger demand and operating
costs, especially jet fuel costs. These kinds of events
(including natural disasters such as the recent tsunamis in the
Indian Ocean) are likely to continue to impact the airline
industry. Depending on the severity and geographical impact of
such events, they may have a substantial adverse impact on our
passenger demand, our costs, the value of our assets and our
access to, and cost of capital. We cannot predict whether we
will have sufficient liquidity or access to capital to withstand
the adverse impact of a prolonged decrease in passenger demand
or a substantial increase in costs caused by such global events.
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Increases in insurance costs or reductions in insurance
    coverage may adversely impact our operations and financial
    results.
The terrorist attacks of September 11, 2001 led to a
significant increase in insurance premiums and a decrease in the
insurance coverage available to commercial airline carriers.
Accordingly, our insurance costs increased significantly and our
ability to continue to obtain insurance even at current prices
remains uncertain. In addition, AWA and other airlines have been
unable to obtain third party war risk (terrorism) insurance
at reasonable rates from the commercial insurance market and
have been obtaining this insurance through a special program
administered by the FAA. If the Federal insurance program
terminates, we would likely face a material increase in the cost
of war risk insurance. Because of competitive pressures in our
industry, our ability to pass additional insurance costs to
passengers is limited. As a result, further increases in
insurance costs or reductions in available insurance coverage
could harm our earnings.
Our high level of fixed obligations limits our ability to
    fund general corporate requirements and obtain additional
    financing, limits our flexibility in responding to competitive
    developments and increases our vulnerability to adverse economic
    and industry conditions.
We have a significant amount of fixed obligations, including
debt, aircraft leases and financings, aircraft purchase
commitments, leases of airport and other facilities and other
cash obligations. As of December 31, 2004, we had
approximately $786.3 million of outstanding debt, of which
$186.0 million was secured. In addition, we had
$8.5 million of payments to satisfy capital lease
obligations and $3.2 billion of operating lease obligations
through lease expiration dates incurred primarily in connection
with off-balance sheet aircraft financings. We also have
guaranteed costs associated with our regional alliance with Mesa
and commitments to purchase aircraft from Airbus. As a result of
the substantial fixed costs associated with these obligations:
•
A decrease in revenues results in a disproportionately greater
    percentage decrease in earnings.
•
We may not have sufficient liquidity to fund all of these fixed
    costs if our revenues decline or costs increase.
•
We may have to use our working capital to fund these fixed costs
    instead of funding general corporate requirements, including
    capital expenditures.
•
We may not have sufficient liquidity to respond to competitive
    developments and adverse economic conditions.
Our obligations also impair our ability to obtain additional
financing, if needed, and our flexibility in the conduct of our
business. Our existing indebtedness is secured by substantially
all of our assets, leaving us with limited collateral for
additional financing. Moreover, the terms of the government
guaranteed loan restrict our ability to incur additional
indebtedness or issue equity unless we use the proceeds of those
transactions to repay the loan, require prepayment if our
employee compensation costs exceed a certain threshold, require
us to maintain a minimum cash balance of $100 million, and
restrict our ability to take certain other actions, including
mergers and acquisitions, investments and asset sales.
Our ability to pay the fixed costs associated with our
contractual obligations depends on our operating performance and
cash flow, which in turn depend on general economic and
political conditions. A failure to pay our fixed costs or breach
of the contractual obligations could result in a variety of
adverse consequences, including the acceleration of our
indebtedness, the withholding of credit card proceeds by the
credit card servicers and the exercise of remedies by our
creditors and lessors. In such a situation, it is unlikely that
we would be able to fulfill our obligations under or repay the
accelerated indebtedness, make required lease payments or
otherwise cover our fixed costs.
Fluctuations in jet fuel costs could adversely affect our
    operating expenses and results.
The price and supply of jet fuel are unpredictable and fluctuate
based on events outside our control, including geopolitical
developments, supply interruptions, regional production patterns
and environmental
14
Table of Contents
concerns. Since jet fuel is the principal raw material consumed
by our business, accounting for 23% of our total operating
expenses in 2004, price escalations or reductions in the supply
of jet fuel will increase our operating expenses and cause our
operating results and net income to decline. For example, based
on our current level of fuel consumption which includes our Mesa
alliance, we estimate that a one-cent per gallon increase in jet
fuel prices will cause our annual operating expense to increase
by $5.7 million.
We have implemented a fuel-hedging program to manage the risk
and effect of fluctuating jet fuel prices on our business. Our
hedging program is intended to offset increases in jet fuel
costs by using derivative instruments keyed to the future price
of heating oil, which is highly correlated to the price of jet
fuel delivered on the East Coast of the United States. Our
hedging program does not fully protect us against increasing jet
fuel costs because our hedging program does not cover all of our
projected jet fuel volumes for 2005. Hedging transactions are in
place with respect to approximately 45% and 2% of remaining
projected 2005 and 2006 jet fuel requirements, respectively.
Furthermore, our ability to effectively hedge jet fuel prices is
limited because we purchase a substantially larger portion of
our jet fuel requirements on the West Coast of the United States
compared to our large competitors and West Coast fuel prices are
less correlated to heating oil prices and other viable petroleum
derivatives than East Coast fuel prices and, therefore, more
difficult to hedge. The effectiveness of our fuel-hedging
program may also be negatively impacted by continued instability
in oil producing regions such as the Middle East, Nigeria,
Russia and Venezuela.
Because of our relatively low credit ratings, our
    borrowing costs may be high and our ability to incur additional
    debt may be impaired.
Our credit ratings are relatively low, with Moody's
assessment of AWA's senior implied rating and senior
unsecured debt rating at B3 and Caa2, respectively,
Standard & Poor's assessment of AWA's and
Holdings' corporate credit ratings at B- and AWA's
senior unsecured rating at CCC, and Fitch Ratings'
assessment of AWA's long-term and senior unsecured debt
rating at CCC. In addition, Standard & Poor's
recently placed AWA's aircraft debt on CreditWatch with
negative implications as part of a broader review of
aircraft-backed debt. Low credit ratings could cause our future
borrowing costs to increase, which would increase our interest
expense and could affect our earnings and our credit ratings
could adversely affect our ability to obtain additional
financing. The rating agencies base their ratings on our
financial performance and operations, our cash flow and
liquidity, the level of our indebtedness and industry conditions
in general. If our financial performance or industry conditions
do not improve, we may face future downgrades, which could
further negatively impact our borrowing costs and the prices of
our equity or debt securities. In addition, any downgrade of our
credit ratings may indicate a decline in our business and in our
ability to satisfy our obligations under our indebtedness.
Negotiations with labor unions could divert management
    attention and disrupt operations and new collective bargaining
    agreements or amendments to existing collective bargaining
    agreements could increase our labor costs and operating
    expenses.
Some of our employees are represented by unions and other groups
of our employees may seek union representation in the future.
Negotiations with the IBT for a second collective bargaining
agreement covering the Airline's mechanics and related
employees commenced on October 9, 2003 and are ongoing.
Additionally, negotiations with the AFA on a second contract
covering the Company's flight attendants commenced on
February 4, 2004 and are ongoing. On August 18, 2004,
the National Mediation Board certified the IBT as the collective
bargaining representative for the Company's passenger
service employees and reservations agents. Negotiations are
expected to begin April 2005.
We cannot predict the outcome of the negotiations with the IBT
or AFA or any future negotiations relating to union
representation or collective bargaining agreements. Agreements
reached in collective bargaining may increase operating expenses
and lower operating results and net income. This is particularly
significant because our current employee costs contribute
substantially to the low cost structure that we believe is one
of our competitive strengths and because we are required to
repay a portion of the government guaranteed loan if our labor
costs exceed a certain threshold. In addition, negotiations with
unions could divert management attention and disrupt operations,
which may result in increased operating expenses and
15
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lower net income. If we are unable to negotiate acceptable
collective bargaining agreements, we might have to address the
threat of, or wait through, "cooling off" periods,
which could be followed by union-initiated work actions,
including strikes. Depending on the nature of the threat or the
type and duration of any work action, these actions could
disrupt our operations and, as a result, have a significant
adverse affect on our operating results.
Fluctuations in interest rates could adversely affect our
    liquidity, operating expenses and results.
A substantial portion of our indebtedness bears interest at
fluctuating interest rates based on the London interbank offered
rate for deposits of U.S. dollars, or LIBOR. LIBOR tends to
fluctuate based on general economic conditions, general interest
rates, including the prime rate, and the supply of and demand
for credit in the London interbank market. We have not hedged
our interest rate exposure and, accordingly, our interest
expense for any particular period may fluctuate based on LIBOR.
To the extent LIBOR increases, our interest expense will
increase, in which event, we may have difficulties making
interest payments and funding our other fixed costs and our
available cash flow for general corporate requirements may be
adversely affected.
Our operating costs could increase as a result of past,
    current or new regulations that impose additional requirements
    and restrictions on airline operations.
The airline industry is heavily regulated. Both federal and
state governments from time to time propose new laws and
regulations that impose additional requirements and restrictions
on airline operations. Implementing these measures, such as
aviation ticket taxes and passenger safety measures, has
increased operating costs for us and the airline industry as a
whole. In addition, new security measures imposed by the ATSA,
or otherwise by Congress, the Department of Homeland Security or
the FAA as a result of concern over continuing terrorist threats
are expected to continue to increase costs for us and the
airline industry as a whole. Furthermore, certain governmental
agencies, such as the DOT and the FAA, have the authority to
impose mandatory orders, such as Airworthiness Directives in
connection with our aircraft and civil penalties for violations
of applicable laws and regulations, each of which can result in
material costs and adverse publicity. For example, the FAA from
time to time may require us to retrofit our aircraft to meet
enhanced safety standards. Depending on the implementation of
these laws, regulations and other measures, our operating costs
could increase significantly. We cannot predict which laws,
regulations and other measures will be adopted or what other
action regulators might take. Accordingly, we cannot guarantee
that future legislative and regulatory acts will not have a
material impact on our operating results.
Interruptions or disruptions in service at one our hub
    airports could have a material adverse impact on our
    operations.
We operate primarily through our hubs in Phoenix and Las Vegas.
A majority of our flights either originate or fly into one of
these hubs. A significant interruption or disruption in service
at one of our hubs could result in the cancellation or delay of
a significant portion of our flights and, as a result, could
have a severe impact on our business, operations and financial
performance.
The airline industry and the markets we serve are highly
    competitive and we may be unable to compete effectively against
    carriers with substantially greater resources or lower cost
    structures.
The airline industry and most of the markets we serve are highly
competitive. We compete with other airlines on the basis of
pricing, scheduling (frequency and flight times), on-time
performance, type of equipment, cabin configuration, amenities
provided to passengers, frequent flyer programs, the automation
of travel agent reservation systems, on-board products and other
services. We compete with other low cost carriers primarily on
the basis of pricing. Price competition occurs on a
market-by-market basis through price discounts, changes in
pricing structures, fare matching, target promotions and
frequent flyer initiatives. Most airlines will quickly match
price reductions in a particular market and certain airlines
have in the past engaged in retaliatory activities, including
steep pricing discounts in certain markets and termination of
alliance agreements, in response to changes in our pricing
structure. Our ability to compete on the basis of price is
limited by our fixed costs and depends on our ability to
maintain low operating costs. Our principal competitor,
Southwest Airlines, and certain other low cost carriers have
lower operating cost structures than we do. We also compete
against the legacy carriers, many of which offer more extensive
routes, frequencies
16
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and customer loyalty, marketing and advertising programs and
have substantially greater resources than we do. We may be
unable to compete effectively against carriers with
substantially greater resources or lower cost structures.
Recent airline restructurings and bankruptcies could alter
    the competitive environment of the airline industry to our
    detriment.
The terrorist attacks of September 11, 2001, the continued
military presence in Iraq and Afghanistan, increased competition
from low cost carriers and soft economic conditions have led to
the airline industry's significant losses since 2001.
Largely as a result of these losses, ATA Airlines,
U.S. Airways, Aloha Airlines, Hawaiian Airlines and United
Airlines filed for bankruptcy protection. Because bankruptcy
protection may allow for greater flexibility in reducing costs
by voiding contracts and renegotiating existing business
obligations, current and future airline bankruptcies could have
a substantial impact on industry competition. Continued weakness
in the airline industry also may result in additional industry
consolidation, greater reliance on industry alliances and
increased price competition among the existing airlines, each of
which could dramatically alter competitive environments in the
markets we serve.
Our business is sensitive to general economic conditions,
    unforeseen events and seasonal fluctuations. As a result, our
    prior performance is not necessarily indicative of our future
    results.
The air travel business historically fluctuates on a seasonal
basis and in response to general economic conditions. Due to the
greater demand for air and leisure travel during the summer
months, revenues in the airline industry in the second and third
quarters of the year tend to be greater than revenues in the
first and fourth quarters of the year. In addition, the airline
industry is highly susceptible to unforeseen events that result
in declines in revenues or increased costs, such as political
instability, regional hostilities, terrorist attacks, recession,
fuel price escalation, inflation, infectious disease outbreaks,
adverse weather conditions, consumer preferences, labor
instability or regulatory oversight. Also, our results of
operations for interim periods are not necessarily indicative of
those for an entire year and our prior results are not
necessarily indicative of our future results.
We depend on the expertise of our management team. If key
    individuals leave unexpectedly, our business and operations
    could suffer.
Many of our executive officers are key to the management of our
business and operations. Our future success depends on our
ability to retain these officers and other capable managers.
Although we believe we could replace key personnel given
adequate prior notice, the unexpected departure of key executive
officers could cause substantial disruption to our business and
operations. In addition, we may not be able to retain and
recruit talented personnel without incurring substantial costs.
Moreover, we must repay a portion of the government guaranteed
loan if our labor costs exceed a certain threshold. As a result,
our ability to spend additional amounts to retain and recruit
talented personnel is limited.
The stockholders who effectively control the voting power
    of Holdings could take actions that would favor their own
    personal interests to the detriment of our interests.
Currently, two stockholders collectively control more than 50%
of the total voting power of Holdings. These stockholders, TPG
Partners, L.P. and TPG Parallel I, L.P., or collectively,
the TPG Stockholders, are controlled by the same company, TPG
Advisors, Inc. Since TPG Advisors, Inc. is an investment firm,
its strategic objectives may be different than both the
short-term or long-term objectives of our board of directors and
management. We cannot guarantee that the TPG Stockholders will
not try to influence Holdings' business in a way that would
favor their own personal interests to the detriment of our
interests and those of our other stockholders.
We are at risk of losses and adverse publicity stemming
    from any accident involving any of our aircraft.
If one of our aircraft were to crash or be involved in an
accident, we could be exposed to significant tort liability.
There can be no assurance that the insurance we carry to cover
damages arising from any future
17
Table of Contents
accidents will be adequate. In the event that our insurance is
not adequate, we may be forced to bear substantial losses from
an accident. Claims resulting from an accident in excess of our
insurance coverage would harm our business and results of
operations. Accidents could also result in unforeseen mechanical
and maintenance costs. In addition, any accident involving an
aircraft that we operate could create a public perception that
our aircraft are not safe or reliable, which could harm our
reputation, result in air travelers being reluctant to fly on
our aircraft and harm our business.
Our operations are often affected by factors beyond our
    control, including traffic congestion at airports, weather
    conditions and increased security measures, any of which could
    harm our financial condition and results of operations.
Like other airlines, our operations are subject to delays caused
by factors beyond our control, including air traffic congestion
at airports, adverse weather conditions and increased security
measures, such as those required to be implemented under the
ATSA. During periods of fog, snow, rain, storms or other adverse
weather conditions, flights may be cancelled or significantly
delayed. Cancellations and delays frustrate passengers, reduce
aircraft utilization and increase costs, all of which in turn
affect profitability. As a result, cancellations or delays could
harm our financial condition and results of operations.
We rely heavily on automated systems to operate our
    business and any failure of these systems could harm our
    business.
We depend on automated systems to operate our business,
including our computerized airline reservation system, our
telecommunication systems and our website. In 2004,
approximately 96% of our tickets were issued electronically. Our
website and reservation system must be able to accommodate a
high volume of traffic and deliver important flight information.
Substantial or repeated website, reservations system or
telecommunication systems failures could reduce the
attractiveness of our services and could cause our customers to
purchase tickets from another airline. Any disruption in these
systems could result in the loss of important data, increase our
expenses and generally harm our business.
Shares of our Class B common stock issuable upon
    exercise or conversion of outstanding securities could adversely
    affect our stock price and dilute the ownership interests of
    existing stockholders.
Sales and potential sales of substantial amounts of our
Class B common stock or securities exercisable for or into
our Class B common stock in the public market, or the
perception that these sales could occur, could adversely affect
the market price of our Class B common stock. A substantial
number of additional shares of our Class B common stock are
issuable upon the conversion or exercise of outstanding
securities. As of March 14, 2005, the outstanding shares of
our Class B common stock were subject to dilution by:
•
19,692,000 shares of Class B common stock that are
    issuable upon the exercise, at a price of $3.00 per share,
    of certain warrants issued in connection with the government
    guaranteed loan, including 18,754,000 shares of
    Class B common stock issuable upon exercise of a warrant
    issued to the Air Transportation Stabilization Board, or
    ATSB; and
•
9,615,245 shares of our Class B common stock that are
    issuable upon the exercise of outstanding options.
In addition, 859,117 shares of Class B common stock
are issuable upon conversion of the outstanding shares of
Holdings' Class A common stock held by the TPG
Stockholders (but subject to certain contractual restrictions on
transfer), up to 8,095,842 shares of Holdings'
Class B common stock are issuable upon the exchange of
AWA's 7.25% senior exchangeable notes due 2023 (which
exchange may not occur until the trading price of Holdings'
Class B common stock reaches certain thresholds, or other
triggering events occur) and up to approximately
9,400,000 shares of Holdings' Class B common
stock are issuable upon conversion of Holdings'
7.5% convertible senior notes due 2009. Holdings has
registered either the issuance or resale of all of these shares,
meaning that upon exercise, exchange or conversion, as
applicable, such shares could be sold in the public market at
any time.
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Table of Contents
The conversion or exercise of some or all of these notes,
warrants and options will dilute the ownership interests of
existing stockholders and any sales in the public market of our
Class B common stock issuable upon such conversion or
exercise could adversely affect prevailing market prices of our
Class B common stock. In addition, the existence of the
notes, warrants and options may encourage short selling by
market participants because conversion or exercise of the notes
or warrants could depress the price of our Class B common
stock.
Provisions in our charter documents might deter
    acquisition bids for us.
Holdings' Certificate of Incorporation and Bylaws contain
provisions that, among other things:
•
authorize Holdings' board of directors to issue preferred
    stock ranking senior to our Class B common stock without
    any action on the part of the stockholders;
•
establish advance notice procedures for stockholder proposals,
    including nominations of directors, to be considered at
    stockholders' meetings;
•
authorize Holdings' board of directors to fill vacancies on
    the board resulting from an increase in the authorized number of
    directors or any other cause; and
•
restrict the ability of stockholders to call special meetings of
    stockholders.
These provisions might make it more difficult for a third party
to acquire us, even if doing so would benefit the stockholders.
Our stock price may continue to be volatile and could
    decline substantially.
The stock market has, from time to time, experienced extreme
price and volume fluctuations. Many factors may cause the market
price for the Class B common stock to decline including,
among others, the following:
•
our operating results failing to meet the expectations of
    securities analysts or investors in any quarter;
•
downward revisions in securities analysts' estimates;
•
material announcements by us or our competitors;
•
public sales of a substantial number of shares of our
    Class B common stock;
•
governmental regulatory action; and
•
adverse changes in general market conditions or economic trends.
Item 2.
Properties
For a description of the Company's properties, see
Item 1 of Part I of this Annual Report on
Form 10-K.
Item 3.
Legal Proceedings
Holdings, AWA and certain of Holdings' stockholders,
executive officers and directors have been named as defendants
in lawsuits filed in March and April of 1999 and subsequently
consolidated in the Federal District Court of Arizona, alleging
violations of the Exchange Act in connection with Holdings'
public disclosures regarding its business and prospects during
1997 and 1998. The defendants deny the claims set forth in these
lawsuits. A settlement of the lawsuits was reached with the
plaintiffs in November 2004 for $15 million. A fairness
hearing was held on March 9, 2005 to allow class members to
object to the settlement. No objections were filed and the Court
entered a final judgment. The lawsuit was fully insured, but AWA
contributed $5.1 million to the settlement due to the
insolvency of one of its insurers.
In addition, Holdings and its subsidiaries are parties to
various legal proceedings, including some purporting to be class
action suits and some that demand large monetary damages or
other relief, which, if
19
Table of Contents
granted, would require significant expenditures. See
Note 6,
"Commitments and Contingencies —
(e) Contingent Legal Obligations,"
in
Holdings' Notes to Consolidated Financial Statements and
Note 7,
"Commitments and Contingencies —
(e) Contingent Legal Obligations,"
in AWA's
Notes to Consolidated Financial Statements.
Item 4.
Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
Set forth below is information with respect to the names, ages,
positions and offices with Holdings and AWA of the executive
officers of Holdings and AWA as of March 14, 2005.
W. Douglas Parker, Age 43.
Chairman of the
Board, President and Chief Executive Officer of Holdings and
AWA. Mr. Parker joined the Company as Senior Vice President
and Chief Financial Officer in June 1995. He was elected
Executive Vice President of the Company and Executive Vice
President — Corporate Group of AWA in April 1999. He
was elected President of AWA in May 2000 and Chief Operating
Officer of AWA in December 2000. He was elected to his current
positions in September 2001.
J. Scott Kirby, Age 37.
Executive Vice
President — Sales and Marketing of AWA. Mr. Kirby
joined AWA as Senior Director — Schedules and Planning
in October 1995. In October 1997, Mr. Kirby was elected to
the position of Vice President — Planning and in May
1998, he was elected to the position of Vice
President — Revenue Management. In January 2000, he
was elected to the positions of Senior Vice
President — E-Business and Technology of AWA. He was
elected to his current position in September 2001.
Jeffrey D. McClelland, Age 45.
Executive Vice
President and Chief Operating Officer of AWA.
Mr. McClelland joined AWA as Senior Vice
President — Operations in September 1999. He was
elected Executive Vice President — Operations in
September 2001 and was elected Chief Operating Officer in
November 2002. From 1991 until 1999, Mr. McClelland worked
at Northwest Airlines, most recently as Senior Vice
President — Finance and Controller.
Joseph C. Beery, Age 42.
Senior Vice President and
Chief Information Officer of AWA. Mr. Beery joined AWA in
1999 as Senior Director — Business Technology
Delivery. In July 2000, Mr. Beery was elected to the
position of Vice President — Business Technology
Delivery. He was elected to his current position in December
2002. From 1989 until he joined AWA, Mr. Beery held a
variety of positions in the computer integrated manufacturing
group of Motorola Semiconductor.
Hal M. Heule, Age 56.
Senior Vice
President — Technical Operations of AWA.
Mr. Heule joined AWA in January 2001. From 1994 until the
time he joined AWA, Mr. Heule served as Executive Vice
President for Strand Associates, Inc., an aviation consulting
firm.
C.A. Howlett, Age 61.
Senior Vice
President — Public Affairs of AWA and Holdings.
Mr. Howlett joined AWA as Vice President — Public
Affairs in January 1995. On January 1, 1997, he was elected
Vice President — Public Affairs of Holdings. He was
elected to his current positions in February 1999.
Derek J. Kerr, Age 40.
Senior Vice President and
Chief Financial Officer of AWA and Holdings. Mr. Kerr
joined AWA as Senior Director — Financial Planning in
April 1996. He was elected to the position of Vice
President — Financial Planning and Analysis in May
1998. In February 2002, Mr. Kerr was elected Senior Vice
President — Financial Planning and Analysis. He was
elected to his current positions in September 2002.
Anthony V. Mulé, Age 61.
Senior Vice
President — Customer Service of AWA.
Mr. Mulé joined AWA as Vice President —
In-Flight Services in 1996. He was elected to his current
position in October 2000. Prior to joining AWA,
Mr. Mulé held senior management positions at American
Airlines, Pan American Airways and SuperShuttle, International.
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Table of Contents
James E. Walsh III, Age 57.
Senior Vice
President and General Counsel of AWA. Mr. Walsh joined AWA
as Senior Vice President and General Counsel in August 2004.
Prior to joining AWA, Mr. Walsh was Senior Vice
President & General Counsel of Fairchild Dornier
Corporation. Prior to joining Fairchild in 1991, Mr. Walsh
spent 12 years at American Airlines in various positions
including Vice President of Purchasing & Inventory
Control and later Vice President of Law.
Michael R. Carreon, Age 51.
Vice President and
Controller of AWA. Mr. Carreon joined AWA as Senior
Director — Corporate Audit in December 1994. He was
elected to his current position in January 1996.
Elise R. Eberwein, Age 39.
Vice
President — Corporate Communications of AWA.
Ms. Eberwein joined AWA in September 2003. Prior to joining
AWA, Ms. Eberwein held various communication positions for
three other airlines, including Denver-based Frontier Airlines
where she served as Vice President, Communications from 2000
until she joined AWA.
Kara L. Gin, Age 34.
Vice President —
Financial Planning and Analysis of AWA. Mrs. Gin joined AWA
as a Senior Analyst in Financial Planning & Analysis in
June 1996. Prior positions held at AWA include Manager of
Financial Planning, Manager of Flight Profitability, Director of
Financial Planning and Senior Director of Distribution. She was
elected to her current position in May 2004.
Thomas T. Weir, Age 49.
Vice President and Treasurer
of AWA. Mr. Weir joined AWA in February 2000. From 1988
until 2000, Mr. Weir held various sales finance positions
at Airbus Industrie of North America, Inc., most recently as
Sales Finance Director.
PART II
Item 5.
Market for Registrants' Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity Securities
Holdings' Class A common stock, par value
$0.01 per share, is not publicly traded. Holdings'
Class B common stock, par value $0.01 per share, has
been traded on the New York Stock Exchange under the symbol
"AWA" since August 26, 1994.
The following table sets forth, for the periods indicated, the
high and low sales prices of the Class B common stock as
reported on the New York Stock Exchange.
Class B
Common Stock
High
Low
Year Ended December 31, 2004
First Quarter
$
13.6200
$
7.9200
Second Quarter
11.2400
8.8400
Third Quarter
9.1400
4.9300
Fourth Quarter
6.8600
3.9100
Year Ended December 31, 2003
First Quarter
$
2.3300
$
1.6700
Second Quarter
6.9800
1.9600
Third Quarter
11.0200
6.6300
Fourth Quarter
16.0000
9.5500
As of December 31, 2004, there were two record holders of
Class A common stock and approximately 2,949 record holders
of Class B common stock.
Holdings has not paid cash dividends in any of the last three
fiscal years and does not anticipate paying cash dividends in
the foreseeable future. The terms of the government guaranteed
loan restrict the Company's ability to pay cash dividends
or repurchases shares of its stock prior to repayment of the
loan in full.
21
Table of Contents
The following table set forth all purchases made by us or any
"affiliated purchases" (as defined in
Rule 10b-18(a)(3) of the Exchange Act), of Class B
common stock during each month within the fourth quarter of
2004. No purchases were made pursuant to a publicly announced
repurchase plan or program.
(d)
Maximum Number
(c)
(or Approximate
Total Number of
Dollar Value) of
Shares Purchased
Shares that May
(a)
(b)
as Part of Publicly
Yet be Purchased
Total Number of
Average Price
Announced Plans
Under the Plans
Period
Shares Purchased(1)
Paid per Share
or Programs
or Programs
October 1, 2004 — October 31, 2004
120,700
4.82
—
—
November 1, 2004 — November 30, 2004
51,400
4.91
—
—
December 1, 2004 — December 31, 2004
8,000
5.16
—
—
(1)
Amounts consist of shares of Class B common stock purchased
    on the open market by the America West Holdings Corporation
    Future Care 401(k) Plan.
AWA has 1,000 shares of common stock outstanding, all of
which are owned by Holdings. There is no established public
trading market for AWA's common stock. Except for limited
ability to fund operating expenses of Holdings, AWA's
ability to pay cash dividends on its common stock is restricted
by the debt instruments and in the manner described above.
22
Table of Contents
Item 6.
Selected Consolidated Financial Data
Selected Consolidated Financial Data of Holdings
The selected consolidated financial data presented below under
the captions
"Consolidated Statements of Operations
Data"
and
"Consolidated Balance Sheet
Data"
as of and for the years ended December 31,
2004, 2003, 2002, 2001 and 2000 are derived from the audited
consolidated financial statements of Holdings. The selected
consolidated financial data should be read in conjunction with
the consolidated financial statements for the respective
periods, the related notes and the related reports of the
Company's independent registered public accounting firms.
Year Ended December 31,
2004
2003
2002
2001
2000
(in thousands except per share amounts)
Consolidated statements of operations data:
Operating revenues
$
2,338,957
$
2,254,497
$
2,047,116
$
2,065,913
$
2,344,354
Operating expenses(b)
2,382,728
2,232,362
2,206,540
2,476,594
2,356,991
Operating income (loss)
(43,771
)
22,135
(159,424
)
(410,681
)
(12,637
)
Income (loss) before income taxes (benefit) and cumulative
    effect of change in accounting principle(c)
(88,993
)
57,534
(214,757
)
(324,387
)
24,743
Income taxes (benefit)
30
114
(35,071
)
(74,536
)
17,064
Income (loss) before cumulative effect of change in accounting
    principle
(89,023
)
57,420
(179,686
)
(249,851
)
7,679
Net income (loss)
(89,023
)
57,420
(387,909
)
(249,851
)
7,679
Earnings (loss) per share before cumulative effect of change in
    accounting principle:
Basic
(2.47
)
1.66
(5.33
)
(7.42
)
0.22
Diluted
(2.47
)
1.26
(5.33
)
(7.42
)
0.22
Net income (loss) per share:
Basic
(2.47
)
1.66
(11.50
)
(7.42
)
0.22
Diluted(d)
(2.47
)
1.26
(11.50
)
(7.42
)
0.22
Shares used for computation:
Basic
36,026
34,551
33,723
33,670
35,139
Diluted(d)
36,026
56,113
33,723
33,670
35,688
Consolidated balance sheet data (at end of period):
Total assets(a)
$
1,475,264
$
1,614,385
$
1,438,953
$
1,469,218
$
1,568,515
Long-term debt, less current maturities
635,129
688,965
700,983
224,551
145,578
Total stockholders' equity(a)
36,447
125,989
68,178
420,363
667,073
(a)
The Company has restated its consolidated balance sheet and
    consolidated statement of stockholders' equity and
    comprehensive income as of and for the year ended
    December 31, 2003 to reflect the non-compliance with
    SFAS No. 133. See Note 2
, "Restatement of
    Previously Reported Amounts"
in Notes to Consolidated
    Financial Statements.
(b)
The 2004 results include a $16.3 million net credit
    associated with the termination of the rate per engine hour
    agreement with General Electric Engine Services for overhaul
    maintenance services on V2500-A1 engines, a $0.6 million
    credit related to the revision of the estimated costs associated
    with the sale and leaseback of certain aircraft recorded in the
    first quarter of 2002 and a $0.4 million credit related to
    the revision of estimated charges associated with the Columbus,
    Ohio hub ("CMH") closure originally recorded in the
    second quarter of 2003. These credits were partially offset by
    $1.9 million of net charges related to the return of
    certain Boeing 737-200 aircraft which includes termination
    payments of $2.1 million, the write-down of leasehold
    improvements and deferred rent of $2.8 million, offset by
    the net reversal of maintenance reserves of $3.0 million.
    The 2003 period includes $16.0 million of charges resulting
    from the elimination of AWA's hub operations in CMH
    ($11.1 million), the reduction-in-force of certain
    management, professional and administrative employees
    ($2.3 million), the impairment of certain owned Boeing
    737-200 aircraft that have been grounded ($2.6 million)
    offset by a $1.1 million reduction of charges due to a
    revision of the estimated costs related to the early termination
    of certain aircraft leases and a $0.5 million reduction
    related to the revision of estimated costs associated with the
    sale and leaseback of certain aircraft. The 2002 period includes
    $19.0 million of charges primarily related to the
23
Table of Contents
restructuring completed on January 18, 2002, resulting from
    the events of September 11, 2001. The 2001 period includes
    $141.6 million of special charges related to the impairment
    of reorganization value in excess of amounts allocable to
    identifiable assets ("ERV") and owned aircraft and
    engines, as well as the earlier-than-planned return of seven
    leased aircraft and severance expenses following a
    reduction-in-force in 2001. See Note 11,
"Special
    Charges"
in Holdings' Notes to Consolidated
    Financial Statements. The Company reclassified amounts related
    to settled fuel hedge transactions and mark-to-market
    adjustments on open hedge instruments from fuel expense to gain
    (loss) on derivative instruments, net. The amounts for the years
    ended December 31, 2004 and 2003 were an addition to fuel
    expense of $30.5 million and $10.7 million,
    respectively. For the years ended December 31, 2002 and
    2001, the amounts reduced fuel expense by $0.7 million and
    $7.2 million, respectively.
(c)
Nonoperating income (expense) in the 2004 period includes a
    $30.5 million net gain on derivative instruments, which
    included mark-to-market changes and settled transactions, and
    $1.3 million for the write-off of debt issue costs in
    connection with the refinancing of the term loan. The 2003
    period includes federal government assistance of
    $81.3 million recognized as nonoperating income under the
    Emergency Wartime Supplemental Appropriations Act and
    $8.5 million and $108.2 million recognized in 2002 and
    2001, respectively, as nonoperating income under the Air
    Transportation Safety and System Stabilization Act. The 2003,
    2002 and 2001 periods include a $10.7 million net gain,
    $0.7 million net loss and $7.2 million net loss on
    derivative instruments, respectively, including mark-to-market
    changes and settled transactions. See Note 12,
"Nonoperating Income (Expenses) — Other,
    Net"
in Holdings' Notes to Consolidated Financial
    Statements.
(d)
The Company recalculated its diluted EPS for the year ended
    December 31, 2003 to include the 7.25% notes under the
    "if-converted" methodology. The impact reduced diluted
    EPS by $0.03 from $1.29 to $1.26.
24
Table of Contents
Item 7.
Management's Discussion and Analysis of Financial
    Condition and Results of Operations
Holdings' primary business activity is ownership of the
capital stock of AWA and, prior to January 1, 2004, The
Leisure Company. Management's Discussion and Analysis of
Financial Condition and Results of Operations presented below
relates to the consolidated financial statements of Holdings
presented in Item 8A and the consolidated financial
statements for AWA presented in Item 8B.
Restatement of Previously Reported Amounts
Derivative
Instruments
In February 2005, management undertook a review of AWA's
accounting for its fuel hedging transactions. As a result of
this review, management concluded that AWA's fuel hedging
transactions did not qualify for hedge accounting under
U.S. generally accepted accounting principles and that the
Company's financial statements for prior periods required
restatement to reflect the fair value of fuel hedging contracts
in the balance sheets and statements of stockholders equity and
comprehensive income of Holdings and AWA. See Note 2,
"Restatement of Previously Reported Amounts"
and Note 16,
"Quarterly Financial Data
(Unaudited)"
in Holdings' and Note 2,
"Restatement of Previously Reported Amounts"
and Note 15,
"Quarterly Financial Data
(Unaudited)"
in AWA's consolidated financial
statements for the financial impact of the restatements. The
Company concluded that these accounting errors were the result
of deficiencies in its internal control over financial
reporting, from the lack of effective reviews of hedge
transaction documentation and of quarterly mark-to-market
accounting entries on open fuel hedging contracts by personnel
at an appropriate level.
2004 in Review
Overview
Over the past several years, the U.S. domestic airline
industry has experienced an unprecedented financial crisis
caused by the combination of the terrorist attacks of
September 11, 2001, soft economic conditions, increased
competition and capacity and high fuel prices. In response to
these conditions, AWA had repositioned itself as a low cost
carrier and was able to operate profitably for 2003. During
2004, however, extremely high jet fuel prices and excessive
capacity throughout the domestic air system began to negatively
impact all airlines including the low cost segment of the
airline industry as well and several low cost carriers that had
previously operated profitably, including AWA, experienced
declining earnings. Despite difficult industry conditions, AWA
was able to complete two financial transactions in the third and
fourth quarters of 2004 that brought additional capital into the
company and extended debt maturities.
During 2004, our constant commitment to lower costs remained a
priority and we implemented the following revenue and cost
reduction initiatives:
•
We increased point-to-point flying and utilization flying,
    (using an aircraft that would ordinarily be parked at a gate for
    additional flights at minimal additional costs).
•
We continued to aggressively manage yield during peak travel
    periods.
•
We overhauled our first class fare structure much in the same
    way we did to our coach fares in 2002. This initiative reduced
    first class fares by up to 70 percent in some markets as
    compared to legacy carriers' first class fares.
•
We launched two new websites designed to increase revenues from
    travel agents and corporate travel managers while lowering
    distribution costs.
We also continued to position our airline as a low cost carrier
with unique elements that differentiate our service from other
low cost carriers. For example, in 2004 we continued, and intend
to continue, to offer full service amenities that the major
airlines offer, such as first class seating, an award winning
frequent flyer program, FlightFund, and assigned seating. We
believe that leisure and business customers will continue to
25
Table of Contents
value the service of low cost carriers and that our full service
amenities give us a competitive advantage over other low cost
carriers.
In spite of these initiatives and others designed to increase
revenue and productivity and reduce costs, we reported a net
loss of $89.0 million in 2004 compared to net income of
$57.4 million in 2003. The change in earnings was driven by
a $181.1 million increase in fuel expense primarily due to
a 39.1% increase in the average price per gallon of fuel. The
2003 results also included a nonoperating gain of
$81.3 million related to federal government assistance
recognized under the Emergency Wartime Supplemental
Appropriations Act.
Capacity, as measured by available seat miles (ASMs), was up
8.1% as compared to 2003. Passenger revenues were up 3.9% to
$2.2 billion for 2004 over 2003. Passenger revenue per
available seat mile (RASM) fell 3.8% during 2004 to
7.29 cents versus 2003 primarily due to a 5.2% decline in
yield, a 7.9% increase in aircraft utilization and a 4.7%
increase in average stage length.
Total operating expenses were $2.4 billion, an increase of
6.7% from 2003. The average fuel price per gallon increased
39.1% to $1.24 during 2004. This, along with increased fuel burn
due to increased flying during 2004, resulted in a 48.1%
increase in fuel expenses in 2004 over 2003. In spite of the
enormous increase in the cost of fuel, stringent cost controls
enabled us to decrease unit costs by 1.3% during 2004 to
7.89 cents.
In spite of our diligent work to contain our costs, we believe
revenues will continue to reflect the excess capacity that
exists across the domestic system and fuel prices will remain
at, or exceed, record highs. Given these conditions, we
anticipate significant losses for full year 2005.
As of December 31, 2004, Holdings' unrestricted and
restricted cash, cash equivalents, short-term investments and
investments in debt securities totaled $419.1 million.
Although there can be no assurances, we believe that this cash
balance, coupled with our financing commitments and cash flows
from operating activities during 2005, will be adequate to fund
our operating and capital needs as well as enable us to remain
compliant with our various debt agreements through at least
December 31, 2005.
Cost Control
We remain committed to maintaining a low cost structure, which
we believe offers a significant competitive advantage over other
major hub-and-spoke airlines in the United States. In 2004, our
operating cost per available seat mile, or CASM, of
7.89 cents was the lowest of all the other major
hub-and-spoke airlines in the United States and remained
competitive with the major point-to-point airline, Southwest
Airlines.
In light of the current industry environment, we continue to
focus on minimizing capital expenditures and prudent spending
for discretionary expenses.
Revised Pricing
Structure
The revenue environment during 2004 remained challenging. As
background, we restructured our coach fares in March 2002 in an
effort to maximize revenue and increase business traffic. We
eliminated our historic pricing structure and replaced it with a
simplified structure, the primary components of which included
reduced business fares (typically 40-75% below the walkup prices
on major network carriers), elimination of Saturday night stay
requirements and more fares available on a one-way basis. At the
same time, we significantly reduced the number and level of
highly discounted fares available through off-tariff channels.
Immediately following the introduction of the new fare
structure, higher-cost competitors placed extremely low prices
in our nonstop markets and Continental Airlines cancelled its
long-standing code share and frequent flyer agreements with us.
As a result of these actions, our year-over-year domestic unit
revenue performance during 2002 and 2003 was significantly
better than the industry average, and the net effect on revenue
of our revised pricing structure was positive.
In February 2004, we revised our first class pricing structure
similar to the coach fare restructuring initiated on our coach
fares in early 2002 and as discussed above. The new first class
fare structure featured
26
Table of Contents
nonrefundable first class fares that are up to 70% lower than
the industry's traditional first class fares. We believe
that the revised first class fare structure will exploit our
competitive advantages over both the major airlines, as their
higher cost structures may prevent them from reducing their
first class fares to match ours in a profitable manner, and the
other low cost carriers, as many of them do not have first class
cabins.
In spite of these initiatives, during 2004, we experienced
increased low cost carrier (LCC) competition and increased
legacy carrier competition, and the results of these two factors
can be seen in our unit revenue performance relative to the
industry during 2004. Also, in January 2005, Delta Airlines made
significant changes to its domestic pricing structure.
Refundable business fares were reduced approximately 50-60% with
none of the new fares exceeding a coach class cap of $499. First
class fares were capped at $599. Delta also relaxed many of the
rules with regard to leisure fares such as eliminating the
Saturday night minimum stay requirement. While America West
still has lower business fares in most markets than those of
Delta's, Delta's new pricing scheme has resulted in a
reduction in the number of markets and magnitude of pricing
advantages previously held by America West. In addition,
long-term industry competitive reaction is unclear at this time,
and there is potential for negative revenue impact on the
industry and America West. However, given the adverse impacts to
our revenues in 2004 from increased LCC competition and
increased legacy carrier response, we believe that the
incremental effect of the Delta initiative will be smaller than
it would have been had the Delta fare initiative occurred
earlier.
Customer Service
Continued emphasis on customer service is essential to growing
our business and leisure traffic. Therefore, we are committed to
building a successful airline by taking care of our customers.
AWA reported the following operating statistics to the DOT for
2004, 2003, and 2002:
Percent Change
Percent Change
2004
2003
2002
2004 - 2003
2004 - 2002
On-time performance(a)
75.7
82.0
82.9
(7.7
)
(8.7
)
Completion factor(b)
98.4
99.0
99.0
(0.6
)
(0.6
)
Mishandled baggage(c)
3.98
3.30
3.55
20.6
12.1
Customer complaints(d)
1.02
0.84
1.63
21.4
(37.4
)
(a)
Percentage of reported flight operations arriving on time.
(b)
Percentage of scheduled flight operations completed.
(c)
Rate of mishandled baggage reports per 1,000 passengers.
(d)
Rate of customer complaints filed with the DOT per 100,000
    passengers.
2004 proved to be a challenging year from an operations
performance perspective. AWA made a business decision to
increase aircraft utilization approximately 10%, in order to
increase revenues and reduce unit costs. This increased
utilization came through a combination of increased night flying
through the Las Vegas hub and the creation of flight
opportunities during the day when some aircraft previously sat
on the ground for extended periods. Additionally, 2004 was a
difficult year from an Air Traffic Control or "ATC"
perspective. The growth in FAA reportable delays significantly
outpaced the growth of domestic air traffic. For the year, FAA
reportable delays grew 41.1% year-over-year compared to a 4.5%
growth in domestic air traffic. AWA's utilization growth,
coupled with the increased ATC delays, offset somewhat by
operating improvements, were the contributing factors resulting
in the overall change in operating performance.
2005 Outlook
We continue to face considerable challenges in 2005, including
competing with legacy carriers that, through a variety of
restructuring mechanisms, have reduced labor wages, extended
debt maturities and lowered their overall cost per available
seat mile. These actions could cause AWA's cost advantage
to diminish. In addition, recent fare initiatives by the major
carriers may also cause a reduction in revenue per available
seat mile. In 2004, we made loan repayments of approximately
$85.8 million on the government guaranteed loan and
payments of approximately $168.5 million in respect to our
off-balance sheet aircraft
27
Table of Contents
financing arrangements. In 2005, we will need to make loan
repayments of approximately $85.8 million on the government
guaranteed loan, $41.3 million to redeem the
10
3
/
4
senior unsecured notes and payments of approximately
$167.8 million in respect to our off-balance sheet aircraft
financing arrangements. Although there can be no assurances,
management believes that cash flow from operating activities,
coupled with existing cash balances and financing commitments,
will be adequate to fund the Company's operating and
capital needs as well as enable it to maintain compliance with
its various debt agreements at least through December 31,
2005. See
"Risk Factors Relating to the Company and
Industry Related Risks"
and
"Management's
Discussion and Analysis of Financial Condition and Results of
Operations — Liquidity and Capital Resources."
Results of Operations
Summary of Holdings' Financial Results
Holdings recorded a consolidated net loss of $89.0 million
in 2004, or diluted earnings per share of $2.47. This compares
to consolidated income of $57.4 million, or $1.26 per
diluted share, in 2003 and a consolidated loss before the
cumulative effect of a change in accounting principle of
$179.7 million, or $5.33 per diluted share, in 2002.
Including the cumulative effect of a change in accounting
principle related to the Company's adoption of Statement of
Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets,"
on
January 1, 2002, Holdings' net loss for 2002 was
$387.9 million, or $11.50 per diluted share.
The 2004 results include a $16.3 million net credit
associated with the termination of the rate per engine hour
agreement with General Electric Engine Services for overhaul
maintenance services on V2500-A1 engines. This credit was
partially offset by $1.9 million of net charges related to
the return of certain Boeing 737-200 aircraft which includes
termination payments of $2.1 million, the write-down of
leasehold improvements and deferred rent of $2.8 million,
offset by the net reversal of maintenance reserves of
$3.0 million.
The 2004 results also include a $30.5 million net gain on
derivative instruments, including mark-to-market changes and
settled transactions, a $6.1 million charge arising from
the resolution of pending litigation, a $4.6 million loss
on the sale and leaseback of two new Airbus aircraft and a
$1.3 million charge for the write-off of debt issue costs
in connection with the refinancing of the term loan.
The 2003 results include a nonoperating gain of
$81.3 million related to the federal government assistance
received under the Emergency Wartime Supplemental Appropriations
Act, a $10.8 million net gain on derivative instruments,
including mark-to-market changes and settled transactions, a
$9.8 million nonoperating gain on sale of the
Company's investment in Hotwire.com and a $3.3 million
nonoperating gain on sale of the Company's investment in
National Leisure Group. See Note 12,
"Nonoperating
Income (Expenses) — Other, Net"
in
Holdings' Notes to Consolidated Financial Statements. The
2003 results also include an operating gain of $4.4 million
related to the purchase and subsequent exchange of an A320
airframe and a $2.8 million operating gain related to the
settlement of disputed billings under the Company's
frequent flyer program. These gains were offset in part by
$19.7 million of charges related to the execution of a new
labor agreement with the Air Line Pilots Association
("ALPA") net charges of $14.4 million resulted
from the elimination of AWA's hub operations in Columbus,
Ohio ($11.1 million), the reduction-in-force of certain
management, professional and administrative employees
($2.3 million) and the impairment of certain owned Boeing
737-200 aircraft that have been grounded ($2.6 million),
offset by a $1.1 million reduction due to a revision of the
estimated costs related to the early termination of certain
aircraft leases and a $0.5 million reduction related to the
revision of estimated costs associated with the sale and
leaseback of certain aircraft. See Note 11,
"Special Charges"
in Holdings' Notes to
Consolidated Financial Statements.
The 2002 results include charges of $19.0 million primarily
related to the restructuring completed on January 18, 2002
and an operating gain of $4.9 million related to a change
in the Company's vacation policy for certain administrative
employees. The Company also recognized a nonoperating charge of
$2.8 million related to the write-off of the Company's
investment in an e-commerce entity and a nonoperating gain of
$8.5 million related to the federal government assistance
received under the Air Transportation Safety and
28
Table of Contents
System Stabilization Act in 2002. AWA did not record an income
tax benefit for the year ended December 31, 2004 as it
currently expects to continue to record a full valuation
allowance on any future tax benefits until it has achieved
several quarters of consecutive profitable results coupled with
an expectation of continued profitability. Consolidated income
tax expense for financial reporting purposes was
$0.1 million for 2003 on pretax income of
$57.5 million. This compares to a consolidated income tax
benefit for financial reporting purposes of $35.1 million
for the 2002 period on a consolidated loss before income tax
benefit and cumulative effect of a change in accounting
principle of $214.8 million. The benefit in 2002 is
primarily due to additional carryback losses made available as a
result of the enactment of new tax legislation allowing an
extended carryback period under the Job Creation and Workers
Assistance Act of 2002.
AWA
The following discussion provides an analysis of AWA's
results of operations and reasons for material changes therein
for the years ended December 31, 2004, 2003 and 2002.
America West Airlines, Inc.
Statements of Operations
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)
2004
2003
2002
Operating revenues:
Passenger
$
2,196,627
$
2,113,629
$
1,929,444
Cargo
28,233
26,914
27,574
Other
113,417
113,274
89,545
Total operating revenues
2,338,277
2,253,817
2,046,563
Operating expenses:
Salaries and related costs
655,185
658,042
601,870
Aircraft rents
304,343
297,518
295,016
Other rents and landing fees
167,772
154,598
158,290
Aircraft fuel
557,098
375,996
299,284
Agency commissions
25,191
34,457
49,953
Aircraft maintenance materials and repairs
205,580
223,266
252,691
Depreciation and amortization
54,354
66,865
75,201
Special charges (credits), net
(15,432
)
14,370
19,030
Other
423,890
402,613
451,444
Total operating expenses
2,377,981
2,227,725
2,202,779
Operating income (loss)
(39,704
)
26,092
(156,216
)
Nonoperating income (expenses):
Interest income
14,169
13,249
17,551
Interest expense, net
(86,488
)
(86,743
)
(79,529
)
Federal government assistance
—
81,255
8,466
Gain (loss) on disposition of property and equipment
1,460
151
(1,852
)
Gain on sale of investment
—
9,762
—
Gain (loss) on derivative instruments, net
23,782
10,746
(656
)
Other, net
1,547
6,888
215
Total nonoperating income (expenses), net
(45,530
)
35,308
(55,805
)
Income (loss) before income taxes (benefit) and cumulative
    effect of change in accounting principle
$
(85,234
)
$
61,400
$
(212,021
)
29
Table of Contents
The table below sets forth selected operating data for AWA.
Year Ended
December 31,
Percent Change
Percent Change
2004
2003
2002
2004 - 2003
2003 - 2002
Aircraft (end of period)
138
139
143
(0.7
)
(2.8
)
Average daily aircraft utilization (hours)(a)
10.9
10.1
9.6
7.9
5.2
Available seat miles (in millions)(b)
30,153
27,888
27,008
8.1
3.3
Block hours (in thousands)(c)
557
519
505
7.3
2.8
Average stage length (miles)(d)
1,052
1,005
949
4.7
5.9
Average passenger journey (miles)(e)
1,686
1,564
1,434
7.8
9.1
Revenue passenger miles (in millions)(f)
23,333
21,295
19,878
9.6
7.1
Load factor (percent)(g)
77.4
76.4
73.6
1.0
pts
2.8
pts
Passenger enplanements (in thousands)(h)
21,132
20,050
19,454
5.4
3.1
Yield per revenue passenger mile (cents)(i)
9.41
9.93
9.71
(5.2
)
2.3
Revenue per available seat mile:
Passenger (cents)(j)
7.29
7.58
7.14
(3.8
)
6.2
Total (cents)(k)
7.75
8.08
7.58
(4.1
)
6.6
Fuel consumption (gallons in millions)
450
423
411
6.4
2.9
Average fuel price (cents per gallon)
123.7
88.9
73.0
39.1
21.8
Full-time equivalent employees (end of period)
11,893
11,475
12,111
3.6
(5.3
)
(a)
Average daily aircraft utilization — The average
    number of block hours per day for all aircraft in service.
(b)
Available seat mile ("ASM") — A basic
    measure of production. It is one seat flown one statute mile.
(c)
Block hours — The hours measured from the moment an
    aircraft first moves under its own power, including taxi time,
    for the purposes of flight until the aircraft is docked at the
    next point of landing and its power is shut down.
(d)
Average stage length — The average of the distances
    flown on each segment of every route.
(e)
Average passenger journey — The average one-way trip
    measured in statute miles for one passenger origination.
(f)
Revenue passenger mile ("RPM") — A basic
    measure of sales volume. It is one passenger flown one mile.
(g)
Load factor — The percentage of available seats that
    are filled with revenue passengers.
(h)
Passenger enplanements — The number of passengers on
    board an aircraft including local, connecting and through
    passengers.
(i)
Yield — A measure of airline revenue derived by
    dividing passenger revenue by revenue passenger miles and
    expressed in cents per mile.
(j)
Passenger revenue per available seat mile
    ("RASM") — Total passenger revenues divided
    by total available seat miles.
(k)
Total revenue per available seat mile — Total
    operating revenues divided by total available seat miles.
The table below sets forth the major components of CASM for AWA
for the applicable years.
Year Ended
December 31,
Percent Change
Percent Change
2004
2003
2002
2004 - 2003
2003 - 2002
(in cents)
Salaries and related costs
2.17
2.36
2.23
(7.9
)
5.9
Aircraft rents
1.01
1.07
1.09
(5.4
)
(2.3
)
Other rents and landing fees
0.56
0.55
0.59
0.4
(5.4
)
Aircraft fuel
1.85
1.35
1.11
37.0
21.7
Agency commissions
0.08
0.12
0.18
(32.4
)
(33.2
)
Aircraft maintenance materials and repairs
0.68
0.80
0.94
(14.8
)
(14.4
)
Depreciation and amortization
0.18
0.24
0.28
(24.8
)
(13.9
)
Special charges (credits), net
(0.05
)
0.06
0.07
—
(26.9
)
Other
1.41
1.44
1.67
(2.6
)
(13.6
)
7.89
7.99
8.16
(1.3
)
(2.1
)
30
Table of Contents
2004 Compared with 2003
AWA realized an operating loss of $39.7 million in 2004
compared to operating income of $26.1 million in 2003. Loss
before income taxes was $85.3 million in 2004 compared to
income before income taxes of $61.4 million for the
comparable 2003 period.
Total operating revenues for 2004 were $2.3 billion.
Passenger revenues were $2.2 billion in 2004 compared to
$2.1 billion in 2003. A 9.6% increase in RPMs exceeded an
8.1% increase in capacity, as measured by ASMs, resulting in a
1.0 point increase in load factor to 77.4%. RASM during 2004
decreased 3.8 percent to 7.29 cents, despite a
4.7 percent increase in average stage length, while yields
decreased 5.2 percent to 9.41 cents. Cargo revenues for
2004 increased $1.3 million (4.9%) due to higher mail
volumes. Other revenues remained flat year of year.
Operating expenses increased $150.3 million or 6.7%
compared to the comparable 2003 period, while ASMs increased
8.1% due to increases in average stage length of 4.7% and
aircraft utilization of 7.9%. CASM decreased 1.3% to 7.89 cents
in 2004 from 7.99 cents in 2003 despite a 39.1% increase in
average fuel price per gallon. The 2004 period includes a
$15.4 million reduction in special charges versus a
$14.4 million charge in 2003. Significant changes in the
components of operating expense per ASM are explained as follows:
•
Salaries and related costs per ASM decreased 7.9% due to
    increased productivity and lower benefit costs. ASMs increased
    8.1% and average full-time equivalent employees
    ("FTEs") decreased 2.2%. This increase in productivity
    was offset in part by a $26.5 million increase in pilot
    payroll expense principally as a result of the new labor
    agreement with the Air Line Pilots Association
    ("ALPA") effective December 30, 2003.
•
Aircraft rent expense per ASM decreased 5.4% due to the 7.9%
    increase in aircraft utilization.
•
Other rents and landing fees expense per ASM remained flat year
    over year as increases in airport rents ($6.6 million) and
    landing fees ($5.7 million) were offset by the 8.1%
    increase in ASMs.
•
Aircraft jet fuel expense per ASM increased 37.0% due primarily
    to a 39.1% increase in the average price per gallon of fuel to
    123.7 cents in 2004 from 88.9 cents in 2003.
•
Agency commissions expense per ASM decreased 32.4% due to the
    reductions in various travel agency incentive programs and lower
    override commissions.
•
Aircraft maintenance materials and repair expense per ASM
    decreased 14.8% due to decreases in capitalized maintenance
    amortization expense ($23.4 million), and aircraft C-Check
    expense ($4.0 million). The decrease in capitalized
    maintenance amortization expense is driven by changes in the
    estimated useful life on certain engines, effective
    January 1, 2004, as a result of changes in aircraft
    utilization ($9.2 million), and on certain aircraft engine
    overhaul costs, effective April 1, 2003, driven by a new
    maintenance agreement that guarantees minimum cycles on engine
    overhauls ($2.3 million). During 2004, the net decrease of
    fully amortized assets versus new asset amortization totaled
    $6.6 million. These decreases were partially offset by
    increases in airframe maintenance ($6.1 million) and engine
    overhaul ($3.7 million) expenses.
•
Depreciation and amortization expense per ASM decreased 24.8%
    due to lower computer hardware and software amortization
    ($6.1 million) as a result of AWA's cash conservation
    program, which reduced capital expenditures and lower
    amortization expenses related to aircraft leasehold improvements
    ($1.7 million). The change in the estimated useful life as
    a result of changes in AWA's fleet plan discussed above
    contributed to the decrease in depreciation for improvements on
    AWA's owned aircraft ($3.1 million), and for rotable
    and repairable spare parts ($2.1 million).
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Table of Contents
•
Other operating expenses per ASM decreased 2.6% to $1.41 from
    $1.44 primarily due to decreases in catering costs
    ($6.3 million), bad debt expense ($2.6 million) and
    traffic liability insurance ($1.8 million). These decreases
    were partially offset by increases in aircraft jet fuel tax
    ($4.7 million), passenger traffic related expenses
    ($4.2 million), reservation system booking fees
    ($4.1 million), legal fees ($3.6 million), computer
    credit card discount fees ($3.5 million), airport guard
    services ($1.9 million) and ground handling expenses
    ($1.6 million). As a result, other operating expenses
    increased by $21.4 million. In addition, the 2004 period
    also included a $5.1 million charge resulting from the
    settlement of the shareholder lawsuit, a $4.6 million
    charge related to the sale and leaseback transactions of two new
    aircraft, a $3.5 million gain resulting from the settlement
    of a claim in bankruptcy for amounts earned under an executory
    contract, a $2.0 million gain resulting from the settlement
    of a lawsuit related to certain computer hardware and software
    that had previously been written off, a $1.0 million charge
    related to an arbitration settlement with Aeroxchange and a
    $1.0 million volume incentive earned due to certain
    Affinity Card sales levels meeting certain contract thresholds.
    The comparable 2003 period includes a $4.4 million gain
    related to the purchase and subsequent exchange of an A320
    airframe.
AWA had net nonoperating expense of $45.5 million in 2004
compared to net nonoperating income of $35.3 million in
2003. The 2003 period benefited from $81.3 million of
federal government assistance received under the Emergency
Wartime Supplemental Appropriations Act. See Note 16,
"Emergency Wartime Supplemental Appropriations Act"
in AWA's Notes to Consolidated Financial Statements. In
2004, debt issue costs totaling $1.3 million were written
off in connection with the refinancing of the term loan. This
was more than offset by a gain on the disposition of property
and equipment ($1.1 million) primarily due to the sale of
two Boeing 737-200 aircraft. Interest income increased
$0.9 million or 6.9% due to higher average cash balances in
the 2004 period. The changes in the fair value of the
Company's derivative instruments and the net realized gains
for the settled hedge transactions was a $23.8 million
credit in 2004 compared to a $10.7 million credit in the
2003 period. Interest expense remained flat year-over-year. The
2003 period also includes a $9.8 million gain related to
the sale of an investment in Hotwire.com. See Note 12,
"Nonoperating Income (Expenses) — Other,
Net"
in AWA's Notes to Consolidated Financial
Statements.
2003 Compared with 2002
AWA recorded operating income of $26.1 million in 2003
compared to an operating loss of $156.2 million in 2002.
Income before income taxes was $61.4 million in 2003
compared to a loss before income taxes and the cumulative effect
of a change in accounting principle of $212.0 million in
2002.
Total operating revenues for 2003 were $2.3 billion.
Passenger revenues were $2.1 billion in 2003 compared to
$1.9 billion in 2002. A 7.1% increase in RPMs exceeded a
3.3% increase in capacity, as measured by ASMs, resulting in a
2.8 point increase in load factor to 76.4%. RASM during
2003 increased 6.2 percent to 7.58 cents, despite a
5.9 percent increase in average stage length, while yields
improved 2.3 percent to 9.93 cents. Cargo revenues for
2003 decreased $0.7 million (2.4%) due to lower freight and
mail volumes. Other revenues, which consist primarily of
alcoholic beverage sales, contract service sales, service
charges, America West Vacations net revenues and Mesa codeshare
agreement revenues, increased $23.7 million (26.5%) due to
increased net revenues from AWA's code sharing agreement
with Mesa Airlines, higher excess baggage revenue and higher
ticket refund and reissue penalty fees for ticketing changes.
Operating expenses, including special charges of
$14.4 million and $19.0 million recognized in 2003 and
2002, respectively, (see Note 11,
"Special
Charges"
in AWA's Notes to Consolidated Financial
Statements) increased $24.9 million or 1.1%, while ASMs
increased 3.3% in 2003 as compared to 2002. As a result, CASM
decreased 2.1% to 7.99 cents in 2003 from 8.16 cents
in 2002. Significant changes in the components of operating
expense per ASM are explained as follows:
•
Salaries and related costs per ASM increased 5.9% primarily due
    to an increase in the accrual for employee performance bonuses
    and AWArd Pay ($20.1 million), charges related to the
32
Table of Contents
execution of a new labor agreement between AWA and ALPA
    ($19.7 million), higher medical, disability and
    workers' compensation insurance costs ($6.7 million),
    vacation expense due to a change in the Company's vacation
    policy for certain administrative employees in 2002
    ($6.4 million) and DOT on-time performance bonuses
    ($2.3 million). These increases were offset in part by a
    4.5% decrease FTEs in 2003 as compared to 2002, driven by the
    Company's decision to eliminate its Columbus hub operations
    and the reduction-in-force of management, administrative and
    professional employees.
•
Aircraft rent expense per ASM decreased 2.3% due to a reduction
    of rental rates as a result of lease extensions that occurred in
    2003.
•
Other rents and landing fees expense per ASM decreased 5.4%
    primarily due to lower costs for borrowed parts
    ($5.6 million) and other space rental ($1.3 million).
    This decrease was offset in part by higher airport rent
    ($1.5 million) and landing fees ($1.4 million).
•
Aircraft jet fuel expense per ASM increased 21.7% primarily due
    to a 21.8% increase in the average price per gallon of fuel to
    88.9 cents in 2003 from 73.0 cents in 2002.
•
Agency commissions expense per ASM decreased 33.2% primarily due
    to the elimination of base commissions for travel agency tickets
    issued in the United States, effective March 21, 2002,
    subsequent reductions in various travel agency incentive
    programs and lower override commissions.
•
Aircraft maintenance materials and repair expense per ASM
    decreased 14.4% primarily due to lower aircraft C-Check
    ($10.1 million), airframe maintenance ($3.1 million),
    and engine overhaul ($2.9 million) expenses and the 3.3%
    increase in ASMs. In addition, a change in the estimated useful
    life of certain aircraft engine overhaul costs, effective
    April 1, 2003 and driven by a new maintenance agreement
    that guarantees minimum cycles on engine overhauls, resulted in
    a $12.7 million reduction in capitalized maintenance
    amortization expense (see Note 1,
"Summary of
    Significant Accounting Policies — (e) Aircraft
    Maintenance and Repairs"
in AWA's Notes to
    Consolidated Financial Statements) offset by a $0.9 million
    penalty for the return of two spare engines in 2003.
•
Depreciation and amortization expense per ASM decreased 13.9%
    due primarily to reduced capital expenditures as a result of the
    Company's cash conservation program and the 3.3% increase
    in ASMs. Decreases in computer hardware, software and facility
    improvements ($4.5 million), aircraft leasehold improvement
    amortization ($2.9 million) and depreciation expense for
    owned aircraft ($2.0 million) were offset in part by an
    increase in depreciation expense for rotable aircraft parts
    ($0.9 million).
•
Other operating expenses per ASM decreased 13.6% from
    1.67 cents to 1.44 cents primarily due to decreases in
    traffic liability insurance ($11.6 million), computer
    reservations system booking fees ($7.7 million), security
    services ($6.0 million), FlightFund expense
    ($5.2 million), bad debt expense ($5.2 million) and
    the 3.3% increase in ASMs. These decreases were offset in part
    by increased credit card fees ($6.2 million). In addition,
    the 2003 period includes a $4.4 million gain related to the
    purchase and subsequent exchange of an A320 airframe and a
    $2.8 million credit related to the settlement of disputed
    billings under the Company's frequent flyer program.
AWA had net nonoperating income of $35.3 million in 2003
compared to $55.8 million of net nonoperating expenses in
2002. The 2003 period benefited from $81.3 million of
federal government assistance received under the Emergency
Wartime Supplemental Appropriations Act. See Note 16,
"Emergency Wartime Supplemental Appropriations Act"
in AWA's Notes to Consolidated Financial Statements.
Interest expense increased $7.2 million in 2003 due to
higher average outstanding debt while interest income decreased
$4.3 million primarily due to lower interest rates in 2003
compared to 2002. The 2003 period also includes a
$9.8 million gain related to the sale of an investment in
Hotwire.com. See Note 12,
"Nonoperating Income
(Expenses) — Other, Net"
in AWA's Notes
to Consolidated Financial
33
Table of Contents
Statements. The 2002 period included $8.5 million of
federal government assistance received under the Air
Transportation Safety and System Stabilization Act and a
$2.8 million charge related to the write-off of AWA's
investment in an e-commerce entity. The changes in the fair
value of the Company's derivative instruments and the net
realized gains and losses for the settled hedge transactions was
a $10.7 million credit in 2003 compared to
$0.7 million expense in the 2002 period.
Liquidity and Capital Resources
Sources and Uses of Cash
At December 31, 2004, Holdings' and AWA's total
cash, cash equivalents, short-term investments, investments in
debt securities and restricted cash balances were
$419.1 million and $398.5 million, respectively. Net
cash provided by operating activities for Holdings and AWA was
$20.8 million and $20.6 million, respectively, in
2004. This compares to net cash provided by operating activities
of $241.8 million and $226.1 million for Holdings and
AWA, respectively, in 2003. The year-over-year decrease in net
cash provided by operating activities of $221.0 million and
$205.4 million for Holdings and AWA, respectively, was
primarily due to the loss in the 2004 period and the receipt of
$81.3 million of refunded security fees from the Federal
government in 2003.
In 2004, net cash used in investing activities was
$16.1 million for Holdings and $16.0 million for AWA,
respectively. This compares to net cash used in investing
activities of $491.6 million for both Holdings and AWA in
2003. Principal investing activities during 2004 included
purchases of property and equipment totaling $219.4 million
for both Holdings and AWA and net sales of short-term
investments and investments in debt securities totaling
$205.3 million for both Holdings and AWA. The 2003 period
included purchases of property and equipment totaling
$154.4 million for both Holdings and AWA and net purchases
of short-term investments totaling $269.4 million for both
Holdings and AWA. Restricted cash increased by $2.2 million
during 2004 compared to an increase of $23.9 million during
2003 primarily due to an increase in cash reserves required
under an agreement for processing the Company's Visa and
MasterCard credit card transactions. The 2003 period also
included proceeds from the disposition of assets totaling
$25.8 million.
In 2004, net cash used in financing activities was
$41.2 million and $42.3 million for Holdings and AWA,
respectively, consisting principally of $175.6 debt repayments
including principal repayments of $85.8 million for the
government guaranteed loan. In addition, AWA entered into a term
loan financing with GECC resulting in proceeds of
$110.6 million, approximately $77.0 million of which
was used to pay off the balance of the term loan with Muzuho
Corporate Bank, Ltd. and certain other lenders. The 2004 period
also includes $30.8 million of proceeds from the issuance
of senior secured discount notes, secured by the Company's
leasehold interest in its Phoenix maintenance facility and
flight training center. This compares to net cash provided by
financing activities of $67.4 million and
$65.0 million for Holdings and AWA, respectively, in 2003.
The 2003 period included proceeds from the issuance of senior
exchangeable notes totaling $86.8 million and debt
repayments of $16.8 million.
Capital expenditures for 2004 were $219.4 million for
Holdings and AWA. Capital expenditures for 2003 were
$154.4 million for Holdings and AWA. Included in these
amounts are capital expenditures for capitalized maintenance of
approximately $139.2 million and $119.3 million for
both Holdings and AWA for 2004 and 2003, respectively.
Off-Balance Sheet Arrangements
The Pass Through Trusts
Since AWA's restructuring in 1994, AWA has set up 19 pass
through trusts, which have issued over $1.4 billion of pass
through trust certificates (also known as "Enhanced
Equipment Trust Certificates" or "EETC")
covering the financing of 54 aircraft. These trusts are
off-balance sheet entities, the primary purpose of which is to
finance the acquisition of aircraft. Rather than finance each
aircraft separately when such aircraft is purchased or
delivered, these trusts allow the Company to raise the financing
for several aircraft at one time and place such funds in escrow
pending the purchase or delivery of the relevant aircraft.
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Table of Contents
The trusts are also structured to provide for certain credit
enhancements, such as liquidity facilities to cover certain
interest payments, that reduce the risks to the purchasers of
the trust certificates and, as a result, reduce the cost of
aircraft financing to AWA.
Each trust covered a set amount of aircraft scheduled to be
delivered within a specific period of time. At the time of each
covered aircraft financing, the relevant trust used the funds in
escrow to purchase equipment notes relating to the financed
aircraft. The equipment notes were issued, at AWA's
election, either by AWA in connection with a mortgage financing
of the aircraft or by a separate owner trust in connection with
a leveraged lease financing of the aircraft. In the case of a
leveraged lease financing, the owner trust then leased the
aircraft to AWA. In both cases, the equipment notes are secured
by a security interest in the aircraft. The pass through trust
certificates are not direct obligations of, nor guaranteed by,
Holdings or AWA. However, in the case of mortgage financings,
the equipment notes issued to the trusts are direct obligations
of AWA and in the case of leveraged lease financings, the leases
are direct obligations of AWA. In addition, neither Holdings nor
AWA guarantee or participate in any way in the residual value of
the leased aircraft. All aircraft financed by these trusts are
currently structured as leveraged lease financings, which are
not reflected as debt on the balance sheets of either AWA or
Holdings. In 2004, AWA made $168.5 million in lease
payments in respect of the leveraged lease financings under the
pass through trusts.
Other Operating Leases
In addition to the aircraft financed by the pass through trust
certificates, AWA has noncancelable operating leases covering 82
aircraft, of which four aircraft will be delivered in 2005, as
well as leases for certain terminal space, ground facilities and
computer and other equipment. In 2004, AWA made
$197.2 million in lease payments related to these operating
leases. See the Airline's fleet section in Item 1 for
further discussion.
Special Facility Revenue Bonds
In June 1999, Series 1999 special facility revenue bonds
("new bonds") were issued by a municipality to fund
the retirement of the Series 1994A bonds ("old
bonds") and the construction of a new concourse with 14
gates at Terminal 4 in Phoenix Sky Harbor International Airport
in support of AWA's strategic growth plan. The new bonds
are due June 2019 with interest accruing at 6.25% per annum
payable semiannually on June 1 and December 1,
commencing on December 1, 1999. The new bonds are subject
to optional redemption prior to the maturity date on or after
June 1, 2009 in whole or in part, on any interest payment
date at the following redemption prices: 101% on June 1 or
December 1, 2009; 100.5% on June 1 or December 1,
2010; and 100% on June 1, 2011 and thereafter. In
accordance with Emerging Issues Task Force ("EITF")
Issue No. 97-10,
"The Effect of Lessee Involvement
in Asset Construction,"
the Company accounts for this
as an operating lease.
In connection with these bonds, AWA entered into an Amended and
Restated Airport Use Agreement, pursuant to which AWA agreed to
make sufficient payments to the Industrial Development Authority
("IDA") to cover the principal and interest of the
bonds and to indemnify the IDA for any claims arising out of the
issuance and sale of the bonds and the use and occupancy of the
concourses financed by these bonds and the old bonds. At
December 31, 2004, the outstanding principal amount of the
bonds was $21.8 million. The Company estimates its
remaining payments to cover the principal and interest of these
bonds will be approximately $43.6 million.
Commitments
As of December 31, 2004, we had $786.3 million of
long-term debt (including current maturities). This amount
consisted primarily of the $343.2 million government
guaranteed loan, a secured term loan financing with General
Electric Capital Corporation ("GECC"), of which
$110.6 million remains outstanding, $39.5 million
principal amount of
10
3
/
4
% senior
unsecured notes, $112.3 million principal amount of
7.5% convertible senior notes (including interest through
December 31, 2004 as a deemed loan added to the
35
Table of Contents
principal thereof) and $252.7 million issue price of
7.25% senior exchangeable notes, of which
$86.8 million was received at issuance.
Government Guaranteed Loan
In January 2002, AWA closed a $429 million loan supported
by a $380 million guarantee provided by the ATSB. Certain
third-party counter-guarantors have fully and unconditionally
guaranteed the payment of an aggregate of $45 million of
the outstanding principal amount under the government guaranteed
loan plus accrued and unpaid interest thereon. In addition,
Holdings has fully and unconditionally guaranteed the payment of
all principal, premium, interest and other obligations
outstanding under the government guaranteed loan and has pledged
the stock of AWA to secure its obligations under such guarantee.
Principal amounts under this loan become due in ten installments
of $42.9 million on each March 31 and
September 30, commencing on March 31, 2004 and ending
on September 30, 2008. Principal amounts outstanding under
the government guaranteed loan bear interest at a rate per annum
equal to LIBOR plus 40 basis points.
Subject to certain exceptions, we are required to prepay the
government guaranteed loan with:
•
the net proceeds of all issuances of debt or equity by either
    Holdings or AWA after January 2002;
•
proceeds from asset sales in excess of $20 million in any
    fiscal year; and
•
insurance proceeds in excess of $2 million to the extent
    such proceeds are not used to restore or replace the assets from
    which such proceeds are derived.
In addition, we are required to prepay the government guaranteed
loan upon a change in control and we may be required to prepay
portions of the loan if our employee compensation costs exceed a
certain threshold. We may, at our option, prepay the government
guaranteed loan without premium or penalty, subject to
reimbursement of the lenders' breakage costs in the case of
prepayment of LIBOR loans.
The government guaranteed loan requires that AWA maintain a
minimum cash balance of $100 million. In addition, the
government loan contains customary affirmative covenants and the
following negative covenants: restrictions on liens,
investments, restricted payments, fundamental changes, asset
sales and acquisitions, the creation of new subsidiaries, sale
and leasebacks, transactions with affiliates, the conduct of
business, mergers or consolidations, issuances and dispositions
of capital stock of subsidiaries, and amendments to other
indebtedness. The government guaranteed loan contains customary
events of default, including payment defaults, cross-defaults,
breach of covenants, bankruptcy and insolvency defaults and
judgment defaults.
GECC Term Loan Financing
On September 10, 2004, AWA entered into a term loan
financing with GECC providing for loans in an aggregate amount
of $110.6 million. AWA used approximately
$77.0 million of the proceeds from this financing to repay
in full its term loan with Mizuho Corporate Bank, Ltd. and
certain other lenders and to pay certain costs associated with
this transaction. AWA used the remaining proceeds for general
corporate purposes. The new term loan financing consists of two
secured term loan facilities: a $75.6 million term loan
facility secured primarily by spare parts, rotables and
appliances (the "Spare Parts Facility"); and a
$35.0 million term loan facility secured primarily by
aircraft engines and parts installed in such engines (the
"Engine Facility").
The facilities are cross-collateralized on a subordinated basis
and the collateral securing the facilities also secures on a
subordinated basis certain of AWA's other existing debt and
lease obligations to GECC and its affiliates.
The loans under the Spare Parts Facility are payable in full at
maturity on September 10, 2010. The loans under the Engine
Facility are payable in equal quarterly installments of
$1.3 million beginning on March 10, 2006 through
June 10, 2010 with the remaining loan amount of
$11.8 million payable at maturity on September 10,
2010. The loans under each facility may be prepaid in an amount
not less than $5 million
36
Table of Contents
at any time after the 30th monthly anniversary of the funding
date under such facility. If AWA fails to maintain a certain
ratio of rotables to loans under the Spare Parts Facility, it
may be required to pledge additional rotables or cash as
collateral, provide a letter of credit or prepay some or all of
the loans under the Spare Parts Facility. In addition, the loans
under the Engine Facility are subject to mandatory prepayment
upon the occurrence of certain events of loss applicable to, or
certain dispositions of, aircraft engines securing the facility.
Principal amounts outstanding under the loans bear interest at a
rate per annum based on three-month LIBOR plus a margin. Both
facilities contain customary events of default, including
payment defaults, cross-defaults, breach of covenants,
bankruptcy and insolvency defaults and judgment defaults.
Senior Secured Discount Notes Due 2009
On December 27, 2004, AWA raised additional capital by
financing its Phoenix maintenance facility and flight training
center. The flight training center was previously unencumbered,
and the maintenance facility became unencumbered earlier this
year when AWA refinanced its term loan. Using its leasehold
interests in these two facilities as collateral, AWA, through a
wholly owned subsidiary named FTCHP LLC, raised
$30.8 million through the issuance of senior secured
discount notes. The notes were issued by FTCHP at a discount
pursuant to the terms of a senior secured term loan agreement
among the Company, FTCHP, Heritage Bank, SSB, as administrative
agent, Citibank, N.A., as the initial lender, and the other
lenders from time to time party thereto. Citibank, N.A.
subsequently assigned all of its interests in the notes to third
party lenders.
AWA has fully and unconditionally guaranteed the payment and
performance of FTCHP's obligations under the notes and the
loan agreement. The notes require aggregate principal payments
of $36.0 million with principal payments of
$1.5 million due on each of the first two anniversary dates
and the remaining principal amount due on the fifth anniversary
date. The notes may be prepaid in full at any time (subject to
customary LIBOR breakage costs) and in partial amounts of
$1.5 million on the third and fourth anniversary dates. The
unpaid principal amount of the notes bears interest based on
LIBOR plus a margin subject to adjustment based on a loan to
collateral value ratio.
The loan agreement contains customary covenants applicable to
loans of this type, including obligations relating to the
preservation of the collateral and restrictions on the
activities of FTCHP. In addition, the loan agreement contains
events of default, including payment defaults, cross-defaults to
other debt of FTCHP, if any, breach of covenants, bankruptcy and
insolvency defaults and judgment defaults.
In connection with this financing, AWA sold all of its leasehold
interests in the maintenance facility and flight training center
to FTCHP and entered into subleases for the facilities with
FTCHP at lease rates expected to approximate the interest
payments due under the notes. In addition, AWA agreed to make
future capital contributions to FTCHP in amounts sufficient to
cover principal payments and other amounts owing pursuant to the
notes and the loan agreement.
The proceeds from this financing, together with
$10.5 million from operating cash flow, were irrevocably
deposited with the trustee for AWA's
10
3
/
4
% senior
unsecured notes due 2005 and subsequently redeemed on
January 26, 2005.
10
3
/
4
% Senior
    Notes due 2005
In August 1995, AWA issued $75.0 million principal amount
of
10
3
/
4
% senior
unsecured notes due 2005 of which $39.5 million remained
outstanding at December 31, 2004. Interest on the
10
3
/
4
% senior
unsecured notes is payable semiannually in arrears on
March 1 and September 1 of each year. The senior notes
were subsequently redeemed on January 26, 2005.
7.5% Convertible Senior Notes due 2009
In connection with the closing of the government guaranteed loan
and the related transactions, Holdings issued
$104.5 million of 7.5% convertible senior notes due
2009, of which approximately $112.3 million
37
Table of Contents
remained outstanding at December 31, 2004 (including
interest paid through December 31, 2004 as a deemed loan
added to the principal thereof). These notes are convertible
into shares of class B common stock, at the option of the
holders, at an initial conversion price of $12.00 per share
or a conversion ratio of approximately 83.333 shares per
$1,000 principal amount of such notes, subject to standard
anti-dilution adjustments. Interest on the 7.5% convertible
senior notes is payable semiannually in arrears on June 1
and December 1 of each year. At Holdings' option, the
first six interest payments were payable in the form of a deemed
loan added to the principal amount of these notes. The
7.5% convertible senior notes will mature on
January 18, 2009 unless earlier converted or redeemed. The
payment of principal, premium and interest on the
7.5% convertible senior notes is fully and unconditionally
guaranteed by AWA.
Holdings may redeem 7.5% convertible senior notes, in whole
or in part, at the following redemption prices (expressed as
percentages of the principal amount thereof), if redeemed during
the twelve-month period commencing on January 18 of the
years set forth below, plus, in each case, accrued and unpaid
interest, if any, to the date of redemption:
Year
Redemption Price
2005
103.75%
2006
102.50%
2007
101.25%
2008 and thereafter
100.00%
7.25% Senior Exchangeable Notes due 2023
In July and August of 2003, AWA completed a private placement of
approximately $86.8 million issue price of
7.25% Senior Exchangeable Notes due 2023. The notes bear
cash interest until July 30, 2008. Thereafter, the notes
will cease bearing cash interest and begin accruing original
issue discount daily at a rate of 7.25% per year until
maturity. Each note was issued at a price of $343.61 and is
exchangeable for class B common stock of Holdings at an
exchange ratio of 32.038 shares per $1,000 principal amount
at maturity of the notes (subject to adjustment in certain
circumstances). This represents an equivalent conversion price
of approximately $10.73 per share. The aggregate amount due
at maturity, including accrued original issue discount from
July 31, 2008, will be $252,695,000. The notes are
unconditionally guaranteed on a senior unsecured basis by
Holdings.
Holders may exchange their notes for the shares of class B
common stock of Holdings in any fiscal quarter commencing after
September 30, 2003, if, as of the last day of the preceding
fiscal quarter, the closing sale price of the class B
common stock for at least 20 trading days in a period of 30
consecutive trading days ending on the last trading day of such
preceding fiscal quarter is more than 110% of the accreted
exchange price per share of Class B common stock on the
last day of such preceding fiscal quarter. If the foregoing
condition is satisfied, then the notes will be exchangeable at
any time at the option of the holder through maturity. The
accreted exchange price per share as of any day will equal the
issue price of a note plus accrued original issue discount to
that day divided by 32.038, subject to any adjustments to the
exchange rate through that day.
On or before July 30, 2018, a holder also may exchange its
notes for shares of the Class B common stock at any time
after a 10 consecutive trading-day period in which the average
of the trading prices for the notes for that 10 trading-day
period was less than 103% of the average exchange value for the
notes during that period. Exchange value is equal to the product
of the closing sale price for the shares of Class B common
stock on a given day multiplied by the then current exchange
rate, which is the number of shares of Class B common stock
for which each note is then exchangeable.
In addition, the holders may exchange the notes if the notes
have been called for redemption or if certain specified
corporate transactions have occurred.
Holders of the notes may require AWA to repurchase the notes at
a price equal to the original issue price plus accrued cash
interest and original issue discount, if any, on July 30,
2008, 2013 and 2018. The purchase price of such notes may be
paid in cash or class B common stock of Holdings, subject
to certain restrictions.
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In addition, each holder may require AWA to purchase all or a
portion of such holder's notes upon the occurrence of
certain change of control events concerning AWA or Holdings. AWA
may redeem the notes, in whole or in part, on or after
July 30, 2008 at a price equal to the original issue price
plus accrued cash interest and original issue discount, if any.
Other Indebtedness and Obligations
In addition to the above described indebtedness, we had
$39.5 million of secured equipment notes and
$45.8 million of other unsecured indebtedness, including
$29.3 million of industrial revenue bonds.
The following table sets forth our cash obligations as of
December 31, 2004.
Beyond
2005
2006
2007
2008
2009
2009
Total
(in thousands)
Long-term debt:
Equipment notes — non-EETC(1)
$
8,305
$
8,305
$
7,772
$
15,082
$
—
$
—
$
39,464
GECC term loan(2)
—
5,158
5,158
5,158
5,158
89,932
110,564
7.5% convertible senior notes due 2009(3)
—
—
—
—
112,299
—
112,299
7.25% senior exchangeable notes due 2023(4)
—
—
—
—
—
252,695
252,695
Government guaranteed loan(5)
85,800
85,800
85,800
85,800
—
—
343,200
State loan(6)
250
250
250
—
—
—
750
10
3
/
4
% senior
    unsecured notes due 2005
39,548
—
—
—
—
—
39,548
Industrial development bonds(7)
—
—
—
—
—
29,300
29,300
AVSA promissory notes(8)
15,750
—
—
—
—
—
15,750
Senior Secured Discount Notes(9)
1,530
1,529
1,529
1,530
29,870
—
35,988
151,183
101,042
100,509
107,570
147,327
371,927
979,558
Cash aircraft rental payments(10)
343,554
318,668
300,247
249,000
223,894
1,668,015
3,103,378
Lease payments on equipment and facility operating leases(11)
18,117
16,744
14,645
15,017
14,180
51,919
130,622
Capital lease obligations
4,659
4,988
1,773
—
—
—
11,420
Special facility revenue bonds(12)
1,363
1,363
1,362
1,362
2,044
36,106
43,600
Aircraft purchase commitments(13)
272,820
456,891
47,697
—
—
—
777,408
Engine maintenance commitments(14)
12,000
6,000
3,000
1,000
—
—
22,000
Total
$
803,696
$
905,696
$
469,233
$
373,949
$
387,445
$
2,127,967
$
5,067,986
(1)
Includes approximately $39.5 million of equipment notes
    with variable interest rates of 2.88% to 3.37%, averaging 2.96%
    at December 31, 2004, installments due 2005 through 2008.
(2)
The amount consists of two the Spare Parts Facility and the
    Engine Facility with a variable interest rate of 6.41% at
    December 31, 2004. See
"— GECC Term
    Loan Financing"
above.
(3)
Includes $90.7 million principal amount of
    7.5% convertible senior notes, due 2009, and
    $21.6 million of interest paid in kind of issuance through
    December 31, 2004. For financial reporting purposes, we
    initially recorded the convertible senior notes at their fair
    market value on the date of issuance. As of December 31,
    2004, the accreted balance of the convertible senior notes in
    the accompanying consolidated balance sheet is approximately
    $68.5 million.
(4)
Includes $252.7 million principal amount of
    7.25% senior exchangeable notes due July 2023 with cash
    interest payable through July 2008 at a rate of 2.49% on the
    principal amount at maturity. Thereafter, the notes will cease
    bearing cash interest and begin accruing original issue discount
    at a rate of 7.25% until maturity. The aggregate amount due at
    maturity, including accrued original issue discount from
    July 31, 2008, will be $252.7 million.
(5)
Government guaranteed loan includes $343.2 million with a
    variable interest rate of 2.38% at December 31, 2004 and
    ratable principal payments due 2005 through 2008. Guarantee fees
    of approximately 8.0% of the outstanding guaranteed principal
    balance in 2005 through 2008 are payable to the
    U.S. Treasury Department and other loan participants.
(6)
Includes Arizona State loan of $0.8 million due December
    2007 with a variable interest rate of 5.97% at December 31,
    2004.
(7)
Includes $29.3 million of 6.3% industrial development bonds
    due April 2023.
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(8)
Includes AVSA promissory notes of $15.8 million due 2005
    with a variable interest rate of 3.61% at December 31, 2004.
(9)
Includes $36.0 million of senior secured discount notes due
    2009 with a variable interest rate of 6.42% at December 31,
    2004.
(10)
Includes non-cancelable operating leases for 136 aircraft with
    remaining terms ranging from five months to approximately
    19 years. Management estimates the debt equivalent value of
    these operating leases approximates $1.9 billion using an
    interest rate of 10%.
(11)
Includes leases for terminal space, ground facilities, the
    flight training center and computer and other equipment under
    non-cancelable operating leases.
(12)
Includes Series 1999 Terminal 4 Improvements Bonds,
    due 2019.
(13)
Includes commitments to purchase a total of 20 Airbus aircraft
    and seven spare engines for delivery in 2005 through 2007.
(14)
Includes minimum commitments under AWA's rate per engine
    hour agreement with General Electric Engine Services for
    overhaul maintenance services on CFM56-3B engines through April
    2008. Minimum monthly commitment amounts: for the period through
    and including April 2006 — $1.0 million, for the
    period May 2006 through and including April 2008 —
    $250,000. These amounts reflect the termination agreement signed
    by AWA in late December 2004 which eliminates the V2500-A1
    engines from the program.
We expect to fund these cash obligations from funds provided by
operations and future financings, if necessary. The cash
available to us from these sources, however, may not be
sufficient to cover these cash obligations because economic
factors outside our control may reduce the amount of cash
generated by operations or increase our costs. For instance, an
economic downturn or general global instability caused by
military actions, terrorism, disease outbreaks and natural
disasters could reduce the demand for air travel, which would
reduce the amount of cash generated by operations. An increase
in our costs, either due to an increase in borrowing costs
caused by a reduction in our credit rating or a general increase
in interest rates or due to an increase in the cost of fuel,
maintenance, aircraft and aircraft engines and parts, could
decrease the amount of cash available to cover the cash
obligations. In addition, we may be required to prepay portions
of the government guaranteed loan if our employee compensation
costs exceed a certain threshold and we may be required to
prepay portions of the term loan to the extent the value of the
collateral securing the term loan decreases. In any of these
cases, our liquidity may be adversely affected and we may not
have sufficient cash to prepay the government loan and meet our
other obligations. Moreover, the government guaranteed loan
contains a $100 million minimum cash balance requirement.
As a result, we cannot use all of our available cash to fund
operations, capital expenditures and cash obligations without
violating this requirement.
Although there can be no assurances, management believes that
cash flow from operating activities, coupled with existing cash
balances and financing commitments, will be adequate to fund the
Company's operating and capital needs as well as enable it
to maintain compliance with its various debt agreements at least
through December 31, 2005.
Financial Covenants and Credit Rating
In addition to the minimum cash balance requirements, our
long-term debt agreements contain various negative covenants
that restrict our actions, including our ability to pay
dividends, or make other restricted payments. Finally, our
long-term debt agreements contain cross-default provisions,
which may be triggered by defaults by us under other agreements
relating to indebtedness. See
"Risk Factors Relating to
the Company and Industry Related Risks — Our high
level of fixed obligations limits our ability to fund general
corporate requirements and obtain additional financing, limits
our flexibility in responding to competitive developments and
increases our vulnerability to adverse economic and industry
conditions."
As of December 31, 2004, Holdings and
AWA were in compliance with the covenants in their long-term
debt agreements.
Our credit ratings are relatively low, with Moody's
assessment of AWA's senior implied rating and senior
unsecured debt rating at B3 and Caa2, respectively,
Standard & Poor's assessment of AWA's and
Holdings' corporate credit ratings at B- and AWA's
senior unsecured rating at CCC and Fitch Ratings'
assessment of AWA's long-term and unsecured debt rating at
CCC. In addition, Standard & Poor's recently
placed AWA's aircraft debt on CreditWatch with negative
implications as part of a broader review of aircraft-backed
debt. Low credit ratings could cause our borrowing costs to
increase, which would increase our interest expense and could
affect our net income and our credit ratings could adversely
affect our ability to obtain additional financing. The rating
agencies base their ratings on our financial performance and
operations, our cash flow and liquidity, the level of our
indebtedness and industry conditions in general. If
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our financial performance or industry conditions do not improve,
we may face future downgrades, which could further negatively
impact our borrowing costs and the prices of our equity or debt
securities. In addition, any downgrade of our credit ratings may
indicate a decline in our business and in our ability to satisfy
our obligations under our indebtedness. See
"Risk
Factors Relating to the Company and Industry Related
Risks — Because of our relatively low credit ratings,
our borrowing costs may be high and our ability to incur
additional debt may be impaired."
Other Information
Labor Relations
A large majority of the employees of the major airlines in the
United States are represented by labor unions. The majority of
AWA employees have selected union representation and/or
negotiated collective bargaining agreements with AWA. Although
there are few remaining employee groups who could engage in
organization efforts, we cannot predict the outcome of any
future efforts to organize those remaining employees or the
terms of any future labor agreements or the effect, if any, on
the Company's or AWA's operations or financial
performance. For more discussion, see
"Risk Factors
Relating to the Company and Industry Related Risks —
Negotiations with labor unions could divert management attention
and disrupt operations and new collective bargaining agreements
or amendments to existing collective bargaining agreements could
increase our labor costs and operating expenses."
Income Taxes
At December 31, 2004, the Company had net operating loss
carryforwards ("NOLs") and tax credit carryforwards
for federal income tax purposes of approximately
$451.4 million and $1.1 million, respectively. The
NOLs expire during the years 2007 through 2024 while
approximately $0.2 million of the tax credit carryforwards
will expire in 2005 and 2006. The Company also had capital loss
carryforwards for federal income tax purposes of approximately
$1.4 million which expire in 2009. However, such
carryforwards are not available to offset federal (and in
certain circumstances, state) alternative minimum taxable
income. Further, as a result of a statutory "ownership
change" (as defined for purposes of Section 382 of the
Internal Revenue Code) that occurred as a result of the
Company's reorganization in 1994, the Company's
ability to utilize its NOLs and business tax credit
carryforwards may be restricted.
The Company's reorganization and the associated
implementation of fresh start reporting in 1994 gave rise to
significant items of expense for financial reporting purposes
that are not deductible for income tax purposes. In large
measure, it is these nondeductible expenses that result in an
effective tax expense (benefit) rate for financial reporting
purposes that differs from the current federal statutory income
tax rate of 35%.
Government Regulations
On November 19, 2001, the President signed into law the
ATSA. This law enhances aviation security measures and
federalizes many aspects of civil aviation security. The ATSA
established a new Transportation Security Administration, now
within the Department of Homeland Security. Under the ATSA,
substantially all security screeners at airports are federal
employees and a significant number of other airport security
functions are overseen and performed by federal employees,
including federal security managers, federal law enforcement
officers and federal air marshals. The ATSA mandated that
beginning on January 18, 2002, all checked baggage at
United States airports be screened using explosive detection
systems or, where such systems are not yet available, using
other screening techniques such as positively matching baggage
to a passenger who has boarded an aircraft. The ATSA required
all checked baggage to be screened by explosive detection
systems by December 31, 2003. Other requirements in the
ATSA that directly affect airline operations include the
strengthening of cockpit doors, deploying federal air marshals
on board certain flights, improving airline crew security
training and expanding use of criminal background checks of
employees. Implementation of these and other requirements of the
ATSA resulted in increased costs for air carriers and may result
in delays and disruptions to air travel. Under the ATSA, funding
for the new federal security system is provided by a
$2.50 per enplanement ticket tax, not to exceed
$5.00 per one-way trip, and by
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imposing additional direct fees on air carriers. In 2004 and
2003, the Company's cost of compliance with the security
requirements of the ATSA was approximately $14.4 million
and $13.2 million, respectively. The estimated cost to the
Company of compliance with the security requirements of the ATSA
for 2005 is approximately $17.0 million under current law.
Under the proposed White House budget released February 7,
2005, this ticket tax for security fees would increase from
$2.50 per leg to $5.50 with a cap of $8.00 one-way trip
with multiple legs and $16.00 for a round trip. This budget
proposal is subject to approval of Congress. As a result of
competitive pressure, AWA and other airlines may be unable to
recover all of these additional security costs from passengers
through increased fares. In addition, we cannot forecast what
new security and safety requirements may be imposed in the
future or the costs or financial impact of complying with any
such requirements.
In 1997, new aviation taxes were imposed through
September 30, 2007 to provide funding for the FAA. Included
in the law is a phase-in of a modified federal air
transportation excise tax structure with a system that includes
a domestic excise tax which started at 9% and declined to 7.5%
in 1999, a domestic segment tax that started at $1.00 and
increased to $3.00 in 2003, and an increase in taxes imposed on
international travel from $6.00 per international departure
to an arrival and departure tax of $12.00 (each way). Both the
domestic segment tax and the international arrival and departure
tax are indexed for inflation. The legislation also included a
7.5% excise tax on certain amounts paid to an air carrier for
the right to provide mileage and similar awards (e.g., purchase
of frequent flyer miles by a credit card company). As a result
of competitive pressures, AWA and other airlines have been
limited in their ability to pass on the cost of these taxes to
passengers through fare increases.
For additional information on government regulation and its
effect on the Company see
"Government Regulations"
in Item 1, Business.
Related Party Transactions
As part of our reorganization in 1994, Continental Airlines and
AWA entered into an alliance agreement that included code
sharing arrangements, reciprocal frequent flyer programs and
ground handling operations. In March 2002, AWA received notice
from Continental of its intention to terminate the code sharing
and frequent flyer agreements between the two airlines,
effective April 26, 2002. Two of Continental's
directors are managing partners of Texas Pacific Group, which,
through TPG Advisors, Inc., effectively controls the voting
power of Holdings. See
"Risk Factors Relating to the
Company and Industry Related Risks — The stockholders
who effectively control the voting power of Holdings could take
actions that would favor their own personal interests to the
detriment of our interests."
AWA paid Continental
approximately $13.4 million, $17.3 million and
$25.5 million and also received approximately
$4.1 million, $5.0 million and $15.9 million in
2004 and 2003 and 2002, respectively, from Continental pursuant
to these agreements.
Texas Pacific Group agreed to reimburse the Company
approximately $2.5 million for expenses incurred by the
Company on its behalf. As a result, the Company recorded this as
a receivable as of December 31, 2004. Subsequent to
December 31, 2004, the Company received $1.3 million
in such reimbursement and expects to receive an additional
$1.2 million in 2005.
Application of Critical Accounting Policies
The preparation of our consolidated financial statements in
accordance with generally accepted accounting principles
requires that we make certain estimates and assumptions that
affect the reported amount of assets and liabilities, revenues
and expenses, and the disclosure of contingent assets and
liabilities at the date of our financial statements. We believe
our estimates and assumptions are reasonable; however, actual
results could differ from those estimates. We have identified
the following critical accounting policies that require the use
of significant judgments and estimates relating to matters that
are inherently uncertain and may result in materially different
results under different assumptions and conditions.
•
Passenger Revenue
— Passenger revenue is
    recognized when transportation is provided. Ticket sales for
    transportation that has not yet been provided are recorded as
    air traffic liability. Passenger traffic commissions and related
    fees are expensed when the related revenue is
42
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recognized. Passenger traffic commissions and related fees not
    yet recognized are included as a prepaid expense. Due to complex
    pricing structures, refund and exchange policies, and interline
    agreements with other airlines, certain amounts are recognized
    in revenue using estimates regarding both the timing of the
    revenue recognition and the amount of revenue to be recognized.
    These estimates are generally based on the statistical analysis
    of our historical data. Any adjustments resulting from periodic
    evaluations of the estimated air traffic liability are included
    in results of operations during the period in which the
    evaluations are completed.
•
Accounting For Long-Lived Assets
— Owned
    property and equipment are recorded at cost and depreciated to
    residual values over the estimated useful lives using the
    straight-line method. Leasehold improvements relating to flight
    equipment and other property on operating leases are amortized
    over the life of the lease, or the life of the asset, whichever
    is shorter. Interest on advance payments for aircraft
    acquisitions and on expenditures for aircraft improvements is
    capitalized and added to the cost of the asset. The estimated
    useful lives of our owned aircraft, jet engines, flight
    equipment and rotable parts range from five to 25 years.
    The estimated useful lives of our technical support facility and
    flight training center in Phoenix, Arizona are 22 years and
    30 years, respectively. The estimated useful lives of our
    ground property and equipment range from three to 12 years.
    We test for impairment losses on long-lived assets used in
    operations when events and circumstances indicate that the
    assets might be impaired as defined by SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived
    Assets."
An impairment loss is recognized if the
    carrying amount of the asset is not recoverable from its
    undiscounted cash flows and is measured as the difference
    between the carrying amount and fair value of the asset.
•
Frequent Flyer Accounting
— We maintain a
    frequent travel award program known as "FlightFund"
    that provides a variety of awards to program members based on
    accumulated mileage. The estimated cost of providing the free
    travel is recognized as a liability and charged to operations as
    program members accumulate mileage. Travel awards are valued at
    the incremental cost of carrying one passenger, based on
    expected redemptions. Incremental costs are based on
    expectations of expenses to be incurred on a per passenger basis
    and include fuel, liability insurance, food, beverages, supplies
    and ticketing costs. We also sell mileage credits to companies
    participating in our FlightFund program, such as hotels, car
    rental agencies and credit card companies.
    Transportation-related revenue from the sale of mileage credits
    is deferred and recognized when transportation is provided. A
    change to the estimated cost per mile, minimum award level,
    percentage of revenue to be deferred or deferred recognition
    period could have a significant impact on our revenues or
    mileage liability accrual in the year of the change as well as
    future years.
•
Long-Term Maintenance Reserve
— We record an
    accrual for the estimated cost of scheduled airframe and engine
    overhauls required to be performed on leased aircraft upon their
    return to the lessors. These estimates are based on historical
    costs and our assumptions regarding the renewal of aircraft
    leases. A significant change to AWA's fleet plan could have
    a material impact on our reserve requirements.
•
Deferred Tax Asset Valuation Allowance
— The
    Company initially recorded a full valuation allowance relating
    to its net deferred tax assets at December 31, 2001 and to
    tax benefits generated in 2002. In recording that valuation
    allowance, we considered whether it was more likely than not
    that all or a portion of the deferred tax assets will not be
    realized, in accordance with SFAS No. 109,
"Accounting for Income Taxes."
The Company was
    in a cumulative loss position three out of four years between
    December 31, 2001 through December 31, 2004, which
    weighed heavily in the overall determination that a valuation
    allowance was needed. As of December 31, 2004, the Company
    had recorded a valuation allowance of $129.0 million
    against its net deferred tax assets. The Company expects to
    continue to record a full valuation allowance on any future tax
    benefits until we have achieved
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Table of Contents
several quarters of consecutive profitable results coupled with
    an expectation of continued profitability.
Recently Issued Accounting Pronouncements
In November 2004, the Emerging Issues Task Force
("EITF") of the FASB reached a consensus on
EITF 04-08,
"The Effect of Contingently Convertible
Instruments on Diluted Earnings per Share,"
which
requires that issuers of convertible securities with contingent
conversion features use the "if-converted" method to
calculate reported earnings per share ("EPS")
irrespective of the contingent conversion trigger being met. As
approved by the FASB, this change is effective for years ending
after December 15, 2004. The Company applied this
methodology in the accompanying consolidated statement of
operations. The impact of using the "if-converted"
method for the Company's 7.25% Notes is antidilutive
for the years ended December 31, 2004 and 2002. For the
year ended December 31, 2003, the inclusion of the
7.25% Notes reduced diluted EPS by $0.03 from $1.29 to
$1.26.
In November 2004, the FASB issued Revised Statement
No. 123,
"Accounting for Share-Based Payment"
("SFAS No. 123R"). This statement
requires the Company to recognize the grant-date fair value of
stock options in the Statement of Operations. In addition, the
Company will be required to calculate this compensation using
the fair-value based method, versus the intrinsic value method
previously allowed under SFAS No. 123. This revision
is effective for periods beginning after June 15, 2005.
Accordingly, the Company will adopt this revised SFAS effective
July 1, 2005. The Company is currently evaluating how it
will adopt SFAS No. 123R and has not determined the
method it will use to value granted stock options. The adoption
of SFAS No. 123R is expected to have a material effect
on the Company's results of operations. See Note 1,
"Summary of Significant Accounting Policies"
(n)
"Stock Options"
for the Company's
disclosure of the impact of the compensation cost associated
with stock options under SFAS No. 123.
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
Market Risk Sensitive Instruments
(a) Commodity Price Risk
Aircraft jet fuel costs accounted for approximately 23% of the
Company's total operating expenses during 2004. At current
consumption levels, a one-cent per gallon change in the price of
jet fuel would affect the Company's annual operating
results in 2005 by approximately $5.7 million which
includes Mesa. Accordingly, a substantial change in the price of
jet fuel would have a significant impact on the Company's
results of operations.
In 1996, AWA implemented a fuel hedging program to manage the
risk from fluctuating jet fuel prices. The program's
objectives are to provide some protection against extreme,
upward movements in the price of jet fuel and to protect
AWA's ability to meet its annual fuel expense budget. Under
the program, AWA may enter into certain hedging transactions
with approved counterparties for future periods generally not
exceeding 12 months.
As of December 31, 2004, the Company had entered into
costless collar transactions that establish an upper and lower
limit on heating oil futures prices and basis swap transactions
that establish the spread between heating oil and jet fuel.
These transactions are in place with respect to approximately
42% of projected 2005 fuel requirements, including 67% related
to the first quarter of 2005, 46% related to the second quarter,
36% related to the third quarter and 20% for the fourth quarter.
See
"Risk Factors Relating to the Company and Industry
Related Risks — Fluctuations in jet fuel costs could
adversely affect our operating expenses and results."
The use of such hedging transactions in the Company's fuel
hedging program could result in the Company not fully benefiting
from certain declines in heating oil futures prices. At
December 31, 2004, the Company estimates that a 10%
increase in heating oil futures prices would increase the fair
value of the costless collar transactions by approximately
$7.5 million. The Company estimates that a 10% decrease in
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heating oil futures prices would decrease the fair value of the
costless collar transactions by approximately $9.6 million.
As of March 14, 2005, approximately 45% and 2% of
AWA's remaining 2005 and 2006, respectively, projected fuel
requirements are hedged.
(b) Interest Rate Risk
The Company's exposure to interest rate risk relates
primarily to its variable rate long-term debt obligations. At
December 31, 2004, the Company's variable-rate
long-term debt obligations of approximately $545.7 million
represented approximately 69.4% of its total long-term debt. If
interest rates increased 10% in 2004, the impact on the
Company's results of operations would not be material.
Item 8A. Consolidated Financial Statements and
Supplementary Data — America West Holdings
Corporation
Consolidated balance sheets of Holdings as of December 31,
2004 and 2003, and the related consolidated statements of
operations, cash flows and stockholders' equity and
comprehensive income for each of the years in the three-year
period ended December 31, 2004, together with the related
notes and the reports of KPMG LLP, and PricewaterhouseCoopers
LLP, independent registered public accounting firms, are set
forth on the following pages.
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
America West Holdings Corporation:
We have audited the accompanying consolidated balance sheets of
America West Holdings Corporation and subsidiary as of
December 31, 2004 and 2003, and the related consolidated
statements of operations, cash flows and stockholders'
equity and comprehensive income for the years then ended. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of America West Holdings Corporation and subsidiary as
of December 31, 2004 and 2003, and the results of their
operations and their cash flows for the years then ended, in
conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of America West Holdings Corporation's
internal control over financial reporting as of
December 31, 2004, based on criteria established in
Internal Control — Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated March 11, 2005,
expressed an unqualified opinion on management's assessment
of,
and an adverse opinion on the effective operation of,
internal control over financial reporting.
As discussed in Note 2 to the accompanying consolidated
financial statements, the Company has restated the consolidated
balance sheet as of December 31, 2003 and the consolidated
statement of changes in stockholders' equity and
comprehensive income for the year then ended. As discussed in
Note 13 to the accompanying consolidated financial
statements, the Company restated its dilutive earnings per share
for the year ended December 31, 2003 in connection with the
adoption of Emerging Issue Task Force 04-8,
"The Effect
of Contingently Convertible Instruments on Diluted Earnings Per
Share"
.
KPMG LLP
Phoenix, Arizona
March 11, 2005
46
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
of America West Holdings Corporation:
In our opinion, the accompanying consolidated statements of
operations, of cash flows and of stockholders' equity and
comprehensive income for the year ended December 31, 2002
present fairly, in all material respects, the results of
operations and cash flows of America West Holdings Corporation
and its subsidiaries for the year ended December 31, 2002,
in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these
statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
As discussed in Note 1(k) to the consolidated financial
statements, the Company changed its method of accounting for
reorganization value in excess of amounts allocable to
identifiable assets in connection with the adoption of Statement
of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets,"
effective January 1, 2002.
PricewaterhouseCoopers LLP
Phoenix, Arizona
March 24, 2003
47
Table of Contents
America West Holdings Corporation
Consolidated Balance Sheets
December 31, 2004 and 2003
(in thousands except share data)
2004
2003
(As restated —
see Note 2)
ASSETS
Current assets:
Cash and cash equivalents
$
149,091
$
153,357
Short-term investments
126,651
322,615
Restricted cash
41,264
42,900
Accounts receivable, less allowance for doubtful accounts of
    $1,487 in 2004 and $5,807 in 2003
108,837
77,235
Expendable spare parts and supplies, less allowance for
    obsolescence of $14,759 in 2004 and $12,254 in 2003
57,563
58,575
Prepaid expenses
141,571
129,368
Total current assets
624,977
784,050
Property and equipment:
Flight equipment
926,930
858,395
Other property and equipment
290,897
273,284
Equipment purchase deposits
63,450
46,050
1,281,277
1,177,729
Less accumulated depreciation and amortization
624,742
570,017
656,535
607,712
Other assets:
Investments in debt securities
30,000
40,740
Restricted cash
72,091
69,876
Other assets, net
91,661
112,007
193,752
222,623
$
1,475,264
$
1,614,385
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
$
151,183
$
103,899
Current obligations under capital leases
3,475
3,442
Accounts payable
173,887
210,288
Air traffic liability
194,718
174,486
Accrued compensation and vacation benefits
42,699
61,045
Accrued taxes
32,796
36,846
Other accrued liabilities
65,958
59,277
Total current liabilities
664,716
649,283
Long-term debt, less current maturities
635,129
688,965
Capital leases, less current obligations
5,061
8,467
Deferred credits and other liabilities
133,911
141,681
Commitments and contingencies (see Note 6)
Stockholders' equity:
Preferred stock, $.01 par value. Authorized
    48,800,000 shares; no shares issued
—
—
Class A common stock, $.01 par value. Authorized
    1,200,000 shares; issued and outstanding
    859,117 shares at December 31, 2004 and 2003
8
8
Class B common stock, $.01 par value. Authorized
    100,000,000 shares; issued and outstanding
    51,564,865 shares in 2004 and 51,239,200 shares in 2003
516
512
Additional paid-in capital
632,446
631,269
Accumulated deficit
(288,617
)
(199,594
)
Less: Cost of Class B common stock in treasury,
    16,437,575 shares in 2004 and 16,283,895 shares in 2003
(307,906
)
(306,206
)
Total stockholders' equity
36,447
125,989
$
1,475,264
$
1,614,385
See accompanying Notes to Consolidated Financial Statements.
48
Table of Contents
America West Holdings Corporation
Consolidated Statements of Operations
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands except per share data)
2004
2003
2002
Operating revenues:
Passenger
$
2,196,627
$
2,113,629
$
1,929,444
Cargo
28,233
26,914
27,574
Other
114,097
113,954
90,098
Total operating revenues
2,338,957
2,254,497
2,047,116
Operating expenses:
Salaries and related costs
656,462
660,299
603,657
Aircraft rents
304,343
297,518
295,016
Other rents and landing fees
167,772
154,598
158,290
Aircraft fuel
557,098
375,996
299,284
Agency commissions
25,191
34,457
49,953
Aircraft maintenance materials and repairs
205,580
223,266
252,691
Depreciation and amortization
54,354
66,865
75,201
Special charges (credits), net
(15,432
)
14,370
19,030
Other
427,360
404,993
453,418
Total operating expenses
2,382,728
2,232,362
2,206,540
Operating income (loss)
(43,771
)
22,135
(159,424
)
Nonoperating income (expenses):
Interest income
7,597
6,262
10,549
Interest expense, net
(79,608
)
(79,665
)
(72,442
)
Federal government assistance
—
81,255
8,466
Gain (loss) on disposition of property and equipment
1,460
151
(1,852
)
Gain on sale of investments
—
10,110
—
Gain (loss) on derivative instruments, net
23,782
10,746
(656
)
Other, net
1,547
6,540
602
Total nonoperating income (expenses), net
(45,222
)
35,399
(55,333
)
Income (loss) before income taxes (benefit) and cumulative
    effect of change in accounting principle
(88,993
)
57,534
(214,757
)
Income tax expense (benefit)
30
114
(35,071
)
Income (loss) before cumulative effect of change in accounting
    principle
(89,023
)
57,420
(179,686
)
Cumulative effect of change in accounting principle
—
—
(208,223
)
Net income (loss)
$
(89,023
)
$
57,420
$
(387,909
)
Basic earnings (loss) per share:
Earnings (loss) before cumulative effect of change in accounting
    principle
$
(2.47
)
$
1.66
$
(5.33
)
Cumulative effect of change in accounting principle
—
—
(6.17
)
Basic earnings (loss) per share
$
(2.47
)
$
1.66
$
(11.50
)
Diluted earnings (loss) per share:
Earnings (loss) before cumulative effect of change in accounting
    principle
$
(2.47
)
$
1.26
$
(5.33
)
Cumulative effect of change in accounting principle
—
—
(6.17
)
Diluted earnings (loss) per share
$
(2.47
)
$
1.26
$
(11.50
)
Shares used for computation:
Basic
36,026
34,551
33,723
Diluted
36,026
56,113
33,723
See accompanying Notes to Consolidated Financial Statements.
49
Table of Contents
America West Holdings Corporation
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)
2004
2003
2002
Cash flows from operating activities:
Net income (loss)
$
(89,023
)
$
57,420
$
(387,909
)
Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:
Depreciation and amortization
54,354
66,865
75,894
Amortization of capitalized maintenance
85,590
105,076
111,576
Amortization of deferred credits
(8,208
)
(10,970
)
(10,077
)
Amortization of deferred rent
6,189
9,514
11,452
Amortization of warrants
7,155
8,100
7,708
Amortization of debt issue costs and guarantee fees
35,752
35,977
24,978
Amortization of bond discount
3,826
3,366
2,894
Amortization of investment discount and premium, net
1,435
899
—
Special charges, net
(15,432
)
14,370
19,055
Gain on sale of investment
—
(3,287
)
—
Cumulative effect of change in accounting principle
—
—
208,223
Other
28,374
7,770
16,746
Changes in operating assets and liabilities:
Decrease (increase) in restricted cash
1,636
(42,900
)
—
Decrease (increase) in accounts receivable, net
(13,337
)
(5,408
)
21,445
Decrease (increase) in expendable spare parts and supplies, net
1,012
(2,681
)
(4,061
)
Increase in prepaid expenses
(49,286
)
(45,932
)
(64,726
)
Decrease (increase) in other assets, net
82
183
5,634
Increase (decrease) in accounts payable
(35,417
)
17,945
(71,488
)
Increase (decrease) in air traffic liability
20,232
4,395
(6,894
)
Increase (decrease) in accrued compensation and vacation benefits
(18,347
)
19,796
(3,050
)
Increase (decrease) in accrued taxes
(4,050
)
1,687
(24,647
)
Increase (decrease) in other accrued liabilities
6,938
(1,689
)
28,348
Increase in other liabilities
1,299
1,294
16,022
Net cash provided by (used in) operating activities
20,774
241,790
(22,877
)
Cash flows from investing activities:
Purchases of property and equipment
(219,383
)
(154,365
)
(157,202
)
Sale of property and equipment
74
—
—
Purchases of short-term investments
(487,505
)
(633,711
)
(69,987
)
Sales of short-term investments
707,774
364,332
45,249
Purchases of investments in debt securities
(35,000
)
(80,436
)
—
Sales of investments in debt securities
20,000
10,300
—
Decrease (increase) in restricted cash
(2,215
)
(23,908
)
—
Proceeds from sales of aircraft.
—
—
175,478
Proceeds from sales of other property and equipment
32,372
25,826
122
Proceeds from sale of NLG investment
—
348
—
Net cash provided by (used in) investing activities
16,117
(491,614
)
(6,340
)
Cash flows from financing activities:
Proceeds from issuance of debt
141,354
86,828
435,386
Repayment of debt
(175,640
)
(16,832
)
(192,596
)
Payment of debt issue costs
(1,152
)
(3,236
)
(36,987
)
Other
(5,719
)
671
2,299
Net cash provided by (used in) financing activities
(41,157
)
67,431
208,102
Net increase (decrease) in cash and cash equivalents
(4,266
)
(182,393
)
178,885
Cash and cash equivalents at beginning of year
153,357
335,750
156,865
Cash and cash equivalents at end of year
$
149,091
$
153,357
$
335,750
See accompanying Notes to Consolidated Financial Statements.
50
Table of Contents
America West Holdings Corporation
Consolidated Statements of Stockholders' Equity and
Comprehensive Income
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands except share data)
Accumulated
Class A
Class B
Additional
Retained
Other
Class B
Common
Common
Paid-In
Earnings/
Comprehensive
Treasury
Stock
Stock
Capital
(Deficit)
Income
Stock
Total
Balance at December 31, 2001
$
9
$
491
$
593,784
$
130,895
$
1,390
$
(306,206
)
$
420,363
Net loss
—
—
—
(387,909
)
—
—
(387,909
)
Other comprehensive income (loss):
Changes in the fair value of derivative financial instruments,
    net of tax
—
—
—
—
640
—
640
Total comprehensive income (loss)
—
—
—
(387,909
)
640
—
(387,269
)
Issuance of warrants to purchase Class B common stock
—
—
35,384
—
—
—
35,384
Cancellation of 15,166 shares of Class B common stock
    issued as restricted stock
—
—
(300
)
—
—
—
(300
)
Balance at December 31, 2002
9
491
628,868
(257,014
)
2,030
(306,206
)
68,178
Net income
—
—
—
57,420
—
—
57,420
Correction of other comprehensive income(a)
—
—
—
—
(2,030
)
—
(2,030
)
Conversion of 82,314 shares of Class A common stock to
    Class B common stock
(1
)
1
—
—
—
—
—
Issuance of 1,653,908 shares of Class B common stock
    pursuant to the exercise of stock warrants
—
17
(17
)
—
—
—
—
Issuance of 451,525 shares of Class B common stock
    pursuant to the exercise of stock options
—
3
2,462
—
—
—
2,465
Cancellation of 3,727 shares of Class B common stock
    issued as restricted stock
—
—
(44
)
—
—
—
(44
)
Balance at December 31, 2003, as restated
8
512
631,269
(199,594
)
—
(306,206
)
125,989
Net loss
—
—
—
(89,023
)
—
—
(89,023
)
Other comprehensive loss:
Acquisition of 153,680 shares of Class B treasury
    stock due to default on loan
—
—
—
—
—
(1,700
)
(1,700
)
Issuance of 151,321 shares of Class B common stock
    pursuant to the exercise of stock warrants
—
2
—
—
—
—
2
Issuance of 174,344 shares of Class B common stock
    pursuant to the exercise of stock options
—
2
633
—
—
—
635
Accelerated vesting
—
—
544
—
—
—
544
Balance at December 31, 2004
$
8
$
516
$
632,446
$
(288,617
)
$
—
$
(307,906
)
$
36,447
(a)
Correction of Other Comprehensive Income — See
    Note 2,
"Restatement of Previously Reported
    Amounts"
See accompanying Notes to Consolidated Financial Statements.
51
Table of Contents
America West Holdings Corporation
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
America West Holdings Corporation ("Holdings" or the
"Company") is a holding company that owns all of the
stock of America West Airlines, Inc. ("AWA" or the
"Airline"). AWA accounted for most of the
Company's revenues and expenses in 2004. Based on 2004
operating revenues and available seat miles ("ASMs"),
AWA is the eighth largest passenger airline in the United States
with the lowest cost structure of the eight major hub-and-spoke
airlines. At the end of 2004, AWA operated a fleet of 138
aircraft with an average fleet age of 10.7 years and served
63 destinations in North America, including eight in Mexico,
three in Canada and one in Costa Rica. Through regional alliance
and code share arrangements with other airlines, AWA served an
additional 51 destinations in North America and the Middle East
as of December 31, 2004. In 2004, AWA flew approximately
21.1 million passengers and generated revenues of
approximately $2.3 billion. Prior to 2004, Holdings owned
the outstanding stock of The Leisure Company ("TLC"),
which sells individual and group travel packages, including air
transportation of AWA and Hawaiian Airlines, hotel
accommodations, car rentals, cruise packages and other travel
products, directly to consumers as well as through retail travel
agencies in the United States, Canada, Mexico and Costa Rica. As
of January 1, 2004, TLC has been merged into AWA and
continues to operate as the America West Vacations division of
AWA.
1.
Summary of Significant Accounting Policies
(a)
Basis of Presentation
The consolidated financial statements include the accounts of
Holdings and its wholly owned subsidiary AWA, which includes its
wholly owned subsidiary Flight Training Center Hangar Plan. All
significant intercompany balances and transactions have been
eliminated in consolidation. Certain reclassifications have been
made to the prior years' consolidated financial statements
to conform to the current year's presentation.
(b)
Cash, Cash Equivalents and Short-term Investments
Cash equivalents consist of all highly liquid debt instruments
purchased with original maturities of three months or less.
Short-term investments consist of cash invested in certain debt
securities with original maturities greater than 90 days
and less than one year. The debt securities are classified as
held to maturity and are carried at amortized cost that
approximates fair value.
The Company reclassified investments in auction rate securities
previously classified as cash equivalents to short-term
investments on the accompanying consolidated balance sheets.
Investments reclassified in 2004 and 2003 were
$58.4 million and $249.7 million, respectively.
(c)
Expendable Spare Parts and Supplies
Flight equipment expendable spare parts and supplies are valued
at average cost. An allowance for obsolescence is provided, over
the estimated useful life of the related aircraft and engines,
for spare parts expected to be on hand at the date the aircraft
are retired from service.
(d)
Property and Equipment
Property and equipment are recorded at cost. Interest
capitalized on advance payments for aircraft acquisitions and on
expenditures for aircraft improvements are part of these costs.
Interest capitalized for the years ended December 31, 2004,
2003 and 2002, was $2.2 million, $1.6 million and
$3.0 million, respectively. Property and equipment is
depreciated and amortized to residual values over the estimated
useful lives or the lease term, whichever is less, using the
straight-line method.
The estimated useful lives for the Company's ground
property and equipment range from three to 12 years for
owned property and equipment and up to 30 years for the
flight training facility. The estimated useful lives of the
Company's owned aircraft, jet engines, flight equipment and
rotable parts range from five to 25 years. Leasehold
improvements relating to flight equipment and other property on
operating leases are amortized over the life of the lease or the
life of the asset, whichever is shorter.
52
Table of Contents
The Company records impairment losses on long-lived assets used
in operations when events and circumstances indicate that the
assets might be impaired as defined by Statement of Financial
Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-Lived
Assets."
Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset
to undiscounted future net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less cost to sell.
(e)
Restricted Cash
Restricted cash includes cash deposits securing certain letters
of credit and surety bonds and cash deposits held by
institutions that process credit card sales transactions.
Current restricted cash includes amounts set aside in an
irrevocable trust for the redemption of the
10
3
/
4
% senior
unsecured notes that was subsequently paid on January 26,
2005.
(f)
Aircraft Maintenance and Repairs
Routine maintenance and repairs are charged to expense as
incurred. The cost of major scheduled airframe, engine and
certain component overhauls are capitalized and amortized over
the periods benefited and are included in aircraft maintenance
materials and repairs expense.
In the first quarter of 2004, the Company revised the estimated
useful life for certain aircraft and related spare parts
inventory as a result of changes in AWA's fleet plan and
for capitalized maintenance on certain of its engines as a
result of changes in aircraft utilization. The net impact of
this change in estimate decreased the net loss for 2004 by
approximately $18.4 million or $0.51 per basic and
diluted share.
An accrual for the estimated cost of scheduled airframe and
engine overhauls required to be performed on leased aircraft
prior to their return to the lessors has also been recorded.
These estimates are based on historical costs and our
assumptions regarding the renewal of aircraft leases.
(g)
Derivative Instruments
AWA's fuel hedging contracts do not qualify as cash flow
hedges under Statement of Financial Accounting Standards
No. 133,
"Accounting for Derivative Instruments and
Hedging Activities"
("SFAS No. 133"). See Note 2,
"Restatement of Previously Reported Amounts."
Accordingly, the derivative hedging instruments are recorded
as an asset or liability on the balance sheet at fair value and
the changes in the fair values are recorded in
"Gain
(Loss) on Derivative Instruments, Net"
in the
accompanying consolidated statements of operations. See
Note 12,
"Nonoperating Income
(Expenses) — Other, Net."
(h)
Frequent Flyer Awards
The Company maintains a frequent travel award program known as
"FlightFund" that provides a variety of awards to
program members based on accumulated mileage. The estimated cost
of providing the free travel, using the incremental cost method
as adjusted for estimated redemption rates, is recognized as a
liability and charged to operations as program members
accumulate mileage.
The Company also sells mileage credits to companies
participating in its FlightFund program, such as hotels, car
rental agencies and credit card companies.
Transportation-related revenue from the sale of mileage credits
is deferred and recognized when transportation is provided.
(i)
Deferred Credits — Operating Leases
Rents for operating leases were adjusted to fair market value
when the Company emerged from bankruptcy in 1994. The net
present value of the difference between the stated lease rates
and the fair market rates has been recorded as a deferred credit
in the accompanying consolidated balance sheets. The deferred
credit will be increased through charges to interest expense and
decreased on a straight-line basis as a reduction in rent
expense over the applicable lease periods. At December 31,
2004 and 2003, the unamortized balance of the deferred credit
was $38.3 million and $44.6 million, respectively.
53
Table of Contents
In January 2002, AWA closed a $429 million loan supported
by a $380 million government loan guarantee. This loan
triggered aircraft rent concessions negotiated with
approximately 20 aircraft lessors. Approximately
$18.1 million of aircraft rent, which was accrued as of
December 31, 2001, was waived by the aircraft lessors. This
amount has been recorded as a deferred credit in the
accompanying consolidated balance sheet and will be amortized
over the remaining lives of the applicable leases as a reduction
in rent expense. At December 31, 2004 and 2003, the
unamortized balance of the deferred credit was approximately
$4.2 million and $7.8 million, respectively.
(j)
Passenger Revenue
Passenger revenue is recognized when transportation is provided.
Ticket sales for transportation that has not yet been provided
are recorded as air traffic liability. Passenger traffic
commissions and related fees are expensed when the related
revenue is recognized. Due to complex pricing structures, refund
and exchange policies, and interline agreements with other
airlines, certain amounts are recognized in revenue using
estimates regarding both the timing of the revenue recognition
and the amount of revenue to be recognized. These estimates are
generally based on the statistical analysis of the
Company's historical data. Any adjustments resulting from
periodic evaluations of the estimated air traffic liability are
included in results of operations during the period in which the
evaluations are completed.
(k)
Reorganization Value in Excess of Amounts Allocable to
    Identifiable Assets ("ERV")
In June 2001, the Financial Accounting Standards Board
("FASB") issued SFAS No. 142,
"Goodwill and Other Intangible Assets."
SFAS No. 142 primarily addresses the accounting
for goodwill and intangible assets subsequent to their
acquisition. SFAS No. 142 does not permit the
amortization of goodwill as required by Accounting Principles
Board ("APB") Opinion No. 17,
"Intangible
Assets."
Rather, goodwill is subject to a periodic
impairment test, using a two-step process. The first step is to
identify a potential impairment. The second step of the goodwill
impairment test measures the amount of the impairment loss,
using a fair value-based approach. Under SFAS No. 142,
ERV is reported as goodwill and accounted for in the same manner
as goodwill. SFAS No. 142 was effective for fiscal
years beginning after December 15, 2001. Upon adoption of
this statement on January 1, 2002, the Company recorded an
impairment loss of $208.2 million, which was supported by
an independent valuation of the Company. The impairment loss was
recorded as the cumulative effect of a change in accounting
principle.
(l)
Advertising Costs
The Company expenses the costs of advertising as incurred.
Advertising expense for the years ended December 31, 2004,
2003 and 2002 was $8.3 million, $9.0 million and
$10.6 million, respectively.
(m)
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. A valuation allowance is
established, if necessary, for the amount of any tax benefits
that, based on available evidence, are not expected to be
realized.
(n)
Stock Options
At December 31, 2004, the Company had two stock-based
employee compensation plans, which are described more fully in
Note 9,
"Stock Options and Awards."
The
Company accounts for its stock option plans in accordance with
the provisions of APB Opinion No. 25,
"Accounting
for Stock Issued to Employees,"
and related
interpretations. As such, compensation expense would be recorded
on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. Accordingly, no
compensation cost has been recognized for stock options in the
consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for
its stock options under
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Table of Contents
SFAS No. 123,
"Accounting for Share-Based
Payment,"
the Company's net income (loss) and
earnings (loss) per share would have been reduced to the pro
forma amounts indicated below:
2004
2003
2002
(in thousands except per share data)
Net income (loss), as reported
$
(89,023
)
$
57,420
$
(387,909
)
Stock-based compensation expense, net of income taxes
(5,874
)
(4,320
)
(3,709
)
Pro forma net income (loss)
$
(94,897
)
$
53,100
$
(391,618
)
Earnings (loss) per share:
Basic — as reported
$
(2.47
)
$
1.66
$
(11.50
)
Basic — pro forma
$
(2.63
)
$
1.54
$
(11.61
)
Diluted — as reported
$
(2.47
)
$
1.26
$
(11.50
)
Diluted — pro forma
$
(2.63
)
$
1.19
$
(11.61
)
(o)
New Accounting Standards
In November 2004, the Emerging Issues Task Force
("EITF") of the FASB reached a consensus on
EITF 04-08,
"The Effect of Contingently Convertible
Instruments on Diluted Earnings per Share,"
which
requires that issuers of convertible securities with contingent
conversion features use the "if-converted" method to
calculate reported earnings per share ("EPS")
irrespective of the contingent conversion trigger being met. As
approved by the FASB, this change is effective for years ending
after December 15, 2004. The Company applied this
methodology in the accompanying consolidated statement of
operations. The impact of using the "if-converted"
method for the Company's 7.25% Notes is antidilutive
for the years ended December 31, 2004 and 2002. For the
year ended December 31, 2003, the inclusion of the
7.25% Notes reduced diluted EPS by $0.03 from $1.29 to
$1.26.
In November 2004, the FASB issued Revised Statement
No. 123,
"Accounting for Share-Based Payment"
("SFAS No. 123R"). This statement
requires the Company to recognize the grant-date fair value of
stock options in the Statement of Operations. In addition, the
Company will be required to calculate this compensation using
the fair-value based method, versus the intrinsic value method
previously allowed under SFAS No. 123. This revision
is effective for periods beginning after June 15, 2005.
Accordingly, the Company will adopt this revised SFAS effective
July 1, 2005. The Company is currently evaluating how it
will adopt SFAS No. 123R and has not determined the
method it will use to value granted stock options. The adoption
of SFAS No. 123R is expected to have a material effect
on the Company's results of operations. See Note 1,
"Summary of Significant Accounting Policies"
(n)
"Stock Options"
for the Company's
disclosure of the impact of the compensation cost associated
with stock options under SFAS No. 123.
(p)
Use of Estimates
Management of the Company has made certain estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to
prepare these consolidated financial statements in conformity
with accounting principles generally accepted in the United
States. Actual results could differ from those estimates.
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Table of Contents
(q)
Reclassifications
The Company reclassified amounts related to settled fuel hedge
transactions and mark-to-market adjustments on open hedge
instruments from
"Aircraft Fuel"
expense to
"Gain (Loss) on Derivative Instruments, Net"
in
the accompanying consolidated statement of operations. In fiscal
years 2004 and 2003, such amounts reduced fuel expense while in
fiscal years 2002 and 2001, such amounts increased fuel expense,
as originally classified. The amounts reclassified are as
follows:
Fiscal Year
Amounts Reclassified
(in thousands)
2004
$
30,529
2003
10,746
2002
(656
)
2.
Restatement of Previously Reported Amounts
Derivative Instruments
In February 2005, management undertook a review of the
Company's accounting for its fuel hedging transactions. As
a result of this review, management concluded that the
Company's fuel hedging transactions did not qualify for
hedge accounting under U.S. generally accepted accounting
principles. Accordingly, management concluded that the financial
statements for prior periods required restatement to reflect the
fair value of fuel hedging contracts in the balance sheets and
statements of stockholders equity and comprehensive income of
Holdings and AWA. Specifically, (i) Holdings has restated
its balance sheet and statement of stockholders' equity and
comprehensive income as of and for the year ended
December 31, 2003, and (ii) AWA has restated its
balance sheet and statement of stockholder's equity and
comprehensive income as of and for the year ended
December 31, 2003, and (iii) Holdings and AWA have
restated their 2004 and 2003 interim financial results to
correct the aforementioned accounting errors. The unaudited
interim results as originally reported and as restated are
presented in Note 16,
"Quarterly Financial Data
(Unaudited)."
The Company restated its 2003
consolidated balance sheet to reduce the carrying value of its
derivative instruments asset by $12.5 million, which served
to record the asset at fair value of open contracts as of
December 31, 2003. The restatement also eliminated
$12.5 million in accumulated other comprehensive income,
$2.0 million of which was previously recorded in the 2003
beginning balance of accumulated other comprehensive income. The
restated amount of other assets is $112 million in the
accompanying 2003 consolidated balance sheet. The restatement
eliminates the balance in accumulated other comprehensive income
in the accompanying 2003 consolidated balance sheet and
consolidated statement of stockholders' equity and
comprehensive income.
3.
Investments in Debt Securities
Cash equivalents and short-term investments as of
December 31 are classified as follows:
2004
2003
(in thousands)
Cash and cash equivalents:
Corporate notes
$
—
$
4,206
Cash and money market funds
147,586
147,647
U.S. government securities
1,505
1,504
Total cash and cash equivalents
$
149,091
$
153,357
Short-term investments:
Corporate notes
$
126,651
$
318,845
U.S. government securities
—
3,770
Total short-term investments
126,651
322,615
Total cash equivalents and short-term investments
$
275,742
$
475,972
In addition, the Company had long-term investments in debt
securities of $30.0 million and $40.7 million as of
December 31, 2004 and 2003, respectively. Long-term
investments consist of cash
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Table of Contents
invested in certain debt securities with maturities greater than
one year. The debt securities are classified as held to maturity
and are carried at amortized cost that approximates fair value.
4.
Financial Instruments and Risk Management
(a)
Fair Value of Financial Instruments
Cash Equivalents, Short-term Investments and
    Receivables
The carrying amount approximates fair value because of the
short-term nature of these instruments.
Investments in Equity Securities
In May 2000, Holdings completed the sale of a majority interest
in The Leisure Company, ("TLC"), currently operating
as a division in AWA as America West Vacations, retail
operations, National Leisure Group and The Vacation Store, to
Softbank Capital Partners and General Catalyst LLC. TLC received
$52 million in cash and retained a 12% passive ownership
interest in the restructured venture. In response to additional
capital calls, TLC invested an additional $1.2 million in
National Leisure Group during 2001. The investment was carried
on the Company's consolidated balance sheet at cost, which
approximated $7.7 million at December 31, 2002. In the
fourth quarter of 2003, Holdings completed the sale of its 12%
interest in National Leisure Group to PAR Capital. PAR Capital
owned $10.45 million face value of the Company's
10
3
/
4
% senior
unsecured notes. PAR Capital purchased the Company's
investment in National Leisure Group in exchange for the
$10.45 million face value of the
10
3
/
4
% notes
plus $0.3 million in cash. This resulted in a
$3.3 million nonoperating gain. See Note 12,
"Nonoperating Income (Expenses) — Other,
Net."
Long-term Debt
At December 31, 2004 and 2003, the fair value of long-term
debt was approximately $721.5 million and
$845.6 million, respectively. The Company's variable
rate long-term debt with a carrying value of $545.7 million
and $555.9 million at December 31, 2004 and 2003,
respectively, approximates fair value because these borrowings
have variable interest rate terms that approximate market
interest rates for similar debt instruments. The fair values of
the Company's other long-term debt are determined based on
quoted market prices if available or market prices for
comparable debt instruments.
(b)
Fuel Price Risk Management
Under its fuel hedging program, the Company may enter into
certain hedging transactions with approved counterparties for a
period generally not exceeding 12 months. As of
December 31, 2004, the Company had entered into costless
collar and basis swap transactions hedging approximately 42% of
its projected 2005 fuel requirements. The fair value of the
Company's financial derivative instruments was a net asset
of approximately $0.2 million and $2.7 million at
December 31, 2004 and 2003, respectively. See Note 2,
"Restatement of Previously Reported Amounts."
The Company is exposed to credit risks in the event any
counterparty fails to meet its obligations. The Company does not
anticipate such non-performance as counterparties are selected
based on credit ratings, exposure to any one counterparty is
limited based on formal guidelines and the relative market
positions with such counterparties are closely monitored.
(c)
Concentration of Credit Risk
The Company does not believe it is subject to any significant
concentration of credit risk. Most of the Company's
receivables result from tickets sold to individual passengers
through the use of major credit cards or from tickets sold by
other airlines and used by passengers on AWA. These receivables
are short-term, generally being settled shortly after the sale.
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Table of Contents
5.
Long-Term Debt
Long-term debt at December 31, 2004 and 2003 consists of
the following:
2004
2003
(in thousands)
Secured
Equipment notes payable, variable interest rates of 2.88% to
    3.37%, averaging 2.96%, installments due 2005 through 2008
$
39,464
$
48,454
GECC term loan, variable interest rate of 6.41%, quarterly
    installments beginning 2006 through 2010(a)
110,564
—
Term loan, variable interest rate, paid off September 2004(a)
—
74,775
Senior secured discount notes, variable interest rate of 6.42%,
    installments due 2005 through 2009(b)
35,988
—
186,016
123,229
Unsecured
Government guaranteed loan, variable interest rate of 2.38%,
    installments due 2005 through 2008(c)
343,200
429,000
10
3
/
4
% senior
    unsecured notes, interest only payments until due in 2005(d)
39,548
39,548
7.5% convertible senior notes, interest only payments until
    due in 2009(e)
112,299
104,328
7.25% senior exchangeable notes, due 2023 with cash
    interest at 2.49% payable through 2008 and original issue
    discount of 7.25% thereafter(f)
252,695
252,695
Equipment notes payable, interest rates of 90-day LIBOR +1.25%,
    averaging 3.61%, installments due through 2005
15,750
5,250
Industrial development bonds, fixed interest rate of 6.3% due
    2023(g)
29,300
29,300
State loan, variable interest rate of 5.97%, installments due
    2005 through 2007
750
1,500
793,542
861,621
Total long-term debt
979,558
984,850
Less: Unamortized discount on debt
(193,246
)
(191,986
)
Current maturities
(151,183
)
(103,899
)
$
635,129
$
688,965
(a)
On September 10, 2004, AWA entered into a term loan
    financing with GECC providing for loans in an aggregate amount
    of $110.6 million. AWA used approximately
    $77.0 million of the proceeds from this financing to repay
    in full its term loan with Mizuho Corporate Bank, Ltd. and
    certain other lenders and to pay certain costs associated with
    this transaction. AWA used the remaining proceeds for general
    corporate purposes. The new term loan financing consists of two
    secured term loan facilities: a $75.6 million term loan
    facility secured primarily by spare parts, rotables and
    appliances (the "Spare Parts Facility"); and a
    $35.0 million term loan facility secured primarily by
    aircraft engines and parts installed in such engines (the
    "Engine Facility").
The facilities are cross-collateralized on a subordinated basis
    and the collateral securing the facilities also secures on a
    subordinated basis certain of AWA's other existing debt and
    lease obligations to GECC and its affiliates.
The loans under the Spare Parts Facility are payable in full at
    maturity on September 10, 2010. The loans under the Engine
    Facility are payable in equal quarterly installments of
    $1.3 million beginning on March 10, 2006 through
    June 10, 2010 with the remaining loan amount of
    $11.8 million payable at maturity on September 10,
    2010. The loans under each facility may be prepaid in an amount
    not less than $5 million at any time after the 30th monthly
    anniversary of the funding date under such facility. If AWA
    fails to maintain a certain ratio of rotables to loans under the
    Spare Parts Facility, it may be required to pledge additional
    rotables or cash as collateral, provide a letter of credit or
    prepay some or all of the loans under the Spare Parts Facility.
    In addition, the loans under the Engine Facility are subject to
    mandatory prepayment upon the occurrence of certain events of
    loss applicable to, or certain dispositions of, aircraft engines
    securing the facility.
Principal amounts outstanding under the loans bear interest at a
    rate per annum based on three-month LIBOR plus a margin. Both
    facilities contain customary events of default, including
    payment defaults, cross-defaults, breach of covenants,
    bankruptcy and insolvency defaults and judgment defaults.
(b)
On December 27, 2004, AWA raised additional capital by
    financing its Phoenix maintenance facility and flight training
    center. The flight training center was previously unencumbered,
    and the maintenance facility became unencumbered earlier this
    year when AWA refinanced its term loan. Using its leasehold
    interest these two facilities as collateral, AWA, through a
    wholly owned subsidiary named FTCHP LLC, raised
    $30.8 million through the issuance of a senior secured
    discount notes. The notes were issued by FTCHP at a discount
    pursuant to the terms of a senior secured term loan agreement
    among the Company, FTCHP, Heritage Bank, SSB, as
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Table of Contents
administrative agent, Citibank, N.A., as the initial lender, and
    the other lenders from time to time party thereto. Citibank,
    N.A. subsequently assigned all of its interests in the notes to
    third party lenders.
AWA has fully and unconditionally guaranteed the payment and
    performance of FTCHP's obligations under the notes and the
    loan agreement. The notes require aggregate principal payments
    of $36 million with principal payments of $1.5 million
    due on each of the first two anniversary dates and the remaining
    principal amount due on the fifth anniversary date. The notes
    may be prepaid in full at any time (subject to customary LIBOR
    breakage costs) and in partial amounts of $1.5 million on
    the third and fourth anniversary dates. The unpaid principal
    amount of the notes bears interest based on LIBOR plus a margin
    subject to adjustment based on a loan to collateral value ratio.
The loan agreement contains customary covenants applicable to
    loans of this type, including obligations relating to the
    preservation of the collateral and restrictions on the
    activities of FTCHP. In addition, the loan agreement contains
    events of default, including payment defaults, cross-defaults to
    other debt of FTCHP, if any, breach of covenants, bankruptcy and
    insolvency defaults and judgment defaults.
In connection with this financing, AWA sold all of its leasehold
    interests in the maintenance facility and flight training center
    to FTCHP and entered into subleases for the facilities with
    FTCHP at lease rates expected to approximate the interest
    payments due under the notes. In addition, AWA agreed to make
    future capital contributions to FTCHP in amounts sufficient to
    cover principal payments and other amounts owing pursuant to the
    notes and the loan agreement.
The proceeds from this financing, together with
    $10.5 million from operating cash flow, were irrevocably
    deposited with the trustee for AWA's
    10
3
/
4
% senior
    unsecured notes due 2005 and subsequently redeemed on
    January 26, 2005.
(c)
In January 2002, AWA closed a $429 million loan backed by a
    $380 million federal loan guarantee provided by the Air
    Transportation Stabilization Board (the "ATSB").
    Certain third-party counter-guarantors have fully and
    unconditionally guaranteed the payment of an aggregate of
    $45 million of the outstanding principal amount under the
    government guaranteed loan plus accrued and unpaid interest
    thereon. In addition, Holdings has fully and unconditionally
    guaranteed the payment of all principal, premium, interest and
    other obligations outstanding under the government guaranteed
    loan and has pledged the stock of AWA to secure its obligations
    under such guarantee. Principal amounts under this loan become
    due in ten installments of $42.9 million on each
    March 31 and September 30, commencing on
    March 31, 2004 and ending on September 30, 2008.
    Principal amounts outstanding under the government guaranteed
    loan bear interest at a rate per annum equal to LIBOR plus
    40 basis points.
Subject to certain exceptions, AWA is required to prepay the
    government guaranteed loan with:
•                          the
    net proceeds of all issuances of debt or equity by either
    Holdings or AWA after January 2002;
•                          proceeds
    from asset sales in excess of $20 million in any fiscal
    year; and
•                          insurance
    proceeds in excess of $2 million to the extent such
    proceeds are not used to restore or replace the assets from
    which such proceeds are derived.
In addition, AWA is required to prepay the government guaranteed
    loan upon a change in control and we may be required to prepay
    portions of the loan if our employee compensation costs exceed a
    certain threshold. AWA may, at its option, prepay the government
    guaranteed loan without premium or penalty, subject to
    reimbursement of the lenders' breakage costs in the case of
    prepayment of LIBOR loans.
The government guaranteed loan requires that AWA maintain a
    minimum cash balance of $100 million. In addition, the
    government loan contains customary affirmative covenants and the
    following negative covenants: restrictions on liens,
    investments, restricted payments, fundamental changes, asset
    sales and acquisitions, the creation of new subsidiaries, sale
    and leasebacks, transactions with affiliates, the conduct of
    business, mergers or consolidations, issuances and dispositions
    of capital stock of subsidiaries, and amendments to other
    indebtedness. The government guaranteed loan contains customary
    events of default, including payment defaults, cross-defaults,
    breach of covenants, bankruptcy and insolvency defaults and
    judgment defaults.
(d)
In August 1995, AWA issued $75.0 million principal amount
    of
    10
3
/
4
% senior
    unsecured notes due 2005 of which $39.5 million remained
    outstanding at December 31, 2004. Interest on the
    10
3
/
4
% senior
    unsecured notes is payable semiannually in arrears on
    March 1 and September 1 of each year. On
    December 27, 2004, AWA called for the redemption on
    January 26, 2005 of all of the senior unsecured notes at a
    redemption price of 100% of the principal amount thereof plus
    accrued and unpaid interest through the redemption date. In
    addition, AWA irrevocably deposited the $30.8 million
    raised through the maintenance facility and flight training
    center financing, together with an additional $10.5 million
    from its operating cash flow, with the trustee for the senior
    unsecured notes. The senior notes were subsequently redeemed on
    January 26, 2005.
(e)
In connection with the closing of the government guaranteed loan
    and the related transactions, Holdings issued
    $104.5 million of 7.5% convertible senior notes due
    2009, of which approximately $112.3 million remained
    outstanding at December 31, 2004 (including
    $21.6 million of interest paid through December 31,
    2004 as a deemed loan added to the initial principal thereof).
    Beginning January 18, 2005, these notes are convertible
    into shares of class B common stock, at the option of the
    holders, at an initial conversion price of $12.00 per share
    or a conversion ratio of approximately 83.333 shares per
    $1,000 principal amount of such notes, subject to standard
    anti-dilution adjustments. Interest on the 7.5% convertible
    senior notes is payable semiannually in arrears on June 1
    and December 1 of each year. At Holdings' option, the
    first six interest payments were payable in the form of a deemed
    loan added to the principal amount of these notes. The
    7.5% convertible senior notes will mature on
    January 18, 2009 unless earlier converted or redeemed. The
    payment of principal, premium and interest on the
    7.5% convertible senior notes is fully and unconditionally
    guaranteed by AWA.
Holdings may redeem some or all of the 7.5% convertible
    senior notes at any time before January 18, 2005, at a
    redemption price equal to $1,000 per note to be redeemed if
    (A) the closing price of the class B common stock has
    exceeded 120% of the conversion
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Table of Contents
price then in effect for at least 20 trading days within a
    period of 30 consecutive trading days ending on the trading day
    before the date of the mailing of the redemption notice, and
    (B) a shelf registration statement covering resales of the
    notes and the class B common stock issuable upon conversion
    thereof is effective and available for use and is expected to
    remain effective and available for use for the 30 days
    following the redemption date, unless registration is no longer
    required. Holdings may redeem the 7.5% convertible senior
    notes, in whole or in part, on or after January 18, 2005 at
    the following redemption prices (expressed as percentages of the
    principal amount thereof), if redeemed during the twelve- month
    period commencing on January 18 of the years set forth below,
    plus, in each case, accrued and unpaid interest, if any, to the
    date of redemption:
Year
Redemption Price
2005
103.75
%
2006
102.50
%
2007
101.25
%
2008 and thereafter
100.00
%
For financial reporting purposes, the Company recorded the
    convertible senior notes at their fair market value on the date
    of issuance. The balance at December 31, 2004 is net of an
    unamortized discount of $22.2 million.
(f)
In July and August of 2003, AWA completed a private placement of
    approximately $86.8 million issue price of
    7.25% Senior Exchangeable Notes due 2023. The notes bear
    cash interest at 2.49% per year until July 30, 2008.
    Thereafter, the notes will cease bearing cash interest and begin
    accruing original issue discount daily at a rate of
    7.25% per year until maturity. Each note was issued at a
    price of $343.61 and is exchangeable for class B common
    stock of Holdings at an exchange ratio of 32.038 shares per
    $1,000 principal amount at maturity of the notes (subject to
    adjustment in certain circumstances). This represents an
    equivalent conversion price of approximately $10.73 per
    share. The aggregate amount due at maturity, including accrued
    original issue discount from July 31, 2008, will be
    $252,695,000. The notes are unconditionally guaranteed on a
    senior unsecured basis by Holdings.
Holders may exchange their notes for the shares of class B
    common stock of Holdings in any fiscal quarter commencing after
    September 30, 2003, if, as of the last day of the preceding
    fiscal quarter, the closing sale price of the class B
    common stock for at least 20 trading days in a period of 30
    consecutive trading days ending on the last trading day of such
    preceding fiscal quarter is more than 110% of the accreted
    exchange price per share of Class B common stock on the
    last day of such preceding fiscal quarter. If the foregoing
    condition is satisfied, then the notes will be exchangeable at
    any time at the option of the holder through maturity. The
    accreted exchange price per share as of any day will equal the
    issue price of a note plus accrued original issue discount to
    that day divided by 32.038, subject to any adjustments to the
    exchange rate through that day.
On or before July 30, 2018, a holder also may exchange its
    notes for shares of the Class B common stock at any time
    after a 10 consecutive trading-day period in which the average
    of the trading prices for the notes for that 10 trading-day
    period was less than 103% of the average exchange value for the
    notes during that period. Exchange value is equal to the product
    of the closing sale price for the shares of Class B common
    stock on a given day multiplied by the then current exchange
    rate, which is the number of shares of Class B common stock
    for which each note is then exchangeable. In addition, the
    holders may exchange the notes if the notes have been called for
    redemption or if certain specified corporate transactions have
    occurred.
Holders of the notes may require AWA to repurchase the notes at
    a price equal to the original issue price plus accrued cash
    interest and original issue discount, if any, on July 30,
    2008, 2013 and 2018. The purchase price of such notes may be
    paid in cash or class B common stock of Holdings, subject
    to certain restrictions. In addition, each holder may require
    AWA to purchase all or a portion of such holder's notes
    upon the occurrence of certain change of control events
    concerning AWA or Holdings. AWA may redeem the notes, in whole
    or in part, on or after July 30, 2008 at a price equal to
    the original issue price plus accrued cash interest and original
    issue discount, if any.
(g)
The industrial development revenue bonds are due April 2023.
    Interest at 6.3% is payable semiannually (April 1 and
    October 1). The bonds are subject to optional redemption prior
    to the maturity date on or after April 1, 2008, in whole or
    in part, on any interest payment date at the following
    redemption prices: 102% on April 1 or October 1, 2008;
    101% on April 1 or October 1, 2009; and 100% on
    April 1, 2010 and thereafter.
Secured financings totaling $186.0 million are
collateralized by assets, primarily aircraft, engines,
simulators, rotable aircraft parts and AWA's hangar
facility, with a net book value of $268.4 million at
December 31, 2004.
At December 31, 2004, the estimated maturities of long-term
debt are as follows:
(in thousands)
2005
151,183
2006
101,042
2007
100,509
2008
107,570
2009
147,327
Thereafter
371,927
$
979,558
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Certain of the Company's long-term debt agreements contain
minimum cash balance requirements and other covenants with which
Holdings and AWA are in compliance. Certain of these covenants
restrict the Company's ability to pay cash dividends on its
common stock and make certain other restricted payments (as
specified therein). Finally, AWA's long-term debt
agreements contain cross-default provisions, which may be
triggered by defaults by AWA under other agreements relating to
indebtedness.
6.
Commitments and Contingencies
(a)
Leases
As of December 31, 2004, the Company had 136 aircraft under
operating leases, including four aircraft that will be delivered
in 2005, with remaining terms ranging from five months to
approximately 19 years. In January 2002, in connection with
the government guaranteed loan, AWA restructured its aircraft
lease commitments. Under the restructured lease agreements,
annual rent payments have been reduced for each of the next five
years. Certain of these leases contain put options pursuant to
which the lessors could require AWA to renew the leases for
periods ranging from eight months to approximately nine years or
call options pursuant to which the lessors could require AWA to
return the aircraft to the lessors upon receipt of six to nine
months written notice. The Company also has options to purchase
certain of the aircraft at fair market values at the end of the
lease terms. Certain of the agreements require security
deposits, minimum return provisions and supplemental rent
payments.
Since AWA's restructuring in 1994, AWA has set up 19 pass
through trusts, which have issued over $1.4 billion of pass
through trust certificates (also known as "Enhanced
Equipment Trust Certificates" or "EETC")
covering the financing of 54 aircraft. These trusts are
off-balance sheet entities, the primary purpose of which is to
finance the acquisition of aircraft. Rather than finance each
aircraft separately when such aircraft is purchased or
delivered, these trusts allow the Company to raise the financing
for several aircraft at one time and place such funds in escrow
pending the purchase or delivery of the relevant aircraft. The
trusts are also structured to provide for certain credit
enhancements, such as liquidity facilities to cover certain
interest payments, that reduce the risks to the purchasers of
the trust certificates and, as a result, reduce the cost of
aircraft financings to AWA.
Each trust covered a set amount of aircraft scheduled to be
delivered within a specific period of time. At the time of each
covered aircraft financing, the relevant trust used the funds in
escrow to purchase equipment notes relating to the financed
aircraft. The equipment notes were issued, at AWA's
election, either by AWA in connection with a mortgage financing
of the aircraft or by a separate owner trust in connection with
a leveraged lease financing of the aircraft. In the case of a
leveraged lease financing, the owner trust then leased the
aircraft to AWA. In both cases, the equipment notes are secured
by a security interest in the aircraft. The pass through trust
certificates are not direct obligations of, nor guaranteed by,
Holdings or AWA. However, in the case of mortgage financings,
the equipment notes issued to the trusts are direct obligations
of AWA and in the case of leveraged lease financings, the leases
are direct obligations of AWA. In addition, neither Holdings nor
AWA guarantee or participate in any way in the residual value of
the leased aircraft. All aircraft financed by these trusts are
currently structured as leveraged lease financings, which are
not reflected as debt on the balance sheets of either AWA or
Holdings. The Company does not provide residual value guarantees
under these lease arrangements. Each lease contains a purchase
option that allows the Company to purchase the aircraft at a
fixed price, which at the inception of the lease approximated
the aircraft's expected fair market value at the option
date, near the end of the lease term. These leasing entities
meet the criteria for variable interest entities. However, they
do not meet the consolidation criteria under FASB Interpretation
No. 46,
"Consolidation of Variable Interest
Entities,"
because the Company is not the primary
beneficiary under these arrangements.
As a result of the rent restructuring associated with the
government guaranteed loan, one aircraft lease was amended to
include a bargain purchase option. As a result, this lease has
been classified as a capital lease in accordance with
SFAS No. 13,
"Accounting for Leases,"
as amended, with an asset value of $14.8 million which
includes accumulated amortization of $2.1 million and
corresponding lease obligation of $8.5 million at
December 31, 2004.
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In January 2004, one aircraft lessor exercised its put rights
under the aircraft lease agreement to extend the lease for one
Boeing 737-300 aircraft for an additional 33 months.
The Company also leases certain terminal space, ground
facilities and computer and other equipment under noncancelable
operating leases.
At December 31, 2004, the scheduled future minimum cash
rental payments under capital leases and noncancelable operating
leases with initial terms of more than one year are as follows:
Capital
Operating
Years Ending December 31,
Leases
Leases
(in thousands)
2005
$
4,659
$
361,671
2006
4,988
335,412
2007
1,773
314,892
2008
—
264,017
2009
—
238,074
Thereafter
—
1,719,934
Total minimum lease payments
11,420
$
3,234,000
Less: Amounts of lease payments that represent interest
(2,884
)
Present value of future minimum capital lease payments
8,536
Less: Current obligations under capital leases
(3,475
)
Long-term capital lease obligations
$
5,061
Rent expense (excluding landing fees) was approximately
$421.1 million, $406.8 million and $409.4 million
for the years ended December 31, 2004, 2003 and 2002,
respectively.
Collectively, the operating lease agreements require security
deposits with lessors of $24.0 million, which have been
classified as
"Other Assets, Net"
in the
accompanying consolidated balance sheets, and bank letters of
credit of $13.8 million. The letters of credit are
collateralized by $13.9 million of restricted cash.
(b)
Revenue Bonds
In June 1999, Series 1999 special facility revenue bonds
("new bonds") were issued by a municipality to fund
the retirement of the Series 1994A bonds ("old
bonds") and the construction of a new concourse with 14
gates at Terminal 4 in Phoenix Sky Harbor International Airport
in support of AWA's strategic growth plan. The new bonds
are due June 2019 with interest accruing at 6.25% per annum
payable semiannually on June 1 and December 1,
commencing on December 1, 1999. The new bonds are subject
to optional redemption prior to the maturity date on or after
June 1, 2009 in whole or in part, on any interest payment
date at the following redemption prices: 101% on June 1 or
December 1, 2009; 100.5% on June 1 or December 1,
2010; and 100% on June 1, 2011 and thereafter. In
accordance with EITF Issue No. 97-10,
"The Effect
of Lessee Involvement in Asset Construction,"
the
Company accounts for this as an operating lease.
In connection with these bonds, AWA entered into an Amended and
Restated Airport Use Agreement, pursuant to which AWA agreed to
make sufficient payments to the Industrial Development Authority
("IDA") to cover the principal and interest of the
bonds and to indemnify the IDA for any claims arising out of the
issuance and sale of the bonds and the use and occupancy of the
concourses financed by these bonds and the old bonds. At
December 31, 2004, the outstanding principal amount of the
bonds was $21.8 million. The Company estimates its
remaining payments to cover the principal and interest of these
bonds will be approximately $43.6 million.
In addition, the Company is also the lessee under certain
long-term leases at various airports. At certain of these
airports, municipalities have issued revenue bonds to improve
airport facilities that are leased by the Company and accounted
for as operating leases. The Company does not guarantee the
underlying debt related to these operating leases.
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(c)
Aircraft Acquisitions
In August 2004, AWA amended its aircraft purchase contract with
AVSA S.A.R.L., an affiliate of Airbus Industrie or
"AVSA," to acquire 22 Airbus A320 family aircraft
(thirteen A320s and nine A319s), all powered by V2500 engines
from International Aero Engines. Of the 22 aircraft, it is
anticipated that 18 will be purchased directly from the
manufacturer and four have been leased under noncancelable
leases from various lessors for aircraft to be delivered in
2005. In the context of this incremental order, AWA also secured
extensive flexibility from Airbus with respect to its existing
A318 order, allowing AWA to better react to market conditions by
enabling it to amend its 15 A318 delivery positions to A319s and
A320s, if it so desires, or to take no additional aircraft under
certain conditions.
The Company has an agreement with International Aero Engines or
"IAE," which provides for the purchase by the Company
of seven new V2500-A5 spare engines scheduled for delivery
through 2007 for use on certain of the Airbus A320 fleet. At
December 31, 2004, the seven engines have an estimated
gross cost of $39 million.
The following table reflects estimated net cash payments under
the restructured aircraft purchase agreement with AVSA and the
IAE engine contract. Actual payments may vary due to inflation
factor adjustments and changes in the delivery schedule of the
equipment.
(in thousands)
2005
$
272,820
2006
456,891
2007
47,697
$
777,408
(d)
Sale-Leaseback Transactions
In the fourth quarter of 2004, the Company completed two
separate aircraft sale-leaseback transactions on one Airbus A320
aircraft and one Airbus A319 aircraft resulting in a combined
loss of $4.6 million. This amount was recorded in
"Other Operating Expenses."
In May 2004, the Company completed a sale-leaseback transaction
on one V2500-A5 engine resulting in a gain of $2.9 million
which has been deferred and will be amortized over the lease
term of seven years.
In July 2004, the Company completed a sale-leaseback transaction
on one V2500-A5 engine resulting in a gain of $0.8 million
which has been deferred and will be amortized over the lease
term of seven years.
As part of the restructuring completed on January 18, 2002,
AWA committed to the sale and leaseback of eight aircraft. The
sales and leaseback of six of these aircraft were completed in
2002 and resulted in losses of approximately $3.8 million.
The sale and leaseback of one aircraft was completed in June
2003 and resulted in a loss of approximately $0.6 million.
The sale and leaseback of the final aircraft was completed in
September 2003 and resulted in a loss of approximately
$0.7 million. The losses on the sale-leaseback
transactions, which were subject to a firm commitment in January
2002, were accrued in the accompanying consolidated statements
of operations classified in
"Special Charges"
in the first quarter of 2002. See Note 11,
"Special Charges."
(e)
Contingent Legal Obligations
Holdings and its subsidiaries are parties to various legal
proceedings, including some purporting to be class action suits,
and some that demand large monetary damages or other relief,
which, if granted, would require significant expenditures. In
certain cases where it is probable that the outcome will result
in monetary damages, the Company has reviewed available
information and determined that the best estimate of losses to
be incurred related to these cases is $2 million, which has
been accrued. For those cases where a loss is possible, or cases
where a range of loss is probable but no amount within the range
is a better estimate than any other amount, the estimated amount
of additional exposure ranges from $0 to $25 million. In
these instances, no accrual has been recorded.
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(f)
General Guarantees and Indemnifications
The Company is the lessee under many aircraft financing
agreements (including leveraged lease financings of aircraft
under the pass through trusts) and real estate leases. It is
common in such transactions for the Company as the lessee to
agree to indemnify the lessor and other related third parties
for the manufacture, design, ownership, financing, use,
operation and maintenance of the aircraft, and for tort
liabilities that arise out of or relate to the Company's
use or occupancy of the leased asset. In some cases, this
indemnity extends to related liabilities arising from the
negligence of the indemnified parties, but usually excludes any
liabilities caused by their gross negligence or willful
misconduct. Additionally, in the case of real estate leases, the
Company typically indemnifies such parties for any environmental
liability that arises out of or relates to the Company's
use of the leased premises. The Company expects that it would be
covered by insurance (subject to deductibles) for most tort
liabilities and related indemnities described above with respect
to leased real estate and operated aircraft.
7.
Income Taxes
The Company recorded income tax expense (benefit) as follows:
Year Ended December 31,
2004
2003
2002
(in thousands)
Federal
$
—
$
114
$
(35,071
)
State
30
—
—
Total current taxes
30
114
(35,071
)
Deferred taxes
—
—
—
Total income tax expense (benefit)
$
30
$
114
$
(35,071
)
The Company's emergence from bankruptcy reorganization in
1994 and the associated implementation of fresh start reporting
gave rise to significant items of expense for financial
reporting purposes that are not deductible for income tax
purposes. In large measure, it is these nondeductible (for
income tax purposes) expenses that result in an effective tax
expense (benefit) rate for financial reporting purposes that
differs from the current federal statutory income tax rate of
35%.
Income tax expense (benefit) differs from amounts computed at
the federal statutory income tax rate as follows:
Year Ended December 31,
2004
2003
2002
(in thousands)
Income tax expense (benefit) at the federal statutory income tax
    rate
$
(31,148
)
$
20,137
$
(75,165
)
State income tax expense (benefit), net of federal income tax
    expense (benefit)
(3,196
)
2,383
(8,024
)
State rate change
—
(3,229
)
—
Change in valuation allowance
32,492
(17,334
)
38,137
Expired tax credits
—
—
7,987
Other, net
1,882
(1,843
)
1,994
Total
$
30
$
114
$
(35,071
)
As of December 31, 2004, the Company has available net
operating loss carryforwards ("NOLs") and tax credit
carryforwards for federal income tax purposes of approximately
$451.4 million and $1.1 million, respectively. The
NOLs expire during the years 2007 through 2024 while
approximately $0.2 million of the tax credit carryforwards
will expire in 2005 and 2006. The Company also had capital loss
carryforwards for federal income tax purposes of approximately
$1.4 million which expire in 2009. However, such
carryforwards are not available to offset federal (and in
certain circumstances, state) alternative minimum taxable
income. Further, as a result of a statutory "ownership
change" (as defined for purposes of Section 382 of the
Internal Revenue Code) that occurred as a result of the
Company's reorganization in 1994, the Company's
ability to utilize its NOLs and tax credit carryforwards may be
restricted.
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In September 2003, Holdings filed its 2002 consolidated income
tax return with the IRS, which included a claim to carryback
losses incurred in 2002 to the tax years 1999 and 2000. This
resulted in a refund of approximately $3.1 million, of
which substantially all was received in the fourth quarter of
2003.
Composition of Deferred Tax Items:
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. As of December 31, the
significant components of the Company's deferred tax assets
and liabilities are a result of the temporary differences
related to the items described as follows:
2004
2003
(in thousands)
Deferred tax assets:
Net operating loss carryforwards
$
184,515
$
126,219
Aircraft leases
13,585
17,347
Vacation accrual
13,407
11,948
Frequent flyer accrual
6,592
5,958
Restructuring and other reserves
3,626
3,858
Tax credit carryforwards
1,112
1,112
Other
3,144
2,767
Gross deferred tax assets
225,981
169,209
Deferred tax liabilities:
Accelerated depreciation and amortization
(95,365
)
(70,534
)
Partnership losses
(1,421
)
(1,420
)
Other
(229
)
(781
)
Gross deferred tax liabilities
(97,015
)
(72,735
)
Net deferred tax assets before valuation allowance
128,966
96,474
Less valuation allowance
(128,966
)
(96,474
)
Net deferred liability
—
—
SFAS No. 109,
"Accounting for Income
Taxes,"
requires that a valuation allowance be
established when it is "more likely than not" that all
or a portion of deferred tax assets will not be realized. A
review of all available positive and negative evidence needs to
be considered, including the company's performance, the
market environment in which the company operates, forecasts of
future profitability, the utilization of past tax credits,
length of carryforward periods and similar factors.
SFAS No. 109 further states that it is difficult to
conclude that a valuation allowance is not needed when there is
negative evidence such as cumulative losses in recent years.
Therefore, cumulative losses weigh heavily in the overall
assessment.
The Company was in a cumulative loss position three out of four
years between December 31, 2001 through December 31,
2004, which weighed heavily in the overall determination that a
valuation allowance was needed. As of December 31, 2004,
the Company had recorded a valuation allowance of
$129.0 million against its net deferred tax assets. The
Company expects to continue to record a full valuation allowance
on any future tax benefits until we have achieved several
quarters of consecutive profitable results coupled with an
expectation of continued profitability. As of December 2004 and
2003, the valuation allowance totaled $129.0 million and
$96.5 million, respectively.
8.
Capital Stock
Preferred Stock
The Company's Board of Directors by resolution may
authorize the issuance of the preferred stock as a class, in one
or more series, having the number of shares, designations,
relative voting rights, dividend rights, liquidation and other
preferences and limitations that the Board of Directors fixes,
without any stockholder approval. No shares of preferred stock
have been issued.
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Common Stock
The holders of Class A common stock are entitled to fifty
votes per share, and the holders of Class B common stock
are entitled to one vote per share, on all matters submitted to
a vote of common stockholders except that voting rights of
non-U.S. citizens are limited. The Class A common
stock is convertible into an equal number of Class B shares
at any time at the election of the holders of the Class A
common stock. Holdings' Class B common stock is listed
on the New York Stock Exchange.
Holders of common stock of all classes participate equally as to
any dividends or distributions on the common stock, except that
dividends payable in shares of common stock, or securities to
acquire common stock, will be made in the same class of common
stock as that held by the recipient of the dividend. Holders of
common stock have no right to cumulate their votes in the
election of directors. The common stock votes together as a
single class, subject to the right to a separate class vote in
certain instances required by law.
Treasury Stock
In September 1995, Holdings adopted a stock repurchase program.
The program was amended in December 1995, August 1997, August
1998, May 1999 and February 2000. During 1995 through 2000,
Holdings repurchased approximately 16.5 million shares of
Class B common stock and 7.4 million warrants to
purchase Class B common stock. Holdings has not repurchased
any Class B common stock during the last four fiscal years.
Holdings' stock repurchase program expired on
December 31, 2002. The terms of the government guaranteed
loan restricted the Company's ability to repurchase shares
of its stock prior to repayment of the loan in full.
In March and April 2004, Holdings reacquired 153,680 shares
of Class B common stock from a former executive in payment
for approximately $1.7 million of nonrecourse loans made by
Holdings between 1994 and 1997.
Warrants
As compensation for various elements of the Company's
financial restructuring completed in January 2002, Holdings
issued a warrant to purchase 18.8 million shares of
its Class B common stock to the federal government and
additional warrants to purchase 3.8 million shares of
its Class B common stock to other loan participants, in
each case at an exercise price of $3 per share and a term
of ten years. For accounting purposes, the warrants were valued
at $35.4 million, or $1.57 per share, using the
Black-Scholes pricing model with the following assumptions:
expected dividend yield of 0.0%, risk-free interest rate of
4.8%, volatility of 44.9% and an expected life of ten years.
This amount has been recorded in the accompanying consolidated
balance sheets, classified as
"Other Assets, Net,"
and will be amortized over the life of the government
guaranteed loan as an increase to interest expense. In the first
quarter of 2004, approximately 220,000 warrant were exercised at
$3 per share. In the third quarter of 2003, approximately
2.6 million warrants were exercised at $3 per share.
These warrant exercises were cashless transactions resulting in
the issuance of approximately 1.6 million shares of
Holdings' Class B common stock.
9.
Stock Options and Awards
Under the 1994 Incentive Equity Plan, as amended (the "1994
Incentive Plan"), the Company's Board of Directors
(the "Board") was authorized to grant stock options to
officers and key employees. The maximum number of shares of
Class B common stock authorized for issuance under the Plan
was 9.0 million shares.
As of March 27, 2002, only 205,831 shares of the
Company's Class B common stock remained available for
future grants under the 1994 Incentive Plan. As of that date,
although awards covering an aggregate of 6,799,570 shares
of Class B common stock remained outstanding under the 1994
Incentive Plan, all options granted prior to December 31,
2001 were significantly out-of-the-money (based on the
$5.55 per share closing price of the Company's
Class B common stock as reported on the New York Stock
Exchange on March 27, 2002) due to the significant drop in
the price of the Company's stock during 2001 (largely as a
result of the events of September 11, 2001 and its
aftermath). Consequently, these options had lost substantially
all value as retention and incentive tools. The Board is
strongly opposed to repricing outstanding
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stock options and, in connection with the government guaranteed
loan, the Company agreed not to reprice any outstanding stock
options so long as the loan remains outstanding.
For these reasons, on March 27, 2002, the Board adopted the
Company's 2002 Incentive Equity Plan (the "2002
Incentive Plan"). A total of 8.0 million shares of
Class B common stock, which the Company believes will be
adequate to fund the requirements under its long-term
compensation arrangements through 2005, have been reserved for
issuance under the 2002 Incentive Plan. At the same time, the
Board determined that, regardless of share availability, no new
awards will be granted under the 1994 Incentive Plan following
stockholder approval of the 2002 Incentive Plan. In May 2002,
the Company's stockholders approved the adoption of the
2002 Incentive Plan.
Stock options are granted with an exercise price equal to the
stock's fair market value at the date of grant, generally
become exercisable over a three-year period and expire if
unexercised at the end of 10 years. At December 31,
2004, approximately 2.5 million shares are available for
grant under the 2002 Incentive Plan.
Stock option activity during the years indicated is as follows:
Weighted
Number of
Average
1994 Plan
Shares
Exercise Price
Balance at December 31, 2001:
5,288,886
$
15.74
Granted
986,987
$
3.79
Exercised
—
—
Canceled
(362,267
)
$
11.38
Balance at December 31, 2002:
5,913,606
$
14.01
Granted
—
—
Exercised
(235,737
)
$
6.09
Canceled
(1,088,089
)
$
15.33
Balance at December 31, 2003:
4,589,780
$
14.10
Granted
—
—
Exercised
(23,672
)
$
3.80
Canceled
(506,046
)
$
9.90
Balance at December 31, 2004:
4,060,062
$
14.69
Number of
Average
2002 Plan
Shares
Exercise Price
Balance at December 31, 2002:
2,021,963
$
5.00
Granted
1,780,600
$
3.68
Exercised
(215,788
)
$
4.78
Canceled
(182,661
)
$
4.77
Balance at December 31, 2003:
3,404,114
$
4.34
Granted
1,973,100
$
10.10
Exercised
(150,672
)
$
3.63
Canceled
(138,513
)
$
7.09
Balance at December 31, 2004:
5,088,029
$
6.52
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At December 31, 2004, options outstanding and exercisable
by price range for both plans are as follows:
Options
Weighted
Weighted
Options
Weighted
Range of Exercise Prices
Outstanding
Average
Average
Currently
Average
Remaining
Exercise
Exercisable
Exercise
Contractual
Price
Price
Life
$
1.93 to $ 3.80
2,192,083
7.82
$
2.98
1,067,382
$
3.12
$
4.88 to $ 9.92
1,846,703
6.17
$
6.28
1,049,239
$
6.02
$
10.13 to $10.75
1,831,766
8.90
$
10.54
516,266
$
10.48
$
10.82 to $17.94
1,845,964
3.96
$
13.26
1,831,298
$
13.26
$
18.06 to $29.19
1,431,575
3.80
$
21.58
1,431,575
$
21.58
9,148,091
6.30
$
10.14
5,895,760
$
11.91
There were 4,959,604 and 4,669,601 stock options
exercisable as of December 31, 2003 and December 31,
2002, respectively. The per share weighted-average fair value of
stock options granted during 2004, 2003 and 2002 was $4.50,
$2.03 and $2.87, respectively, on the date of grant using the
Black-Scholes option pricing model with the following
weighted-average assumptions: 2004 — expected dividend
yield of 0.0%, risk-free interest rate of 3.4%, volatility of
54.0% and an expected life of five years; 2003 —
expected dividend yield of 0.0%, risk-free interest rate of
2.8%, volatility of 70.4% and an expected life of five years;
2002 — expected dividend yield of 0.0%, risk-free
interest rate of 3.9%, volatility of 87.9% and an expected life
of four years.
There were no restricted stock grants in the last three fiscal
years. The Company recognized compensation expense of
$0.1 million, $1.1 million and $0.7 million
related to restricted stock grants under the 1994 Incentive Plan
in 2004, 2003 and 2002, respectively. At December 31, 2004,
135,342 shares of restricted stock were vested.
The stock option plans also provide for the issuance of stock
and grant of stock options to non-employee directors. The
Company has granted options to purchase 563,000 shares
of Class B common stock to members of the Board of
Directors who are not employees of the Company. The options have
a ten-year term and are exercisable six months after the date of
grant. As of December 31, 2004, 409,000 options were
outstanding and exercisable at prices ranging from $1.93 to
$29.19 per share. There were no grants of Class B
common stock to non-employee directors in 2004 or 2003.
10.
Employee Benefit Plan
The Company has a 401(k) defined contribution plan, covering
essentially all employees of the Company. Participants may
contribute from 1 to 50% of their pretax earnings to a maximum
of $13,000 in 2004. The Company's matching contribution is
determined annually by the Board of Directors. The
Company's contribution expense to the plan totaled
$11.4 million, $8.7 million and $8.7 million in
2004, 2003 and 2002, respectively.
During the third quarter of 2004, the Company became aware that
an insufficient number of shares of its Class B common
stock were registered for offer and sale through its 401(k)
plan. In response to this registration shortfall, the Company
promptly filed a new registration statement on Form S-8 on
August 13, 2004, which registered an additional
4,500,000 shares of Class B common stock to permit the
continued offer and sale of such shares to participants through
the 401(k) plan. Because the 401(k) plan in the past has
purchased and in the future expects to continue to purchase
shares of Class B common stock needed for allocation to
participant accounts only in the open market and not directly
from the Company, the registration of these additional shares
and their purchase by the 401(k) plan will have no dilutive
impact on the outstanding equity of the Company. As a result of
the registration shortfall, however, participants who acquired
unregistered shares through their 401(k) plan accounts after
June 30, 2003, and prior to August 13, 2004, may be
entitled to rescission rights or other remedies under the
Securities Act of 1933, as amended. The Company has notified
affected existing and former plan participants of their
potential rescission rights, but cannot predict the extent to
which any such rescission rights may be exercised or the impact
of any possible federal or state regulatory action pertaining to
the registration shortfall. The Company does not
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believe, however, that any consequences arising from the
registration shortfall will have a material adverse effect on
its financial position or results of operations.
11.
Special Charges
In the first quarter of 2004, the Company recorded a
$0.6 million reduction in special charges related to the
revision of estimated costs associated with the sale and
leaseback of certain aircraft.
In August 2004, the Company entered into definitive agreements
with two lessors to return six Boeing 737-200 aircraft. Three of
these aircraft were returned to the lessors in the third
quarter, two were returned in the fourth quarter and one was
returned in January 2005. In addition, the Company continues
negotiating with one lessor on the return of its remaining two
Boeing 737-200 aircraft, one of which was parked in March 2002.
The other aircraft was removed from service in January 2005. In
connection with the return of the aircraft, the Company recorded
$1.9 million of special charges which include lease
termination payment of $2.1 million, the write-down of
leasehold improvements and aircraft rent balance of
$2.8 million, offset by the net reversal of maintenance
reserves of $3.0 million.
In December 2004, the Company and General Electric
("GE") mutually agreed to terminate the V2500 A-1
power by hour (PBH) agreement effective January 1,
2005. This agreement was entered into March 1998 with an
original term of ten years. For terminating the agreement early,
the Company received a $20.0 million credit to be applied
to amounts due for other engines under the 1998 agreement that
is expected to be fully applied by December 31, 2005. The
Company had capitalized PBH payments for V2500 A-1 engines
in excess of the unamortized cost of the overhauls performed by
GE of approximately $3.7 million. With the termination of
this agreement, these payments were not realizable and as a
result, the Company wrote off this amount against the
$20.0 million credit referred to above resulting in a
$16.3 million net gain.
In February 2003, AWA announced the elimination of its hub
operations in Columbus, Ohio. As a result, 12 regional jets, all
of which were operated by Chautauqua Airlines under the America
West Express banner, have been phased out of the fleet. In
addition, the hub has been downsized from 49 daily departures to
15 destinations to four flights per day to Phoenix and Las
Vegas. Service to New York City La Guardia Airport was also
eliminated because perimeter rules at the airport prohibit
flights beyond 1,500 miles, precluding service from
AWA's hubs in Phoenix and Las Vegas. In the first and
second quarters of 2003, the Company recorded special charges of
$1.0 million and $9.6 million, respectively, related
to the costs associated with the termination of certain aircraft
and facility contracts, employee transfer and severance expenses
and the write-off of leasehold improvements in Columbus, Ohio.
In the first quarter of 2003, the Company recorded a
$1.1 million reduction in special charges related to the
earlier-than-planned return of certain leased aircraft in 2001
and 2002, as all payments related to these aircraft returns have
been made.
In April 2003, as part of a cost reduction program, the Company
implemented a plan to reduce management, professional and
administrative payroll costs which resulted in 179 fewer
employees within these workgroups. As a result, the Company
recorded a special charge of $2.3 million related to this
reduction-in-force.
In June 2003, the Company recorded an impairment loss of
$2.6 million related to three owned Boeing 737-200 aircraft
that were grounded and subsequently sold.
In the third quarter of 2003, the Company recorded an additional
$0.5 million of special charges associated with the
elimination of our hub operations in Columbus, Ohio. These
special charges were offset by a $0.5 million reduction in
special charges related to the revision of estimated costs
associated with the sale and leaseback of certain aircraft.
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Table of Contents
In the first quarter of 2002, the Company recorded a special
charge of $21.1 million, primarily related to the
restructuring completed on January 18, 2002, resulting from
the events of September 11, 2001. Components of the special
charge are as follows:
Special Charges
(in thousands)
Fleet restructuring costs
$
9,915
Losses on sale-leaseback transactions
6,328
Professional fees
4,745
Write-off of computer system and security equipment
3,411
Severance
656
Revision of estimate for second quarter 2001 special charge
(4,000
)
Total
$
21,055
Of this amount, approximately $10.3 million, principally
related to losses on sale-leaseback transactions, fleet
restructuring costs, professional fees and severance was accrued.
In the third quarter of 2002, the Company recorded a
$2.0 million reduction in special charges due to a revision
of the estimated costs related to the early termination of
certain aircraft leases.
The following table presents the payments and other settlements
made during 2002, 2003 and 2004 and the remaining special charge
accruals as of December 31, 2004.
Contract
Sale-
Fleet
Professional
Reductions-
Termination/
Leaseback
Restructuring
Fees
in-Force
Other Costs
Total
(in thousands)
Balance at December 31, 2001
$
—
$
16,786
$
—
$
83
$
—
$
16,869
Special charges
6,328
10,582
1,489
631
—
19,030
Reclassification of aircraft rent due to restructuring
—
4,696
—
—
—
4,696
Payments
—
(14,516
)
(1,489
)
(714
)
—
(16,719
)
Issuance of convertible notes
—
(5,000
)
—
—
—
(5,000
)
Forfeiture of security deposits
—
(2,289
)
—
—
—
(2,289
)
Loss on sale-leasebacks
(3,852
)
—
—
—
—
(3,852
)
Reclassification of capitalized maintenance for parked aircraft
—
(902
)
—
—
—
(902
)
Revision of estimate
—
(6,000
)
—
—
—
(6,000
)
Balance at December 31, 2002
2,476
3,357
—
—
—
5,833
Special charges
(510
)
1,545
—
2,701
10,634
14,370
Payments
—
(896
)
—
(2,344
)
(7,446
)
(10,686
)
Loss on sale-leasebacks
(1,361
)
—
—
—
—
(1,361
)
Write-off of leasehold improvements due to Columbus hub closure
—
—
—
—
(539
)
(539
)
Impairment loss
—
(2,617
)
—
—
—
(2,617
)
Balance at December 31, 2003
605
1,389
—
357
2,649
5,000
Special charges
(600
)
1,913
—
—
—
1,313
Payments
(5
)
(2,908
)
—
(292
)
(2,528
)
(5,733
)
Revision of estimate
—
—
—
(65
)
—
(65
)
Reversal of maintenance reserves
—
3,000
—
—
—
3,000
Write-off of leasehold improvements, engine overhauls and
    deferred rent
—
(2,751
)
—
—
—
(2,751
)
Balance at December 31, 2004
$
—
$
643
$
—
$
—
$
121
$
764
The Company expects to make payments related to these special
charges through the fourth quarter of 2005.
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12.
Nonoperating Income (Expenses) — Other, Net
In connection with the term loan refinancing with GECC, the
Company wrote off $1.3 million of debt issue costs
associated to the term loan with Mizuho in 2004. This amount was
recorded in nonoperating expenses.
The changes in the fair value of the Company's derivative
instruments and the net realized gains and losses for the
settled hedge transactions was a $30.5 million credit in
2004, $10.7 million credit in 2003 and $0.6 million
expense in 2002.
In April 2003, the Senate and House of Representatives of the
United States of America passed, and the President signed, the
Emergency Wartime Supplemental Appropriations Act to provide
certain aviation-related assistance. $2.3 billion of the
appropriation was for grants by the TSA to U.S. air
carriers based on the proportional share each carrier had paid
or collected as of the date of enactment of the legislation for
passenger security and air carrier security fees. In May 2003,
AWA received approximately $81.3 million representing its
proportional share of passenger security and air carrier
security fees paid or collected as of April 2003, which has been
classified as
"Federal Government Assistance"
in the accompanying consolidated statements of operations.
See Note 17,
"Emergency Wartime Supplemental
Appropriations Act."
In the fourth quarter of 2003, IAC/ InterActiveCorp completed
its acquisition of Hotwire.com, a discount travel website.
Hotwire was founded by the Texas Pacific Group, American
Airlines, Continental Airlines, Northwest Airlines, United
Airlines, US Airways and AWA in October 2000. AWA had an
ownership interest of approximately 1.5% in Hotwire.com with a
carrying value of approximately $0.03 million. Upon closing
of the transaction, AWA received cash of $9.8 million.
Accordingly, AWA recognized a nonoperating gain of
$9.8 million in the fourth quarter of 2003.
In the fourth quarter of 2003, Holdings completed the sale of
its 12% interest in National Leisure Group to PAR Capital. The
investment in National Leisure Group was carried on the
Company's consolidated balance sheet at cost, which
approximated $7.7 million. PAR Capital owned
$10.45 million face value of the Company's
10
3
/
4
% senior
unsecured notes. PAR Capital purchased the Company's
investment in National Leisure Group in exchange for the
$10.45 million face value of the
10
3
/
4
% notes
plus $0.3 million in cash. This resulted in a
$3.3 million nonoperating gain. See Note 4,
"Financial Instruments and Risk Management —
(a) Fair Value of Financial Instruments —
Investments in Equity Securities."
Under the airline compensation provisions of the Air
Transportation Safety and System Stabilization Act (the
"Act"), each air carrier was entitled to receive the
lesser of: (i) its direct and incremental losses for the
period September 11, 2001 to December 31, 2001 or
(ii) its proportional available seat mile allocation (based
on available seat miles for August 2001) of the
$4.5 billion compensation available under the Act. In 2001,
AWA received $98.2 million under the Act from the United
States government and expected to receive, based on its losses
and its share of available seat miles, at least an additional
$10.0 million. In accordance with EITF Issue
No. 01-10,
"Accounting for the Impact of the
Terrorist Attacks of September 11, 2001,"
AWA
recognized $108.2 million of federal government assistance
in 2001 as nonoperating income because direct and incremental
losses incurred during 2001 exceeded that amount. In July 2002,
AWA received an additional $12.3 million under the Act.
Accordingly, $10.0 million was credited against the
receivable established in 2001 and $2.3 million was
recognized as nonoperating income in the second quarter of 2002.
In August 2002, AWA received an additional payment of
$6.2 million under the Act, which was recognized as
nonoperating income in the third quarter of 2002.
In March 2002, the Company wrote down its investment in
Aeroxchange, an e-commerce entity, which was carried at cost, to
net realizable value recognizing a loss of $2.8 million.
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13.
Earnings (Loss) Per Share
Year Ended December 31,
2004
2003
2002
(in thousands of dollars except per share data)
BASIC EARNINGS (LOSS) PER SHARE
Income (loss) before cumulative effect of change in accounting
    principle
$
(89,023
)
$
57,420
$
(179,686
)
Cumulative effect of change in accounting principle
—
—
(208,223
)
Net income (loss)
$
(89,023
)
$
57,420
$
(387,909
)
Weighted average common shares outstanding
36,026,478
34,550,979
33,723,252
Basic earnings (loss) per share:
Earnings (loss) before cumulative effect of change in accounting
    principle
$
(2.47
)
$
1.66
$
(5.33
)
Cumulative effect of change in accounting principle
—
—
(6.17
)
Net earnings (loss)
$
(2.47
)
$
1.66
$
(11.50
)
DILUTED EARNINGS (LOSS) PER SHARE
Income (loss) before cumulative effect of change in accounting
    principle
$
(89,023
)
$
57,420
$
(179,686
)
Cumulative effect of change in accounting principle
—
—
(208,223
)
Net income (loss)
(89,023
)
57,420
(387,909
)
Interest expense on 7.5% convertible senior notes
—
10,664
—
Interest expense on 7.25% senior exchangeable notes
—
2,881
—
Income (loss) for purposes of computing diluted net income
    (loss) per share
$
(89,023
)
$
70,965
$
(387,909
)
Share computation:
Weighted average common shares outstanding
36,026,478
34,550,979
33,723,252
Assumed exercise of stock options and warrants
—
9,966,128
—
Assumed conversion of 7.5% convertible senior notes
—
8,157,839
—
Assumed conversion of 7.25% senior exchangeable notes
—
3,437,960
—
Weighted average common shares outstanding as adjusted
36,026,478
56,112,906
33,723,252
Diluted earnings (loss) per share:
Earnings (loss) before cumulative effect of change in accounting
    principle
$
(2.47
)
$
1.26
$
(5.33
)
Cumulative effect of change in accounting principle
—
—
(6.17
)
Net earnings (loss)
$
(2.47
)
$
1.26
$
(11.50
)
For the year ended December 31, 2004, 5,248,891 stock
options and 7,352,988 warrants issued in conjunction with the
government guaranteed loan and related transactions are not
included in the computation of diluted EPS because the option
and warrant exercise prices were greater than the average market
price of common stock for the period. In addition,
8,095,842 shares issuable upon conversion of the
7.25% senior exchangeable notes due 2023 and 8,694,000
issuable upon conversion of the 7.5% convertible senior
notes are not included in the computation of diluted EPS because
of the antidilutive effect on EPS.
For the year ended December 31, 2003, 5,256,111 stock
options and 11,410,318 warrants issued in conjunction with the
government guaranteed loan and related transactions are not
included in the computation of diluted EPS because the option
and warrant exercise prices were greater than the average market
price of common stock for the period. In November 2004, the
Emerging Issues Task Force ("EITF") of the FASB
reached a consensus on EITF 04-08,
"The Effect of
Contingently Convertible Instruments on Diluted Earnings per
Share,"
which requires that issuers of convertible
securities with contingent conversion features use the
"if-converted" method to calculate reported earnings
per share ("EPS") irrespective of the contingent
conversion trigger being met. As approved by the FASB, this
change is effective for years ending after December 15,
2004. The Company applied this methodology in the accompanying
consolidated statement of operations. The impact of using the
"if-converted" method for the Company's
7.25% Notes is
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Table of Contents
antidilutive for the years ended December 31, 2004 and
2002. For the year ended December 31, 2003, the inclusion
of the 7.25% Notes reduced diluted EPS by $0.03 from $1.29
to $1.26.
For the year ended December 31, 2002, 22,074 stock options
and 2,794,399 warrants issued in conjunction with the government
guaranteed loan and related transactions are not included in the
computation of diluted EPS because of the antidilutive effect on
EPS. In addition, 7,292,706 stock options and 19,742,601
warrants are not included in the computation of diluted EPS
because the option and warrant exercise prices were greater than
the average market price of common stock for the period. The
shares issuable upon conversion of the 7.5% convertible
senior notes are not included in the computation of diluted EPS
because of the antidilutive effect on EPS.
14.
Supplemental Information to Consolidated Statements of Cash
    Flows
Supplemental disclosure of cash flow information and non-cash
investing and financing activities were as follows:
Year Ended December 31,
2004
2003
2002
(in thousands)
Non-cash transactions:
Reclassification of investments in debt securities to short-term
$
25,730
$
29,058
$
—
Issuance of convertible notes
—
—
67,902
Cancellation of convertible notes
—
(660
)
(8,279
)
Cancellation of 10.75% senior unsecured notes related to
    sale of NLG investment
—
(10,370
)
—
Issuance of warrants
—
—
35,383
Exercise of warrants
(2
)
(17
)
—
Equipment acquired through capital leases
—
—
17,753
Equipment acquired with issuance of notes payable
—
—
64,163
Notes payable issued for equipment purchase deposits
17,500
5,250
10,500
Notes payable canceled under the aircraft purchase agreement
(7,000
)
(7,000
)
(10,500
)
Payment in kind notes issued, net of returns
9,033
8,972
7,756
Acquisition of shares due to loan default
1,700
—
—
Cash transactions:
Interest paid, net of amounts capitalized
23,841
17,201
25,942
Income taxes paid (refunded)
1,118
(3,605
)
(63,353
)
15.
Related Party Transactions
As part of AWA's reorganization in 1994, Continental
Airlines and AWA entered into an alliance agreement that
included code sharing arrangements, reciprocal frequent flyer
programs and ground handling operations. In March 2002, AWA
received notice from Continental of its intention to terminate
the code sharing and frequent flyer agreements between the two
airlines, effective April 26, 2002. Two of
Continental's directors are managing partners of Texas
Pacific Group, which, through TPG Advisors, Inc., effectively
controls the voting power of Holdings. AWA paid Continental
approximately $13.4 million, $17.3 million and
$25.5 million and also received approximately
$4.1 million, $5.0 million and $15.9 million in
2004, 2003 and 2002, respectively, from Continental pursuant to
these agreements.
Texas Pacific Group agreed to reimburse the Company
approximately $2.5 million for expenses incurred by the
Company on its behalf. As a result, the Company recorded this as
a receivable as of December 31, 2004. Subsequent to
December 31, 2004, the Company received $1.3 million
in such reimbursement and expects to receive an additional
$1.2 million in 2005.
16.
Quarterly Financial Data (Unaudited)
The 2004 and 2003 unaudited quarterly financial data has been
restated to reflect the accounting for fuel hedging derivative
instruments pursuant to management's determination that the
Company did not qualify for hedge accounting under
SFAS No. 133. In addition, the restated amounts also
reflect corrections to properly
73
Table of Contents
reflect the fair value of open derivative instruments at each
quarter end. See Note 2,
"Restatement of Previously
Reported Amounts."
Summarized quarterly financial data for 2004 and 2003 follows
(in thousands of dollars except per share amounts):
1st Quarter
2nd Quarter
(as previously
(as previously
(as restated)
reported)
(as restated)
reported)
2004
Operating revenues
$
576,544
$
576,544
$
605,074
$
605,074
Operating income
14,685
(1)
17,828
16,330
(3)
20,848
Nonoperating expenses, net
(16,248
)(1)(2)
(16,652
)
(5,669
)(3)(4)
(15,154
)
Income tax expense
—
—
—
—
Net income (loss)
(1,563
)(2)
1,176
10,661
(4)
5,694
Net income (loss) per share:
Basic
(0.04
)
0.03
0.30
0.16
Diluted
(0.03
)
0.02
0.20
0.11
3rd Quarter
4th Quarter
(as previously
(as previously
(as restated)
reported)
(as restated)
reported)
2004
Operating revenues
$
578,623
$
578,623
$
578,716
$
578,716
Operating loss
(36,038
)(5)
(28,237
)
(38,748
)(7)
(23,681
)
Nonoperating income (expenses), net
7,373
(5)(6)
(18,830
)
(30,678
)(7)(8)
(26,001
)
Income tax expense
—
—
30
30
Net loss
(28,665
)(6)
(47,067
)
(69,456
)(8)
(49,712
)
Net loss per share:
Basic
(0.79
)
(1.30
)
(1.92
)
(1.38
)
Diluted
(0.79
)
(1.30
)
(1.92
)
(1.38
)
1st Quarter
2nd Quarter
(as previously
(as previously
(as restated)
reported)
(as restated)
reported)
2003
Operating revenues
$
523,233
$
523,233
$
575,771
$
575,771
Operating income (loss)
(56,376
)(9)
(46,140
)
16,447
(11)
16,305
Nonoperating income (expenses), net
(7,045
)(9)(10)
(15,878
)
62,425
(11)(12)
63,379
Income tax expense
—
—
—
—
Net income (loss)
(63,421
)(10)
(62,018
)
78,872
(12)
79,684
Net income (loss) per share:
Basic
(1.88
)
(1.84
)
2.34
2.36
Diluted
(1.88
)
(1.84
)
2.00
2.02
3rd Quarter
4th Quarter
(as previously
(as previously
(as restated)
reported)
(as restated)
reported)
2004
Operating revenues
$
592,302
$
592,302
$
563,191
$
563,191
Operating income
50,268
(13)
50,135
11,796
(15)
12,581
Nonoperating expenses, net
(18,678
)(13)(14)
(17,193
)
(1,303
)(15)(16)
(5,655
)
Income tax expense
—
—
(114
)
(114
)
Net income
31,590
(14)
32,942
10,379
(16)
6,812
Net income per share:
Basic
0.90
0.94
0.29
0.19
Diluted
0.53
0.60
0.19
0.13
74
Table of Contents
(1)
Reflects reclassification of $3.1 million net credit from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
(2)
Reflects the restatement of $2.7 million net expense to
    eliminate hedge accounting for the period presented.
(3)
Reflects reclassification of $4.5 million net credit from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
(4)
Reflects the restatement of $5.0 million net credit to
    eliminate hedge accounting for the period presented.
(5)
Reflects reclassification of $7.8 million net credit from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
(6)
Reflects the restatement of $18.4 million net credit to
    eliminate hedge accounting for the period presented.
(7)
Reflects reclassification of $15.0 million net credit from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
Note, an additional
    $7.6 million of losses on derivative instruments was
    recorded directly to
"Gain (Loss) on Derivative
    Instruments, Net."
(8)
Reflects the restatement of $19.7 million net expense to
    eliminate hedge accounting for the period presented.
(9)
Reflects reclassification of $10.2 million net credit from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
(10)
Reflects the restatement of $1.4 million net expense to
    eliminate hedge accounting for the period presented.
(11)
Reflects reclassification of $0.2 million net expense from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
(12)
Reflects the restatement of $0.8 million net expense to
    eliminate hedge accounting for the period presented.
(13)
Reflects reclassification of $0.1 million net expense from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
(14)
Reflects the restatement of $1.4 million net expense to
    eliminate hedge accounting for the period presented.
(15)
Reflects reclassification of $0.8 million net credit from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
(16)
Reflects the restatement of $3.6 million net credit to
    eliminate hedge accounting for the period presented.
Earnings per share are computed independently for each of the
quarters presented. Therefore, the sum of the quarterly earnings
per share in 2004 and 2003 does not equal the total computed for
the year.
17.
Emergency Wartime Supplemental Appropriations Act
In April 2003, the Senate and House of Representatives of the
United States of America passed, and the President signed, the
Emergency Wartime Supplemental Appropriations Act to provide
certain aviation-related assistance. The bill included the
following key provisions:
•
$2.3 billion of the appropriation was for grants by the
    Transportation Security Administration ("TSA") to
    U.S. air carriers based on the proportional share each
    carrier had paid or collected as of the date of enactment of the
    legislation for passenger security and air carrier security
    fees. In May 2003, the Company received approximately
    $81.3 million representing its proportional share of
    passenger security and air carrier security fees paid or
    collected as of April 2003. The Company recorded this amount as
    nonoperating income in the accompanying consolidated statements
    of operations. See Note 12,
"Nonoperating Income
    (Expenses) — Other, Net."
•
The TSA would not impose passenger security fees during the
    period beginning June 1, 2003 and ending September 30,
    2003.
•
$100 million of the appropriation would be available to
    compensate air carriers for the direct costs associated with the
    strengthening of flight deck doors and locks on aircraft. AWA
    received approximately $4.6 million in 2003 as
    reimbursement for the costs of reinforcing flight deck doors and
    locks.
•
Aviation war risk insurance provided by the federal government
    is extended until August 2005.
•
Certain airlines that received the aviation-related assistance,
    principally those airlines with trans-Pacific or trans-Atlantic
    flights, agreed to limit the total cash compensation for certain
    executive officers during the 12-month period beginning
    April 1, 2003 to an amount equal to the annual salary paid
    to that officer during the air carrier's fiscal year 2002.
    Any violation of this agreement would have required the carrier
    to repay to the government the amount reimbursed for airline
    security fees. Since AWA does not operate trans-Pacific or
    trans-Atlantic flights, AWA was not subject to this provision.
18.
Segment Disclosures
Holdings is one reportable operating segment. Accordingly, the
segment reporting financial data required by
SFAS No. 131 is included in the accompanying
consolidated balance sheets and consolidated statements of
operations.
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Table of Contents
Item 8B.
Consolidated Financial Statements and Supplementary
    Data — America West Airlines, Inc.
    ("AWA")
Consolidated balance sheets of AWA as of December 31, 2004
and 2003, and the related consolidated statements of operations,
cash flows and stockholder's equity and comprehensive
income for each of the years in the three-year period ended
December 31, 2004, together with the related notes and the
reports of KPMG LLP, and PricewaterhouseCoopers LLP, independent
registered public accounting firms, are set forth on the
following pages.
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholder
America West Airlines, Inc.:
We have audited the accompanying consolidated balance sheets of
America West Airlines, Inc. as of December 31, 2004 and
2003, and the related consolidated statements of operations,
cash flows and stockholder's equity and comprehensive
income for the years then ended. These consolidated financial
statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of America West Airlines, Inc., and subsidiary as of
December 31, 2004 and 2003, and the results of their
operations and their cash flows for the years then ended, in
conformity with U.S. generally accepted accounting
principles.
As discussed in Note 2 to the accompanying consolidated
financial statements, the Company has restated the consolidated
balance sheet as of December 31, 2003 and the consolidated
statement of changes in stockholder's equity and
comprehensive income for the year then ended.
/s/ KPMG LLP
Phoenix, Arizona
March 11, 2005
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholder
of America West Airlines, Inc.:
In our opinion, the accompanying consolidated statements of
operations, of cash flows and of stockholder's equity and
comprehensive income for the year ended December 31, 2002
present fairly, in all material respects, the results of
operations and cash flows of America West Airlines, Inc. (a
wholly-owned subsidiary of America West Holdings Corporation)
for the year ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of
the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with the
standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
As discussed in Note 1(k) to the consolidated financial
statements, the Company changed its method of accounting for
reorganization value in excess of amounts allocable to
identifiable assets in connection with the adoption of Statement
of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets,"
effective January 1, 2002.
PricewaterhouseCoopers LLP
Phoenix, Arizona
March 24, 2003, except for the effects of the
reorganization transaction described in Note 1(a)
as to which the date is August 2, 2004
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America West Airlines, Inc.
Consolidated Balance Sheets
December 31, 2004 and 2003
(in thousands except share data)
2004
2003
(as restated -
See Note 2)
ASSETS
Current assets:
Cash and cash equivalents
$
128,497
$
134,150
Short-term investments
126,651
322,615
Restricted cash
41,264
42,900
Accounts receivable, less allowance for doubtful accounts of
    $1,487 in 2004 and $5,806 in 2003
108,837
77,235
Expendable spare parts and supplies, less allowance for
    obsolescence of $14,759 in 2004 and $12,254 in 2003
57,563
58,575
Prepaid expenses
141,571
129,291
Total current assets
604,383
764,766
Property and equipment:
Flight equipment
926,930
858,395
Other property and equipment
289,279
271,593
Equipment purchase deposits
63,450
46,050
1,279,659
1,176,038
Less accumulated depreciation and amortization
624,193
569,468
655,466
606,570
Other assets:
Investments in debt securities
30,000
40,740
Restricted cash
72,091
69,876
Advances to parent company, net (see Note 5)
258,777
254,792
Other assets, net
90,270
110,198
451,138
475,606
$
1,710,987
$
1,846,942
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt
$
151,183
$
103,899
Current obligations under capital leases
3,475
3,442
Accounts payable
173,196
209,373
Payable to affiliate, net
—
1,926
Air traffic liability
194,718
174,486
Accrued compensation and vacation benefits
42,699
61,045
Accrued taxes
20,651
24,117
Other accrued liabilities
65,958
59,277
Total current liabilities
651,880
637,565
Long-term debt, less current maturities
635,129
688,965
Capital leases, less current obligations
5,061
8,467
Deferred credits and other liabilities
132,103
139,873
Commitments and contingencies (see Note 7)
Stockholder's equity:
Class B common stock, $.01 par value. Authorized
    1,000 shares; issued and outstanding 1,000 shares
—
—
Additional paid-in capital
555,114
555,115
Accumulated deficit
(268,300
)
(183,043
)
Total stockholder's equity
286,814
372,072
$
1,710,987
$
1,846,942
See accompanying Notes to Consolidated Financial Statements.
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America West Airlines, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)
2004
2003
2002
Operating revenues:
Passenger
$
2,196,627
$
2,113,629
$
1,929,444
Cargo
28,233
26,914
27,574
Other
113,417
113,274
89,545
Total operating revenues
2,338,277
2,253,817
2,046,563
Operating expenses:
Salaries and related costs
655,185
658,042
601,870
Aircraft rents
304,343
297,518
295,016
Other rents and landing fees
167,772
154,598
158,290
Aircraft fuel
557,098
375,996
299,284
Agency commissions
25,191
34,457
49,953
Aircraft maintenance materials and repairs
205,580
223,266
252,691
Depreciation and amortization
54,354
66,865
75,201
Special charges (credits), net
(15,432
)
14,370
19,030
Other
423,890
402,613
451,444
Total operating expenses
2,377,981
2,227,725
2,202,779
Operating income (loss)
(39,704
)
26,092
(156,216
)
Nonoperating income (expenses):
Interest income
14,169
13,249
17,551
Interest expense, net
(86,488
)
(86,743
)
(79,529
)
Federal government assistance
—
81,255
8,466
Gain (loss) on disposition of property and equipment
1,460
151
(1,852
)
Gain on sale of investments
—
9,762
—
Gain (loss) on derivative instruments, net
23,782
10,746
(656
)
Other, net
1,547
6,888
215
Total nonoperating income (expenses), net
(45,530
)
35,308
(55,805
)
Income (loss) before income taxes (benefit) and cumulative
    effect of change in accounting principle
(85,234
)
61,400
(212,021
)
Income tax expense (benefit)
23
114
(30,544
)
Income (loss) before cumulative effect of change in accounting
    principle
(85,257
)
61,286
(181,477
)
Cumulative effect of change in accounting principle
—
—
(208,223
)
Net income (loss)
$
(85,257
)
$
61,286
$
(389,700
)
See accompanying Notes to Consolidated Financial Statements.
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America West Airlines, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)
2004
2003
2002
Cash flows from operating activities:
Net income (loss)
$
(85,257
)
$
61,286
$
(389,700
)
Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:
Cumulative effect of change in accounting principle
—
—
208,223
Depreciation and amortization
54,354
66,865
75,894
Amortization of capitalized maintenance
85,590
105,076
111,576
Amortization of deferred credits
(8,208
)
(10,970
)
(10,077
)
Amortization of deferred rent
6,189
9,514
11,452
Amortization of warrants
7,155
8,100
7,708
Amortization of debt issue costs and guarantee fees
35,752
35,977
24,978
Amortization of bond discount
3,826
3,366
2,894
Amortization of investment discount and premium, net
1,435
899
—
Gain on sale of investments
—
(3,287
)
—
Special charges, net
(15,432
)
14,370
19,055
Other
28,311
6,714
15,801
Changes in operating assets and liabilities:
Decrease (increase) in restricted cash
1,636
(42,900
)
—
Decrease (increase) in accounts receivable, net
(13,337
)
4,365
60,009
Decrease (increase) in expendable spare parts and supplies, net
1,012
(2,681
)
(4,061
)
Increase in prepaid expenses
(49,286
)
(45,932
)
(64,350
)
Decrease (increase) in other assets, net
(2,635
)
(254
)
5,319
Increase (decrease) in accounts payable
(37,120
)
9,385
(61,525
)
Increase (decrease) in air traffic liability
20,232
4,395
(6,894
)
Increase (decrease) in accrued compensation and vacation benefits
(18,347
)
19,796
(3,050
)
Decrease in accrued taxes
(3,465
)
(17,614
)
(68,909
)
Increase (decrease) in other accrued liabilities
6,938
(1,689
)
28,348
Increase in other liabilities
1,299
1,294
16,022
Net cash provided by (used in) operating activities
20,642
226,075
(21,287
)
Cash flows from investing activities:
Purchases of property and equipment
(219,383
)
(154,365
)
(157,202
)
Purchases of short-term investments
(487,505
)
(633,711
)
(69,987
)
Sales of short-term investments
707,774
364,332
45,249
Purchases of investments in debt securities
(35,000
)
(80,436
)
—
Sales of investments in debt securities
20,000
10,300
—
Increase in restricted cash
(2,215
)
(23,908
)
—
Proceeds from sales of aircraft.
—
—
175,478
Proceeds from sales of other property and equipment
32,372
25,826
122
Proceeds from sale of NLG investment
—
348
—
Net cash provided by (used in) investing activities
16,043
(491,614
)
(6,340
)
Cash flows from financing activities:
Proceeds from issuance of debt
141,354
86,828
435,386
Repayment of debt
(175,640
)
(16,832
)
(192,596
)
Payment of debt issue costs
(1,152
)
(3,236
)
(36,987
)
Other
(6,900
)
(1,750
)
2,600
Net cash provided by (used in) financing activities
(42,338
)
65,010
208,403
Net increase (decrease) in cash and cash equivalents
(5,653
)
(200,529
)
180,776
Cash and cash equivalents at beginning of year
134,150
334,679
153,903
Cash and cash equivalents at end of year
$
128,497
$
134,150
$
334,679
See accompanying Notes to Consolidated Financial Statements.
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America West Airlines, Inc.
Consolidated Statements of Stockholder's Equity and
Comprehensive Income
For the Years Ended December 31, 2004, 2003 and 2002
(In thousands except share data)
Accumulated
Additional
Retained
Other
Paid-In
Earnings/
Comprehensive
Capital
(Deficit)
Income
Total
Balance at December 31, 2001
$
519,748
$
145,371
$
1,390
$
666,509
Net loss
—
(389,700
)
—
(389,700
)
Other comprehensive income:
Changes in the fair value of derivative financial instruments,
    net of tax
—
—
640
640
Total comprehensive income (loss)
—
(389,700
)
640
(389,060
)
Non-cash capital contribution
35,384
—
—
35,384
Balance at December 31, 2002
555,132
(244,329
)
2,030
312,833
Net income
—
61,286
—
61,286
Correction of other comprehensive income(a)
—
—
(2,030
)
(2,030
)
Exercise of warrants
(17
)
—
—
(17
)
Balance at December 31, 2003, as restated
$
555,115
$
(183,043
)
$
—
$
372,072
Net loss
—
(85,257
)
—
(85,257
)
Exercise of warrants
(1
)
—
—
(1
)
Balance at December 31, 2004
$
555,114
$
(268,300
)
$
—
$
286,814
(a)
Correction of Other Comprehensive Income — See
    Note 2,
"Restatement of Previously Reported
    Amounts."
See accompanying Notes to Consolidated Financial Statements.
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America West Airlines, Inc.
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002
America West Airlines, Inc. ("AWA" or the
"Airline") is a wholly owned subsidiary of America
West Holdings Corporation ("Holdings" or the
"Company"). AWA accounted for most of the
Company's revenues and expenses in 2004. Based on 2004
operating revenues and available seat miles ("ASMs"),
AWA is the eighth largest passenger airline in the United States
with the lowest cost structure of the eight major hub-and-spoke
airlines. At the end of 2004, AWA operated a fleet of 138
aircraft with an average fleet age of 10.7 years and served
63 destinations in North America, including eight in Mexico,
three in Canada and one in Costa Rica. Through regional alliance
and code share arrangements with other airlines, AWA served an
additional 51 destinations in North America and the Middle East.
In 2004, AWA flew approximately 21.1 million passengers and
generated revenues of approximately $2.3 billion.
1.
Summary of Significant Accounting Policies
(a)
Basis of Presentation
The consolidated financial statements include the accounts of
America West Airlines and its wholly owned subsidiary Flight
Training Center Hangar Plan ("FTCHP"). All significant
intercompany balances and transactions have been eliminated in
consolidation. Certain reclassifications have been made to prior
years' consolidated financial statements to conform to the
current year's presentation.
The Leisure Company ("TLC"), previously a wholly owned
subsidiary of Holdings, was merged into AWA on January 1,
2004 and continues to operate as the America West Vacations
division of AWA. This transaction was accounted for as a
reorganization of entities under common control. The 2003 and
2002 consolidated financial statements are presented on a
comparable basis with the 2004 consolidated financial
statements, as if the reorganization had occurred
January 1, 2002. All intercompany transactions between AWA
and TLC have been eliminated.
(b)
Cash, Cash Equivalents and Short-term Investments
Cash equivalents consist of all highly liquid debt instruments
purchased with original maturities of three months or less.
Short-term investments consist of cash invested in certain debt
securities with original maturities greater than 90 days
and less than one year. The debt securities are classified as
held to maturity and are carried at amortized cost that
approximates fair value.
AWA reclassified investments in auction rate securities
previously classified as cash equivalents to short-term
investments on the accompanying consolidated balance sheets.
Investments reclassified in 2004 and 2003 were
$58.4 million and $249.7 million, respectively.
(c)
Expendable Spare Parts and Supplies
Flight equipment expendable spare parts and supplies are valued
at average cost. An allowance for obsolescence is provided, over
the estimated useful life of the related aircraft and engines,
for spare parts expected to be on hand at the date the aircraft
are retired from service.
(d)
Property and Equipment
Property and equipment are recorded at cost. Interest
capitalized on advance payments for aircraft acquisitions and on
expenditures for aircraft improvements are part of these costs.
Interest capitalized for the years ended December 31, 2004,
2003 and 2002 was $2.2 million, $1.6 million and
$3.0 million, respectively. Property and equipment is
depreciated and amortized to residual values over the estimated
useful lives or the lease term, whichever is less, using the
straight-line method.
The estimated useful lives for AWA's ground property and
equipment range from three to 12 years for owned property
and equipment and up to 30 years for the flight training
facility. The estimated useful lives of AWA's owned
aircraft, jet engines, flight equipment and rotable parts range
from five to 25 years. Leasehold improvements relating to
flight equipment and other property on operating leases are
amortized over the life of the lease or the life of the asset,
whichever is shorter.
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AWA records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the
assets might be impaired as defined by SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived
Assets."
Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset
to undiscounted future net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less cost to sell.
(e)
Restricted Cash
Restricted cash includes cash deposits securing certain letters
of credit and surety bonds and cash deposits held by
institutions that process credit card sales transactions.
Current restricted cash includes amounts set aside in an
irrevocable trust for the redemption of the
10
3
/
4
% senior
unsecured notes which was subsequently paid on January 26,
2005.
(f)
Aircraft Maintenance and Repairs
Routine maintenance and repairs are charged to expense as
incurred. The cost of major scheduled airframe, engine and
certain component overhauls are capitalized and amortized over
the periods benefited and are included in aircraft maintenance
materials and repairs expense.
In the first quarter of 2004, the Company revised the estimated
useful life for certain aircraft and related spare parts
inventory as a result of changes in AWA's fleet plan and
for capitalized maintenance on certain of its engines as a
result of changes in aircraft utilization. The net impact of
this change in estimate decreased the net loss for 2004 by
approximately $18.4 million.
An accrual for the estimated cost of scheduled airframe and
engine overhauls required to be performed on leased aircraft
prior to their return to the lessors has also been recorded.
These estimates are based on historical costs and our
assumptions regarding the renewal of aircraft leases.
(g)
Derivative Instruments
AWA's fuel hedging contracts do not qualify as cash flow
hedges under Statement of Financial Accounting Standards
No. 133,
"Accounting for Derivative Instruments and
Hedging Activities"
("SFAS No. 133"). See Note 2,
"Restatement of Previously Reported Amounts."
Accordingly, the derivative hedging instruments are recorded
as an asset or liability on the balance sheet at fair value and
the changes in the fair values are recorded in
"Gain
(Loss) on Derivative Instruments, Net"
in the
accompanying consolidated statements of operations. See
Note 12,
"Nonoperating Income
(Expenses) — Other, Net."
(h)
Frequent Flyer Awards
AWA maintains a frequent travel award program known as
"FlightFund" that provides a variety of awards to
program members based on accumulated mileage. The estimated cost
of providing the free travel, using the incremental cost method
as adjusted for estimated redemption rates, is recognized as a
liability and charged to operations as program members
accumulate mileage.
AWA also sells mileage credits to companies participating in its
FlightFund program, such as hotels, car rental agencies and
credit card companies. Transportation-related revenue from the
sale of mileage credits is deferred and recognized when
transportation is provided.
(i)
Deferred Credit-Operating Leases
Rents for operating leases were adjusted to fair market value
when AWA emerged from bankruptcy in 1994. The net present value
of the difference between the stated lease rates and the fair
market rates has been recorded as a deferred credit in the
accompanying balance sheets. The deferred credit will be
increased through charges to interest expense and decreased on a
straight-line basis as a reduction in rent expense over the
applicable lease periods. At December 31, 2004 and 2003,
the unamortized balance of the deferred credit was
$38.3 million and $44.6 million, respectively.
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In January 2002, AWA closed a $429 million loan supported
by a $380 million government loan guarantee. This loan
triggered aircraft rent concessions negotiated with
approximately 20 aircraft lessors. Approximately
$18.1 million of aircraft rent, which was accrued as of
December 31, 2001, was waived by the aircraft lessors. This
amount has been recorded as a deferred credit in the
accompanying consolidated balance sheet and will be amortized
over the remaining lives of the applicable leases as a reduction
in rent expense. At December 31, 2004 and 2003, the
unamortized balance of the deferred credit was approximately
$4.2 million and $7.8 million, respectively.
(j)
Passenger Revenue
Passenger revenue is recognized when transportation is provided.
Ticket sales for transportation which has not yet been provided
are recorded as air traffic liability. Passenger traffic
commissions and related fees are expensed when the related
revenue is recognized. Passenger traffic commissions and related
fees not yet recognized are included as a prepaid expense. Due
to complex pricing structures, refund and exchange policies, and
interline agreements with other airlines, certain amounts are
recognized in revenue using estimates regarding both the timing
of the revenue recognition and the amount of revenue to be
recognized. These estimates are generally based on the
statistical analysis of AWA's historical data. Any
adjustments resulting from periodic evaluations of the estimated
air traffic liability are included in results of operations
during the period in which the evaluations are completed.
(k)
Reorganization Value in Excess of Amounts Allocable to
    Identifiable Assets ("ERV")
In June 2001, the FASB issued SFAS No. 142,
"Goodwill and Other Intangible Assets."
SFAS No. 142 primarily addresses the accounting
for goodwill and intangible assets subsequent to their
acquisition. SFAS No. 142 does not permit the
amortization of goodwill as required by APB Opinion No. 17,
"Intangible Assets."
Rather, goodwill is
subject to a periodic impairment test, using a two-step process.
The first step is to identify a potential impairment. The second
step of the goodwill impairment test measures the amount of the
impairment loss, using a fair value-based approach. Under
SFAS No. 142, ERV is reported as goodwill and
accounted for in the same manner as goodwill.
SFAS No. 142 was effective for fiscal years beginning
after December 15, 2001. Upon adoption of this statement on
January 1, 2002, AWA recorded an impairment loss of
$208.2 million, which was supported by an independent
valuation of the Company. The impairment loss was recorded as
the cumulative effect of a change in accounting principle.
(l)
Advertising Costs
AWA expenses the costs of advertising as incurred. Advertising
expense for the years ended December 31, 2004, 2003 and
2002 was $8.3 million, $5.8 million and
$6.5 million, respectively.
(m)
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. A valuation allowance is
established, if necessary, for the amount of any tax benefits
that, based on available evidence, are not expected to be
realized.
(n)
Stock Options
Certain of AWA's employees are eligible to participate in
the stock option plans of Holdings. Holdings accounts for its
stock option plans in accordance with the provisions of APB
Opinion No. 25,
"Accounting for Stock Issued to
Employees,"
and related interpretations. As such,
compensation expense would be recorded on the date of grant only
if the current market price of the underlying stock exceeded the
exercise price. Accordingly, no compensation cost has been
recognized for stock options in Holdings' condensed
consolidated financial statements. Had Holdings determined
compensation cost based on the fair value at the grant date for
its stock options under SFAS No. 123,
"Accounting for Share-Based Payments,"
and
allocated
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the compensation expense to AWA for its employees participating
in the stock option plans, AWA's net income (loss) would
have been reduced to the pro forma amounts indicated below:
2004
2003
2002
(in thousands)
Net income (loss), as reported
$
(85,257
)
$
61,286
$
(389,700
)
Stock-based compensation expense
(5,874
)
(4,320
)
(3,709
)
Pro forma net income (loss)
$
(91,131
)
$
56,966
$
(393,409
)
(o)
New Accounting Standards
In November 2004, the FASB issued Revised Statement
No. 123,
"Accounting for Share-Based Payment"
("SFAS No. 123R"). This statement
requires AWA to recognize the grant-date fair value of stock
options in the Statement of Operations. In addition, AWA will be
required to calculate this compensation using the fair-value
based method, versus the intrinsic value method previously
allowed under SFAS No. 123. This revision is effective
for periods beginning after June 15, 2005. Accordingly, AWA
will adopt this revised SFAS effective July 1, 2005. AWA is
currently evaluating how it will adopt SFAS No. 123R
and has not determined the method it will use to value granted
stock options. The adoption of SFAS No. 123R is
expected to have a material effect on AWA's results of
operations. See Note 1,
"Summary of Significant
Accounting Policies"
(n)
"Stock Options"
for AWA's disclosure of the impact of the compensation
cost associated with stock options under SFAS No. 123.
(p)
Use of Estimates
Management of AWA has made certain estimates and assumptions
relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with accounting
principles generally accepted in the United States. Actual
results could differ from those estimates.
(q)
Reclassifications
Certain reclassifications have been made to the prior
years' consolidated financial statements to conform to the
current year's presentation.
AWA reclassified amounts related to settled fuel hedge
transactions and mark-to-market adjustments on open hedge
instruments from
"Aircraft Fuel"
expense to
"Gain (Loss) on Derivative Instruments, Net"
in
the accompanying consolidated statement of operations. In fiscal
years 2004 and 2003, such amounts reduced fuel expense while in
fiscal years 2002 and 2001, such amounts increased fuel expense,
as originally classified. The amounts reclassified are as
follows:
Fiscal Year
Amounts Reclassified
(in thousands)
2004
$
30,529
2003
10,746
2002
(656
)
2.
Restatement of Previously Reported Amounts
Derivative Instruments
In February 2005, management undertook a review of AWA's
accounting for its fuel hedging transactions. As a result of
this review, management concluded that AWA's hedging
transactions did not qualify for hedge accounting under
U.S. generally accepted accounting principles. Accordingly,
management concluded that the financial statements for prior
periods required restatement to reflect the fair value of fuel
hedging contracts in the balance sheets and statements of
stockholders equity and comprehensive income of Holdings and
AWA. Specifically, (i) AWA has restated its balance sheet
and statement of stockholder's equity and comprehensive
income as of and for the year ended December 31, 2003, and
(ii) AWA has restated its 2004 and 2003 interim financial
results to correct the aforementioned accounting errors. The
unaudited interim results as originally reported and as restated
are presented in Note 15,
"Quarterly Financial
Data
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(Unaudited)."
AWA restated its 2003 consolidated
balance sheet to reduce the carrying value of its derivative
instruments asset by $12.5 million, which served to record
the asset at fair value of open contracts as of
December 31, 2003. The restatement also eliminated
$12.5 million in accumulated other comprehensive income,
$2.0 million of which was previously recorded in the 2003
beginning balance of accumulated other comprehensive income. The
restated amount of other assets is $110.2 million in the
accompanying 2003 consolidated balance sheet. The restatement
eliminates the balance in accumulated other comprehensive income
in the accompanying 2003 consolidated balance sheet and
consolidated statement of stockholders' equity and
comprehensive income.
3.
Investments in Debt Securities
Cash equivalents and short-term investments as of
December 31 are classified as follows:
2004
2003
(in thousands)
Cash and cash equivalents:
Corporate notes
$
—
$
4,205
Cash and money market funds
126,992
128,441
U.S. government securities
1,505
1,504
Total cash and cash equivalents
$
128,497
$
134,150
Short-term investments:
Corporate notes
$
126,651
$
318,845
U.S. government securities
—
3,770
Total short-term investments
126,651
322,615
Total cash equivalents and short-term investments
$
255,148
$
456,765
In addition, AWA had long-term investments in debt securities of
$30.0 million and $40.7 million as of
December 31, 2004 and 2003, respectively. Long-term
investments consist of cash invested in certain debt securities
with maturities greater than one year. The debt securities are
classified as held to maturity and are carried at amortized cost
that approximates fair value.
4.
Financial Instruments and Risk Management
(a)
Fair Value of Financial Instruments
Cash Equivalents, Short-term Investments and
    Receivables
The carrying amount approximates fair value because of the
short-term nature of these instruments.
Long-term Debt
At December 31, 2004 and 2003, the fair value of long-term
debt was approximately $721.5 million and
$845.6 million, respectively. AWA's variable rate
long-term debt with a carrying value of $545.7 million and
$555.9 million at December 31, 2004 and 2003,
respectively, approximates fair value because these borrowings
have variable interest rate terms that approximate market
interest rates for similar debt instruments. The fair values of
AWA's other long-term debt are determined based on quoted
market prices if available or market prices for comparable debt
instruments.
(b)
Fuel Price Risk Management
Under its fuel hedging program, AWA may enter into certain
hedging transactions with approved counterparties for a period
generally not exceeding 12 months. As of December 31,
2004, AWA had entered into costless collar and basis swap
transactions hedging approximately 42% of its projected 2005
fuel requirements. The fair value of AWA's financial
derivative instruments was a net asset of approximately
$0.2 million and $2.7 million at December 31,
2004 and 2003, respectively. See Note 2,
"Restatement of Previously Reported Amounts."
AWA is exposed to credit risks in the event any counterparty
fails to meet its obligations. AWA does not anticipate such
non-performance as counterparties are selected based on credit
ratings, exposure to any one
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counterparty is limited based on formal guidelines and the
relative market positions with such counterparties are closely
monitored.
(c)
Concentration of Credit Risk
AWA does not believe it is subject to any significant
concentration of credit risk. Most of AWA's receivables
result from tickets sold to individual passengers through the
use of major credit cards or from tickets sold by other airlines
and used by passengers on AWA. These receivables are short-term,
generally being settled shortly after the sale.
5.
Advances to Parent Company and Affiliate
In January 2002, AWA closed a $429 million loan supported
by a $380 million government loan guarantee. The terms of
this loan and AWA's secured term loan restrict
Holdings' and AWA's ability to incur additional
indebtedness or issue equity unless the proceeds of those
transactions are used to prepay the government guaranteed loan
and the term loan. Accordingly, as a result of this transaction,
AWA's net advances to Holdings have been classified in
"Other Assets" on AWA's balance sheet.
AWA's net advances to Holdings were approximately
$258.8 million and $213.1 million at December 31,
2004 and 2003, respectively.
6.
Long-Term Debt
Long-term debt at December 31, 2004 and 2003 consists of
the following:
2004
2003
(in thousands)
Secured
Equipment notes payable, variable interest rates of 2.88% to
    3.37%, averaging 2.96%, installments due 2005 through 2008
$
39,464
$
48,454
GECC term loan, variable interest rate of 6.41%, quarterly
    installments beginning 2006 through 2010(a)
110,564
—
Term loan, variable interest rate, paid off September 2004(a)
—
74,775
Senior secured discount notes, variable interest rate of 6.42%,
    installments due 2005 through 2009(b)
35,988
—
186,016
123,229
Unsecured
Government guaranteed loan, variable interest rate of 2.38%,
    installments due 2005 through 2008(c)
343,200
429,000
10
3
/
4
% senior
    unsecured notes, interest only payments until due in 2005(d)
39,548
39,548
7.5% convertible senior notes, interest only payments until
    due in 2009(e)
112,299
104,328
7.25% senior exchangeable notes, due 2023 with cash
    interest at 2.49% payable through 2008 and original issue
    discount of 7.25% thereafter(f)
252,695
252,695
Equipment notes payable, interest rates of 90-day LIBOR +1.25%,
    averaging 3.61%, installments due through 2005
15,750
5,250
Industrial development bonds, fixed interest rate of 6.3% due
    2023(g)
29,300
29,300
State loan, variable interest rate of 5.97%, installments due
    2005 through 2007
750
1,500
793,542
861,621
Total long-term debt
979,558
984,850
Less: Unamortized discount on debt
(193,246
)
(191,986
)
Current maturities
(151,183
)
(103,899
)
$
635,129
$
688,965
(a)
On September 10, 2004, AWA entered into a term loan
    financing with GECC providing for loans in an aggregate amount
    of $110.6 million. AWA used approximately
    $77.0 million of the proceeds from this financing to repay
    in full its term loan with Mizuho Corporate Bank, Ltd. and
    certain other lenders and to pay certain costs associated with
    this transaction. AWA used the remaining proceeds for general
    corporate purposes. The new term loan financing consists of two
    secured term loan facilities: a
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$75.6 million term loan facility secured primarily by spare
    parts, rotables and appliances (the "Spare Parts
    Facility"); and a $35.0 million term loan facility
    secured primarily by aircraft engines and parts installed in
    such engines (the "Engine Facility").
The facilities are cross-collateralized on a subordinated basis
    and the collateral securing the facilities also secures on a
    subordinated basis certain of AWA's other existing debt and
    lease obligations to GECC and its affiliates.
The loans under the Spare Parts Facility are payable in full at
    maturity on September 10, 2010. The loans under the Engine
    Facility are payable in equal quarterly installments of
    $1.3 million beginning on March 10, 2006 through
    June 10, 2010 with the remaining loan amount of
    $11.8 million payable at maturity on September 10,
    2010. The loans under each facility may be prepaid in an amount
    not less than $5 million at any time after the 30th monthly
    anniversary of the funding date under such facility. If AWA
    fails to maintain a certain ratio of rotables to loans under the
    Spare Parts Facility, it may be required to pledge additional
    rotables or cash as collateral, provide a letter of credit or
    prepay some or all of the loans under the Spare Parts Facility.
    In addition, the loans under the Engine Facility are subject to
    mandatory prepayment upon the occurrence of certain events of
    loss applicable to, or certain dispositions of, aircraft engines
    securing the facility.
Principal amounts outstanding under the loans bear interest at a
    rate per annum based on three-month LIBOR plus a margin. Both
    facilities contain customary events of default, including
    payment defaults, cross-defaults, breach of covenants,
    bankruptcy and insolvency defaults and judgment defaults.
(b)
On December 27, 2004, AWA raised additional capital by
    financing its Phoenix maintenance facility and flight training
    center. The flight training center was previously unencumbered,
    and the maintenance facility became unencumbered earlier this
    year when AWA refinanced its term loan. Using its leasehold
    interest in these two facilities as collateral, AWA, through a
    wholly owned subsidiary named FTCHP LLC, raised
    $30.8 million through the issuance of senior secured
    discount notes. The notes were issued by FTCHP at a discount
    pursuant to the terms of a senior secured term loan agreement
    among AWA, FTCHP, Heritage Bank, SSB, as administrative agent,
    Citibank, N.A., as the initial lender, and the other lenders
    from time to time party thereto. Citibank, N.A. subsequently
    assigned all of its interests in the notes to third party
    lenders.
AWA has fully and unconditionally guaranteed the payment and
    performance of FTCHP's obligations under the notes and the
    loan agreement. The notes require aggregate principal payments
    of $36 million with principal payments of $1.5 million
    due on each of the first two anniversary dates and the remaining
    principal amount due on the fifth anniversary date. The notes
    may be prepaid in full at any time (subject to customary LIBOR
    breakage costs) and in partial amounts of $1.5 million on
    the third and fourth anniversary dates. The unpaid principal
    amount of the notes bears interest based on LIBOR plus a margin
    subject to adjustment based on a loan to collateral value ratio.
The loan agreement contains customary covenants applicable to
    loans of this type, including obligations relating to the
    preservation of the collateral and restrictions on the
    activities of FTCHP. In addition, the loan agreement contains
    events of default, including payment defaults, cross-defaults to
    other debt of FTCHP, if any, breach of covenants, bankruptcy and
    insolvency defaults and judgment defaults.
In connection with this financing, AWA sold all of its leasehold
    interests in the maintenance facility and flight training center
    to FTCHP and entered into subleases for the facilities with
    FTCHP at lease rates expected to approximate the interest
    payments due under the notes. In addition, AWA agreed to make
    future capital contributions to FTCHP in amounts sufficient to
    cover principal payments and other amounts owing pursuant to the
    notes and the loan agreement.
The proceeds from this financing, together with
    $10.5 million from operating cash flow, were irrevocably
    deposited with the trustee for AWA's
    10
3
/
4
% senior
    unsecured notes due 2005 and subsequently redeemed on
    January 26, 2005.
(c)
In January 2002, AWA closed a $429 million loan backed by a
    $380 million federal loan guarantee provided by the Air
    Transportation Stabilization Board (the "ATSB").
    Certain third-party counter-guarantors have fully and
    unconditionally guaranteed the payment of an aggregate of
    $45 million of the outstanding principal amount under the
    government guaranteed loan plus accrued and unpaid interest
    thereon. In addition, Holdings has fully and unconditionally
    guaranteed the payment of all principal, premium, interest and
    other obligations outstanding under the government guaranteed
    loan and has pledged the stock of AWA to secure its obligations
    under such guarantee. Principal amounts under this loan become
    due in ten installments of $42.9 million on each
    March 31 and September 30, commencing on
    March 31, 2004 and ending on September 30, 2008.
    Principal amounts outstanding under the government guaranteed
    loan bear interest at a rate per annum equal to LIBOR plus
    40 basis points.
Subject to certain exceptions, AWA is required to prepay the
    government guaranteed loan with:
•
the net proceeds of all issuances of debt or equity by either
    Holdings or AWA after January 2002;
•
proceeds from asset sales in excess of $20 million in any
    fiscal year; and
•
insurance proceeds in excess of $2 million to the extent
    such proceeds are not used to restore or replace the assets from
    which such proceeds are derived.
In addition, AWA is required to prepay the government guaranteed
    loan upon a change in control and we may be required to prepay
    portions of the loan if our employee compensation costs exceed a
    certain threshold. AWA may, at its option, prepay the government
    guaranteed loan without premium or penalty, subject to
    reimbursement of the lenders' breakage costs in the case of
    prepayment of LIBOR loans.
The government guaranteed loan requires that AWA maintain a
    minimum cash balance of $100 million. In addition, the
    government loan contains customary affirmative covenants and the
    following negative covenants: restrictions on liens,
    investments, restricted payments, fundamental changes, asset
    sales and acquisitions, the creation of new subsidiaries, sale
    and leasebacks, transactions with
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affiliates, the conduct of business, mergers or consolidations,
    issuances and dispositions of capital stock of subsidiaries, and
    amendments to other indebtedness. The government guaranteed loan
    contains customary events of default, including payment
    defaults, cross-defaults, breach of covenants, bankruptcy and
    insolvency defaults and judgment defaults.
(d)
In August 1995, AWA issued $75.0 million principal amount
    of
    10
3
/
4
% senior
    unsecured notes due 2005 of which $39.5 million remained
    outstanding at December 31, 2004. Interest on the
    10
3
/
4
% senior
    unsecured notes is payable semiannually in arrears on
    March 1 and September 1 of each year. On
    December 27, 2004, AWA called for the redemption on
    January 26, 2005 of all of the senior unsecured notes at a
    redemption price of 100% of the principal amount thereof plus
    accrued and unpaid interest through the redemption date. In
    addition, AWA irrevocably deposited the $30.8 million
    raised through the maintenance facility and flight training
    center financing, together with an additional $10.5 million
    from its operating cash flow, with the trustee for the senior
    unsecured notes. The senior notes were subsequently redeemed on
    January 26, 2005.
(e)
In connection with the closing of the government guaranteed loan
    and the related transactions, Holdings issued
    $104.5 million of 7.5% convertible senior notes due
    2009, of which approximately $112.3 million remained
    outstanding at December 31, 2004 (including
    $21.6 million of interest paid through December 31,
    2004 as a deemed loan added to the initial principal thereof).
    Beginning January 18, 2005, these notes are convertible
    into shares of class B common stock, at the option of the
    holders, at an initial conversion price of $12.00 per share
    or a conversion ratio of approximately 83.333 shares per
    $1,000 principal amount of such notes, subject to standard
    anti-dilution adjustments. Interest on the 7.5% convertible
    senior notes is payable semiannually in arrears on June 1
    and December 1 of each year. At Holdings' option, the
    first six interest payments were payable in the form of a deemed
    loan added to the principal amount of these notes. The
    7.5% convertible senior notes will mature on
    January 18, 2009 unless earlier converted or redeemed. The
    payment of principal, premium and interest on the
    7.5% convertible senior notes is fully and unconditionally
    guaranteed by AWA.
Holdings may redeem some or all of the 7.5% convertible
    senior notes at any time before January 18, 2005, at a
    redemption price equal to $1,000 per note to be redeemed if
    (A) the closing price of the class B common stock has
    exceeded 120% of the conversion price then in effect for at
    least 20 trading days within a period of 30 consecutive trading
    days ending on the trading day before the date of the mailing of
    the redemption notice, and (B) a shelf registration
    statement covering resales of the notes and the class B
    common stock issuable upon conversion thereof is effective and
    available for use and is expected to remain effective and
    available for use for the 30 days following the redemption
    date, unless registration is no longer required. Holdings may
    redeem the 7.5% convertible senior notes, in whole or in
    part, on or after January 18, 2005 at the following
    redemption prices (expressed as percentages of the principal
    amount thereof), if redeemed during the twelve-month period
    commencing on January 18 of the years set forth below, plus, in
    each case, accrued and unpaid interest, if any, to the date of
    redemption:
Year
Redemption Price
2005
103.75
%
2006
102.50
%
2007
101.25
%
2008 and thereafter
100.00
%
For financial reporting purposes, AWA recorded the convertible
    senior notes at their fair market value on the date of issuance.
    The balance at December 31, 2004 is net of an unamortized
    discount of $22.2 million.
(f)
In July and August of 2003, AWA completed a private placement of
    approximately $86.8 million issue price of
    7.25% Senior Exchangeable Notes due 2023. The notes bear
    cash interest at 2.49% per year until July 30, 2008.
    Thereafter, the notes will cease bearing cash interest and begin
    accruing original issue discount daily at a rate of
    7.25% per year until maturity. Each note was issued at a
    price of $343.61 and is exchangeable for class B common
    stock of Holdings at an exchange ratio of 32.038 shares per
    $1,000 principal amount at maturity of the notes (subject to
    adjustment in certain circumstances). This represents an
    equivalent conversion price of approximately $10.73 per
    share. The aggregate amount due at maturity, including accrued
    original issue discount from July 31, 2008, will be
    $252,695,000. The notes are unconditionally guaranteed on a
    senior unsecured basis by Holdings.
Holders may exchange their notes for the shares of class B
    common stock of Holdings in any fiscal quarter commencing after
    September 30, 2003, if, as of the last day of the preceding
    fiscal quarter, the closing sale price of the class B
    common stock for at least 20 trading days in a period of 30
    consecutive trading days ending on the last trading day of such
    preceding fiscal quarter is more than 110% of the accreted
    exchange price per share of Class B common stock on the
    last day of such preceding fiscal quarter. If the foregoing
    condition is satisfied, then the notes will be exchangeable at
    any time at the option of the holder through maturity. The
    accreted exchange price per share as of any day will equal the
    issue price of a note plus accrued original issue discount to
    that day divided by 32.038, subject to any adjustments to the
    exchange rate through that day.
On or before July 30, 2018, a holder also may exchange its
    notes for shares of the Class B common stock at any time
    after a 10 consecutive trading-day period in which the average
    of the trading prices for the notes for that 10 trading-day
    period was less than 103% of the average exchange value for the
    notes during that period. Exchange value is equal to the product
    of the closing sale price for the shares of Class B common
    stock on a given day multiplied by the then current exchange
    rate, which is the number of shares of Class B common stock
    for which each note is then exchangeable.
In addition, the holders may exchange the notes if the notes
    have been called for redemption or if certain specified
    corporate transactions have occurred.
Holders of the notes may require AWA to repurchase the notes at
    a price equal to the original issue price plus accrued cash
    interest and original issue discount, if any, on July 30,
    2008, 2013 and 2018. The purchase price of such notes may be
    paid in cash or
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class B common stock of Holdings, subject to certain
    restrictions. In addition, each holder may require AWA to
    purchase all or a portion of such holder's notes upon the
    occurrence of certain change of control events concerning AWA or
    Holdings. AWA may redeem the notes, in whole or in part, on or
    after July 30, 2008 at a price equal to the original issue
    price plus accrued cash interest and original issue discount, if
    any.
(g)
The industrial development revenue bonds are due April 2023.
    Interest at 6.3% is payable semiannually (April 1 and
    October 1). The bonds are subject to optional redemption prior
    to the maturity date on or after April 1, 2008, in whole or
    in part, on any interest payment date at the following
    redemption prices: 102% on April 1 or October 1, 2008;
    101% on April 1 or October 1, 2009; and 100% on
    April 1, 2010 and thereafter.
Secured financings totaling $186.0 million are
collateralized by assets, primarily aircraft, engines,
simulators, rotable aircraft parts and AWA's hangar
facility, with a net book value of $268.4 million at
December 31, 2004.
At December 31, 2004, the estimated maturities of long-term
debt are as follows:
(in thousands)
2005
151,183
2006
101,042
2007
100,509
2008
107,570
2009
147,327
Thereafter
371,927
$
979,558
Certain of AWA's long-term debt agreements contain minimum
cash balance requirements and other covenants with which
Holdings and AWA are in compliance. Certain of these covenants
restrict AWA's ability to pay cash dividends on its common
stock and make certain other restricted payments (as specified
therein). Finally, AWA's long-term debt agreements contain
cross-default provisions, which may be triggered by defaults by
AWA under other agreements relating to indebtedness.
7.
Commitments and Contingencies
(a)
Leases
As of December 31, 2004, AWA had 136 aircraft under
operating leases, including four aircraft that will be delivered
in 2005, with remaining terms ranging from five months to
approximately 19 years. In January 2002, AWA closed a
$429 million loan supported by a $380 million
government loan guarantee that resulted in a restructuring of
its aircraft lease commitments. Under the restructured lease
agreements, annual rent payments have been reduced for each of
the next five years. Certain of these leases contain put options
pursuant to which the lessors could require AWA to renew the
leases for periods ranging from eight months to approximately
nine years or call options pursuant to which the lessors could
require AWA to return the aircraft to the lessors upon receipt
of six to nine months written notice. AWA also has options to
purchase certain of the aircraft at fair market values at the
end of the lease terms. Certain of the agreements require
security deposits, minimum return provisions and supplemental
rent payments.
Since AWA's restructuring in 1994, AWA has set up
19 pass through trusts, which have issued over
$1.4 billion of pass through trust certificates (also known
as
"Enhanced Equipment Trust Certificates"
or "EETC") covering the financing of 54 aircraft.
These trusts are off-balance sheet entities, the primary purpose
of which is to finance the acquisition of aircraft. Rather than
finance each aircraft separately when such aircraft is purchased
or delivered, these trusts allow AWA to raise the financing for
several aircraft at one time and place such funds in escrow
pending the purchase or delivery of the relevant aircraft. The
trusts are also structured to provide for certain credit
enhancements, such as liquidity facilities to cover certain
interest payments, that reduce the risks to the purchasers of
the trust certificates and, as a result, reduce the cost of
aircraft financings to AWA.
Each trust covered a set amount of aircraft scheduled to be
delivered within a specific period of time. At the time of each
covered aircraft financing, the relevant trust used the funds in
escrow to purchase equipment notes relating to the financed
aircraft. The equipment notes were issued, at AWA's
election, either by AWA in connection with a mortgage financing
of the aircraft or by a separate owner trust in connection with a
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leveraged lease financing of the aircraft. In the case of a
leveraged lease financing, the owner trust then leased the
aircraft to AWA. In both cases, the equipment notes are secured
by a security interest in the aircraft. The pass through trust
certificates are not direct obligations of, nor guaranteed by,
Holdings or AWA. However, in the case of mortgage financings,
the equipment notes issued to the trusts are direct obligations
of AWA and in the case of leveraged lease financings, the leases
are direct obligations of AWA. In addition, neither Holdings nor
AWA guarantee or participate in any way in the residual value of
the leased aircraft. All aircraft financed by these trusts are
currently structured as leveraged lease financings, which are
not reflected as debt on the balance sheets of either AWA or
Holdings. AWA does not provide residual value guarantees under
these lease arrangements. Each lease contains a purchase option
that allows AWA to purchase the aircraft at a fixed price, which
at the inception of the lease approximated the aircraft's
expected fair market value at the option date, near the end of
the lease term. These leasing entities meet the criteria for
variable interest entities. However, they do not meet the
consolidation criteria under FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities,"
because AWA is not the primary beneficiary under these
arrangements.
As a result of the rent restructuring associated with the
government guaranteed loan, one aircraft lease was amended to
include a bargain purchase option. As a result, this lease has
been classified as a capital lease in accordance with
SFAS No. 13,
"Accounting for Leases,"
as amended, with an asset value of $14.8 million which
includes accumulated amortization of $2.1 million and
corresponding lease obligation of $8.5 million at
December 31, 2004.
In January 2004, one aircraft lessor exercised its put rights
under the aircraft lease agreement to extend the lease for one
Boeing 737-300 aircraft for an additional 33 months.
AWA also leases certain terminal space, ground facilities and
computer and other equipment under noncancelable operating
leases.
At December 31, 2004, the scheduled future minimum cash
rental payments under capital leases and noncancelable operating
leases with initial terms of more than one year are as follows:
Capital
Operating
Years Ending December 31,
Leases
Leases
(in thousands)
2005
4,659
361,671
2006
4,988
335,412
2007
1,773
314,892
2008
—
264,017
2009
—
238,074
Thereafter
—
1,719,934
Total minimum lease payments
11,420
$
3,234,000
Less: Amounts of lease payments that represent interest
(2,884
)
Present value of future minimum capital lease payments
8,536
Less: Current obligations under capital leases
(3,475
)
Long-term capital lease obligations
$
5,061
Rent expense (excluding landing fees) was approximately
$421.1 million, $406.8 million and $409.4 million
for the years ended December 31, 2004, 2003 and 200,
respectively.
Collectively, the operating lease agreements require security
deposits with lessors of $24.0 million, which have been
classified as
"Other Assets, Net"
in the
accompanying balance sheets, and bank letters of credit of
$13.8 million. The letters of credit are collateralized by
$13.9 million of restricted cash.
(b)
Revenue Bonds
In June 1999, Series 1999 special facility revenue bonds
("new bonds") were issued by a municipality to fund
the retirement of the Series 1994A bonds ("old
bonds") and the construction of a new concourse with 14
gates at Terminal 4 in Phoenix Sky Harbor International Airport
in support of AWA's strategic
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growth plan. The new bonds are due June 2019 with interest
accruing at 6.25% per annum payable semiannually on
June 1 and December 1, commencing on December 1,
1999. The new bonds are subject to optional redemption prior to
the maturity date on or after June 1, 2009 in whole or in
part, on any interest payment date at the following redemption
prices: 101% on June 1 or December 1, 2009; 100.5% on
June 1 or December 1, 2010; and 100% on June 1,
2011 and thereafter. In accordance with EITF Issue
No. 97-10,
"The Effect of Lessee Involvement in
Asset Construction,"
AWA accounts for this as an
operating lease.
In connection with these bonds, AWA entered into an Amended and
Restated Airport Use Agreement, pursuant to which AWA agreed to
make sufficient payments to the Industrial Development Authority
("IDA") to cover the principal and interest of the
bonds and to indemnify the IDA for any claims arising out of the
issuance and sale of the bonds and the use and occupancy of the
concourses financed by these bonds and the old bonds. At
December 31, 2004, the outstanding principal amount of the
bonds was $21.8 million. AWA estimates its remaining
payments to cover the principal and interest of these bonds will
be approximately $43.6 million.
In addition, AWA is also the lessee under certain long-term
leases at various airports. At certain of these airports,
municipalities have issued revenue bonds to improve airport
facilities that are leased by AWA and accounted for as operating
leases. AWA does not guarantee the underlying debt related to
these operating leases.
(c)
Aircraft Acquisitions
In August 2004, AWA amended its aircraft purchase contract with
AVSA S.A.R.L., an affiliate of Airbus Industrie or
"AVSA," to acquire 22 Airbus A320 family aircraft
(thirteen A320s and nine A319s), all powered by V2500
engines from International Aero Engines. Of the
22 aircraft, it is anticipated that 18 will be
purchased directly from the manufacturer and four have been
leased under noncancelable leases from various lessors for
aircraft to be delivered in 2005. AWA has negotiated lease
agreements for the four leased aircraft. In the context of this
incremental order, AWA also secured extensive flexibility from
Airbus with respect to its existing A318 order, allowing AWA to
better react to market conditions by enabling it to amend its
15 A318 delivery positions to A319s and A320s, if it so
desires, or to take no additional aircraft under certain
conditions.
AWA has an agreement with International Aero Engines
("IAE") which provides for the purchase by AWA of
seven new V2500-A5 spare engines scheduled for delivery through
2007 for use on certain of the Airbus A320 fleet. At
December 31, 2004, the seven engines have an estimated
gross cost of $39 million.
The following table reflects estimated net cash payments under
the restructured aircraft purchase agreement with AVSA and the
IAE engine contract. Actual payments may vary due to inflation
factor adjustments and changes in the delivery schedule of the
equipment.
(in thousands)
2005
$
272,820
2006
456,891
2007
47,697
$
777,408
(d)
Sale-Leaseback Transactions
In the fourth quarter of 2004, AWA completed two separate
aircraft sale-leaseback transactions on one Airbus A320 aircraft
and one Airbus A319 aircraft resulting in a combined loss of
$4.6 million. This amount was recorded in
"Other
Operating Expenses."
In May 2004, AWA completed a sale-leaseback transaction on one
V2500-A5 engine resulting in a gain of $2.9 million which
has been deferred and will be amortized over the lease term of
seven years.
In July 2004, AWA completed a sale-leaseback transaction on one
V2500-A5 engine resulting in a gain of $0.8 million which
has been deferred and will be amortized over the lease term of
seven years.
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As part of the restructuring completed on January 18, 2002,
AWA committed to the sale and leaseback of eight aircraft. The
sales and leaseback of six of these aircraft were completed in
2002 and resulted in losses of approximately $3.8 million.
The sale and leaseback of one aircraft was completed in June
2003 and resulted in a loss of approximately $0.6 million.
The sale and leaseback of the final aircraft was completed in
September 2003 and resulted in a loss of approximately
$0.7 million. The losses on the sale-leaseback
transactions, which were subject to a firm commitment in January
2002, were accrued in the accompanying statements of operations
classified in
"Special Charges"
in the first
quarter of 2002. See Note 11,
"Special
Charges.
"
(e)
Contingent Legal Obligations
Holdings and its subsidiaries are parties to various legal
proceedings, including some purporting to be class action suits,
and some that demand large monetary damages or other relief,
which, if granted, would require significant expenditures. In
certain cases where it is probable that the outcome will result
in monetary damages, AWA has reviewed available information and
determined that the best estimate of losses to be incurred
related to these cases is $2 million, which has been
accrued. For those cases where a loss is possible, or cases
where a range of loss is probable but no amount within the range
is a better estimate than any other amount, the estimated amount
of additional exposure ranges from $0 to $25 million. In
these instances, no accrual has been recorded.
(f)
General Guarantees and Indemnifications
AWA is the lessee under many aircraft financing agreements
(including leveraged lease financings of aircraft under the pass
through trusts) and real estate leases. It is common in such
transactions for AWA as the lessee to agree to indemnify the
lessor and other related third parties for the manufacture,
design, ownership, financing, use, operation and maintenance of
the aircraft, and for tort liabilities that arise out of or
relate to AWA's use or occupancy of the leased asset. In
some cases, this indemnity extends to related liabilities
arising from the negligence of the indemnified parties, but
usually excludes any liabilities caused by their gross
negligence or willful misconduct. Additionally, in the case of
real estate leases, AWA typically indemnifies such parties for
any environmental liability that arises out of or relates to
AWA's use of the leased premises. AWA expects that it would
be covered by insurance (subject to deductibles) for most tort
liabilities and related indemnities described above with respect
to leased real estate and operated aircraft.
8.
Income Taxes
AWA is included in Holdings' consolidated income tax
return. Income tax expense in the accompanying statements of
operations has been determined on a separate company basis.
AWA recorded income tax expense (benefit) as follows:
Year Ended December 31,
2004
2003
2002
(in thousands)
Current taxes:
Federal
$
—
$
114
$
(30,544
)
State
23
—
—
Total current taxes
23
114
(30,544
)
Deferred taxes
—
—
—
Total income tax expense (benefit)
$
23
$
114
$
(30,544
)
AWA's emergence from bankruptcy reorganization in 1994 and
the associated implementation of fresh start reporting gave rise
to significant items of expense for financial reporting purposes
that are not deductible for income tax purposes. In large
measure, it is these nondeductible (for income tax purposes)
expenses that result in an effective tax expense (benefit) rate
for financial reporting purposes that differs from the current
federal statutory income tax rate of 35%.
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Income tax expense (benefit) differs from amounts computed at
the federal statutory income tax rate as follows:
Year Ended December 31,
2004
2003
2002
(in thousands)
Income tax expense (benefit) at the federal statutory income
    tax rate
$
(29,832
)
$
21,490
$
(74,207
)
State income tax expense (benefit), net of federal income tax
    expense (benefit)
(3,057
)
2,532
(7,920
)
State rate change
—
(3,229
)
—
Change in valuation allowance
31,036
(17,532
)
44,461
Expired tax credits
—
—
7,988
Other, net
1,876
(3,147
)
(866
)
Total
$
23
$
114
$
(30,544
)
As of December 31, 2004, AWA has available net operating
loss carryforwards ("NOLs") and tax credit
carryforwards for federal income tax purposes of approximately
$447.6 million and $1.1 million, respectively. The
NOLs expire during the years 2007 through 2024 while
approximately $0.2 million of the tax credit carryforwards
will expire in 2005 and 2006. AWA also had capital loss
carryforwards for federal income tax purposes of approximately
$1.4 million which expire in 2009. However, such
carryforwards are not available to offset federal (and in
certain circumstances, state) alternative minimum taxable
income. Further, as a result of a statutory "ownership
change" (as defined for purposes of Section 382 of the
Internal Revenue Code) that occurred as a result of AWA's
reorganization in 1994, AWA's ability to utilize its NOLs
and tax credit carryforwards may be restricted.
In September 2003, Holdings filed its 2002 consolidated income
tax return with the IRS, which included a claim to carryback
losses incurred in 2002 to the tax years 1999 and 2000. This
resulted in a refund of approximately $3.1 million, of
which substantially all was received in the fourth quarter of
2003.
Composition of Deferred Tax Items
:
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. As of December 31, the
significant components of AWA's deferred tax assets and
liabilities are a result of the temporary differences related to
the items described as follows:
2004
2003
(in thousands)
Deferred tax assets:
Net operating loss carryforwards
$
183,058
$
126,220
Aircraft leases
13,585
17,347
Vacation accrual
13,407
11,948
Frequent flyer accrual
6,592
5,958
Restructuring and other reserves
3,626
3,858
Tax credit carryforwards
1,112
1,112
Other
3,144
2,740
Gross deferred tax assets
224,524
169,183
Deferred tax liabilities:
Accelerated depreciation and amortization
(95,365
)
(70,534
)
Partnership losses
(1,421
)
(1,420
)
Other
(254
)
(781
)
Gross deferred tax liabilities
(97,040
)
(72,735
)
Net deferred tax assets before valuation allowance
127,484
96,448
Less valuation allowance
(127,484
)
(96,448
)
Net deferred liability
—
—
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SFAS No. 109,
"Accounting for Income
Taxes,"
requires that a valuation allowance be
established when it is "more likely than not" that all
or a portion of deferred tax assets will not be realized. A
review of all available positive and negative evidence needs to
be considered, including AWA's performance, the market
environment in which AWA operates, forecasts of future
profitability, the utilization of past tax credits, length of
carryforward periods and similar factors. SFAS No. 109
further states that it is difficult to conclude that a valuation
allowance is not needed when there is negative evidence such as
cumulative losses in recent years. Therefore, cumulative losses
weigh heavily in the overall assessment.
AWA was in a cumulative loss position three out of four years
between December 31, 2001 through December 31, 2004,
which weighed heavily in the overall determination that a
valuation allowance was needed. As of December 31, 2004,
AWA had recorded a valuation allowance of $127.5 million
against its net deferred tax assets. AWA expects to continue to
record a full valuation allowance on any future tax benefits
until we have achieved several quarters of consecutive
profitable results coupled with an expectation of continued
profitability. As of December 2004 and 2003, the valuation
allowance totaled $127.5 million and $96.4 million,
respectively.
9.
Capital Stock
Common Stock
The holders of common stock are entitled to one vote for each
share of stock held by the holder. Holders of common stock have
no right to cumulate their votes in the election of directors.
The holders of common stock are entitled to receive, when and if
declared by the Board of Directors, out of the assets of AWA
which are by law available, dividends payable either in cash, in
stock or otherwise.
Warrants
As compensation for various elements of AWA's financial
restructuring completed in January 2002, Holdings issued a
warrant to purchase 18.8 million shares of its
Class B common stock to the federal government and
additional warrants to purchase 3.8 million shares of
its Class B common stock to other loan participants, in
each case at an exercise price of $3 per share and a term
of ten years. For accounting purposes, the warrants were valued
at $35.4 million, or $1.57 per share, using the
Black-Scholes pricing model with the following assumptions:
expected dividend yield of 0.0%, risk-free interest rate of
4.8%, volatility of 44.9% and an expected life of ten years. The
warrants were recorded by AWA as a non-cash capital contribution
in the accompanying consolidated statements of
stockholder's equity and comprehensive income and
classified as
"Other Assets, Net"
in the
accompanying consolidate balance sheets. The warrants will be
amortized over the life of the government guaranteed loan as an
increase to interest expense. In the first quarter of 2004,
approximately 220,000 warrants were exercised at $3 per
share. In the third quarter of 2003, approximately
2.6 million warrants were exercised at $3 per share.
These warrant exercises were cashless transactions resulting in
the issuance of approximately 1.6 million shares of
Holdings' Class B common stock.
10.
Employee Benefit Plan
Holdings has a 401(k) defined contribution plan, covering
essentially all employees of AWA. Participants may contribute
from 1 to 50% of their pretax earnings to a maximum of $13,000
in 2004. AWA's matching contribution is determined annually
by the Board of Directors. AWA's contribution expense to
the plan totaled $11.4 million, $8.6 million and
$8.6 million in 2004, 2003 and 2002, respectively.
During the third quarter of 2004, Holdings became aware that an
insufficient number of shares of its Class B common stock
were registered for offer and sale through its 401(k) plan. In
response to this registration shortfall, Holdings promptly filed
a new registration statement on Form S-8 on August 13,
2004, which registered an additional 4,500,000 shares of
Class B common stock to permit the continued offer and sale
of such shares to participants through the 401(k) plan. Because
the 401(k) plan in the past has purchased and in the future
expects to continue to purchase shares of Class B common
stock needed for allocation to participant accounts only in the
open market and not directly from Holdings, the registration of
these additional shares and their purchase by the 401(k) plan
will have no dilutive impact on the outstanding equity of
Holdings. As a result of the registration shortfall, however,
participants who acquired unregistered shares
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through their 401(k) plan accounts after June 30,
2003, and prior to August 13, 2004, may be entitled to
rescission rights or other remedies under the Securities Act of
1933, as amended. Holdings has notified affected existing and
former plan participants of their potential rescission rights,
but cannot predict the extent to which any such rescission
rights may be exercised or the impact of any possible federal or
state regulatory action pertaining to the registration
shortfall. Holdings does not believe, however, that any
consequences arising from the registration shortfall will have a
material adverse effect on its financial position or results of
operations.
11.
Special Charges
In the first quarter of 2004, AWA recorded a $0.6 million
reduction in special charges related to the revision of
estimated costs associated with the sale and leaseback of
certain aircraft.
In August 2004, AWA entered into definitive agreements with two
lessors to return six Boeing 737-200 aircraft. Three of these
aircraft were returned to the lessors in the third quarter, two
were returned in the fourth quarter and one was returned in
January 2005. In addition, AWA continues negotiating with one
lessor on the return of its remaining two Boeing 737-200
aircraft, one of which was parked in March 2002. The other
aircraft was removed from service in January 2005. In connection
with the return of the aircraft, AWA recorded $1.9 million
of special charges which include lease termination payments of
$2.1 million, the write-down of leasehold improvements and
aircraft rent balances of $2.8 million, offset by the net
reversal of maintenance reserves of $3.0 million.
In December 2004, AWA and General Electric ("GE")
mutually agreed to terminate the V2500 A-1 power by hour
(PBH) agreement effective January 1, 2005. This
agreement was entered into March 1998 with an original term of
ten years. For terminating the agreement early, AWA received a
$20.0 million credit to be applied to amounts due for other
engines under the 1998 agreement that is expected to be fully
applied by December 31, 2005. AWA had capitalized PBH
payments for V2500 A-1 engines in excess of the unamortized
cost of the overhauls performed by GE of approximately
$3.7 million. With the termination of this agreement, these
payments were not realizable and as a result, AWA wrote off this
amount against the $20.0 million credit referred to above
resulting in a $16.3 million net gain.
In February 2003, AWA announced the elimination of its hub
operations in Columbus, Ohio. As a result, 12 regional
jets, all of which were operated by Chautauqua Airlines under
the America West Express banner, have been phased out of the
fleet. In addition, the hub has been downsized from 49 daily
departures to 15 destinations to four flights per day to
Phoenix and Las Vegas. Service to New York City La Guardia
Airport was also eliminated because perimeter rules at the
airport prohibit flights beyond 1,500 miles, precluding
service from AWA's hubs in Phoenix and Las Vegas. In the
first and second quarters of 2003, AWA recorded special charges
of $1.0 million and $9.6 million, respectively,
related to the costs associated with the termination of certain
aircraft and facility contracts, employee transfer and severance
expenses and the write-off of leasehold improvements in
Columbus, Ohio.
In the first quarter of 2003, AWA recorded a $1.1 million
reduction in special charges related to the earlier-than-planned
return of certain leased aircraft in 2001 and 2002, as all
payments related to these aircraft returns have been made.
In April 2003, as part of a cost reduction program, AWA
implemented a plan to reduce management, professional and
administrative payroll costs which resulted in 161 fewer
employees within these workgroups. As a result, AWA recorded a
special charge of $1.8 million related to this
reduction-in-force.
In June 2003, AWA recorded an impairment loss of
$2.6 million related to three owned Boeing 737-200 aircraft
that were grounded and subsequently sold.
In the third quarter of 2003, AWA recorded an additional
$0.5 million of special charges associated with the
elimination of our hub operations in Columbus, Ohio. These
special charges were offset by a $0.5 million reduction in
special charges related to the revision of estimated costs
associated with the sale and leaseback of certain aircraft.
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In the first quarter of 2002, AWA recorded a special charge of
$21.0 million, primarily related to the restructuring
completed on January 18, 2002, resulting from the events of
September 11, 2001. Components of the special charge are as
follows:
Special Charges
(in thousands)
Fleet restructuring costs
$
9,915
Losses on sale-leaseback transactions
6,328
Professional fees
4,745
Write-off of computer system and security equipment
3,411
Severance
631
Revision of estimate for second quarter 2001 special charge
(4,000
)
Total
$
21,030
Of this amount, approximately $10.3 million, principally
related to losses on sale-leaseback transactions, fleet
restructuring costs, professional fees and severance was accrued.
In the third quarter of 2002, AWA recorded a $2.0 million
reduction in special charges due to a revision of the estimated
costs related to the early termination of certain aircraft
leases.
The following table presents the payments and other settlements
made during 2002, 2003 and 2004 and the remaining special charge
accruals as of December 31, 2004.
Contract
Sale-
Fleet
Professional
Reductions-
Termination/
Leaseback
Restructuring
Fees
in-force
Other Costs
Total
(in thousands)
Balance at December 31, 2001
$
—
$
16,786
$
—
$
83
$
—
$
16,869
Special charges
6,328
10,582
1,489
631
—
19,030
Reclassification of aircraft rent due to restructuring
—
4,696
—
—
—
4,696
Payments
—
(14,516
)
(1,489
)
(714
)
—
(16,719
)
Issuance of convertible notes
—
(5,000
)
—
—
—
(5,000
)
Forfeiture of security deposits
—
(2,289
)
—
—
—
(2,289
)
Loss on sale-leasebacks
(3,852
)
—
—
—
—
(3,852
)
Reclassification of capitalized maintenance for parked
    aircraft.
—
(902
)
—
—
—
(902
)
Revision of estimate
—
(6,000
)
—
—
—
(6,000
)
Balance at December 31, 2002
2,476
3,357
—
—
—
5,833
Special charges
(510
)
1,545
—
2,310
10,634
13,979
Payments
—
(896
)
—
(2,003
)
(7,446
)
(10,345
)
Loss on sale-leasebacks
(1,361
)
—
—
—
—
(1,361
)
Write-off of leasehold improvements due to Columbus hub closure
—
—
—
—
(539
)
(539
)
Impairment loss
—
(2,617
)
—
—
—
(2,617
)
Balance at December 31, 2003
605
1,389
—
307
2,649
4,950
Special charges
(600
)
1,913
—
—
—
1,313
Payments
(5
)
(2,908
)
—
(242
)
(2,528
)
(5,683
)
Revision of estimate
—
—
—
(65
)
—
(65
)
Reversal of maintenance reserves
—
3,000
—
—
—
3,000
Write-off of leasehold improvements, engine overhauls and
    deferred rent
—
(2,751
)
—
—
—
(2,751
)
Balance at December 31, 2003
$
—
$
643
$
—
$
—
$
121
$
764
AWA expects to make payments related to these special charges
through the fourth quarter of 2005.
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12.
Nonoperating Income (Expenses) — Other, Net
In connection with the term loan refinancing with GECC, AWA
wrote off $1.3 million of debt issue costs associated to
the term loan with Mizuho in 2004. This amount was recorded in
nonoperating expenses.
The changes in the fair value of AWA's derivative
instruments and the net realized gains and losses for the
settled hedge transactions was a $30.5 million credit in
2004, $10.7 million credit in 2003 and $0.6 million
expense in 2002.
In April 2003, the Senate and House of Representatives of the
United States of America passed, and the President signed, the
Emergency Wartime Supplemental Appropriations Act to provide
certain aviation-related assistance. $2.3 billion of the
appropriation was for grants by the TSA to U.S. air
carriers based on the proportional share each carrier had paid
or collected as of the date of enactment of the legislation for
passenger security and air carrier security fees. In May 2003,
AWA received approximately $81.3 million representing its
proportional share of passenger security and air carrier
security fees paid or collected as of April 2003, which has been
classified as
"Federal Government Assistance"
in the accompanying statements of operations. See
Note 16,
"Emergency Wartime Supplemental
Appropriations Act."
In the fourth quarter of 2003, IAC/ InterActiveCorp completed
its acquisition of Hotwire.com, a discount travel website.
Hotwire was founded by the Texas Pacific Group, American
Airlines, Continental Airlines, Northwest Airlines, United
Airlines, US Airways and AWA in October 2000. AWA had an
ownership interest of approximately 1.5% in Hotwire.com with a
carrying value of approximately $0.03 million. Upon closing
of the transaction, AWA received cash of $9.8 million.
Accordingly, AWA recognized a nonoperating gain of
$9.8 million in the fourth quarter of 2003.
Under the airline compensation provisions of the Air
Transportation Safety and System Stabilization Act (the
"Act"), each air carrier was entitled to receive the
lesser of: (i) its direct and incremental losses for the
period September 11, 2001 to December 31, 2001 or
(ii) its proportional available seat mile allocation (based
on available seat miles for August 2001) of the
$4.5 billion compensation available under the Act. In 2001,
AWA received $98.2 million under the Act from the United
States government and expected to receive, based on its losses
and its share of available seat miles, at least an additional
$10.0 million. In accordance with EITF Issue
No. 01-10,
"Accounting for the Impact of the
Terrorist Attacks of September 11, 2001,"
AWA
recognized $108.2 million of federal government assistance
in 2001 as nonoperating income because direct and incremental
losses incurred during 2001 exceeded that amount. In July 2002,
AWA received an additional $12.3 million under the Act.
Accordingly, $10.0 million was credited against the
receivable established in 2001 and $2.3 million was
recognized as nonoperating income in the second quarter of 2002.
In August 2002, AWA received an additional payment of
$6.2 million under the Act, which was recognized as
nonoperating income in the third quarter of 2002.
In March 2002, AWA wrote down its investment in Aeroxchange, an
e-commerce entity, which was carried at cost, to net realizable
value recognizing a loss of $2.8 million.
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13.
Supplemental Information to Statements of Cash Flows
Supplemental disclosure of cash flow information and non-cash
investing and financing activities were as follows:
Year Ended December 31,
2004
2003
2002
(in thousands)
Non-cash transactions:
Reclassification of investments in debt securities to short-term
    investments
$
25,730
$
29,058
$
—
Reclassification of advances to parent company, net
—
—
265,810
Issuance of convertible notes
—
—
67,902
Cancellation of convertible notes
—
(660
)
(8,280
)
Cancellation of 10.75% senior unsecured notes related to
    sale of NLG investment
—
(10,370
)
—
Issuance of warrants
—
—
35,383
Exercise of warrants
(2
)
(17
)
—
Equipment acquired through capital leases
—
—
17,753
Equipment acquired with issuance of notes payable
—
—
64,163
Notes payable issued for equipment purchase deposits
17,500
5,250
10,500
Notes payable canceled under the aircraft purchase agreement
(7,000
)
(7,000
)
(10,500
)
Payment in kind notes issued, net of returns
9,033
8,972
7,756
Cash transactions:
Interest paid, net of amounts capitalized
23,841
17,201
25,942
Income taxes paid (refunded)
367
(2,493
)
(63,503
)
14.
Related Party Transactions
As part of our reorganization in 1994, Continental Airlines and
AWA entered into an alliance agreement that included code
sharing arrangements, reciprocal frequent flyer programs and
ground handling operations. In March 2002, AWA received notice
from Continental of its intention to terminate the code sharing
and frequent flyer agreements between the two airlines,
effective April 26, 2002. Two of Continental's
directors are managing partners of Texas Pacific Group, which,
through TPG Advisors, Inc., effectively controls the voting
power of Holdings. AWA paid Continental approximately
$13.4 million, $17.3 million and $25.5 million
and also received approximately $4.1 million,
$5.0 million and $15.9 million in 2004, 2003 and 2002,
respectively, from Continental pursuant to these agreements.
Texas Pacific Group agreed to reimburse AWA approximately
$2.5 million for expenses incurred by AWA on its behalf. As
a result, AWA recorded this as a receivable as of
December 31, 2004. Subsequent to December 31, 2004,
AWA received $1.3 million in such reimbursement and expects
to receive an additional $1.2 million in 2005.
15.
Quarterly Financial Data (Unaudited)
The 2004 and 2003 unaudited quarterly financial data has been
restated to reflect the accounting for fuel hedging derivative
instruments pursuant to management's determination that AWA
did not qualify for hedge accounting under
SFAS No. 133. In addition, the restated amounts also
reflect corrections to properly reflect the fair value of open
derivative instruments at each quarter end. See Note 2,
"Restatement of Previously Reported Amounts."
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Summarized quarterly financial data for 2004 and 2003 follows
(in thousands of dollars):
1st Quarter
2nd Quarter
(as previously
(as previously
(as restated)
reported)
(as restated)
reported)
2004
Operating revenues
$
576,374
$
576,374
$
604,904
$
604,904
Operating income
15,481
(1)
18,624
17,266
(3)
21,784
Nonoperating expenses, net
(16,275
)(1)(2)
(16,679
)
(5,741
)(3)(4)
(15,226
)
Income tax expense
—
—
—
—
Net income
(794
)(2)
1,945
11,525
(4)
6,558
3rd Quarter
4th Quarter
(as previously
(as previously
(as restated)
reported)
(as restated)
reported)
2004
Operating revenues
$
578,453
$
578,453
$
578,546
$
578,546
Operating loss
(35,069
)(5)
(27,268
)
(37,382
)(7)
(22,315
)
Nonoperating income (expenses), net
7,307
(5)(6)
(18,896
)
(30,821
)(7)(8)
(26,144
)
Income tax expense
—
—
(23
)
(23
)
Net loss
(27,762
)(6)
(46,164
)
(68,226
)(8)
(48,482
)
1st Quarter
2nd Quarter
(as previously
(as previously
(as restated)
reported)
(as restated)
reported)
2003
Operating revenues
$
523,063
$
523,063
$
575,601
$
575,601
Operating income (loss)
(55,356
)(9)
(45,120
)
17,457
(11)
17,315
Nonoperating income (expenses), net
(7,066
)(9)(10)
(15,899
)
62,403
(11)(12)
63,357
Income tax expense
—
—
—
—
Net income (loss)
(62,422
)(10)
(61,019
)
79,860
(12)
80,672
3rd Quarter
4th Quarter
(as previously
(as previously
(as restated)
reported)
(as restated)
reported)
2003
Operating revenues
$
592,132
$
592,132
$
563,021
$
563,021
Operating income
51,170
(13)
51,037
12,821
(15)
13,606
Nonoperating expenses, net
(18,702
)(13)(14)
(17,217
)
(1,327
)(15)(16)
(5,679
)
Income tax expense
—
—
(114
)
(114
)
Net income
32,468
(14)
33,820
11,380
(16)
7,813
(1)
Reflects reclassification of $3.1 million net credit from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
(2)
Reflects the restatement of $2.7 million net expense to
    eliminate hedge accounting for the period presented.
(3)
Reflects reclassification of $4.5 million net credit from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
(4)
Reflects the restatement of $5.0 million net credit to
    eliminate hedge accounting for the period presented.
(5)
Reflects reclassification of $7.8 million net credit from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
(6)
Reflects the restatement of $18.4 million net credit to
    eliminate hedge accounting for the period presented.
(7)
Reflects reclassification of $15.0 million net credit from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
Note, an additional
    $7.6 million of losses on derivative instruments was
    recorded directly to
"Gain (Loss) on Derivative
    Instruments, Net."
(8)
Reflects the restatement of $19.7 million net expense to
    eliminate hedge accounting for the period presented.
(9)
Reflects reclassification of $10.2 million net credit from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
(10)
Reflects the restatement of $1.4 million net expense to
    eliminate hedge accounting for the period presented.
(11)
Reflects reclassification of $0.2 million net expense from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
(12)
Reflects the restatement of $0.8 million net expense to
    eliminate hedge accounting for the period presented.
(13)
Reflects reclassification of $0.1 million net expense from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
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(14)
Reflects the restatement of $1.4 million net expense to
    eliminate hedge accounting for the period presented.
(15)
Reflects reclassification of $0.8 million net credit from
"Aircraft Fuel"
expense to
"Gain (Loss)
    on Derivative Instruments, Net."
(16)
Reflects the restatement of $3.6 million net credit to
    eliminate hedge accounting for the period presented.
16.
Emergency Wartime Supplemental Appropriations Act
In April 2003, the Senate and House of Representatives of the
United States of America passed, and the President signed, the
Emergency Wartime Supplemental Appropriations Act to provide
certain aviation-related assistance. The bill included the
following key provisions:
•
$2.3 billion of the appropriation was for grants by the TSA
    to U.S. air carriers based on the proportional share each
    carrier had paid or collected as of the date of enactment of the
    legislation for passenger security and air carrier security
    fees. In May 2003, AWA received approximately $81.3 million
    representing its proportional share of passenger security and
    air carrier security fees paid or collected as of April 2003.
    AWA recorded this amount as nonoperating income in the
    accompanying statements of operations. See Note 12,
"Nonoperating Income (Expenses) — Other,
    Net."
•
The TSA would not impose passenger security fees during the
    period beginning June 1, 2003 and ending September 30,
    2003.
•
$100 million of the appropriation would be available to
    compensate air carriers for the direct costs associated with the
    strengthening of flight deck doors and locks on aircraft. AWA
    received approximately $4.6 million in 2003 as
    reimbursement for the costs of reinforcing flight deck doors and
    locks.
•
Aviation war risk insurance provided by the federal government
    is extended until August 2005.
•
Certain airlines that received the aviation-related assistance,
    principally those airlines with trans-Pacific or trans-Atlantic
    flights, agreed to limit the total cash compensation for certain
    executive officers during the 12-month period beginning
    April 1, 2003 to an amount equal to the annual salary paid
    to that officer during the air carrier's fiscal year 2002.
    Any violation of this agreement would have required the carrier
    to repay to the government the amount reimbursed for airline
    security fees. Since AWA does not operate trans-Pacific or
    trans-Atlantic flights, AWA was not subject to this provision.
17.
Segment Disclosures
AWA is one reportable operating segment. Accordingly, the
segment reporting financial data required by
SFAS No. 131 is included in the accompanying balance
sheets and statements of operations.
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Table of Contents
Item 9.
Changes In and Disagreements with Accountants on Accounting
    and Financial Disclosure
The Holdings' Audit Committee has selected and retained
KPMG LLP as the Company's independent registered public
accounting firm for the fiscal year ended December 31, 2004.
PricewaterhouseCoopers LLP served as the Company's and
AWA's independent registered public accounting firm for the
fiscal years ended December 31, 2002 and 2001. On
August 21, 2003, the Company dismissed
PricewaterhouseCoopers LLP as the Company's and AWA's
independent registered public accounting firm. The Company
appointed KPMG as independent registered public accounting firm
for the Company and AWA on August 21, 2003. The decision to
change independent auditors was approved by the Company's
Audit Committee.
The audit reports of PricewaterhouseCoopers LLP on
Holdings' and AWA's consolidated balance sheets as of
December 31, 2001 and 2002 and the related statements of
operations, cash flows and stockholders' equity for each of
such years did not contain an adverse opinion or disclaimer of
opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
In connection with the audits of the fiscal years ended
December 31, 2001 and 2002 and through August 21,
2003, there were no disagreements between Holdings or AWA and
PricewaterhouseCoopers LLP as to any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of PricewaterhouseCoopers LLP,
would have caused it to make reference to the subject matter of
the disagreement in its reports on the financial statements for
such periods within the meaning of Item 304(a)(1)(iv) of
Regulation S-K.
During the fiscal years ended December 31, 2001 and 2002
and through August 21, 2003, there were no reportable
events (as defined in Item 304(a)(1)(v) of
Regulation S-K).
Holdings and AWA did not consult with KPMG LLP prior to its
engagement regarding the application of accounting principles to
a specified transaction, either completed or proposed, the type
of audit opinion that might be rendered on the financial
statements of Holdings or AWA or any matter that was either the
subject of a disagreement or a reportable event within the
meaning of Item 304(a)(1) of Regulation S-K.
Item 9A. Controls and Procedures
(a)
Evaluation of Disclosure Controls and Procedures.
The Company's internal control system was designed to
provide reasonable assurance to the Company's management
and board of directors regarding the preparation and fair
presentation of published financial statements. All internal
control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Our Chief
Executive Officer and Chief Financial Officer believe that our
disclosure controls and procedures were not effective at the
"reasonable assurance" level as of the end of the
period covered by this report since they resulted in a need to
restate our financial statements as described below.
(b)
Management's Report on Internal Control over Financial
Reporting.
Management's Report on Internal Control over Financial
    Reporting
Management is responsible for establishing and maintaining
effective internal control over Holdings' financial
reporting as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act. Management assessed the effectiveness of
Holdings' internal control over financial reporting as of
December 31, 2004. In making this assessment, management
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO") in
Internal Control — Integrated Framework.
Based
on this assessment, management has concluded that as of
December 31, 2004, the Company did not maintain effective
internal control over financial reporting, due to a material
weakness associated with the accounting for AWA's fuel
hedging program, as described below.
In February 2005, management undertook a review of AWA's
accounting for its fuel hedging transactions. As a result of
this review, management concluded that AWA's fuel hedging
transactions did not qualify for hedge accounting under
U.S. generally accepted accounting principles and that the
Company's
103
Table of Contents
financial statements for prior periods required restatement to
reflect the fair value of fuel hedging contracts in the balance
sheets and statements of stockholders equity and comprehensive
income of Holdings and AWA. See Note 2,
"Restatement of Previously Reported Amounts"
and Note 16,
"Quarterly Financial Data
(Unaudited)"
in Holdings' and Note 2,
"Restatement of Previously Reported Amounts"
and Note 15,
"Quarterly Financial Data
(Unaudited)"
in AWA's consolidated financial
statements for the financial impact of the restatements. The
Company concluded that these accounting errors were the result
of deficiencies in its internal control over financial
reporting, from the lack of effective reviews of hedge
transaction documentation and of quarterly mark-to-market
accounting entries on open fuel hedging contracts by personnel
at an appropriate level.
The Company's independent registered public accounting
firm, KPMG LLP, have audited and issued their report on
management's assessment of Holdings' effectiveness of
internal control over financial reporting as of
December 31, 2004. The report of KPMG LLP appears in
(d) below.
(c)
Changes in Internal Controls.
There were no changes, in our internal controls over financial
reporting during the period covered by this report that
materially affected, or were reasonably likely to materially
affect, our internal controls over financial reporting. However,
prior to the filing of this report, we have implemented changes
to our internal controls to correct the material weakness
identified, as described above. Specifically, we have corrected
this material weakness by implementing a review process that
verifies the quarterly mark-to-market adjustment on open
derivative positions. In addition, the Company will utilize the
mark-to-market method of accounting for its derivative
instruments going forward until such time it is able to
implement processes and controls necessary to ensure that
appropriate hedge documentation is obtained at hedge inception.
At that time, the Company will evaluate whether it will re-apply
hedge accounting.
(d)
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
America West Holdings Corporation:
We have audited management's assessment, included in the
accompanying Management's Report on Internal Control Over
Financial Reporting (Item 9A(b)), that America West
Holdings Corporation ("Holdings" or the
"Company") and its subsidiary America West Airlines,
Inc. ("AWA") did not maintain effective internal
control over financial reporting as of December 31, 2004,
because of the effect of the material weakness identified in
management's assessment associated with the Company's
accounting for fuel hedging transactions, based on criteria
established in
Internal Control — Integrated
Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Company's management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting. Our responsibility is to express an opinion
on management's assessment and an opinion on the
effectiveness of the Company's internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
management's assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company's
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
104
Table of Contents
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with U.S. generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
A material weakness is a control deficiency, or combination of
control deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. The
following material weakness has been identified and included in
management's assessment: As of December 31, 2004, the
Company did not maintain effective internal control over
financial reporting due to a material weakness associated with
its accounting for AWA's fuel hedging transactions.
Management concluded that AWA's fuel hedging transactions
did not qualify for hedge accounting under U.S. generally
accepted accounting principles and that the Company's
financial statements for prior periods required restatement to
reflect the fair value of fuel hedging contracts in the balance
sheets and statements of stockholders equity and comprehensive
income of Holdings and AWA. These accounting errors resulted
from the lack of effective reviews of hedge transaction
documentation and of quarterly mark-to-market accounting entries
on open fuel hedging contracts by personnel at an appropriate
level.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of the Company as of
December 31, 2004 and 2003, and the related consolidated
statements of operations, cash flows and stockholders'
equity and comprehensive income, for the years then ended. The
aforementioned material weakness was considered in determining
the nature, timing, and extent of audit tests applied in our
audit of the Company's 2004 consolidated financial
statements, and this report does not affect our report dated
March 11, 2005, which expressed an unqualified opinion on
the Company's consolidated financial statements
.
In our opinion, management's assessment that the Company
did not maintain effective internal control over financial
reporting as of December 31, 2004, is fairly stated, in all
material respects, based on criteria established in
Internal
Control — Integrated Framework
issued by COSO.
Also, in our opinion, because of the effect of the material
weakness described above on the achievement of the objectives of
the control criteria, the Company has not maintained effective
internal control over financial reporting as of
December 31, 2004, based on criteria established in
Internal Control — Integrated Framework
issued
by COSO.
/s/
KPMG LLP
Phoenix, Arizona
March 11, 2005
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Table of Contents
Item 9B. Other Information
On March 10, 2005, the Compensation Committee of
Holdings' Board of Directors approved grants of stock
options to executive officers of Holdings and AWA as set forth
in the table below. All of the options have an exercise price
equal to $5.13, the fair market value of Holdings' common
stock on the date of grant, and will vest in equal thirds on
each of March 10, 2006, 2007 and 2008.
Number of Shares
Name
Position
Underlying Stock Options
W. Douglas Parker
Chairman, President and Chief Executive Officer of Holdings and
    AWA
250,000
J. Scott Kirby
Executive Vice President — Sales and Marketing of AWA
100,000
Jeffrey D. McClelland
Executive Vice President and Chief Operating Officer of AWA
100,000
Joseph C. Beery
Senior Vice President and Chief Information Officer of AWA
30,000
Hal M. Heule
Senior Vice President — Technical Operations of AWA
30,000
C.A. Howlett
Senior Vice President — Public Affairs of Holdings and
    AWA
30,000
Derek J. Kerr
Senior Vice President and Chief Financial Officer of Holdings
    and AWA
35,000
Anthony Mule
Senior Vice President — Customer Service of AWA
30,000
James E. Walsh III
Senior Vice President and General Counsel of AWA
30,000
Michael R. Carreon
Vice President and Controller of AWA
22,000
Elise R. Eberwein
Vice President — Corporate Communications of AWA
23,000
Kara L. Gin
Vice President — Financial Planning and Analysis of AWA
22,000
Thomas T. Weir
Vice President and Treasurer of AWA
22,000
PART III
Item 10.
Directors and Executive Officers of the Registrants
Information respecting continuing directors and nominees of the
Company will be set forth under the caption
"Proposal I: Election of Directors"
in
Holdings' Proxy Statement relating to its 2005 Annual
Meeting of Stockholders (the "Proxy Statement") and is
incorporated by reference into this Annual Report on
Form 10-K.
Information respecting compliance with Section 16(a) of the
Exchange Act will be set forth under the caption
"Section 16(a) Beneficial Ownership Reporting
Compliance"
in the Proxy Statement and is incorporated
by reference into this Annual Report on Form 10-K.
We have adopted a Code of Business Conduct and Ethics, or the
"Code," within the meaning of Item 406(b) of
Regulation S-K. The Code applies to our principal executive
officer, principal financial officer, principal accounting
officer or controller, and persons performing similar functions.
The Code, our Corporate Governance Guidelines and the charters
of our Board committees are publicly available on our website at
www.americawest.com
. Printed copies of the Code, our
Corporate Governance Guidelines and the charters of our Board
committees are available at no charge to any stockholder upon
request to the Company's Corporate Secretary at America
West Holdings Corporation, 111 West Rio Salado Parkway, Tempe,
Arizona 85281. If we make substantive amendments to the Code or
grant any waiver, including any implicit waiver, to our
principal executive officer, principal financial offer,
principal accounting officer or controller, and persons
performing similar functions, we will disclose the nature of
such amendment or waiver on our website or in a Current Report
on Form 8-K in accordance with applicable rules and
regulations.
Other information required by Item 10 will be set forth
under an appropriate caption in the Proxy Statement and
incorporated by reference into this Annual Report on
Form 10-K.
The Proxy Statement will be filed with the SEC in accordance
with Rule 14a-6(c) promulgated under the Exchange Act. With
the exception of the foregoing information and other information
specifically incorporated by reference into this Form 10-K
Report, the Proxy Statement is not being filed as a part hereof.
Information respecting executive officers of the Company is set
forth at Part I of this Annual Report on Form 10-K.
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Table of Contents
Item 11.
Executive Compensation
Information concerning executive compensation will be set forth
under the captions
"Report of the Compensation and Human
Resources Committee of the Board of Directors on Executive
Compensation," "Executive Compensation"
and
"Employment Agreements"
in the Proxy Statement
and is incorporated by reference into this Annual Report on
Form 10-K.
Item 12.
Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters
Information concerning security ownership of certain beneficial
owners and management will be set forth under the captions
"Security Ownership of Certain Beneficial Owners and
Management"
and
"Equity Compensation Plan
Information"
in the Proxy Statement and is incorporated
by reference into this Annual Report on Form 10-K.
Item 13.
Certain Relationships and Related Transactions
Information concerning certain relationships and related
transactions required by Item 13 is set forth under the
captions
"Employment Agreements"
and
"Certain Transactions"
in the Proxy Statement
and is incorporated by reference into this Annual Report on
Form 10-K.
Item 14.
Principal Accountant Fees and Services
Information concerning principal accountant fees and services
will be set forth under the captions
"Independent
Registered Public Accounting Firm's Fees," "Audit
Committee Disclosure"
and
"Policy on Audit
Committee Pre-Approval"
in the Proxy Statement and is
incorporated by reference into this Annual Report on
Form 10-K.
PART IV
Item 15.
Exhibits and Financial Statement Schedules
(a)(1) Financial Statements
The following financial statements and the Reports of
Independent Registered Public Accounting Firms are filed in
Part II, Items 8A and 8B of this report on the pages
indicated:
America West Holdings Corporation
Report of Independent Registered Public Accounting
    Firm — page 41.
Report of Independent Registered Public Accounting
    Firm — page 42.
Consolidated Balance Sheets — December 31, 2004
    and 2003 — page 43.
Consolidated Statements of Operations — Years ended
    December 31, 2004, 2003 and 2002 — page 44.
Consolidated Statements of Cash Flows — Years ended
    December 31, 2004, 2003 and 2002 — page 45.
Consolidated Statements of Stockholders' Equity and
    Comprehensive Income — Years ended December 31,
    2003, 2002 and 2001 — page 46.
Notes to Consolidated Financial Statements —
    page 47.
America West Airlines, Inc.
Report of Independent Registered Public Accounting
    Firm — page 73.
Report of Independent Registered Public Accounting
    Firm — page 74.
Consolidated Balance Sheets — December 31, 2004
    and 2003 — page 75.
Consolidated Statements of Operations — Years ended
    December 31, 2004, 2003 and 2002 — page 76.
107
Table of Contents
Consolidated Statements of Cash Flows — Years ended
    December 31, 2003, 2002 and 2001 — page 77.
Consolidated Statements of Stockholder's Equity and
    Comprehensive Income — Years ended December 31,
    2003, 2002 and 2001 — page 78.
Notes to Consolidated Financial Statements —
    page 79.
(a)(2) Financial Statement Schedules
America West Holdings Corporation
Report of Independent Registered Public Accounting Firm on
    Financial Statement Schedule — page 114.
Report of Independent Registered Public Accounting Firm on
    Financial Statement Schedule — page 115.
Schedule II: Valuation and Qualifying
    Accounts — page 116.
America West Airlines, Inc.
Report of Independent Registered Public Accounting Firm on
    Financial Statement Schedule — page 117.
Report of Independent Registered Public Accounting Firm on
    Financial Statement Schedule — page 118.
Schedule II: Valuation and Qualifying
    Accounts — page 119.
All other information and schedules have been omitted as not
applicable or because the required information is included in
the financial statements or notes thereto.
(c)
Exhibits
Exhibit
Number
Title
2
.2
Agreement and Plan of Merger, dated as of December 19,
    1996, by and among America West Holdings Corporation
    ("Holdings"), America West Airlines, Inc.
    ("AWA") and AWA Merger, Inc., with an effective date
    and time as of midnight on December 31, 1996 —
    Incorporated by reference to Exhibit 2.1 to Holdings'
    Registration Statement on Form 8-B dated January 13,
    1997.
3
.1
Restated Certificate of Incorporation of AWA (included in
    Exhibit 2.2 above).
3
.2*
Bylaws of AWA.
3
.3
Certificate of Incorporation of Holdings — Filed with
    the Secretary of State of the State of Delaware on
    December 13, 1996 and incorporated by reference to
    Exhibit 3.1 of Holdings' Registration Statement on
    Form 8-B dated January 13, 1997. Holdings'
    Certificate of Incorporation was subsequently amended by a
    Certificate of Amendment, filed with the Delaware Secretary of
    State on May 24, 2004 and incorporated herein by reference
    to Exhibit 3.1 to Holdings' and AWA's Quarterly
    Report on Form 10-Q for the quarter ended June 30,
    2004 (File No. 001-12649).
3
.4*
Bylaws of Holdings.
4
.1
Indenture, dated as of July 30, 2003, between America West
    Airlines, Inc. and U.S. Bank National Association, as
    trustee and not in its individual capacity, for America West
    Airlines, Inc. Senior Exchangeable Notes due 2023 —
    Incorporated by reference to Exhibit 4.1 to Holdings'
    and AWA's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2003.
4
.2
Form of America West Airlines, Inc. Senior Exchangeable Note due
    2023 — Incorporated by reference to Exhibit 4.2
    to Holdings' and AWA's Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2003.
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Table of Contents
Exhibit
Number
Title
4
.3
Registration Rights Agreement, dated as of July 30, 2003,
    with respect to shares of Class B Common Stock underlying
    the America West Airlines, Inc. Senior Exchangeable Notes due
    2023 — Incorporated by reference to Exhibit 4.3
    to Holdings' and AWA's Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2003.
4
.4
Guarantee and Exchange Agreement, dated as of July 30,
    2003, between America West Holdings Corporation and
    U.S. Bank, National Association, as exchange agent and
    trustee and not in its individual capacity, for America West
    Airlines Inc. Senior Exchangeable Notes due 2023 —
    Incorporated by reference to Exhibit 4.4 to Holdings'
    and AWA's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2003.
4
.5
Stock Option Agreement, dated as of December 31, 1996,
    between Holdings and AWA — Incorporated by reference
    to Exhibit 4.5 to Holdings' Registration Statement on
    Form 8-B dated January 13, 1997.
4
.6
Registration Rights Agreement dated as of August 25, 1994,
    among AWA, AmWest Partners, L.P. and other holders —
    Incorporated by reference to Exhibit 4.6 to the AWA's
    Current Report on Form 8-K dated August 25, 1994 (File
    No. 000-12337).
4
.7
Assumption of Certain Obligations Under Registration Rights
    Agreement executed by Holdings for the benefit of TPG Partners,
    L.P., TPG Parallel I, L.P., Air Partners II, L.P.,
    Continental Airlines, Inc., Mesa Airlines, Inc., Lehman
    Brothers, Inc., Belmont Capital Partners II, L.P. and
    Belmont Fund, L.P. — Incorporated by reference to
    Exhibit 4.7 to Holdings' Registration Statement on
    Form 8-B dated January 13, 1997.
4
.8
Form of Pass Through Trust Agreement, dated as of
    November 26, 1996, between AWA and Fleet National Bank, as
    Trustee — Incorporated by reference to
    Exhibit 4.1 to AWA's Current Report on Form 8-K
    dated November 26, 1996 (File No. 000-12337).
4
.9
Form of Pass Through Trust Agreement, dated as of
    June 17, 1997, between AWA and Fleet National Bank, as
    Trustee — Incorporated by reference to
    Exhibit 4.5 to AWA's Registration Statement on
    Form S-3 dated June 4, 1997 (File No. 333-27351).
4
.10
Forms of Pass Through Trust Agreements, dated as of
    October 6, 1998, between AWA and Wilmington Trust Company,
    as Trustee — Incorporated by reference to
    Exhibits 4.4, 4.5, 4.6, 4.7, 4.8 and 4.9 to AWA's
    Registration Statement on Form S-4 dated March 25,
    1999 (File No. 333-71615).
4
.11
Pass Through Trust Agreements, dated as of
    September 21, 1999, between AWA and Wilmington Trust
    Company, as Trustee, made with respect to the formation of
    America West Airlines Pass Through Trusts,
    Series 1999-1G-S, 1999-1G-O, 1999-1C-S and 1999-1C-O and
    the issuance of 7.93% Initial Pass Through Certificates
    Series 1999-1G-S and 1999-1G-O, the issuance of 8.54%
    Initial Pass Through Certificates, Series 1999-1C-S and
    1999-1C-O, the issuance of 7.93% Exchange Pass Through
    Certificates, Series 1999-1G-S and 1999-1G-O, and the
    issuance of 8.54% Exchange Pass Through Certificates,
    Series 1999-1C-S and 1999-1C-O — Incorporated by
    reference to AWA's Quarterly Report on Form 10-Q for
    the period ended September 30, 1999 (File No. 000-12337).
4
.12
Insurance and Indemnity Agreement, dated as of
    September 21, 1999, among AWA, Ambac Assurance Corporation
    as Policy Provider and Wilmington Trust Company as Subordination
    Agent and Trustee under the Pass Through
    Trust 1999-1G-O — Incorporated by reference to
    Exhibits 4.15 to AWA's Registration Statement on
    Form S-4 dated March 16, 2000 (File
    No. 333-93393).
4
.13
Pass Through Trust Agreement, dated as of July 7,
    2000, between AWA, and Wilmington Trust Company, as Trustee,
    made with respect to the formation of America West Airlines Pass
    Through Trust, Series 2000-1G-0, 2000-1G-S, 2000-1C-O and
    2000-1C-S, the issuance of 8.057% Initial Pass Through
    Certificates, Series 2000-1G-O and 2000-1G-S, the issuance
    of 9.244% Initial Pass Through Certificates,
    Series 2000-1C-O and 2000-1C-S, the issuance of 8.057%
    Exchange Pass Through Certificates, Series 2000-1G-O and
    2000-1G-S and the issuance of 9.244% Exchange Pass Through
    Certificates, Series 2000-1C-O and 2000-1C-S —
    Incorporated by reference to Exhibits 4.3, 4.4, 4.5 and 4.6
    to AWA's Registration Statement on Form S-4 dated
    September 12, 2002 (File No. 333-44930).
109
Table of Contents
Exhibit
Number
Title
4
.14
Insurance and Indemnity Agreement, dated as of July 7,
    2000, among AWA, Ambac Assurance Corporation as Policy Provider
    and Wilmington Trust company as Subordination Agent and Trustee
    under the Pass Through Trust 2000-1G —
    Incorporated by reference to Exhibits 4.15 to AWA's
    Registration Statement on Form S-4 dated September 12,
    2002 (File No. 333-44930).
4
.16
Insurance and Indemnity Agreement (Series G), dated as of
    May 17, 2001, among AWA, Ambac Assurance Corporation as
    Policy Provider and Wilmington Trust company as Subordination
    Agent — Incorporated by reference to Exhibit 4.20
    to AWA's Registration Statement on Form S-4 dated
    February 14, 2002 (File No. 333-69356).
4
.17
Indenture, dated as of January 18, 2002, between America
    West Holdings Corporation and Wilmington Trust Company, as
    Trustee and not in its individual capacity, for America West
    Holdings Corporation 7.5% Convertible Senior Notes due
    2009 — Incorporated by reference to Exhibit 4.15
    to Holdings' and AWA's Current Report on Form 8-K
    dated January 31, 2002 (File Nos. 001-12649 and 000-12337).
4
.18
Form of America West Holdings Corporation 7.5% Convertible
    Senior Notes due 2009 — Incorporated by reference to
    Exhibit 4.16 to Holdings' and AWA's Current
    Report on Form 8-K dated January 31, 2002 (File Nos.
    001-12649 and 000-12337).
4
.19
Registration Rights Agreement, dated January 18, 2002, with
    respect to shares of Class B Common Stock underlying the
    America West Holdings Corporation 7.5% Convertible Senior
    Notes due 2009 — Incorporated by reference to
    Exhibit 4.17 to Holdings' and AWA's Current
    Report on Form 8-K dated January 31, 2002 (File Nos.
    001-12649 and 000-12337).
4
.20
Guaranty, dated as of January 18, 2002, by America West
    Airlines, Inc., in favor of the Holders and the Trustee under
    the Indenture dated January 18, 2002 —
    Incorporated by reference to Exhibit 4.18 to Holdings'
    and AWA's Current Report on Form 8-K dated
    January 31, 2002 (File Nos. 001-12649 and 000-12337).
4
.21
Form of Warrant to Purchase Class B Common Stock, dated
    January 18, 2002, issued to the Air Transportation
    Stabilization Board and certain warrant recipients —
    Incorporated by reference to Exhibit 4.19 to Holdings'
    and AWA's Current Report on Form 8-K dated
    January 31, 2002 (File Nos. 001-12649 and 000-12337).
4
.22
Registration Rights Agreement, dated January 18, 2002,
    between America West Holdings Corporation and the Air
    Transportation Stabilization Board with respect to shares of
    Class B Common Stock underlying the Warrant to Purchase
    Class B Common Stock — Incorporated by reference
    to Exhibit 4.20 to Holdings' and AWA's Current
    Report on Form 8-K dated January 31, 2002 (File Nos.
    001-12649 and 000-12337).
4
.23
Warrant Registration Rights Agreement between America West
    Holdings Corporation and certain warrant recipients —
    Incorporated by reference to Exhibit 4.21 to Holdings'
    and AWA's Current Report on Form 8-K dated
    January 31, 2002 (File Nos. 001-12649 and 000-12337).
10
.1
Airport Use Agreement, dated as of July 1, 1989, among the
    City of Phoenix, The Industrial Development Authority of the
    City of Phoenix, Arizona and AWA ("Airport Use
    Agreement") — Incorporated by reference to
    Exhibit 10-(D)(9) to AWA's Annual Report on
    Form 10-K for the year ended December 31, 1989 (File
    No. 000-12337).
10
.2
First Amendment to Airport Use Agreement, dated as of
    August 1, 1990 — Incorporated by reference to
    Exhibit 10-(D)(9) to AWA's Quarterly Report on
    Form 10-Q for the quarter ended September 30, 1990
    (File No. 000-12337).
10
.3
Management Rights Agreement, dated as of August 25, 1994,
    between TPG Partners L.P., TPG Genpar, L.P. and AWA —
    Incorporated by reference to Exhibit 10.47 to AWA's
    Registration Statement on Form S-1 dated August 23,
    1994, as amended (File No.33-54243).
10
.4
Financing Agreement, dated as of April 1, 1998, between the
    Industrial Development Authority of the City of Phoenix, Arizona
    and AWA — Incorporated by reference to
    Exhibit 10.29 to Holdings' Quarterly Report on
    Form 10-Q for the quarter ended June 30, 1998 (File
    No. 001-12649).
110
Table of Contents
Exhibit
Number
Title
10
.5
Indenture of Trust, dated as of April 1, 1998, from the
    Industrial Development Authority of the City of Phoenix, Arizona
    to Norwest Bank, Arizona N.A. — Incorporated by
    reference to Exhibit 10.30 to Holdings' Quarterly
    Report on Form 10-Q for the quarter ended June 30,
    1998 (File No. 001-12649).
10
.6
Second Amendment to Airport Use Agreement, dated as of
    August 25, 1995 — Incorporated by reference to
    Exhibit 10.34 to AWA's Annual Report on Form 10-K
    for the year ended December 31, 1998 (File
    No. 000-12337).
10
.7
Indenture of Trust, dated as of June 1, 1999, from The
    Industrial Development Authority of the City of Phoenix, Arizona
    to Bank One Arizona, N.A. — Incorporated by reference
    to Exhibit 10.35 to AWA's Quarterly Report on
    Form 10-Q for the quarter ended June 30, 1999 (File
    No. 000-12337).
10
.8(1)
Airbus A320/ A319 Purchase Agreement, dated as of
    September 12, 1997, between AVSA S.A.R.L and AWA, including
    Letter Agreements Nos. 1-10 — Incorporated by
    reference to Exhibit 10.26 to Holdings' Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 1997 (File No. 001- 12649).
10
.9(1)
Amendment No. 1, dated as of March 31, 1998, to the
    Airbus A320/ A319 Purchase Agreement, dated as of
    September 12, 1997, between AVSA S.A.R.L. and
    AWA — Incorporated by reference to Exhibit 10.28
    to Holdings' Quarterly Report on Form 10-Q for the
    quarter ended June 30, 1998 (File No. 001-12649).
10
.10(1)
Amendment No. 2, dated as of December 9, 1998, to the
    Airbus A320/ A319 Purchase Agreement, dated as of
    September 12, 1997, between AVSA S.A.R.L. and
    AWA — Incorporated by reference to Exhibit 10.32
    to AWA's Annual Report on Form 10-K for the year ended
    December 31, 1998 (File No. 000-12337).
10
.11(1)
Amendment No. 3, dated as of October 14, 1999, to the
    Airbus A320/319 Purchase Agreement, dated as of
    September 12, 1997, between AVSA, S.A.R.L. and AWA,
    including Letter Agreement Nos. 1 — 8
    thereto — Incorporated by reference to
    Exhibit 10.36 to Holdings' and AWA's Annual
    Report on Form 10-K for the year ended December 31,
    1999 (File No. 000-12337).
10
.12(1)
Amendment No. 4, dated as of July 1, 2000, to the
    Airbus A320/319 Purchase Agreement, dated as of
    September 12, 1997, between AVSA S.A.R.L. and
    AWA — Incorporated by reference to Exhibit 10.38
    to AWA's Quarterly Report on Form 10-Q for the quarter
    ended September 30, 2000 (File No. 000-12337).
10
.13(1)
Amendment No. 5, dated as of October 12, 2000, to the
    Airbus A320/319 Purchase Agreement, dated as of
    September 12, 1997, between AVSA S.A.R.L. and
    AWA — Incorporated by reference to Exhibit 10.39
    to AWA's Quarterly Report on Form 10-Q for the quarter
    ended September 30, 2000 (File No. 000-12337).
10
.14(1)
Amendment No. 7, dated July 30, 2004, to the A319/
    A320 Purchase Agreement dated September 12, 1997, between
    AVSA, S.A.R.L. and AWA and Letter Agreement Nos. 2 —
    8 — Incorporated by reference to Exhibit 10.15 to
    Holdings' and AWA's Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2004 (File
    No. 001-12649).
10
.15(1)
Amended and Restated V2500 Support Contract, dated as of
    October 7, 1998, between AWA and IAE International Aero
    Engines AG and Side Letters Nos. 1 and 2 thereto —
    Incorporated by reference to Exhibit 10.20 to
    Holdings' and AWA's Annual Report on Form 10-K
    for the year ended December 31, 1998 (File
    No. 000-12337).
10
.16(1)
Side Letter No. 15, dated May 26, 2004, to the Amended
    and Restated V2500 Support Contract, dated October 7, 1998,
    between AWA and IAE International Aero Engines AG —
    Incorporated by reference to Exhibit 10.16 to
    Holdings' and AWA's Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2004 (File
    No. 001-12649).
10
.18
Priority Distribution Agreement, dated as of August 25,
    1994, between TPG Partners, L.P., TPG Parallel I, L.P., Air
    Partners II, L.P., and Continental Airlines,
    Inc. — Incorporated by reference to Exhibit 3 to
    Schedule 13D filed by TPG Partners, L.P. on
    September 6, 1994.
111
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Exhibit
Number
Title
10
.19
Disposition and Redevelopment Agreement, dated as of
    February 5, 2001, between AWA and the City of Phoenix,
    AZ — Incorporated by reference to Exhibit 10.44
    to AWA's Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2001 (File No. 000-12337).
10
.20(1)
Unsubordinated Ground Lease, dated as of February 5, 2001,
    between AWA and the City of Phoenix, AZ — Incorporated
    by reference to Exhibit 10.45 to AWA's Quarterly
    Report on Form 10-Q for the quarter ended March 31,
    2001 (File No. 000-12337).
10
.21(1)
Code Share and Revenue Sharing Agreement, dated as of
    March 20, 2001, between AWA and Mesa Airlines,
    Inc. — Incorporated by reference to Exhibit 10.46
    to AWA's Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2001 (File No. 000-12337).
10
.22(1)
$429,000,000 Loan Agreement, dated as of January 18, 2002,
    among America West Airlines, Inc., Citibank, N.A., as Agent,
    KPMG Consulting, Inc., as Loan Administrator, Citibank,
    N.A., as Initial Lender and the Air Transportation Stabilization
    Board — Incorporated by reference to
    Exhibit 10.51 to Holdings' and AWA's Current
    Report on Form 8-K dated January 31, 2002 (File Nos.
    001-12649 and 000-12337).
10
.23
Undertaking (regarding restrictions on transfer of Class A
    Common Stock), dated as of January 18, 2002, among America
    West Holdings Corporation, TPG Partners, L.P., TPG
    Parallel I, L.P. and Air Partners II, L.P. for the
    benefit of the Air Transportation Stabilization
    Board — Incorporated by reference to
    Exhibit 10.53 to Holdings' and AWA's Current
    Report on Form 8-K dated January 31, 2002 (File Nos.
    001-12649 and 000-12337).
10
.24
Second Amendment to Code Share and Revenue Sharing Agreement, as
    amended, dated as of October 24, 2002, by and among AWA,
    Mesa Airlines, Inc., Freedom Airlines, Inc. and Air Midwest,
    Inc. — Incorporated by reference to Exhibit 10.56
    of Holdings' and AWA's Annual Report on Form 10-K
    for the year ended December 31, 2002.
10
.25
Third Amendment to Code Share and Revenue Sharing Agreement
    dated as of January 29, 2003 among AWA, Mesa Airlines, Inc.
    and Freedom Airlines, Inc. — Incorporated by reference
    to Exhibit 10.1 to Holdings' and AWA's Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 2003.
10
.26(1)
Fourth Amendment to Code Share and Revenue Sharing Agreement and
    Release dated as of September 5, 2003 among AWA, Mesa
    Airlines, Inc., Air Midwest, Inc. and Freedom Airlines,
    Inc. — Incorporated by reference to Exhibit 10.2
    to Holdings' and AWA's Amendment No. 1 to
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2003.
10
.27
Loan Agreement [Engines], dated as of September 3, 2004,
    among AWA, GECC, as administrative agent, original Series A
    lender and original Series B lender, Wells Fargo Bank
    Northwest, National Association ("Wells Fargo"), as
    security trustee and the lenders from time to time party
    thereto — Incorporated by reference to
    Exhibit 10.1 to Holdings' and AWA's Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.28
Engine Mortgage and Security Agreement, dated as of
    September 3, 2004, between AWA and Wells Fargo —
    Incorporated by reference to Exhibit 10.2 to Holdings'
    and AWA's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004 (File No. 001-12649).
10
.29
Mortgage and Security Agreement Supplement No. 1, dated
    September 10, 2004, of AWA — Incorporated by
    reference to Exhibit 10.3 to Holdings' and AWA's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.30
Subordinated Engine Mortgage and Security Agreement, dated as of
    September 3, 2004, between AWA and Wells Fargo —
    Incorporated by reference to Exhibit 10.4 to Holdings'
    and AWA's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004 (File No. 001-12649).
10
.31
Subordinated Mortgage and Security Agreement Supplement
    No. 1, dated September 10, 2004, of AWA —
    Incorporated by reference to Exhibit 10.5 to Holdings'
    and AWA's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004 (File No. 001-12649).
10
.32
Security Trustee Agreement [Engines], dated as of
    September 3, 2004, among Wells Fargo, as security trustee
    and the beneficiaries named therein — Incorporated by
    reference to Exhibit 10.6 to Holdings' and AWA's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
112
Table of Contents
Exhibit
Number
Title
10
.33
Payment and Indemnity Agreement [Engines], dated as of
    September 3, 2004, among AWA, certain beneficiaries listed
    on Schedule 1 and Wells Fargo — Incorporated by
    reference to Exhibit 10.7 to Holdings' and AWA's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.34
Restructure Letter Agreement [Engines], dated as of
    September 3, 2004, among AWA and GECC —
    Incorporated by reference to Exhibit 10.8 to Holdings'
    and AWA's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004 (File No. 001-12649).
10
.35
Loan Agreement [Spare Parts], dated as of September 3,
    2004, among AWA, GECC, as administrative agent, original
    Series A lender and original Series B lender, Wells
    Fargo, as security trustee and the lenders from time to time
    party thereto — Incorporated by reference to
    Exhibit 10.9 to Holdings' and AWA's Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.36
Spare Parts Mortgage and Security Agreement, dated as of
    September 3, 2004, between AWA and Wells Fargo —
    Incorporated by reference to Exhibit 10.10 to
    Holdings' and AWA's Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2004 (File
    No. 001-12649).
10
.37
Subordinated Spare Parts Mortgage and Security Agreement, dated
    as of September 3, 2004, between AWA and Wells
    Fargo — Incorporated by reference to
    Exhibit 10.11 to Holdings' and AWA's Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.38
Security Trustee Agreement [Spare Parts], dated as of
    September 3, 2004, among Wells Fargo, as security trustee
    and the beneficiaries named therein — Incorporated by
    reference to Exhibit 10.12 to Holdings' and AWA's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.39
Payment and Indemnity Agreement [Spare Parts], dated as of
    September 3, 2004, among AWA, certain beneficiaries listed
    on Schedule 1 and Wells Fargo — Incorporated by
    reference to Exhibit 10.13 to Holdings' and AWA's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.40
Restructure Letter Agreement [Spare Parts], dated as of
    September 3, 2004, among AWA and GECC —
    Incorporated by reference to Exhibit 10.14 to
    Holdings' and AWA's Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2004 (File No.
    001-12649).
10
.41*
$30,790,000 Senior Secured Term Loan Agreement, dated
    December 23, 2004, among FTCHP LLC, as Borrower, America
    West Airlines, Inc., as Guarantor, Heritage Bank, SSB, as
    Administrative Agent and Citibank, N.A. (and other lenders named
    therein) as Lenders.
10
.42*
Senior Secured Discount Note, dated December 23, 2004,
    issued by FTCHP LLC.
10
.43*
Unconditional Guaranty Agreement, dated December 23, 2004,
    by America West Airlines, Inc. in favor of Citibank, N.A.
10
.44+
Amended and Restated America West 1994 Incentive Equity
    Plan — Incorporated by reference to Exhibit 10.21
    to AWA's Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2001 (File No. 000-12337).
10
.45+
2002 Incentive Equity Plan — Incorporated by reference
    to Appendix A to Holdings' Proxy Statement on
    Schedule 14A filed on April 17, 2002 (File
    No. 001-12649).
10
.46+
Performance-based Award Plan — Incorporated by
    reference to Exhibit 10.57 to Holdings' and AWA's
    quarterly Report on Form 10-Q for the quarter ended
    June 30, 2003 (File No. 001-12649).
10
.47*+
Form of Offer Letter.
10
.48*+
Form of Change of Control and Severance Benefit Agreement for
    Vice Presidents.
10
.49*+
Form of Change of Control and Severance Benefit Agreement for
    Senior Vice Presidents.
10
.50*+
Summary of Officer Benefits.
10
.51*+
Summary of Director Compensation and Benefits.
10
.52+
Form of Letter Agreement for Directors' Travel —
    Incorporated by reference to Exhibit 10.32 to
    Holdings' and AWA's Annual Report on Form 10-K
    for the period ended December 31, 2003.
113
Table of Contents
Exhibit
Number
Title
10
.53*+
Employment Agreement, dated February 24, 2004, by and among
    America West Holdings Corporation, America West Airlines, Inc.
    and W. Douglas Parker.
21
.1*
Subsidiaries of Holdings.
23
.1*
Consent of KPMG LLP.
23
.2*
Consent of PricewaterhouseCoopers LLP.
24
.1
Power of Attorney, pursuant to which amendments to this Annual
    Report on Form 10-K may be filed, is included on the
    signature pages of this Annual Report on Form 10-K.
31
.1*
Certification of Holdings' Chief Executive Officer pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of
    1934, as amended.
31
.2*
Certification of Holdings' Chief Financial Officer pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of
    1934, as amended.
31
.3*
Certification of AWA's Chief Executive Officer pursuant to
    Rule 13a-14(a) under the Securities Exchange Act of 1934,
    as amended.
31
.4*
Certification of AWA's Chief Financial Officer pursuant to
    Rule 13a-14(a) under the Securities Exchange Act of 1934,
    as amended.
32
.1*
Certification of Holdings' Chief Executive Officer and
    Chief Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.
32
.2*
Certification of AWA's Chief Executive Officer and Chief
    Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.
*
Filed herewith.
+  Represents a management contract or
compensatory plan or arrangement.
(1)
The Company has sought confidential treatment for portions of
    the referenced exhibit.
114
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, America West
Holdings Corporation has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICA WEST HOLDINGS CORPORATION
By:
/s/ W. Douglas Parker
W. Douglas Parker,
Chairman, President and Chief Executive Officer
Date: March 14, 2005
POWER OF ATTORNEY
We, the undersigned, directors and officers of America West
Holdings Corporation, do hereby severally constitute and appoint
W. Douglas Parker and Derek J. Kerr and each or any of
them, our true and lawful attorneys and agents, with full power
of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign
any and all amendments to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 2004,
and to file the same with all exhibits thereto, and all other
documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents,
and each or any of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys and agents, and each of them, or his substitute
or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed by the following
persons on behalf of the registrant and in the capacities
indicated on March 14, 2005.
SIGNATURE
TITLE
/s/ W. Douglas Parker
W.
    Douglas Parker
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
/s/ Derek J. Kerr
Derek
    J. Kerr
Senior Vice President
(Principal Financial and Accounting Officer)
/s/ Herbert M. Baum
Herbert
    M. Baum
Director
/s/ John L. Goolsby
John
    L. Goolsby
Director
/s/ Matthew J. Hart
Mathew
    J. Hart
Director
/s/ Walter T. Klenz
Walter
    T. Klenz
Director
/s/ Richard C. Kraemer
Richard
    C. Kraemer
Director
115
Table of Contents
SIGNATURE
TITLE
/s/ Robert J. Miller
Robert
    J. Miller
Director
/s/ Denise M. O'Leary
Denise
    M. O'Leary
Director
/s/ Richard P. Schifter
Richard
    P. Schifter
Director
/s/ John F. Tierney
John
    F. Tierney
Director
/s/ J. Steven Whisler
J.
    Steven Whisler
Director
116
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, America West
Airlines, Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERICA WEST AIRLINES, INC.
By:
/s/ W. Douglas Parker
W. Douglas Parker,
Chairman, President and Chief Executive Officer
Date: March 14, 2005
POWER OF ATTORNEY
We, the undersigned, directors and officers of America West
Airlines, Inc., do hereby severally constitute and appoint
W. Douglas Parker and Derek J. Kerr and each or any of
them, our true and lawful attorneys and agents, with full power
of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign
any and all amendments to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 2004,
and to file the same with all exhibits thereto, and all other
documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and agents,
and each or any of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys and agents, and each of them, or his substitute
or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed by the following
persons on behalf of the registrant and in the capacities
indicated on March 14, 2005.
SIGNATURE
TITLE
/s/ W. Douglas Parker
W.
    Douglas Parker
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
/s/ Derek J. Kerr
Derek
    J. Kerr
Senior Vice President
(Principal Financial Officer)
/s/ Michael R. Carreon
Michael
    R. Carreon
Vice President and Controller
(Principal Accounting Officer)
/s/ Herbert M. Baum
Herbert
    M. Baum
Director
/s/ John L. Goolsby
John
    L. Goolsby
Director
/s/ Matthew J. Hart
Mathew
    J. Hart
Director
/s/ Walter T. Klenz
Walter
    T. Klenz
Director
117
Table of Contents
SIGNATURE
TITLE
/s/ Richard C. Kraemer
Richard
    C. Kraemer
Director
/s/ Robert J. Miller
Robert
    J. Miller
Director
/s/ Denise M. O'Leary
Denise
    M. O'Leary
Director
/s/ Richard P. Schifter
Richard
    P. Schifter
Director
/s/ John F. Tierney
John
    F. Tierney
Director
/s/ J. Steven Whisler
J.
    Steven Whisler
Director
118
Table of Contents
Report of Independent Registered Public Accounting Firm
on Financial Statement Schedule
The Board of Directors and Stockholders
America West Holdings Corporation:
The audits referred to in our report dated March 11, 2005
included the related consolidated financial statement schedule
for the years ended December 31, 2004 and 2003, included
herein. The consolidated financial statement schedule is the
responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated
financial statement schedule based on our audits. In our
opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
As discussed in Note 2 to the accompanying consolidated
financial statements, the Company has restated the consolidated
balance sheet as of December 31, 2003 and the consolidated
statement of changes in stockholders' equity and
comprehensive income for the year then ended. As discussed in
Note 13 to the accompanying consolidated financial
statements, the Company restated its dilutive earnings per share
for the year ended December 31, 2003 in connection with the
adoption of Emerging Issue Task Force 04-8,
"The Effect
of Contingently Convertible Instruments on Diluted Earnings Per
Share"
.
/s/
KPMG LLP
Phoenix, Arizona
March 11, 2005
119
Table of Contents
Report of Independent Registered Public Accounting Firm
on Financial Statement Schedule
To the Board of Directors
of America West Holdings Corporation:
Our audit of the consolidated financial statements of America
West Holdings Corporation referred to in our report dated
March 24, 2003 appearing in this Annual Report on
Form 10-K also included an audit of the 2002 financial
statement schedule information included in the financial
statement schedule listed in Item 15(a)(2) of this
Form 10-K. In our opinion, the 2002 financial statement
schedule information presents fairly, in all material respects,
the information set forth therein when read in conjunction with
the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
Phoenix, Arizona
March 24, 2003
120
Table of Contents
America West Holdings Corporation
Schedule II — Valuation and Qualifying
Accounts
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)
Balance at
Balance
Beginning
at End
Description
of Period
Additions
Deductions
of Period
Allowance for doubtful receivables:
Year ended December 31, 2004
$
5,807
$
1,110
$
5,430
$
1,487
Year ended December 31, 2003
$
6,767
$
1,450
$
2,410
$
5,807
Year ended December 31, 2002
$
3,216
$
6,755
$
3,204
$
6,767
Allowance for obsolescence:
Year ended December 31, 2004
$
12,254
$
2,882
$
377
$
14,759
Year ended December 31, 2003
$
9,261
$
3,450
$
457
$
12,254
Year ended December 31, 2002
$
7,249
$
3,029
$
1,017
$
9,261
Valuation allowance on deferred tax asset, net:
Year ended December 31, 2004
$
96,474
$
56,772
$
24,280
$
128,966
Year ended December 31, 2003
$
78,787
$
38,379
$
20,692
$
96,474
Year ended December 31, 2002
$
40,650
$
46,124
$
7,987
$
78,787
Leased aircraft return provision:
Year ended December 31, 2004
$
26,872
$
6,645
$
1,558
$
31,959
Year ended December 31, 2003
$
22,441
$
9,000
$
4,569
$
26,872
Year ended December 31, 2002
$
11,277
$
17,636
$
6,472
$
22,441
121
Table of Contents
Report of Independent Registered Public Accounting Firm
on Financial Statement Schedule
The Board of Directors and Stockholder
America West Airlines, Inc.:
The audits referred to in our report dated March 11, 2005
included the related consolidated financial statement schedule
for the years ended December 31, 2004 and 2003, included
herein. The consolidated financial statement schedule is the
responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated
financial statement schedule based on our audits. In our
opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
As discussed in Note 2 to the accompanying consolidated
financial statements, the Company has restated the consolidated
balance sheet as of December 31, 2003 and the consolidated
statement of changes in stockholder's equity and
comprehensive income for the year then ended.
/s/
KPMG LLP
Phoenix, Arizona
March 11, 2005
122
Table of Contents
Report of Independent Registered Public Accounting Firm
on Financial Statement Schedule
To the Board of Directors
of America West Airlines, Inc.:
Our audit of the consolidated financial statements of America
West Airlines, Inc. referred to in our report dated
March 24, 2003, except for the effects of the
reorganization transaction described in Note 1(a) as to
which the date is August 2, 2004, appearing in this Annual
Report on Form 10-K also included an audit of the 2002
financial statement schedule information included in the
financial statement schedule listed in Item 15(a)(2) of
this Form 10-K. In our opinion, the 2002 financial
statement schedule information presents fairly, in all material
respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
Phoenix, Arizona
March 24, 2003, except for the effects of the
reorganization transaction described in Note 1(a)
as to which the date is August 2, 2004
123
Table of Contents
America West Airlines, Inc.
Schedule II — Valuation and Qualifying
Accounts
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)
Balance at
Balance
Beginning
at End
Description
of Period
Additions
Deductions
of Period
Allowance for doubtful receivables:
Year ended December 31, 2004
$
5,807
$
1,110
$
5,430
$
1,487
Year ended December 31, 2003
$
6,767
$
1,450
$
2,410
$
5,807
Year ended December 31, 2002
$
3,216
$
6,755
$
3,204
$
6,767
Allowance for obsolescence:
Year ended December 31, 2004
$
12,254
$
2,882
$
377
$
14,759
Year ended December 31, 2003
$
9,261
$
3,450
$
457
$
12,254
Year ended December 31, 2002
$
7,249
$
3,029
$
1,017
$
9,261
Valuation allowance on deferred tax asset, net:
Year ended December 31, 2004
$
96,448
$
55,343
$
24,305
$
127,484
Year ended December 31, 2003
$
78,602
$
39,481
$
21,635
$
96,448
Year ended December 31, 2002
$
34,140
$
52,587
$
8,125
$
78,602
Leased aircraft return provision:
Year ended December 31, 2004
$
26,872
$
6,645
$
1,558
$
31,959
Year ended December 31, 2003
$
22,441
$
9,000
$
4,569
$
26,872
Year ended December 31, 2002
$
11,277
$
17,636
$
6,472
$
22,441
124
Table of Contents
Index to Exhibits
Exhibit
Number
Title
2
.2
Agreement and Plan of Merger, dated as of December 19,
    1996, by and among America West Holdings Corporation
    ("Holdings"), America West Airlines, Inc.
    ("AWA") and AWA Merger, Inc., with an effective date
    and time as of midnight on December 31, 1996 —
    Incorporated by reference to Exhibit 2.1 to Holdings'
    Registration Statement on Form 8-B dated January 13,
    1997.
3
.1
Restated Certificate of Incorporation of AWA (included in
    Exhibit 2.2 above).
3
.2*
Bylaws of AWA.
3
.3
Certificate of Incorporation of Holdings — Filed with
    the Secretary of State of the State of Delaware on
    December 13, 1996 and incorporated by reference to
    Exhibit 3.1 of Holdings' Registration Statement on
    Form 8-B dated January 13, 1997. Holdings'
    Certificate of Incorporation was subsequently amended by a
    Certificate of Amendment, filed with the Delaware Secretary of
    State on May 24, 2004 and incorporated herein by reference
    to Exhibit 3.1 to Holdings' and AWA's Quarterly
    Report on Form 10-Q for the quarter ended June 30,
    2004 (File No. 001-12649).
3
.4*
Bylaws of Holdings.
4
.1
Indenture, dated as of July 30, 2003, between America West
    Airlines, Inc. and U.S. Bank National Association, as
    trustee and not in its individual capacity, for America West
    Airlines, Inc. Senior Exchangeable Notes due 2023 —
    Incorporated by reference to Exhibit 4.1 to Holdings'
    and AWA's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2003.
4
.2
Form of America West Airlines, Inc. Senior Exchangeable Note due
    2023 — Incorporated by reference to Exhibit 4.2
    to Holdings' and AWA's Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2003.
4
.3
Registration Rights Agreement, dated as of July 30, 2003,
    with respect to shares of Class B Common Stock underlying
    the America West Airlines, Inc. Senior Exchangeable Notes due
    2023 — Incorporated by reference to Exhibit 4.3
    to Holdings' and AWA's Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2003.
4
.4
Guarantee and Exchange Agreement, dated as of July 30,
    2003, between America West Holdings Corporation and
    U.S. Bank, National Association, as exchange agent and
    trustee and not in its individual capacity, for America West
    Airlines Inc. Senior Exchangeable Notes due 2023 —
    Incorporated by reference to Exhibit 4.4 to Holdings'
    and AWA's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2003.
4
.5
Stock Option Agreement, dated as of December 31, 1996,
    between Holdings and AWA — Incorporated by reference
    to Exhibit 4.5 to Holdings' Registration Statement on
    Form 8-B dated January 13, 1997.
4
.6
Registration Rights Agreement dated as of August 25, 1994,
    among AWA, AmWest Partners, L.P. and other holders —
    Incorporated by reference to Exhibit 4.6 to the AWA's
    Current Report on Form 8-K dated August 25, 1994 (File
    No. 000-12337).
4
.7
Assumption of Certain Obligations Under Registration Rights
    Agreement executed by Holdings for the benefit of TPG Partners,
    L.P., TPG Parallel I, L.P., Air Partners II, L.P.,
    Continental Airlines, Inc., Mesa Airlines, Inc., Lehman
    Brothers, Inc., Belmont Capital Partners II, L.P. and
    Belmont Fund, L.P. — Incorporated by reference to
    Exhibit 4.7 to Holdings' Registration Statement on
    Form 8-B dated January 13, 1997.
4
.8
Form of Pass Through Trust Agreement, dated as of
    November 26, 1996, between AWA and Fleet National Bank, as
    Trustee — Incorporated by reference to
    Exhibit 4.1 to AWA's Current Report on Form 8-K
    dated November 26, 1996 (File No. 000-12337).
4
.9
Form of Pass Through Trust Agreement, dated as of
    June 17, 1997, between AWA and Fleet National Bank, as
    Trustee — Incorporated by reference to
    Exhibit 4.5 to AWA's Registration Statement on
    Form S-3 dated June 4, 1997 (File No. 333-27351).
125
Table of Contents
Exhibit
Number
Title
4
.10
Forms of Pass Through Trust Agreements, dated as of
    October 6, 1998, between AWA and Wilmington Trust Company,
    as Trustee — Incorporated by reference to
    Exhibits 4.4, 4.5, 4.6, 4.7, 4.8 and 4.9 to AWA's
    Registration Statement on Form S-4 dated March 25,
    1999 (File No. 333-71615).
4
.11
Pass Through Trust Agreements, dated as of
    September 21, 1999, between AWA and Wilmington Trust
    Company, as Trustee, made with respect to the formation of
    America West Airlines Pass Through Trusts,
    Series 1999-1G-S, 1999-1G-O, 1999-1C-S and 1999-1C-O and
    the issuance of 7.93% Initial Pass Through Certificates
    Series 1999-1G-S and 1999-1G-O, the issuance of 8.54%
    Initial Pass Through Certificates, Series 1999-1C-S and
    1999-1C-O, the issuance of 7.93% Exchange Pass Through
    Certificates, Series 1999-1G-S and 1999-1G-O, and the
    issuance of 8.54% Exchange Pass Through Certificates,
    Series 1999-1C-S and 1999-1C-O — Incorporated by
    reference to AWA's Quarterly Report on Form 10-Q for
    the period ended September 30, 1999 (File
    No. 000-12337).
4
.12
Insurance and Indemnity Agreement, dated as of
    September 21, 1999, among AWA, Ambac Assurance Corporation
    as Policy Provider and Wilmington Trust Company as Subordination
    Agent and Trustee under the Pass Through
    Trust 1999-1G-O — Incorporated by reference to
    Exhibits 4.15 to AWA's Registration Statement on
    Form S-4 dated March 16, 2000 (File
    No. 333-93393).
4
.13
Pass Through Trust Agreement, dated as of July 7,
    2000, between AWA, and Wilmington Trust Company, as Trustee,
    made with respect to the formation of America West Airlines Pass
    Through Trust, Series 2000-1G-0, 2000-1G-S, 2000-1C-O and
    2000-1C-S, the issuance of 8.057% Initial Pass Through
    Certificates, Series 2000-1G-O and 2000-1G-S, the issuance
    of 9.244% Initial Pass Through Certificates,
    Series 2000-1C-O and 2000-1C-S, the issuance of 8.057%
    Exchange Pass Through Certificates, Series 2000-1G-O and
    2000-1G-S and the issuance of 9.244% Exchange Pass Through
    Certificates, Series 2000-1C-O and 2000-1C-S —
    Incorporated by reference to Exhibits 4.3, 4.4, 4.5 and 4.6
    to AWA's Registration Statement on Form S-4 dated
    September 12, 2002 (File No. 333-44930).
4
.14
Insurance and Indemnity Agreement, dated as of July 7,
    2000, among AWA, Ambac Assurance Corporation as Policy Provider
    and Wilmington Trust company as Subordination Agent and Trustee
    under the Pass Through Trust 2000-1G —
    Incorporated by reference to Exhibits 4.15 to AWA's
    Registration Statement on Form S-4 dated September 12,
    2002 (File No. 333-44930).
4
.15
Pass Through Trust Agreement, dated as of May 17,
    2001, between AWA and Wilmington Trust Company, as Trustee, made
    with respect to the formation of America West Airlines Pass
    Through Trust, Series 2001-1G-O, 2001-1G-S, 2001-1C-O,
    2001-1C-S, 2001-1D-O and 2001-1D-S, the issuance of 7.10%
    Initial Pass Through Certificates, Series 2001-1G-O and
    2001-1G-S, the issuance of 8.37% Initial Pass Through
    Certificates, Series 2001-1C-O and 2001-1G-S, the issuance
    of Six-Month LIBOR plus 3.20% Initial Pass Through Certificates,
    Series 2001-1D-O and Series 2001-1D-S, the issuance of
    7.10% Exchange Pass Through Certificates, Series 2001-1G-O
    and 2001-1G-S, the issuance of 8.37% Exchange Pass Through
    Certificates, Series 2001-1C-O and 2001-1G-S, and the
    issuance of Six-Month LIBOR plus 3.20% Exchange Pass Through
    Certificates, Series 2001-1D-O and
    Series 2001-1D-S — Incorporated by reference to
    Exhibits 4.4, 4.5, 4.6, 4.7, 4.8 and 4.9 to AWA's
    Registration Statement on Form S-4 dated February 14,
    2002 (File No. 333-69356).
4
.16
Insurance and Indemnity Agreement (Series G), dated as of
    May 17, 2001, among AWA, Ambac Assurance Corporation as
    Policy Provider and Wilmington Trust company as Subordination
    Agent — Incorporated by reference to Exhibit 4.20
    to AWA's Registration Statement on Form S-4 dated
    February 14, 2002 (File No. 333-69356).
4
.17
Indenture, dated as of January 18, 2002, between America
    West Holdings Corporation and Wilmington Trust Company, as
    Trustee and not in its individual capacity, for America West
    Holdings Corporation 7.5% Convertible Senior Notes due
    2009 — Incorporated by reference to Exhibit 4.15
    to Holdings' and AWA's Current Report on Form 8-K
    dated January 31, 2002 (File Nos. 001-12649 and
    000-12337).
126
Table of Contents
Exhibit
Number
Title
4
.18
Form of America West Holdings Corporation 7.5% Convertible
    Senior Notes due 2009 — Incorporated by reference to
    Exhibit 4.16 to Holdings' and AWA's Current
    Report on Form 8-K dated January 31, 2002 (File Nos.
    001-12649 and 000-12337).
4
.19
Registration Rights Agreement, dated January 18, 2002, with
    respect to shares of Class B Common Stock underlying the
    America West Holdings Corporation 7.5% Convertible Senior
    Notes due 2009 — Incorporated by reference to
    Exhibit 4.17 to Holdings' and AWA's Current
    Report on Form 8-K dated January 31, 2002 (File
    Nos. 001-12649 and 000-12337).
4
.20
Guaranty, dated as of January 18, 2002, by America West
    Airlines, Inc., in favor of the Holders and the Trustee under
    the Indenture dated January 18, 2002 —
    Incorporated by reference to Exhibit 4.18 to Holdings'
    and AWA's Current Report on Form 8-K dated
    January 31, 2002 (File Nos. 001-12649 and 000-12337).
4
.21
Form of Warrant to Purchase Class B Common Stock, dated
    January 18, 2002, issued to the Air Transportation
    Stabilization Board and certain warrant recipients —
    Incorporated by reference to Exhibit 4.19 to Holdings'
    and AWA's Current Report on Form 8-K dated
    January 31, 2002 (File Nos. 001-12649 and 000-12337).
4
.22
Registration Rights Agreement, dated January 18, 2002,
    between America West Holdings Corporation and the Air
    Transportation Stabilization Board with respect to shares of
    Class B Common Stock underlying the Warrant to Purchase
    Class B Common Stock — Incorporated by reference
    to Exhibit 4.20 to Holdings' and AWA's Current
    Report on Form 8-K dated January 31, 2002 (File
    Nos. 001-12649 and 000-12337).
4
.23
Warrant Registration Rights Agreement between America West
    Holdings Corporation and certain warrant recipients —
    Incorporated by reference to Exhibit 4.21 to Holdings'
    and AWA's Current Report on Form 8-K dated
    January 31, 2002 (File Nos. 001-12649 and 000-12337).
10
.1
Airport Use Agreement, dated as of July 1, 1989, among the
    City of Phoenix, The Industrial Development Authority of the
    City of Phoenix, Arizona and AWA ("Airport Use
    Agreement") — Incorporated by reference to
    Exhibit 10-(D)(9) to AWA's Annual Report on
    Form 10-K for the year ended December 31, 1989 (File
    No. 000-12337).
10
.2
First Amendment to Airport Use Agreement, dated as of
    August 1, 1990 — Incorporated by reference to
    Exhibit 10-(D)(9) to AWA's Quarterly Report on
    Form 10-Q for the quarter ended September 30, 1990
    (File No. 000-12337).
10
.3
Management Rights Agreement, dated as of August 25, 1994,
    between TPG Partners L.P., TPG Genpar, L.P. and AWA —
    Incorporated by reference to Exhibit 10.47 to AWA's
    Registration Statement on Form S-1 dated August 23,
    1994, as amended (File No. 33-54243).
10
.4
Financing Agreement, dated as of April 1, 1998, between the
    Industrial Development Authority of the City of Phoenix, Arizona
    and AWA — Incorporated by reference to
    Exhibit 10.29 to Holdings' Quarterly Report on
    Form 10-Q for the quarter ended June 30, 1998 (File
    No. 001-12649).
10
.5
Indenture of Trust, dated as of April 1, 1998, from the
    Industrial Development Authority of the City of Phoenix, Arizona
    to Norwest Bank, Arizona N.A. — Incorporated by
    reference to Exhibit 10.30 to Holdings' Quarterly
    Report on Form 10-Q for the quarter ended June 30,
    1998 (File No. 001-12649).
10
.6
Second Amendment to Airport Use Agreement, dated as of
    August 25, 1995 — Incorporated by reference to
    Exhibit 10.34 to AWA's Annual Report on Form 10-K
    for the year ended December 31, 1998 (File
    No. 000-12337).
10
.7
Indenture of Trust, dated as of June 1, 1999, from The
    Industrial Development Authority of the City of Phoenix, Arizona
    to Bank One Arizona, N.A. — Incorporated by reference
    to Exhibit 10.35 to AWA's Quarterly Report on
    Form 10-Q for the quarter ended June 30, 1999 (File
    No. 000-12337).
10
.8(1)
Airbus A320/ A319 Purchase Agreement, dated as of
    September 12, 1997, between AVSA S.A.R.L and AWA, including
    Letter Agreements Nos. 1-10 — Incorporated by
    reference to Exhibit 10.26 to Holdings' Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 1997 (File No. 001- 12649).
127
Table of Contents
Exhibit
Number
Title
10
.9(1)
Amendment No. 1, dated as of March 31, 1998, to the
    Airbus A320/ A319 Purchase Agreement, dated as of
    September 12, 1997, between AVSA S.A.R.L. and
    AWA — Incorporated by reference to Exhibit 10.28
    to Holdings' Quarterly Report on Form 10-Q for the
    quarter ended June 30, 1998 (File No. 001-12649).
10
.10(1)
Amendment No. 2, dated as of December 9, 1998, to the
    Airbus A320/ A319 Purchase Agreement, dated as of
    September 12, 1997, between AVSA S.A.R.L. and
    AWA — Incorporated by reference to Exhibit 10.32
    to AWA's Annual Report on Form 10-K for the year ended
    December 31, 1998 (File No. 000-12337).
10
.11(1)
Amendment No. 3, dated as of October 14, 1999, to the
    Airbus A320/319 Purchase Agreement, dated as of
    September 12, 1997, between AVSA, S.A.R.L. and AWA,
    including Letter Agreement Nos. 1 — 8
    thereto — Incorporated by reference to
    Exhibit 10.36 to Holdings' and AWA's Annual
    Report on Form 10-K for the year ended December 31,
    1999 (File No. 000-12337).
10
.12(1)
Amendment No. 4, dated as of July 1, 2000, to the
    Airbus A320/319 Purchase Agreement, dated as of
    September 12, 1997, between AVSA S.A.R.L. and
    AWA — Incorporated by reference to Exhibit 10.38
    to AWA's Quarterly Report on Form 10-Q for the quarter
    ended September 30, 2000 (File No. 000-12337).
10
.13(1)
Amendment No. 5, dated as of October 12, 2000, to the
    Airbus A320/319 Purchase Agreement, dated as of
    September 12, 1997, between AVSA S.A.R.L. and
    AWA — Incorporated by reference to Exhibit 10.39
    to AWA's Quarterly Report on Form 10-Q for the quarter
    ended September 30, 2000 (File No. 000-12337).
10
.14(1)
Amendment No. 7, dated July 30, 2004, to the A319/
    A320 Purchase Agreement dated September 12, 1997, between
    AVSA, S.A.R.L. and AWA and Letter Agreement Nos. 2 —
    8 — Incorporated by reference to Exhibit 10.15 to
    Holdings' and AWA's Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2004 (File
    No. 001-12649).
10
.15(1)
Amended and Restated V2500 Support Contract, dated as of
    October 7, 1998, between AWA and IAE International Aero
    Engines AG and Side Letters Nos. 1 and 2 thereto —
    Incorporated by reference to Exhibit 10.20 to
    Holdings' and AWA's Annual Report on Form 10-K
    for the year ended December 31, 1998 (File
    No. 000-12337).
10
.16(1)
Side Letter No. 15, dated May 26, 2004, to the Amended
    and Restated V2500 Support Contract, dated October 7, 1998,
    between AWA and IAE International Aero Engines AG —
    Incorporated by reference to Exhibit 10.16 to
    Holdings' and AWA's Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2004 (File
    No. 001-12649).
10
.17
Purchase Agreement, dated as of December 27, 2000, between
    Holdings, AWA and Continental Airlines, Inc., including Letter
    Agreement — Incorporated by reference to
    Exhibit 10.40 to Holdings' and AWA's Annual
    Report on Form 10-K for the year ended December 31,
    2000 (File Nos. 001-12649 and 000-12337).
10
.18
Priority Distribution Agreement, dated as of August 25,
    1994, between TPG Partners, L.P., TPG Parallel I, L.P., Air
    Partners II, L.P., and Continental Airlines,
    Inc. — Incorporated by reference to Exhibit 3 to
    Schedule 13D filed by TPG Partners, L.P. on
    September 6, 1994.
10
.19
Disposition and Redevelopment Agreement, dated as of
    February 5, 2001, between AWA and the City of Phoenix,
    AZ — Incorporated by reference to Exhibit 10.44
    to AWA's Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2001 (File No. 000-12337).
10
.20(1)
Unsubordinated Ground Lease, dated as of February 5, 2001,
    between AWA and the City of Phoenix, AZ — Incorporated
    by reference to Exhibit 10.45 to AWA's Quarterly
    Report on Form 10-Q for the quarter ended March 31,
    2001 (File No. 000-12337).
10
.21(1)
Code Share and Revenue Sharing Agreement, dated as of
    March 20, 2001, between AWA and Mesa Airlines,
    Inc. — Incorporated by reference to Exhibit 10.46
    to AWA's Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2001 (File No. 000-12337).
128
Table of Contents
Exhibit
Number
Title
10
.22(1)
$429,000,000 Loan Agreement, dated as of January 18, 2002,
    among America West Airlines, Inc., Citibank, N.A., as Agent,
    KPMG Consulting, Inc., as Loan Administrator, Citibank,
    N.A., as Initial Lender and the Air Transportation Stabilization
    Board — Incorporated by reference to
    Exhibit 10.51 to Holdings' and AWA's Current
    Report on Form 8-K dated January 31, 2002 (File
    Nos. 001-12649 and 000-12337).
10
.23
Undertaking (regarding restrictions on transfer of Class A
    Common Stock), dated as of January 18, 2002, among America
    West Holdings Corporation, TPG Partners, L.P., TPG
    Parallel I, L.P. and Air Partners II, L.P. for the
    benefit of the Air Transportation Stabilization
    Board — Incorporated by reference to
    Exhibit 10.53 to Holdings' and AWA's Current
    Report on Form 8-K dated January 31, 2002 (File
    Nos. 001-12649 and 000-12337).
10
.24
Second Amendment to Code Share and Revenue Sharing Agreement, as
    amended, dated as of October 24, 2002, by and among AWA,
    Mesa Airlines, Inc., Freedom Airlines, Inc. and Air Midwest,
    Inc. — Incorporated by reference to Exhibit 10.56
    of Holdings' and AWA's Annual Report on Form 10-K
    for the year ended December 31, 2002.
10
.25
Third Amendment to Code Share and Revenue Sharing Agreement
    dated as of January 29, 2003 among AWA, Mesa Airlines, Inc.
    and Freedom Airlines, Inc. — Incorporated by reference
    to Exhibit 10.1 to Holdings' and AWA's Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 2003.
10
.26(1)
Fourth Amendment to Code Share and Revenue Sharing Agreement and
    Release dated as of September 5, 2003 among AWA, Mesa
    Airlines, Inc., Air Midwest, Inc. and Freedom Airlines,
    Inc. — Incorporated by reference to Exhibit 10.2
    to Holdings' and AWA's Amendment No. 1 to
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2003.
10
.27
Loan Agreement [Engines], dated as of September 3, 2004,
    among AWA, GECC, as administrative agent, original Series A
    lender and original Series B lender, Wells Fargo Bank
    Northwest, National Association ("Wells Fargo"), as
    security trustee and the lenders from time to time party thereto
    –Incorporated by reference to Exhibit 10.1 to
    Holdings' and AWA's Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2004 (File
    No. 001-12649).
10
.28
Engine Mortgage and Security Agreement, dated as of
    September 3, 2004, between AWA and Wells Fargo —
    Incorporated by reference to Exhibit 10.2 to Holdings'
    and AWA's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004 (File No. 001-12649).
10
.29
Mortgage and Security Agreement Supplement No. 1, dated
    September 10, 2004, of AWA — Incorporated by
    reference to Exhibit 10.3 to Holdings' and AWA's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.30
Subordinated Engine Mortgage and Security Agreement, dated as of
    September 3, 2004, between AWA and Wells Fargo —
    Incorporated by reference to Exhibit 10.4 to Holdings'
    and AWA's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004 (File No. 001-12649).
10
.31
Subordinated Mortgage and Security Agreement Supplement
    No. 1, dated September 10, 2004, of AWA —
    Incorporated by reference to Exhibit 10.5 to Holdings'
    and AWA's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004 (File No. 001-12649).
10
.32
Security Trustee Agreement [Engines], dated as of
    September 3, 2004, among Wells Fargo, as security trustee
    and the beneficiaries named therein — Incorporated by
    reference to Exhibit 10.6 to Holdings' and AWA's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.33
Payment and Indemnity Agreement [Engines], dated as of
    September 3, 2004, among AWA, certain beneficiaries listed
    on Schedule 1 and Wells Fargo — Incorporated by
    reference to Exhibit 10.7 to Holdings' and AWA's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.34
Restructure Letter Agreement [Engines], dated as of
    September 3, 2004, among AWA and GECC —
    Incorporated by reference to Exhibit 10.8 to Holdings'
    and AWA's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004 (File No. 001-12649).
129
Table of Contents
Exhibit
Number
Title
10
.35
Loan Agreement [Spare Parts], dated as of September 3,
    2004, among AWA, GECC, as administrative agent, original
    Series A lender and original Series B lender, Wells
    Fargo, as security trustee and the lenders from time to time
    party thereto — Incorporated by reference to
    Exhibit 10.9 to Holdings' and AWA's Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.36
Spare Parts Mortgage and Security Agreement, dated as of
    September 3, 2004, between AWA and Wells Fargo —
    Incorporated by reference to Exhibit 10.10 to
    Holdings' and AWA's Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2004 (File
    No. 001-12649).
10
.37
Subordinated Spare Parts Mortgage and Security Agreement, dated
    as of September 3, 2004, between AWA and Wells
    Fargo — Incorporated by reference to
    Exhibit 10.11 to Holdings' and AWA's Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.38
Security Trustee Agreement [Spare Parts], dated as of
    September 3, 2004, among Wells Fargo, as security trustee
    and the beneficiaries named therein — Incorporated by
    reference to Exhibit 10.12 to Holdings' and AWA's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.39
Payment and Indemnity Agreement [Spare Parts], dated as of
    September 3, 2004, among AWA, certain beneficiaries listed
    on Schedule 1 and Wells Fargo — Incorporated by
    reference to Exhibit 10.13 to Holdings' and AWA's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2004 (File No. 001-12649).
10
.40
Restructure Letter Agreement [Spare Parts], dated as of
    September 3, 2004, among AWA and GECC —
    Incorporated by reference to Exhibit 10.14 to
    Holdings' and AWA's Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2004 (File
    No. 001-12649).
10
.41*
$30,790,000 Senior Secured Term Loan Agreement, dated
    December 23, 2004, among FTCHP LLC, as Borrower, America
    West Airlines, Inc., as Guarantor, Heritage Bank, SSB, as
    Administrative Agent and Citibank, N.A. (and other lenders named
    therein) as Lenders.
10
.42*
Senior Secured Discount Note, dated December 23, 2004,
    issued by FTCHP LLC.
10
.43*
Unconditional Guaranty Agreement, dated December 23, 2004,
    by America West Airlines, Inc. in favor of Citibank, N.A.
10
.44+
Amended and Restated America West 1994 Incentive Equity
    Plan — Incorporated by reference to Exhibit 10.21
    to AWA's Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2001 (File No. 000-12337).
10
.45+
2002 Incentive Equity Plan — Incorporated by reference
    to Appendix A to Holdings' Proxy Statement on
    Schedule 14A filed on April 17, 2002 (File
    No. 001-12649).
10
.46+
Performance-based Award Plan — Incorporated by
    reference to Exhibit 10.57 to Holdings' and AWA's
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2003 (File No. 001-12649).
10
.47*+
Form of Offer Letter.
10
.48*+
Form of Change of Control and Severance Benefit Agreement for
    Vice Presidents.
10
.49*+
Form of Change of Control and Severance Benefit Agreement for
    Senior Vice Presidents.
10
.50*+
Summary of Officer Benefits.
10
.51*+
Summary of Director Compensation and Benefits.
10
.52+
Form of Letter Agreement for Directors' Travel —
    Incorporated by reference to Exhibit 10.32 to
    Holdings' and AWA's Annual Report on Form 10-K
    for the period ended December 31, 2003.
10
.53*+
Employment Agreement, dated February 24, 2004, by and among
    America West Holdings Corporation, America West Airlines, Inc.
    and W. Douglas Parker.
21
.1*
Subsidiaries of Holdings.
23
.1*
Consent of KPMG LLP.
23
.2*
Consent of PricewaterhouseCoopers LLP.
24
.1
Power of Attorney, pursuant to which amendments to this Annual
    Report on Form 10-K may be filed, is included on the
    signature pages of this Annual Report on Form 10-K.
130
Table of Contents
Exhibit
Number
Title
31
.1*
Certification of Holdings' Chief Executive Officer pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of
    1934, as amended.
31
.2*
Certification of Holdings' Chief Financial Officer pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of
    1934, as amended.
31
.3*
Certification of AWA's Chief Executive Officer pursuant to
    Rule 13a-14(a) under the Securities Exchange Act of 1934,
    as amended.
31
.4*
Certification of AWA's Chief Financial Officer pursuant to
    Rule 13a-14(a) under the Securities Exchange Act of 1934,
    as amended.
32
.1*
Certification of Holdings' Chief Executive Officer and
    Chief Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.
32
.2*
Certification of AWA's Chief Executive Officer and Chief
    Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.
*  Filed herewith.
+  Represents a management contract or
compensatory plan or arrangement.
(1)
The Company has sought confidential treatment for portions of
    the referenced exhibit.
131
Table of Contents
ANNEX B-2
America West Holdings' Corporation's Quarterly
Report on Form 10-Q
for the three months ended March 31, 2005
B-2
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
For the transition period
    from           to
Commission file number 1-12649
America West Holdings Corporation
(Exact name of registrant as specified in its charter)
Delaware
86-0847214
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
111 West Rio Salado Parkway,
Tempe, Arizona
(Address of principal executive offices)
85281
(Zip Code)
(480) 693-0800
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if
changed since last report)
Commission file number 0-12337
America West Airlines, Inc.
(Exact name of registrant as specified in its charter)
Delaware
86-0418245
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
4000 East Sky Harbor Blvd,
Phoenix, Arizona
(Address of principal executive offices)
85034
(Zip Code)
(480) 693-0800
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether each registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days.     Yes
þ
No
o
Indicate by check mark whether the Registrants are accelerated
filers (as defined in Exchange Act Rule 12b-2).
America West Holdings Corporation
Yes
þ
No
o
America West Airlines, Inc.
Yes
o
No
þ
As of April 25, 2005, America West Holdings Corporation has
859,117 shares of Class A common stock and
35,316,871 shares of Class B common stock outstanding.
As of April 25, 2005, America West Airlines, Inc. has
1,000 shares of Class B common stock outstanding, all
of which are held by America West Holdings Corporation.
Table of Contents
PART I — FINANCIAL INFORMATION
America West Holding Corporation ("Holdings" or the
"Company") is the holding company that owns all of the
stock of America West Airlines, Inc. ("AWA" or the
"Airline"). AWA, the eighth largest passenger airline
and the second largest low cost carrier in the United States,
accounted for most of Holdings' revenues and expenses in
2004. Through its America West Vacations division, AWA also
sells individual and group travel packages. This combined
Form 10-Q is filed by both Holdings and AWA and includes
the financial statements of each company in Item 1A and
Item 1B, respectively.
Item 1A.
Condensed Consolidated Financial Statements —
    America West Holdings Corporation.
America West Holdings Corporation
Condensed Consolidated Balance Sheets
(in thousands except share data)
(unaudited)
March 31,
December 31,
2005
2004
ASSETS
Current assets:
Cash and cash equivalents
$
129,197
$
149,091
Short-term investments
104,513
126,651
Restricted cash
—
41,264
Accounts receivable, net
156,037
108,837
Expendable spare parts and supplies, net
55,643
57,563
Prepaid expenses
208,811
141,571
Total current assets
654,201
624,977
Property and equipment:
Flight equipment
914,853
926,930
Other property and equipment
297,406
290,897
Equipment purchase deposits
70,450
63,450
1,282,709
1,281,277
Less accumulated depreciation and amortization
606,958
624,742
Net property and equipment
675,751
656,535
Other assets:
Investments in debt securities
20,000
30,000
Restricted cash
91,548
72,091
Other assets, net
138,900
91,661
Total other assets
250,448
193,752
$
1,580,400
$
1,475,264
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
$
114,674
$
151,183
Current obligations under capital leases
3,291
3,475
Accounts payable
184,840
173,887
Air traffic liability
276,108
194,718
Accrued compensation and vacation benefits
51,207
42,699
Accrued taxes
48,759
32,796
Other accrued liabilities
87,006
65,958
Total current liabilities
765,885
664,716
Long-term debt, less current maturities
588,589
635,129
Capital leases, less current obligations
5,124
5,061
Deferred credits and other liabilities
150,672
133,911
Stockholders' equity:
Preferred stock, $.01 par value. Authorized
    48,800,000 shares; no shares issued
—
—
Class A common stock, $.01 par value. Authorized
    1,200,000 shares; issued and outstanding
    859,117 shares at March 31, 2005 and December 31,
    2004
8
8
Class B common stock, $.01 par value. Authorized
    100,000,000 shares; issued and outstanding
    51,600,766 shares at March 31, 2005 and
    51,564,865 shares at December 31, 2004
516
516
Additional paid-in capital
632,553
632,446
Accumulated deficit
(255,041
)
(288,617
)
378,036
344,353
Less: Cost of Class B common stock in treasury,
    16,437,575 shares at March 31, 2005 and
    December 31, 2004
(307,906
)
(307,906
)
Total stockholders' equity
70,130
36,447
$
1,580,400
$
1,475,264
See accompanying Notes to Condensed Consolidated Financial
Statements.
2
Table of Contents
America West Holdings Corporation
Condensed Consolidated Statements of Operations
(in thousands except per share data)
(unaudited)
Three Months Ended
March 31,
2005
2004
Operating revenues:
Passenger
$
575,413
$
537,333
Express
103,356
72,651
Cargo
8,644
6,903
Other
35,399
32,440
Total operating revenues
722,812
649,327
Operating expenses:
Salaries and related costs
175,148
166,275
Aircraft rents
76,837
75,185
Other rents and landing fees
41,539
41,241
Aircraft fuel
151,863
114,212
Realized and unrealized gains on fuel hedging instruments, net
(60,483
)
(404
)
Agency commissions
5,554
6,750
Aircraft maintenance materials and repairs
47,988
50,054
Depreciation and amortization
11,860
13,791
Special charges (credits), net
811
(600
)
Express expenses
110,826
73,302
Other
110,791
94,432
Total operating expenses
672,734
634,238
Operating income
50,078
15,089
Nonoperating income (expenses):
Interest income
1,899
1,518
Interest expense, net
(18,979
)
(19,752
)
Other, net
578
1,582
Total nonoperating expenses, net
(16,502
)
(16,652
)
Income (loss) before income taxes
33,576
(1,563
)
Income taxes
—
—
Net income (loss)
$
33,576
$
(1,563
)
Earnings (loss) per share:
Basic
$
0.93
$
(0.04
)
Diluted
$
0.62
$
(0.04
)
Shares used for computation:
Basic
36,152
35,851
Diluted
62,372
35,851
See accompanying Notes to Condensed Consolidated Financial
Statements.
3
Table of Contents
America West Holdings Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
March 31,
2005
2004
Net cash provided by (used in) operating activities
$
113,929
$
(1,432
)
Cash flows from investing activities:
Purchases of property and equipment
(56,613
)
(36,979
)
Purchases of short-term investments
(99,650
)
(164,565
)
Sales of short-term investments
131,644
172,710
Purchases of investments in debt securities
—
(15,000
)
Sales of investments in debt securities
—
15,000
Decrease (increase) in restricted cash
(19,457
)
1,081
Proceeds from disposition of assets
584
1,397
Net cash used in investing activities
(43,492
)
(26,356
)
Cash flows from financing activities:
Repayment of debt
(86,189
)
(47,370
)
Other
(4,142
)
373
Net cash used in financing activities
(90,331
)
(46,997
)
Net decrease in cash and cash equivalents
(19,894
)
(74,785
)
Cash and cash equivalents at beginning of period
149,091
153,357
Cash and cash equivalents at end of period
$
129,197
$
78,572
Cash paid for:
Interest, net of amounts capitalized
$
4,727
$
7,700
Income taxes paid
$
18
$
1,374
Non-cash investing and financing activities:
Reclassification of investments in debt securities to short-term
    investments
$
10,000
$
5,344
Notes payable issued under the aircraft purchase agreement
$
5,250
$
3,500
Notes payable cancelled under the aircraft purchase agreement
$
(3,500
)
$
—
Payment in kind notes issued, net of returns
$
—
$
379
Exercise of warrants
$
—
$
2
Acquisition of shares due to loan default
$
—
$
800
See accompanying Notes to Condensed Consolidated Financial
Statements.
4
Table of Contents
America West Holdings Corporation
Notes to Condensed Consolidated Financial Statements
March 31, 2005
1.
Basis of Presentation
The unaudited condensed consolidated financial statements
include the accounts of Holdings and its wholly owned
subsidiary, AWA. These statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange
Commission and, in accordance with those rules and regulations,
certain information and footnotes required by generally accepted
accounting principles have been omitted. In the opinion of
management, the condensed consolidated financial statements
reflect all adjustments, which are of a normal recurring nature,
necessary for a fair presentation. The accompanying condensed
consolidated financial statements should be read in conjunction
with the consolidated financial statements and related notes
thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2004.
The Company has a regional airline alliance agreement with Mesa
Airlines ("Mesa"). Mesa, operating as America West
Express ("Express"), provides regional feeder service
for AWA. Express operations have grown substantially and, as of
March 31, 2005, comprise approximately 12% of the
Company's total capacity as measured by available seat
miles ("ASMs"). To improve the visibility of Express
operating results, effective with the first quarter of 2005, the
Company has changed its method of reporting for this agreement
to the gross basis of presentation. Previously, AWA used the net
basis of presentation.
Using the gross basis of presentation, the passenger revenues
and operating expenses associated with the Express agreement are
reported gross (i.e.; as
"Operating Revenues —
Express"
and
"Operating Expenses —
Express Expenses"
) in the Condensed Consolidated
Statement of Operations. Under the net basis of presentation,
Express passenger revenues and the associated operating expenses
were netted and classified in
"Operating
Revenues — Other."
Prior period amounts have
been reclassified to be consistent with the first quarter 2005
presentation. These reclassifications did not impact our
operating income or net income (loss) for each period presented.
See Note 7,
"Change in Method of Reporting for
America West Express Results"
for additional
information about this agreement and the reclassifications
related to the change in presentation.
Certain other prior year amounts have been reclassified to
conform with current year presentation.
2.
Stock Options
The Company accounts for its stock option plans in accordance
with the provisions of Accounting Principles Board
("APB") Opinion No. 25,
"Accounting for
Stock Issued to Employees,"
and related
interpretations. As such, compensation expense would be recorded
on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. The Company issues
its stock options at a price equal to fair market value on the
date of grant. Accordingly, no compensation cost has been
recognized for stock options in the accompanying condensed
consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for
its stock options under Statement of Financial Accounting
Standards ("SFAS") No. 123,
"Accounting
for Stock-Based Compensation,"
the
5
Table of Contents
Company's net income (loss) and income (loss) per share
would have been decreased to the pro forma amounts indicated
below:
Three Months Ended
March 31,
2005
2004
(in thousands except per
share data)
Net income (loss), as reported
$
33,576
$
(1,563
)
Stock-based compensation expense
(1,270
)
(1,270
)
Pro forma net income (loss)
$
32,306
$
(2,833
)
Income (loss) per share:
Basic — as reported
$
0.93
$
(0.04
)
Basic — pro forma
$
0.89
$
(0.08
)
Diluted — as reported
$
0.62
$
(0.04
)
Diluted — pro forma
$
0.60
$
(0.08
)
3.
Flight Equipment
In January 2005, the Company entered into an operating lease for
one new Airbus A320 aircraft with a lease term of 5 years.
In March 2005, the Company completed a sale-leaseback
transaction on one Airbus A320 aircraft resulting in a loss of
$3.7 million. This amount was recorded in
"Operating Expenses — Other."
The
term of the leaseback is 12 years.
During the first quarter of 2005, the Company returned one
Boeing 737-200 aircraft to the aircraft lessor in accordance
with the renegotiated lease term.
4.
Special Charges
In the first quarter of 2005, the Company recorded
$0.8 million in special charges, of which $0.7 million
is accrued at March 31, 2005. This is related to continued
costs associated with the retirement of the 737-200 fleet.
The following table presents the payments and other settlements
made during the three months ended March 31, 2005 related
to the special charge accruals:
Contract
Termination/
Fleet Restructuring
Other Costs
Total
Balance at December 31, 2004
$
643
$
121
$
764
Special charges
690
—
690
Payments
(305
)
(111
)
(416
)
Revision of estimate
—
147
147
Balance at March 31, 2005
$
1,028
$
157
$
1,185
The Company expects to make payments related to these special
charges through the fourth quarter of 2005.
6
Table of Contents
5.
Income (Loss) Per Share
The following table presents the computation of basic and
diluted income (loss) per share ("EPS").
Three Months Ended
March 31,
2005
2004
(in thousands except per
share data)
BASIC INCOME (LOSS) PER SHARE
Income (loss) applicable to common stock
$
33,576
$
(1,563
)
Weighted average common shares outstanding
36,152
35,851
Basic income (loss) per share
$
0.93
$
(0.04
)
DILUTED INCOME (LOSS) PER SHARE
Income (loss) as reported
$
33,576
$
(1,563
)
Interest expense on 7.5% convertible senior notes
3,133
—
Interest expense on 7.25% senior exchangeable notes
1,735
—
Income (loss) for purposes of computing diluted net income
    (loss) per share
$
38,444
$
(1,563
)
SHARE COMPUTATION
Weighted average common shares outstanding
36,152
35,851
Assumed exercise of stock options and warrants
8,766
—
Assumed conversion of 7.5% convertible senior notes
9,358
—
Assumed conversion of 7.25% senior exchangeable notes
8,096
—
Weighted average common shares outstanding, as adjusted
62,372
35,851
Diluted income (loss) per share
$
0.62
$
(0.04
)
For the three months ended March 31, 2005, 7,245,251
incremental shares from the assumed exercise of stock options
are not included in the computation of diluted EPS because the
option exercise prices were greater than the average market
price of the Company's Class B common stock for the
period.
For the three months ended March 31, 2004, 2,711,887
incremental shares from the assumed exercise of stock options
and 14,400,403 warrants issued in conjunction with the
government guaranteed loan and related transactions are not
included in the computation of diluted EPS because of the
antidilutive effect on EPS. In addition, 8,694,000 and 8,095,842
incremental shares from assumed conversion of the
7.5% convertible senior notes due 2009 and the
7.25% senior exchangeable notes due 2023, respectively, are
not included in the computation of diluted EPS because of the
antidilutive effect on EPS.
6.
Segment Disclosures
Holdings is one reportable operating segment. Accordingly, the
segment reporting financial data required by
SFAS No. 131,
"Disclosures About Segments of
an Enterprise and Related Information"
is included in
the accompanying condensed consolidated balance sheets and
statements of operations.
7.
Change in Method of Reporting for America West Express
    Results
The Company has a regional airline alliance agreement (the
"Agreement") with Mesa that commenced in February
2001. Pursuant to the Agreement, Mesa, using aircraft owned and
operated by Mesa under the name Express, provides feeder service
to destinations in the western United States, Canada and
northern Mexico. As of March 31, 2005, the Express fleet
included 49 aircraft comprised of 27 86-seat CRJ 900s,
16 50-seat CRJ 200s and six 37-seat Dash 8 turbo prop
aircraft.
7
Table of Contents
Under the Agreement, Mesa is required to fly the routes and
flights designated by AWA using Mesa's aircraft, flight
crews and other related services. Mesa maintains and operates
the aircraft, employs, trains, manages and compensates personnel
necessary to provide the flight services and provides related
passenger handling services for and on the flights. AWA is
responsible for establishing the routes, scheduling Express
flights, pricing of the tickets, marketing and selling the
tickets, collecting all sales amounts, paying all costs of sales
and marketing and taking inventory risk on the inventory of
seats for sale on Mesa. The ground handling of aircraft is
performed by either AWA or Mesa, depending upon the airport.
AWA collects the revenue and income generated from the services
provided by Mesa pursuant to the Agreement. In return, AWA:
(i) reimburses Mesa for actual non-controllable costs
incurred by Mesa such as fuel, insurance, taxes, fees and
security; (ii) pays Mesa for actual controllable
non-maintenance costs, subject to a cap, such as aircraft lease
expense and crew expense; (iii) pays Mesa for controllable
maintenance costs at fixed rates (subject to reimbursement of
excess costs if actual costs during term are less than fixed
amount paid by AWA); (iv) reimburses Mesa costs and
expenses incurred at stations maintained and operated by Mesa;
and (v) shares with Mesa a percentage of the revenue
allocated to the flight segments flown by Mesa on a pro rata
basis.
The agreement is anticipated to expire in June 2012.
As discussed in Note 1,
"Basis of
Presentation,"
the Company is reporting the passenger
revenues and operating expenses associated with the Agreement on
a gross basis. Previously, these revenues and expenses were
reported net in
"Operating Revenues —
Other"
in our Condensed Consolidated Statements of
Operations. The following table presents the effect of this
reclassification for the three months ended March 31, 2004:
As Reported
Adjustments
As Reclassified
Operating revenues:
Passenger
$
537,333
$
—
$
537,333
Express
—
72,651
(1)
72,651
Cargo and other
39,211
132
39,343
Total operating revenues
$
576,544
$
72,783
$
649,327
Operating expenses:
Operating expenses
$
561,455
$
(519
)
$
560,936
Express expenses
—
73,302
(2)
73,302
Total operating expenses
$
561,455
$
72,783
$
634,238
(1)
Reclassification of Express passenger revenues from
"Operating Revenues — Other."
(2)
Reclassification of $72.8 million and $0.5 million of
    Express operating expenses from
"Operating
    Revenues — Other"
and
"Operating
    Expenses — Other,"
respectively.
The operating margin that results from using the gross basis of
presentation for Express revenues and expenses does not include
any beyond contribution passenger revenue generated by feed into
AWA's mainline operations from Express flights. Overall,
the Mesa alliance agreement adds to the total profitability of
AWA.
8
Table of Contents
Item 1B.
Condensed Financial Statements — America West
    Airlines, Inc.
The unaudited condensed consolidated balance sheets of AWA, a
wholly-owned subsidiary of Holdings, as of March 31, 2005
and December 31, 2004, and the condensed consolidated
statements of operations and cash flows for the three months
ended March 31, 2005 and 2004, together with the related
notes, are set forth on the following pages.
America West Airlines, Inc.
Condensed Consolidated Balance Sheets
(in thousands except share data)
(unaudited)
March 31,
December 31,
2005
2004
ASSETS
Current assets:
Cash and cash equivalents
$
108,372
$
128,497
Short-term investments
104,513
126,651
Restricted cash
—
41,264
Accounts receivable, net
156,037
108,837
Expendable spare parts and supplies, net
55,643
57,563
Prepaid expenses
208,775
141,571
Total current assets
633,340
604,383
Property and equipment:
Flight equipment
914,853
926,930
Other property and equipment
295,788
289,279
Equipment purchase deposits
70,450
63,450
1,281,091
1,279,659
Less accumulated depreciation and amortization
606,409
624,193
Net property and equipment
674,682
655,466
Other assets:
Investments in debt securities
20,000
30,000
Restricted cash
91,548
72,091
Advances to parent company, net
259,362
258,777
Other assets, net
137,613
90,270
Total other assets
508,523
451,138
$
1,816,545
$
1,710,987
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
$
114,674
$
151,183
Current obligations under capital leases
3,291
3,475
Accounts payable
183,943
173,196
Air traffic liability
276,108
194,718
Accrued compensation and vacation benefits
51,207
42,699
Accrued taxes
36,608
20,651
Other accrued liabilities
87,006
65,958
Total current liabilities
752,837
651,880
Long-term debt, less current maturities
588,589
635,129
Capital leases, less current maturities
5,124
5,061
Deferred credits and other liabilities
148,864
132,103
Stockholder's equity:
Common Stock $.01 par value. Authorized, issued and
    outstanding; 1,000 shares
—
—
Additional paid-in capital
555,114
555,114
Accumulated deficit
(233,983
)
(268,300
)
Total stockholder's equity
321,131
286,814
$
1,816,545
$
1,710,987
See accompanying Notes to Condensed Consolidated Financial
Statements.
9
Table of Contents
America West Airlines, Inc.
Condensed Consolidated Statements of Operations
(in thousands)
(unaudited)
Three Months Ended
March 31,
2005
2004
Operating revenues:
Passenger
$
575,413
$
537,333
Express
103,356
72,651
Cargo
8,644
6,903
Other
35,229
32,270
Total operating revenues
722,642
649,157
Operating expenses:
Salaries and related costs
174,853
165,929
Aircraft rents
76,837
75,185
Other rents and landing fees
41,539
41,241
Aircraft fuel
151,863
114,212
Realized and unrealized gains on fuel hedging instruments, net
(60,483
)
(404
)
Agency commissions
5,554
6,750
Aircraft maintenance materials and repairs
47,988
50,054
Depreciation and amortization
11,860
13,791
Special charges (credits), net
811
(600
)
Express expenses
110,826
73,302
Other
110,049
93,812
Total operating expenses
671,697
633,272
Operating income
50,945
15,885
Nonoperating income (expenses):
Interest income
3,464
3,201
Interest expense, net
(20,670
)
(21,462
)
Other, net
578
1,582
Total nonoperating expenses, net
(16,628
)
(16,679
)
Income (loss) before income taxes
34,317
(794
)
Income taxes
—
—
Net income (loss)
$
34,317
$
(794
)
See accompanying Notes to Condensed Consolidated Financial
Statements.
10
Table of Contents
America West Airlines, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
March 31,
2005
2004
Net cash provided by (used in) operating activities
$
113,806
$
(1,079
)
Cash flows from investing activities:
Purchases of property and equipment
(56,613
)
(36,979
)
Purchases of short-term investments
(99,650
)
(164,565
)
Sales of short-term investments
131,644
172,710
Purchases of investments in debt securities
—
(15,000
)
Sales of investments in debt securities
—
15,000
Decrease (increase) in restricted cash
(19,457
)
1,081
Proceeds from disposition of assets
584
1,397
Net cash used in investing activities
(43,492
)
(26,356
)
Cash flows from financing activities:
Repayment of debt
(86,189
)
(47,370
)
Other
(4,250
)
(7
)
Net cash used in financing activities
(90,439
)
(47,377
)
Net decrease in cash and cash equivalents
(20,125
)
(74,812
)
Cash and cash equivalents at beginning of period
128,497
134,150
Cash and cash equivalents at end of period
$
108,372
$
59,338
Cash paid for:
Interest, net of amounts capitalized
$
4,727
$
7,700
Income taxes paid (refunded)
$
(17
)
$
325
Non-cash investing and financing activities:
Reclassification of investments in debt securities to short-term
    investments
$
10,000
$
5,344
Notes payable issued under the aircraft purchase agreement
$
5,250
$
3,500
Notes payable cancelled under the aircraft purchase agreement
$
(3,500
)
$
—
Payment in kind notes issued, net of returns
$
—
$
379
See accompanying Notes to Condensed Consolidated Financial
Statements.
11
Table of Contents
America West Airlines, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 2005
1.
Basis of Presentation
The unaudited condensed consolidated financial statements
included herein have been prepared by AWA, a wholly owned
subsidiary of Holdings, pursuant to the rules and regulations of
the Securities and Exchange Commission and, in accordance with
those rules and regulations, certain information and footnotes
required by generally accepted accounting principles have been
omitted. In the opinion of management, the condensed
consolidated financial statements reflect all adjustments, which
are of a normal recurring nature, necessary for a fair
presentation. The accompanying condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and related notes thereto included in
AWA's Annual Report on Form 10-K for the year ended
December 31, 2004.
AWA has a regional airline alliance agreement with Mesa Airlines
("Mesa"). Mesa, operating as America West Express
("Express"), provides regional feeder service for AWA.
Express operations have grown substantially and, as of
March 31, 2005, comprise approximately 12% of AWA's
total capacity as measured by available seat miles
("ASMs"). To improve the visibility of Express
operating results, effective with the first quarter of 2005, AWA
has changed its method of reporting for this agreement to the
gross basis of presentation. Previously, AWA used the net basis
of presentation.
Using the gross basis of presentation, the passenger revenues
and operating expenses associated with the Express agreement are
reported gross (i.e.; as
"Operating Revenues —
Express"
and
"Operating Expenses —
Express Expenses"
) in the Condensed Consolidated
Statement of Operations. Under the net basis of presentation,
Express passenger revenues and the associated operating expenses
were netted and classified in
"Operating
Revenues — Other."
Prior period amounts have
been reclassified to be consistent with the first quarter 2005
presentation. These reclassifications did not impact our
operating income or net income (loss) for each period presented.
See Note 7,
"Change in Method of Reporting for
America West Express Results"
for additional
information about this agreement and the reclassifications
related to the change in presentation.
Certain other prior year amounts have been reclassified to
conform with current year presentation.
2.
Advances to Parent Company and Affiliate
As of March 31, 2005, AWA had net advances to Holdings of
$259.4 million, which were classified in
"Other
Assets"
on AWA's condensed consolidated balance
sheet due to certain restrictions related to the timing of
repayment under the government guaranteed loan, of which
$300.3 million remains outstanding.
3.
Stock Options
Certain of AWA's employees are eligible to participate in
the stock option plans of Holdings. Holdings accounts for its
stock option plans in accordance with the provisions of APB
Opinion No. 25,
"Accounting for Stock Issued to
Employees,"
and related interpretations. As such,
compensation expense would be recorded on the date of grant only
if the current market price of the underlying stock exceeded the
exercise price. Holdings issues its stock options at a price
equal to the fair market value on the date of grant.
Accordingly, no compensation cost has been recognized for stock
options in Holdings' condensed consolidated financial
statements. Had Holdings determined compensation cost based on
the fair value at the grant date for its stock options under
SFAS No. 123,
"Accounting for Stock-Based
Compensation,"
and
12
Table of Contents
allocated the compensation expense to AWA for its employees
participating in the stock option plans, AWA's net income
(loss) would have been decreased to the pro forma amounts
indicated below:
Three Months Ended
March 31,
2005
2004
(in thousands)
Net income (loss), as reported
$
34,317
$
(794
)
Stock-based compensation expense
(1,270
)
(1,270
)
Pro forma net income (loss)
$
33,047
$
(2,064
)
4.
Flight Equipment
In January 2005, AWA entered into an operating lease for one new
Airbus A320 aircraft with a lease term of 5 years.
In March 2005, AWA completed a sale-leaseback transaction on one
Airbus A320 aircraft resulting in a loss of $3.7 million.
This amount was recorded in
"Operating
Expenses — Other."
The term of the leaseback
is 12 years.
During the first quarter of 2005, AWA returned one Boeing
737-200 aircraft with the aircraft lessor in accordance with the
renegotiated lease term.
5.
Special Charges
In the first quarter of 2005, AWA recorded $0.8 million in
special charges of which $0.7 million is accrued at
March 31, 2005. This is related to continued costs
associated with the retirement of the 737-200 fleet.
The following table presents the payments and other settlements
made during the three months ended March 31, 2005 related
to the special charge accruals:
Fleet
Contract Termination/
Restructuring
Other Costs
Total
Balance at December 31, 2004
$
643
$
121
$
764
Special charges
690
—
690
Payments
(305
)
(111
)
(416
)
Revision of estimate
—
147
147
Balance at March 31, 2005
$
1,028
$
157
$
1,185
AWA expects to make payments related to these special charges
through the fourth quarter of 2005.
6.
Segment Disclosures
AWA is one reportable operating segment. Accordingly, the
segment reporting financial data required by
SFAS No. 131,
"Disclosures About Segments of
an Enterprise and Related Information"
is included in
the accompanying condensed balance sheets and statements of
operations.
7.
Change in Method of Reporting for America West Express
    Results
The Company has a regional airline alliance agreement (the
"Agreement") with Mesa that commenced in February
2001. Pursuant to the Agreement, Mesa, using aircraft owned and
operated by Mesa under the name Express, provides feeder service
to destinations in the western United States, Canada and
northern Mexico. As of March 31, 2005, the Express fleet
included 49 aircraft comprised of 27 86-seat CRJ 900s,
16 50-seat CRJ 200s and six 37-seat Dash 8 turbo
prop aircraft.
13
Table of Contents
Under the Agreement, Mesa is required to fly the routes and
flights designated by AWA using Mesa's aircraft, flight
crews and other related services. Mesa maintains and operates
the aircraft, employs, trains, manages and compensates personnel
necessary to provide the flight services and provides related
passenger handling services for and on the flights. AWA is
responsible for establishing the routes, scheduling Express
flights, pricing of the tickets, marketing and selling the
tickets, collecting all sales amounts, paying all costs of sales
and marketing and taking inventory risk on the inventory of
seats for sale on Mesa. The ground handling of aircraft is
performed by either AWA or Mesa, depending upon the airport.
AWA collects the revenue and income generated from the services
provided by Mesa pursuant to the Agreement. In return, AWA:
(i) reimburses Mesa for actual non-controllable costs
incurred by Mesa such as fuel, insurance, taxes, fees and
security; (ii) pays Mesa for actual controllable
non-maintenance costs, subject to a cap, such as aircraft lease
expense and crew expense; (iii) pays Mesa for controllable
maintenance costs at fixed rates (subject to reimbursement of
excess costs if actual costs during term are less than fixed
amount paid by AWA); (iv) reimburses Mesa costs and
expenses incurred at stations maintained and operated by Mesa;
and (v) shares with Mesa a percentage of the revenue
allocated to the flight segments flown by Mesa on a pro rata
basis.
The Agreement is anticipated to expire in June 2012.
As discussed in Note 1,
"Basis of
Presentation,"
AWA is reporting the passenger revenues
and operating expenses associated with the Agreement on a gross
basis. Previously, these revenues and expenses were reported net
in
"Operating Revenues — Other"
in
our Condensed Consolidated Statements of Operations. The
following table presents the effect of this reclassification for
the three months ended March 31, 2004:
As Reported
Adjustments
As Reclassified
Operating revenues:
Passenger
$
537,333
$
—
$
537,333
Express
—
72,651
(1)
72,651
Cargo and other
39,041
132
39,173
Total operating revenues
$
576,374
$
72,783
$
649,157
Operating expenses:
Operating expenses
$
560,489
$
(519
)
$
559,970
Express expenses
—
73,302
(2)
73,302
Total operating expenses
$
560,489
$
72,783
$
633,272
(1)
Reclassification of Express passenger revenues from
"Operating Revenues — Other."
(2)
Reclassification of $72.8 million and $0.5 million of
    Express operating expenses from
"Operating
    Revenues — Other"
and
"Operating
    Expenses — Other,"
respectively.
The operating margin that results from using the gross basis of
presentation for Express revenues and expenses does not include
any beyond contribution passenger revenue generated by feed into
AWA's mainline operations from Express flights. Overall,
the Mesa alliance agreement adds to the total profitability of
AWA.
14
Table of Contents
America West Holdings Corporation and
America West Airlines, Inc.
March 31, 2005
Item 2.
Management's Discussion and Analysis of Financial
    Condition and Results of Operations.
Holdings is the parent company of AWA. AWA is the eighth largest
passenger airline and the second largest low cost carrier in the
United States operating through its hubs located in Phoenix,
Arizona and Las Vegas, Nevada. As of March 31, 2005, AWA
served 63 destinations in North America, including eight
destinations in Mexico, three in Canada and one in Costa Rica.
Through its America West Vacations ("AWV") division,
AWA also arranges and sells vacation packages primarily to Las
Vegas, Nevada that may include airfare, hotel accommodations and
ground transportation. Holdings' primary business activity
is ownership of all the capital stock of AWA.
Overview
During the first quarter of 2005, our improved revenue
performance substantially offset the impact of record high jet
fuel prices as follows:
•
Passenger revenues were $575.4 million for the quarter, an
    increase of $38.1 million from the first quarter of 2004.
    Passenger revenue per available seat mile ("RASM") was
    7.88 cents for the first quarter of 2005, an increase of 7.8%
    versus the 2004 first quarter, driven by a 5.5 point
    increase in load factor with no deterioration in yield. The
    Company's strong unit revenue improvement was due to more
    aggressive yield management in the 2005 first quarter and more
    balanced capacity in the markets served by AWA. Reductions in
    late 2004 of the Company's transcontinental flying, which
    yields were negatively impacted by competitive responses, also
    contributed to improved period-over-period RASM and yield
    performance.
•
The airline industry and AWA incurred and continue to face an
    increase in costs resulting from record high jet fuel prices.
    The average price per gallon of fuel increased 34.6% from
    105.3 cents in the first quarter of 2004 to 141.7 cents per
    gallon in the first quarter of 2005. As a result, aircraft fuel
    expense for the quarter was $151.9 million, an increase of
    $37.7 million, or 33.0% from the first quarter of 2004.
Holdings realized a pretax and net profit of $33.6 million,
or $0.62 per diluted share, for the first quarter of 2005.
During the first quarter we benefited from a $60.5 million
gain associated with the Company's fuel hedging
transactions. Of this amount, $11.6 million was net
realized gains on settled hedge transactions. The remaining
$48.9 million was unrealized gains resulting from the
application of mark-to-market accounting for changes in the fair
value of the Company's fuel hedging instruments. The
Company is required to use mark-to-market accounting as its fuel
hedging instruments do not meet the requirements for hedge
accounting as established by Statement of Financial Accounting
Standards No. 133,
"Accounting for Derivative
Instruments and Hedging Activities."
If these
instruments had qualified for hedge accounting treatment, any
unrealized gains or losses, including the $48.9 million
discussed above, would be deferred in other comprehensive
income, a subset of stockholders' equity until the jet fuel
is purchased and the underlying fuel hedging instrument is
settled. Given the market volatility of jet fuel, the fair value
of these fuel hedging instruments is expected to change until
settled.
As of March 31, 2005, Holdings unrestricted and restricted
cash, cash equivalents, short-term investments, and investments
in debt securities totaled $345.3 million, of which
$253.7 million was unrestricted. Although there can be no
assurances, we believe that cash flows from operating
activities, combined with these cash balances and our financing
commitments, will be adequate to fund our operating and capital
needs as well as enable us to maintain compliance with our
various debt agreements through at least December 31, 2005.
15
Table of Contents
Airline Operations Update
AWA reported the following operating statistics to the
U.S. Department of Transportation ("DOT") for
aircraft operated by AWA ("mainline") for the first
quarter of 2005 and 2004:
Percent Change
2005
2004
2005 - 2004
Jan
Feb
Mar
Jan
Feb
Mar
Jan
Feb
Mar
On-time performance(a)
71.9
76.3
81.8
76.3
71.7
74.8
(5.9
)
6.4
9.3
Completion factor(b)
97.2
98.5
99.0
98.1
98.2
98.6
(0.9
)
0.3
0.4
Mishandled baggage(c)
5.89
4.51
3.83
3.96
3.58
3.50
48.7
26.0
9.4
Customer complaints(d)
2.15
1.85
1.24
1.23
0.97
1.17
74.8
90.7
6.3
(a)
Percentage of reported flight operations arriving on time.
(b)
Percentage of scheduled flight operations completed.
(c)
Rate of mishandled baggage reports per 1,000 passengers.
(d)
Rate of customer complaints filed with the DOT per 100,000
    passengers.
All measures showed marked improvement throughout the quarter
and the key reliability measures, on-time performance and
completion factor, were much improved versus 2004.
Summary of Holdings' Financial Results
Holdings recorded consolidated net income of $33.6 million
in the first quarter of 2005, or $0.62 per diluted share.
This compares to a consolidated net loss of $1.6 million,
or $0.04 per diluted share, in the first quarter of 2004.
The 2005 results include $60.5 million net gains associated
with the Company's fuel hedging transactions. Of this
amount, $48.9 million resulted from mark-to-market
accounting for changes in the fair value of the Company's
fuel hedging instruments and $11.6 million was net realized
gains on settled hedge transactions. The 2005 quarter also
includes $0.8 million of special charges related to the
write-down of deferred aircraft rent payments associated with
the return of one Boeing 737-200 aircraft and a
$3.7 million loss on the sale and leaseback of one new
Airbus A320 aircraft acquired during the period.
The 2004 results include $0.4 million net gains associated
with the Company's fuel hedging transactions. Of this
amount $2.9 million was net realized gains on settled hedge
transactions, which was offset in part by $2.5 million of
losses resulting from mark-to-market accounting for changes in
the fair value of the Company's fuel hedging instruments.
The 2004 quarter also included a $2.5 million credit to
other operating revenues related to the reduction of certain
obligations based upon a settlement with Mesa Airlines, a
$2.0 million reduction in operating expenses resulting from
the settlement of a lawsuit related to certain computer hardware
and software that previously had been written off, a
$1.7 million reduction in bad debt expense due to a
recovery of a previously reserved debt and a $0.6 million
reduction in special charges due to a revision of the estimated
costs related to certain aircraft sale-leaseback transactions.
The Company did not record income tax expense in the first
quarter as it currently expects to realize a loss for the full
year 2005. The Company did not record an income tax benefit in
the first quarter of 2004 as it continued to record a full
valuation allowance on any future tax benefits until it achieves
several quarters of profitable results coupled with an
expectation of continued profitability.
Results of Operations
The following discussion provides an analysis of AWA's
results of operations for the first quarter of 2005 and material
changes compared to the first quarter of 2004.
16
Table of Contents
The table below sets forth selected mainline operating data for
AWA.
Three Months Ended
March 31,
Percent
Change
2005
2004
2005 - 2004
Revenue passenger miles (in millions)(a)
5,671
5,306
6.9
Available seat miles (in millions)(b)
7,301
7,352
(0.7
)
Passenger load factor (percent)(c)
77.7
72.2
5.5 pts
Yield per revenue passenger mile (cents)(d)
10.15
10.13
0.2
Passenger revenue per available seat mile (cents)(e)
7.88
7.31
7.8
Total revenue per available seat mile (cents)(f)
8.48
7.84
8.2
Passenger enplanements (in thousands)(g)
5,172
4,897
5.6
Aircraft (end of period)
138
138
—
Average daily aircraft utilization (hours)(h)
11.0
10.8
1.9
Block hours(i)
136,497
136,678
(0.1
)
Average stage length (miles)(j)
1,022
1,037
(1.4
)
Average passenger journey (miles)(k)
1,624
1,594
1.9
Fuel consumption (gallons in millions)
107.2
108.5
(1.2
)
Average fuel price (cents per gallon)
141.7
105.3
34.6
Average number of full-time equivalent employees
12,154
11,827
2.8
(a)
Revenue passenger mile ("RPM") — A basic
    measure of sales volume. It is one passenger flown one mile.
(b)
Available seat mile ("ASM") — A basic
    measure of production. It is one seat flown one mile.
(c)
Load factor — The percentage of available seats that
    are filled with revenue passengers.
(d)
Yield — A measure of airline revenue derived by
    dividing passenger revenue by revenue passenger miles and
    expressed in cents per mile.
(e)
Passenger revenue per available seat mile
    ("RASM") — Total passenger revenues divided
    by total available seat miles.
(f)
Total revenue per available seat mile — Total
    operating revenues divided by total available seat miles.
(g)
Passenger enplanements — The number of passengers on
    board an aircraft including local, connecting and through
    passengers.
(h)
Average daily aircraft utilization — The average
    number of block hours per day for all aircraft in service.
(i)
Block hours — The hours measured from the moment an
    aircraft first moves under its own power, including taxi time,
    for the purposes of flight until the aircraft is docked at the
    next point of landing and its power is shut down.
(j)
Average stage length — The average of the distances
    flown on each segment of every route.
(k)
Average passenger journey — The average one-way trip
    measured in miles for one passenger origination.
Three Months Ended March 31, 2005 and 2004
For the first quarter of 2005, AWA realized operating income of
$50.9 million as compared to $15.9 million in last
year's quarter. Operating income in the 2005 period
includes a $60.5 million net gain associated with the
Company's fuel hedging transactions. Of this amount
$48.9 million resulted from mark-to-market accounting for
changes in the fair value of the Company's fuel hedging
instruments and $11.6 million was net realized gains on
settled hedge transactions. The 2004 period includes a
$0.4 million net gain associated with the Company's
fuel hedging transactions. Of this amount $2.9 million was
net realized gains on settled hedge transactions, which was
offset in part by $2.5 million of losses resulting from
mark-to-market accounting for changes in the fair value of the
Company's fuel hedging instruments. Income before income
taxes for the first quarter of 2005 was $34.3 million as
compared to a loss before income taxes of $0.8 million for
the comparable 2004 period.
17
Table of Contents
Total operating revenues for the first quarter of 2005 were
$722.6 million. Passenger revenues were $575.4 million
for the first quarter of 2005, an increase of $38.1 million
from the comparable 2004 quarter. RPMs increased 6.9% as ASMs
decreased 0.7%, resulting in a 5.5 point increase in load factor
to 77.7%. This increase in load factor was achieved with no
deterioration in yield, which was relatively flat
period-over-period. As a result, RASM increased 7.8% to 7.88
cents in the first quarter 2005 from 7.31 cents in the 2004
quarter. The Company's strong unit revenue improvement was
driven by more aggressive yield management in the 2005 first
quarter and more balanced capacity in the markets served by AWA.
Reductions in late 2004 of the Company's transcontinental
flying, which yields were negatively impacted by competitive
responses, also contributed to improved period-over-period RASM
and yield performance.
Express revenues were $103.4 million for the first quarter
of 2005, an increase of $30.7 million from the comparable
2004 quarter due to increased flying by Mesa Airlines under its
alliance agreement with AWA.
Cargo revenues increased 25.2% in the first quarter of 2005 to
$8.6 million due to increased mail volume. Other revenues
increased 9.2% to $35.2 million in the first quarter of
2005 from $32.3 million in the first quarter of 2004 due
principally to an increase in ticket change and service fees.
The table below sets forth the mainline and Express operating
expenses for AWA.
Three Months Ended
March 31,
2005
2004
Operating expenses:
Salaries and related costs
$
174,853
$
165,929
Aircraft rents
76,837
75,185
Other rents and landing fees
41,539
41,241
Aircraft fuel
151,863
114,212
Realized and unrealized gains on fuel hedging instruments, net
(60,483
)
(404
)
Agency commissions
5,554
6,750
Aircraft maintenance materials and repairs
47,988
50,054
Depreciation and amortization
11,860
13,791
Special charges (credits), net
811
(600
)
Other
110,049
93,812
Total mainline operating expenses
560,871
559,970
Express expenses
110,826
73,302
Total operating expenses
$
671,697
$
633,272
Total operating expenses in the first quarter of 2005 were
$671.7 million, an increase of $38.4 million or 6.1%,
compared to the 2004 quarter. Mainline operating expenses were
$560.9 million in the first quarter of 2005, an increase of
$0.9 million from the first quarter of 2004, while ASMs
decreased 0.7%. Mainline CASM increased 0.9% to 7.68 cents in
the first quarter of 2005 from 7.61 cents for the comparable
2004 period. The increase in CASM was driven by the decline in
capacity which was not met with a commensurate reduction in
costs and a 34.6% increase in the average fuel price per gallon
offset by a $60.5 million gain associated with the fuel
hedging transaction discussed above.
18
Table of Contents
The table below sets forth the major components of mainline CASM
for AWA.
Three Months
Ended
March 31,
Percent
Change
2005
2004
2005 - 2004
(in cents)
Salaries and related costs
2.39
2.27
6.1
Aircraft rents
1.05
1.02
2.9
Other rents and landing fees
0.57
0.56
1.4
Aircraft fuel
2.08
1.55
33.9
Realized and unrealized gains on fuel hedging instruments, net
(0.83
)
(0.01
)
—
Agency commissions
0.08
0.09
(17.1
)
Aircraft maintenance materials and repairs
0.66
0.68
(3.5
)
Depreciation and amortization
0.16
0.19
(13.4
)
Special charges
0.01
(0.01
)
—
Other
1.51
1.27
18.1
7.68
7.61
0.9
Significant changes in the components of mainline CASM are
explained as follows:
•
Salaries and related costs per ASM increased 6.1% primarily due
    to an increase in benefit related expenses ($7.8 million)
    including defined contribution plan payments which our pilots
    became eligible for on January 1, 2005 ($3.2 million),
    self-funded disability requirements ($2.1 million) and
    workers compensation claim coverage ($1.1 million).
•
Aircraft rent expense per ASM increased 2.9% due to mix as
    previously owned and leased Boeing 737-200 aircraft were retired
    or returned to aircraft lessors and replaced with leased Airbus
    A320 and A319 aircraft at higher monthly lease rates.
•
Aircraft fuel expense per ASM increased 33.9% primarily due to a
    34.6% increase in the average price per gallon of fuel to 141.7
    cents in the first quarter of 2005 from 105.3 cents in the
    comparable 2004 quarter.
•
Agency commissions expense per ASM decreased 17.1% due to the
    continued shift in bookings to lower cost distribution channels
    and continued reductions in travel agency incentive programs.
•
Aircraft maintenance materials and repairs expense per ASM
    decreased 3.5% primarily due to decreases in aircraft C-Check
    ($1.3 million), airframe maintenance ($1.2 million),
    and other maintenance related expenses ($1.2 million),
    which was offset in part by an increase in capitalized
    maintenance amortization ($1.6 million). The decrease in
    other maintenance related expenses resulted from a reduction in
    the rates charged for the repair of certain rotable equipment
    under a power-by-the-hour agreement.
•
Depreciation and amortization expense per ASM decreased 13.4%
    primarily due to lower amortization expense related to computer
    hardware and software ($1.1 million) as a result of
    AWA's cash conservation program, which reduced capital
    expenditures. Aircraft depreciation expense was lower by
    $0.8 million in the 2005 first quarter due primarily to the
    retirement of the Company's Boeing 737-200 fleet during
    2004.
•
Other operating expenses per ASM increased 18.1% due primarily
    to a $3.7 million loss related to an aircraft
    sale-leaseback transaction in the first quarter of 2005 and
    increases in property taxes ($2.1 million), airport guard
    services ($2.0 million), credit card fees
    ($1.0 million), crew per diem ($1.3 million) and
    ground handling services ($1.6 million). The first quarter
    of 2004 included a $2.0 million gain resulting from the
    settlement of a lawsuit
19
Table of Contents
related to certain computer hardware and software that had
    previously been written off and a $1.7 million reduction in
    bad debt expense due to a recovery of a previously reserved debt.
Express expenses increased 51.2% in the first quarter of 2005 to
$110.8 million due to higher fuel and aircraft operating
expenses.
AWA had net nonoperating expenses of $16.6 million in the
first quarter of 2005 compared to $16.7 million in the
first quarter of 2004 as interest income and interest expense
remained relatively flat.
Liquidity and Capital Resources
Sources and Uses of Cash
At of March 31, 2005, Holdings and AWA's total cash,
cash equivalents, short-term investments, investments in debt
securities and restricted cash were $345.3 million and
$324.4 million, respectively. Net cash provided by
operating activities for Holdings and AWA was
$113.9 million and $113.8 million, respectively, for
the first three months of 2005. This compares to net cash used
by operating activities for Holdings and AWA of
$1.4 million and $1.1 million, respectively, for the
first three months of 2004. The year-over-year increase in net
cash provided by operating activities of $115.4 million and
$114.9 million for Holdings and AWA, respectively, was
primarily due to the net earnings in the 2005 period and the
period-over-period change in air traffic liability which grew by
41.8% in the 2005 period as compared to 25.4% in the 2004 period.
In the first three months of 2005, net cash used in investing
activities was $43.5 million for Holdings and AWA. This
compares to net cash used in investing activities of
$26.4 million for Holdings and AWA in the first three
months of 2004. Principal investing activities during the first
three months of 2005 included purchases of property and
equipment totaling $56.6 million, offset in part by net
sales of short-term investments totaling $32.0 million.
Restricted cash increased by $19.5 million during the 2005
period due to an increase in reserves required under an
agreement for processing the Company's Visa and MasterCard
credit card transactions. The first quarter of 2004 included
purchases of property and equipment totaling $37.0 million,
offset in part by net sales of short-term investments totaling
$8.1 million.
In the first quarter of 2005, net cash used in financing
activities by Holdings and AWA was $90.3 million and
$90.4 million, respectively. Principal financing activities
in 2005 included a $42.9 million payment for the government
guaranteed loan and redemption of $39.5 million of the
Company's remaining outstanding 10.75% Senior Secured
Notes which was included in current restricted cash at
December 31, 2004. This compares to $47.4 million of
debt repayments during the comparable 2004 period, including the
first principal payment of $42.9 million for the government
guaranteed loan.
Capital expenditures for the first quarter of 2005 were
approximately $56.6 million for both Holdings and AWA as
compared to capital expenditures of approximately
$37.0 million for both Holdings and AWA for the first
quarter of 2004. Included in these amounts are capital
expenditures for capitalized maintenance of approximately
$45.8 million and $29.8 million for both Holdings and
AWA for the first quarter of 2005 and 2004, respectively.
Off-Balance Sheet Arrangements
The Pass Through Trusts
Since AWA's restructuring in 1994, AWA has set up 19 pass
through trusts, which have issued over $1.4 billion of pass
through trust certificates (also known as "Enhanced
Equipment Trust Certificates" or "EETC")
covering the financing of 54 aircraft. These trusts are
off-balance sheet entities, the primary purpose of which is to
finance the acquisition of aircraft. Rather than finance each
aircraft separately when such aircraft is purchased or
delivered, these trusts allow the Company to raise the financing
for several aircraft at one time and place such funds in escrow
pending the purchase or delivery of the relevant aircraft. The
trusts also are structured to provide for certain credit
enhancements, such as liquidity facilities to cover
20
Table of Contents
certain interest payments, that reduce the risks to the
purchasers of the trust certificates and, as a result, reduce
the cost of aircraft financing to AWA.
Each trust covered a set amount of aircraft scheduled to be
delivered within a specific period of time. At the time of each
covered aircraft financing, the relevant trust used the funds in
escrow to purchase equipment notes relating to the financed
aircraft. The equipment notes were issued, at AWA's
election, either by AWA in connection with a mortgage financing
of the aircraft or by a separate owner trust in connection with
a leveraged lease financing of the aircraft. In the case of a
leveraged lease financing, the owner trust then leased the
aircraft to AWA. In both cases, the equipment notes are secured
by a security interest in the aircraft. The pass through trust
certificates are not direct obligations of, nor guaranteed by,
Holdings or AWA. However, in the case of mortgage financings,
the equipment notes issued to the trusts are direct obligations
of AWA and in the case of leveraged lease financings, the leases
are direct obligations of AWA. In addition, neither Holdings nor
AWA guarantee or participate in any way in the residual value of
the leased aircraft. All aircraft financed by these trusts are
currently structured as leveraged lease financings, which are
not reflected as debt on the balance sheets of either AWA or
Holdings. In the first quarter of 2005, AWA made
$77.2 million in lease payments in respect of the leveraged
lease financings under the pass through trusts.
Other Operating Leases
In addition to the aircraft financed by the pass through trust
certificates, AWA has noncancelable operating leases covering 82
aircraft, of which three aircraft will be delivered in 2005, as
well as leases for certain terminal space, ground facilities and
computer and other equipment. In the first quarter of 2005, AWA
made $60.0 million in lease payments related to these
operating leases.
Special Facility Revenue Bonds
In June 1999, Series 1999 special facility revenue bonds
("new bonds") were issued by a municipality to fund
the retirement of the Series 1994A bonds ("old
bonds") and the construction of a new concourse with 14
gates at Terminal 4 in Phoenix Sky Harbor International Airport
in support of AWA's strategic growth plan. The new bonds
are due June 2019 with interest accruing at 6.25% per annum
payable semiannually on June 1 and December 1,
commencing on December 1, 1999. The new bonds are subject
to optional redemption prior to the maturity date on or after
June 1, 2009 in whole or in part, on any interest payment
date at the following redemption prices: 101% on June 1 or
December 1, 2009; 100.5% on June 1 or December 1,
2010; and 100% on June 1, 2011 and thereafter. In
accordance with Emerging Issues Task Force ("EITF")
Issue No. 97-10,
"The Effect of Lessee Involvement
in Asset Construction,"
the Company accounts for this
as an operating lease.
In connection with these bonds, AWA entered into an Amended and
Restated Airport Use Agreement, pursuant to which AWA agreed to
make sufficient payments to the Industrial Development Authority
("IDA") to cover the principal and interest of the
bonds and to indemnify the IDA for any claims arising out of the
issuance and sale of the bonds and the use and occupancy of the
concourses financed by these bonds and the old bonds. At
March 31, 2005, the outstanding principal amount of the
bonds was $21.8 million. The Company estimates its
remaining payments to cover the principal and interest of these
bonds will be approximately $43.6 million.
Commitments
As of March 31, 2005, we had $703.3 million of
long-term debt (including current maturities). This amount
consisted primarily of the $300.3 million government
guaranteed loan, a secured term loan financing with General
Electric Capital Corporation ("GECC"), of which
$110.6 million remains outstanding, $36.0 million
principal amount of senior secured discount notes,
$112.3 million principal amount of 7.5% convertible
senior notes (including interest through December 31, 2004
as a deemed loan added to the principal thereof) and
$252.7 million issue price of 7.25% senior
exchangeable notes, of which $86.8 million was received at
issuance.
21
Table of Contents
Government Guaranteed Loan
In January 2002, AWA closed a $429 million loan supported
by a $380 million guarantee provided by the Air
Transportation Stabilization Board ("ATSB"). Certain
third-party counter-guarantors have fully and unconditionally
guaranteed the payment of an aggregate of $45 million of
the original principal amount under the government guaranteed
loan plus accrued and unpaid interest thereon. In addition,
Holdings has fully and unconditionally guaranteed the payment of
all principal, premium, interest and other obligations
outstanding under the government guaranteed loan and has pledged
the stock of AWA to secure its obligations under such guarantee.
Principal amounts under this loan become due in ten installments
of $42.9 million on each March 31 and
September 30, which began on March 31, 2004 and end on
September 30, 2008. The Company has made the first three of
these payments as scheduled. Principal amounts outstanding under
the government guaranteed loan bear interest at a rate per annum
equal to LIBOR plus 40 basis points. We also pay guarantees
fees of approximately 8% of the outstanding guaranteed principal
balance in 2005 through 2008 to the U.S. Treasury
Department and other loan participants.
Subject to certain exceptions, we are required to prepay the
government guaranteed loan with:
•
the net proceeds of all issuances of debt or equity by either
    Holdings or AWA after January 2002;
•
proceeds from asset sales in excess of $20 million in any
    fiscal year; and
•
insurance proceeds in excess of $2 million to the extent
    such proceeds are not used to restore or replace the assets from
    which such proceeds are derived.
In addition, we are required to prepay the government guaranteed
loan upon a change in control and we may be required to prepay
portions of the loan if our employee compensation costs exceed a
certain threshold. We may, at our option, prepay the government
guaranteed loan without premium or penalty, subject to
reimbursement of the lenders' breakage costs in the case of
prepayment of LIBOR loans.
The government guaranteed loan requires that AWA maintain a
minimum cash balance of $100 million. In addition, the
government loan contains customary affirmative covenants and the
following negative covenants: restrictions on liens,
investments, restricted payments, fundamental changes, asset
sales and acquisitions, the creation of new subsidiaries, sale
and leasebacks, transactions with affiliates, the conduct of
business, mergers or consolidations, issuances and dispositions
of capital stock of subsidiaries, and amendments to other
indebtedness. The government guaranteed loan contains customary
events of default, including payment defaults, cross-defaults,
breach of covenants, bankruptcy and insolvency defaults and
judgment defaults.
GECC Term Loan Financing
In September 2004, AWA entered into a term loan financing with
GECC providing for loans in an aggregate amount of
$110.6 million. The term loan financing consists of two
secured term loan facilities: a $75.6 million term loan
facility secured primarily by spare parts, rotables and
appliances (the "Spare Parts Facility"); and a
$35.0 million term loan facility secured primarily by
aircraft engines and parts installed in such engines (the
"Engine Facility").
The facilities are cross-collateralized on a subordinated basis
and the collateral securing the facilities also secures on a
subordinated basis certain of AWA's other existing debt and
lease obligations to GECC and its affiliates.
The loans under the Spare Parts Facility are payable in full at
maturity on September 10, 2010. The loans under the Engine
Facility are payable in equal quarterly installments of
$1.3 million beginning on March 10, 2006 through
June 10, 2010 with the remaining loan amount of
$11.8 million payable at maturity on September 10,
2010. The loans under each facility may be prepaid in an amount
not less than $5 million at any time after the 30th monthly
anniversary of the funding date under such facility. If AWA
fails to maintain a certain ratio of rotables to loans under the
Spare Parts Facility, it may be required to pledge additional
rotables or cash as collateral, provide a letter of credit or
prepay some or all of the loans under the Spare Parts Facility.
In addition, the loans under the Engine Facility are subject to
mandatory prepayment
22
Table of Contents
upon the occurrence of certain events of loss applicable to, or
certain dispositions of, aircraft engines securing the facility.
Principal amounts outstanding under the loans bear interest at a
rate per annum based on three-month LIBOR plus a margin. Both
facilities contain customary events of default, including
payment defaults, cross-defaults, breach of covenants,
bankruptcy and insolvency defaults and judgment defaults.
Senior Secured Discount Notes Due 2009
In December 2004, AWA raised additional capital by financing its
Phoenix maintenance facility and flight training center. Using
its leasehold interests in these two facilities as collateral,
AWA, through a wholly owned subsidiary named FTCHP LLC, raised
$30.8 million through the issuance of senior secured
discount notes. The notes were issued by FTCHP at a discount
pursuant to the terms of a senior secured term loan agreement
among the Company, FTCHP, Heritage Bank, SSB, as administrative
agent, Citibank, N.A., as the initial lender, and the other
lenders from time to time party thereto. Citibank, N.A.
subsequently assigned all of its interests in the notes to third
party lenders.
AWA has fully and unconditionally guaranteed the payment and
performance of FTCHP's obligations under the notes and the
loan agreement. The notes require aggregate principal payments
of $36.0 million with principal payments of
$1.5 million due on December 27, 2005 and 2006 and the
remaining principal amount due on December 27, 2009. The
notes may be prepaid in full at any time (subject to customary
LIBOR breakage costs) and in partial amounts of
$1.5 million on December 27, 2007 and 2008. The unpaid
principal amount of the notes bears interest based on LIBOR plus
a margin subject to adjustment based on a loan to collateral
value ratio.
The loan agreement contains customary covenants applicable to
loans of this type, including obligations relating to the
preservation of the collateral and restrictions on the
activities of FTCHP. In addition, the loan agreement contains
events of default, including payment defaults, cross-defaults to
other debt of FTCHP, if any, breach of covenants, bankruptcy and
insolvency defaults and judgment defaults.
In connection with this financing, AWA sold all of its leasehold
interests in the maintenance facility and flight training center
to FTCHP and entered into subleases for the facilities with
FTCHP at lease rates expected to approximate the interest
payments due under the notes. In addition, AWA agreed to make
future capital contributions to FTCHP in amounts sufficient to
cover principal payments and other amounts owing pursuant to the
notes and the loan agreement.
The proceeds from this financing, together with
$10.5 million from operating cash flow, were irrevocably
deposited with the trustee for AWA's
10
3
/
4
% senior
unsecured notes due 2005 and subsequently redeemed on
January 26, 2005.
10
3
/
4
% Senior
    Notes due 2005
AWA had $39.5 million principal amount of
10
3
/
4
% senior
unsecured notes due 2005 outstanding at December 31, 2004.
As discussed above, the senior notes were subsequently redeemed
in January 2005.
7.5% Convertible Senior Notes due 2009
In connection with the closing of the government guaranteed loan
and the related transactions, Holdings issued
$104.5 million of 7.5% convertible senior notes due
2009, of which approximately $112.3 million remained
outstanding at March 31, 2005 (including interest paid
through December 31, 2004 as a deemed loan added to the
principal thereof). These notes are convertible into shares of
class B common stock, at the option of the holders, at an
initial conversion price of $12.00 per share or a
conversion ratio of approximately 83.333 shares per $1,000
principal amount of such notes, subject to standard
anti-dilution adjustments. Interest on the 7.5% convertible
senior notes is payable semiannually in arrears on June 1
and December 1 of each year. At Holdings' option, the
first six interest payments were payable in the form of a deemed
loan added to the principal amount of these notes. The
7.5% convertible senior notes will mature on
January 18,
23
Table of Contents
2009 unless earlier converted or redeemed. The payment of
principal, premium and interest on the 7.5% convertible
senior notes is fully and unconditionally guaranteed by AWA.
Holdings may redeem 7.5% convertible senior notes, in whole
or in part, at the following redemption prices (expressed as
percentages of the principal amount thereof), if redeemed during
the twelve-month period commencing on January 18 of the years
set forth below, plus, in each case, accrued and unpaid
interest, if any, to the date of redemption:
Year
Redemption Price
2005
103.75
%
2006
102.50
%
2007
101.25
%
2008 and thereafter
100.00
%
7.25% Senior Exchangeable Notes due 2023
In July and August of 2003, AWA completed a private placement of
approximately $86.8 million issue price of
7.25% Senior Exchangeable Notes due 2023. The notes bear
cash interest until July 30, 2008. Thereafter, the notes
will cease bearing cash interest and begin accruing original
issue discount daily at a rate of 7.25% per year until
maturity. Each note was issued at a price of $343.61 and is
exchangeable for class B common stock of Holdings at an
exchange ratio of 32.038 shares per $1,000 principal amount
at maturity of the notes (subject to adjustment in certain
circumstances). This represents an equivalent conversion price
of approximately $10.73 per share. The aggregate amount due
at maturity, including accrued original issue discount from
July 31, 2008, will be $252,695,000. The notes are
unconditionally guaranteed on a senior unsecured basis by
Holdings.
Holders may exchange their notes for the shares of class B
common stock of Holdings in any fiscal quarter commencing after
September 30, 2003, if, as of the last day of the preceding
fiscal quarter, the closing sale price of the class B
common stock for at least 20 trading days in a period of 30
consecutive trading days ending on the last trading day of such
preceding fiscal quarter is more than 110% of the accreted
exchange price per share of Class B common stock on the
last day of such preceding fiscal quarter. If the foregoing
condition is satisfied, then the notes will be exchangeable at
any time at the option of the holder through maturity. The
accreted exchange price per share as of any day will equal the
issue price of a note plus accrued original issue discount to
that day divided by 32.038, subject to any adjustments to the
exchange rate through that day.
On or before July 30, 2018, a holder also may exchange its
notes for shares of the Class B common stock at any time
after a 10 consecutive trading-day period in which the average
of the trading prices for the notes for that 10 trading-day
period was less than 103% of the average exchange value for the
notes during that period. Exchange value is equal to the product
of the closing sale price for the shares of Class B common
stock on a given day multiplied by the then current exchange
rate, which is the number of shares of Class B common stock
for which each note is then exchangeable.
In addition, the holders may exchange the notes if the notes
have been called for redemption or if certain specified
corporate transactions have occurred.
Holders of the notes may require AWA to repurchase the notes at
a price equal to the original issue price plus accrued cash
interest and original issue discount, if any, on July 30,
2008, 2013 and 2018. The purchase price of such notes may be
paid in cash or class B common stock of Holdings, subject
to certain restrictions. In addition, each holder may require
AWA to purchase all or a portion of such holder's notes
upon the occurrence of certain change of control events
concerning AWA or Holdings. AWA may redeem the notes, in whole
or in part, on or after July 30, 2008 at a price equal to
the original issue price plus accrued cash interest and original
issue discount, if any.
24
Table of Contents
Other Indebtedness and Obligations
In addition to the above described indebtedness, we had
$35.8 million of secured equipment notes and
$47.6 million of other unsecured indebtedness, including
$29.3 million of industrial revenue bonds.
The following table sets forth our cash obligations as of
March 31, 2005.
2005
2006
2007
2008
2009
Beyond 2009
Total
(in thousands)
Long-term debt:
Equipment notes — non-EETC(1)
$
4,686
$
8,305
$
7,772
$
15,082
$
—
$
—
$
35,845
GECC term loan(2)
—
5,158
5,158
5,158
5,158
89,932
110,564
7.5% convertible senior notes due 2009(3)
—
—
—
—
112,299
—
112,299
7.25% senior exchangeable notes due 2023(4)
—
—
—
—
—
252,695
252,695
Government guaranteed loan(5)
42,900
85,800
85,800
85,800
—
—
300,300
State loan(6)
250
250
250
—
—
—
750
Industrial development bonds(7)
—
—
—
—
—
29,300
29,300
AVSA promissory notes(8)
12,250
5,250
—
—
—
—
17,500
Senior Secured Discount Notes(9)
1,530
1,529
1,529
1,530
29,870
—
35,988
61,616
106,292
100,509
107,570
147,327
371,927
895,241
Cash aircraft rental payments(10)
217,666
323,908
305,809
255,340
229,736
1,703,734
3,036,193
Lease payments on equipment and facility operating leases(11)
16,191
19,213
17,099
16,782
15,214
53,087
137,586
Capital lease obligations
4,464
4,988
1,773
—
—
—
11,225
Special facility revenue bonds(12)
1,363
1,363
1,362
1,362
2,044
36,106
43,600
Aircraft purchase commitments(13)
223,480
464,792
47,719
—
—
—
735,991
Engine maintenance commitments(14)
9,000
6,000
3,000
1,000
—
—
19,000
Total
$
533,780
$
926,556
$
477,271
$
382,054
$
394,321
$
2,164,854
$
4,878,836
(1)
Includes approximately $35.8 million of equipment notes
    with variable interest rates of 3.94% to 4.34%, averaging 4.00%
    at March 31, 2005, installments due 2005 through 2008.
(2)
The amount consists of the Spare Parts Facility and the Engine
    Facility with a variable interest rate of 6.92% at
    March 31, 2005. See
"— GECC Term
    Loan Financing"
above.
(3)
Includes $90.7 million principal amount of
    7.5% convertible senior notes, due 2009, and
    $21.6 million of interest paid in kind of issuance through
    December 31, 2004. For financial reporting purposes, we
    initially recorded the convertible senior notes at their fair
    market value on the date of issuance. As of March 31, 2005,
    the accreted balance of the convertible senior notes in the
    accompanying consolidated balance sheet is approximately
    $69.5 million.
(4)
Includes $252.7 million principal amount of
    7.25% senior exchangeable notes due July 2023 with cash
    interest payable through July 2008 at a rate of 2.49% on the
    principal amount at maturity. Thereafter, the notes will cease
    bearing cash interest and begin accruing original issue discount
    at a rate of 7.25%
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until maturity. The aggregate amount due at maturity, including
    accrued original issue discount from July 31, 2008, will be
    $252.7 million.
(5)
Government guaranteed loan includes $300.3 million with a
    variable interest rate of 2.96% at March 31, 2005 and
    ratable principal payments due 2005 through 2008. Guarantee fees
    of approximately 8.0% of the outstanding guaranteed principal
    balance in 2005 through 2008 are payable to the
    U.S. Treasury Department and other loan participants.
(6)
Includes Arizona State loan of $0.8 million due December
    2007 with a variable interest rate of 7.55% at March 31,
    2005.
(7)
Includes $29.3 million of 6.3% industrial development bonds
    due April 2023.
(8)
Includes AVSA promissory notes of $17.5 million due 2005
    with a variable interest rate of 4.05% at March 31, 2005.
(9)
Includes $36.0 million of senior secured discount notes due
    2009 with a variable interest rate of 6.44% at March 31,
    2005.
(10)
Includes non-cancelable operating leases for 136 aircraft with
    remaining terms ranging from three months to approximately
    19 years. Management estimates the debt equivalent value of
    these operating leases approximates $1.9 billion using an
    interest rate of 10%.
(11)
Includes leases for terminal space, ground facilities, the
    flight training center and computer and other equipment under
    non-cancelable operating leases.
(12)
Includes Series 1999 Terminal 4 Improvements Bonds, due
    2019.
(13)
Includes commitments to purchase a total of 19 Airbus aircraft
    and seven spare engines for delivery in 2005 through 2007.
(14)
Includes minimum commitments under AWA's rate per engine
    hour agreement with General Electric Engine Services for
    overhaul maintenance services on CFM56-3B engines through April
    2008. Minimum monthly commitment amounts: for the period through
    and including April 2006 — $1.0 million, for the
    period May 2006 through and including April 2008 —
    $250,000.
We expect to fund these cash obligations from funds provided by
operations and future financings, if necessary. The cash
available to us from these sources, however, may not be
sufficient to cover these cash obligations because economic
factors outside our control may reduce the amount of cash
generated by operations or increase our costs. For instance, an
economic downturn or general global instability caused by
military actions, terrorism, disease outbreaks and natural
disasters could reduce the demand for air travel, which would
reduce the amount of cash generated by operations. An increase
in our costs, either due to an increase in borrowing costs
caused by a reduction in our credit rating or a general increase
in interest rates or due to an increase in the cost of fuel,
maintenance, aircraft and aircraft engines and parts, could
decrease the amount of cash available to cover the cash
obligations. In addition, we may be required to prepay portions
of the government guaranteed loan if our employee compensation
costs exceed a certain threshold and we may be required to
prepay portions of the term loan to the extent the value of the
collateral securing the term loan decreases. In any of these
cases, our liquidity may be adversely affected and we may not
have sufficient cash to prepay the government loan and meet our
other obligations. Moreover, the government guaranteed loan
contains a $100 million minimum cash balance requirement.
As a result, we cannot use all of our available cash to fund
operations, capital expenditures and cash obligations without
violating this requirement.
Although there can be no assurances, management believes that
cash flow from operating activities, coupled with existing cash
balances and financing commitments, will be adequate to fund the
Company's operating and capital needs as well as enable it
to maintain compliance with its various debt agreements at least
through December 31, 2005.
Financial Covenants and Credit Rating
In addition to the minimum cash balance requirements, our
long-term debt agreements contain various negative covenants
that restrict our actions, including our ability to pay
dividends, or make other restricted payments. Finally, our
long-term debt agreements contain cross-default provisions,
which may be triggered by
26
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defaults by us under other agreements relating to indebtedness.
See
"Risk Factors Relating to the Company and Industry
Related Risks — Our high level of fixed obligations
limits our ability to fund general corporate requirements and
obtain additional financing, limits our flexibility in
responding to competitive developments and increases our
vulnerability to adverse economic and industry conditions."
As of March 31, 2005, Holdings and AWA were in
compliance with the covenants in their long-term debt agreements.
Our credit ratings, like most airlines, are relatively low, with
Moody's assessment of AWA's senior implied rating and
senior unsecured debt rating at B3 and Caa2, respectively,
Standard & Poor's assessment of AWA's and
Holdings' corporate credit ratings at B- and AWA's
senior unsecured rating at CCC and Fitch Ratings'
assessment of AWA's long-term and unsecured debt rating at
CCC. In addition, Standard & Poor's recently
placed AWA's aircraft debt on CreditWatch with negative
implications as part of a broader review of aircraft-backed
debt. Low credit ratings could cause our borrowing costs to
increase, which would increase our interest expense and could
affect our net income and our credit ratings could adversely
affect our ability to obtain additional financing. The rating
agencies base their ratings on our financial performance and
operations, our cash flow and liquidity, the level of our
indebtedness and industry conditions in general. If our
financial performance or industry conditions do not improve, we
may face future downgrades, which could further negatively
impact our borrowing costs and the prices of our equity or debt
securities. In addition, any downgrade of our credit ratings may
indicate a decline in our business and in our ability to satisfy
our obligations under our indebtedness. See
"Risk
Factors Relating to the Company and Industry Related
Risks — Because of our relatively low credit ratings,
our borrowing costs may be high and our ability to incur
additional debt may be impaired."
Other Information
Labor Relations
A large majority of the employees of the major airlines in the
United States are represented by labor unions. The majority of
AWA employees have selected union representation and have
negotiated or are in the process of negotiating collective
bargaining agreements with AWA. Although there are few remaining
employee groups who could engage in organization efforts, we
cannot predict the outcome of any future efforts to organize
those remaining employees or the terms of any future labor
agreements or the effect, if any, on the Company's or
AWA's operations or financial performance. For more
discussion, see
"Risk Factors Relating to the Company
and Industry Related Risks — Negotiations with labor
unions could divert management attention and disrupt operations
and new collective bargaining agreements or amendments to
existing collective bargaining agreements could increase our
labor costs and operating expenses."
Related Party Transactions
Texas Pacific Group agreed to reimburse the Company
approximately $2.5 million for expenses incurred by the
Company on its behalf. As a result, the Company recorded this as
a receivable as of December 31, 2004. Subsequent to
December 31, 2004, the Company received $2.4 million
in such reimbursement and an additional $0.1 million in
2005.
Application of Critical Accounting Policies
The preparation of our consolidated financial statements in
accordance with generally accepted accounting principles
requires that we make certain estimates and assumptions that
affect the reported amount of assets and liabilities, revenues
and expenses, and the disclosure of contingent assets and
liabilities at the date of our financial statements. We believe
our estimates and assumptions are reasonable; however, actual
results could differ from those estimates. We have identified
the following critical accounting policies that require the use
of significant judgments and estimates relating to matters that
are inherently uncertain and may result in materially different
results under different assumptions and conditions.
•
Passenger Revenue
— Passenger revenue is
    recognized when transportation is provided. Ticket sales for
    transportation that has not yet been provided are recorded as
    air traffic liability. Passenger traffic commissions and related
    fees are expensed when the related revenue is recognized.
    Passenger traffic
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Table of Contents
commissions and related fees not yet recognized are included as
    a prepaid expense. Due to complex pricing structures, refund and
    exchange policies, and interline agreements with other airlines,
    certain amounts are recognized in revenue using estimates
    regarding both the timing of the revenue recognition and the
    amount of revenue to be recognized. These estimates are
    generally based on the statistical analysis of our historical
    data. Any adjustments resulting from periodic evaluations of the
    estimated air traffic liability are included in results of
    operations during the period in which the evaluations are
    completed.
•
Accounting For Long-Lived Assets
— Owned
    property and equipment are recorded at cost and depreciated to
    residual values over the estimated useful lives using the
    straight-line method. Leasehold improvements relating to flight
    equipment and other property on operating leases are amortized
    over the life of the lease, or the life of the asset, whichever
    is shorter. Interest on advance payments for aircraft
    acquisitions and on expenditures for aircraft improvements is
    capitalized and added to the cost of the asset. The estimated
    useful lives of our owned aircraft, jet engines, flight
    equipment and rotable parts range from five to 25 years.
    The estimated useful lives of our technical support facility and
    flight training center in Phoenix, Arizona are 22 years and
    30 years, respectively. The estimated useful lives of our
    ground property and equipment range from three to 12 years.
    We test for impairment losses on long-lived assets used in
    operations when events and circumstances indicate that the
    assets might be impaired as defined by SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived
    Assets."
An impairment loss is recognized if the
    carrying amount of the asset is not recoverable from its
    undiscounted cash flows and is measured as the difference
    between the carrying amount and fair value of the asset.
•
Frequent Flyer Accounting
— We maintain a
    frequent travel award program known as "FlightFund"
    that provides a variety of awards to program members based on
    accumulated mileage. The estimated cost of providing the free
    travel is recognized as a liability and charged to operations as
    program members accumulate mileage. Travel awards are valued at
    the incremental cost of carrying one passenger, based on
    expected redemptions. Incremental costs are based on
    expectations of expenses to be incurred on a per passenger basis
    and include fuel, liability insurance, food, beverages, supplies
    and ticketing costs. We also sell mileage credits to companies
    participating in our FlightFund program, such as hotels, car
    rental agencies and credit card companies.
    Transportation-related revenue from the sale of mileage credits
    is deferred and recognized when transportation is provided. A
    change to the estimated cost per mile, minimum award level,
    percentage of revenue to be deferred or deferred recognition
    period could have a significant impact on our revenues or
    mileage liability accrual in the year of the change as well as
    future years.
•
Long-Term Maintenance Reserve
— We record an
    accrual for the estimated cost of scheduled airframe and engine
    overhauls required to be performed on leased aircraft upon their
    return to the lessors. These estimates are based on historical
    costs and our assumptions regarding the renewal of aircraft
    leases. A significant change to AWA's fleet plan could have
    a material impact on our reserve requirements.
•
Deferred Tax Asset Valuation Allowance
— The
    Company initially recorded a full valuation allowance relating
    to its net deferred tax assets at December 31, 2001 and to
    tax benefits generated in 2002. In recording that valuation
    allowance, we considered whether it was more likely than not
    that all or a portion of the deferred tax assets will not be
    realized, in accordance with SFAS No. 109,
"Accounting for Income Taxes."
The Company was
    in a cumulative loss position three out of four years between
    December 31, 2001 through December 31, 2004, which
    weighed heavily in the overall determination that a valuation
    allowance was needed. As of March 31, 2005, the Company had
    recorded a valuation allowance of $115.3 million against
    its net deferred tax assets. The Company expects to continue to
    record a full valuation allowance on any future tax benefits
    until we have achieved several quarters of consecutive
    profitable results coupled with an expectation of continued
    profitability.
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Table of Contents
Recently Issued Accounting Pronouncements
In November 2004, the FASB issued Revised Statement
No. 123,
"Accounting for Share-Based Payment"
("SFAS No. 123R"). This statement
requires the Company to recognize the grant-date fair value of
stock options in its Statement of Operations. In addition, the
Company will be required to calculate this compensation using
the fair-value based method, versus the intrinsic value method
previously allowed under SFAS No. 123. As issued, this
revision was effective for interim periods beginning after
June 15, 2005. On April 14, 2005, the Securities and
Exchange Commission amended the compliance date for
SFAS No. 123R to the beginning of the next fiscal year
that begins after June 15, 2005. Accordingly, the Company
will adopt this revised SFAS effective January 1, 2006. The
Company is currently evaluating how it will adopt
SFAS No. 123R and has not determined the method it
will use to value granted stock options. The adoption of
SFAS No. 123R is expected to have a material effect on
the Company's results of operations.
Forward-Looking Information
This quarterly report on Form 10-Q contains various
forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These statements are
based on management's beliefs as well as assumptions made
by and information currently available to management. When used
in this document, the words "anticipate,"
"estimate," "expect," "project"
and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those
anticipated, estimated, projected or expected. Among the key
factors that may have a direct bearing on our results are:
•
general economic conditions;
•
the impact of global instability caused by military actions,
    terrorism, disease outbreaks and natural disasters;
•
limitations on our flexibility in responding to industry
    conditions due to high fixed costs and restrictions imposed by
    our debt instruments;
•
changes in federal and state laws and regulations;
•
changes in prevailing interest rates and the availability of and
    terms of financing to fund our business;
•
the ability to attract and retain qualified personnel;
•
the cyclical nature of the airline industry;
•
competitive practices in the airline industry;
•
the impact of changes in fuel prices; and
•
relations with unionized employees generally and the impact and
    outcome of labor negotiations.
For additional discussion of these factors and other risks, see
"Business — Risk Factors Relating to the
Company and Industry Related Risks"
discussed below. In
light of these risks, uncertainties and assumptions, the
forward-looking events described in this quarterly report on
Form 10-Q might not occur. Any forward-looking statements
speak only as of the date of this report.
29
Table of Contents
Risk Factors Relating to America West and Industry Related
Risks
We caution the reader that these risk factors may not be
exhaustive. We operate in a continually changing business
environment and new risk factors emerge from time to time.
Management cannot predict such new risk factors, nor can it
assess the impact, if any, of such new risk factors on our
business or the extent to which any factor or combination of
factors may impact our business.
We have sustained, and may continue to sustain significant
    operating losses.
For the year ended December 31, 2004, we incurred an
operating loss of $43.8 million. In addition, we incurred
operating losses for the years ended December 31, 2001 and
2002 resulting primarily from the decrease in revenue and
passenger demand and the increase in operating costs after the
terrorist attacks of September 11, 2001. Recently, the
operating losses resulted primarily from a substantial increase
in the cost of jet fuel and excess domestic industry capacity
resulting in lower revenue per available seat mile. We expect
the threat of further terrorist attacks and continued
instability in oil producing regions to continue to negatively
impact our revenues and costs in the near-term. We may not be
able to effectively counteract increasing costs through our cost
reduction initiatives, customer service initiatives and revised
pricing structures. Moreover, our liquidity and borrowing
options are limited and we may not be able to survive a
prolonged economic downturn, decreases in demand for air travel
or further increases in jet fuel costs. The inability to sustain
profitability may impair our ability to satisfy our obligations
as they become due, obtain future equity or debt financing,
respond to competitive developments and otherwise sustain or
expand our business.
Global instability, caused by events such as terrorism,
    has had and may in the future have a material impact on the
    airline industry and, as a result, our financial condition,
    operations and prospects.
Over the past several years, global instability, caused by
military action, terrorism, disease outbreaks and natural
disasters, has had a profound impact on the airline industry.
The terrorist attacks of September 11, 2001 resulted in a
severe strain on our and the other airlines' liquidity as
the government temporarily suspended all flights, passenger
demand dropped precipitously and financial institutions tried to
reduce their exposure by restricting the industry's access
to capital. In addition, the terrorist attacks led to a decrease
in the value of aircraft and aircraft-related equipment and
facilities and cost increases for enhanced security measures,
aviation insurance, airport rents and landing fees. Subsequent
to the terrorist attacks, other events, such as military action
in Iraq and Afghanistan, general political and economic
instability in oil producing regions, and the Severe Acute
Respiratory Syndrome ("SARS") outbreak in Asia,
continued to adversely impact passenger demand and operating
costs, especially jet fuel costs. These kinds of events
(including natural disasters such as the recent tsunamis in the
Indian Ocean) are likely to continue to impact the airline
industry. Depending on the severity and geographical impact of
such events, they may have a substantial adverse impact on our
passenger demand, our costs, the value of our assets and our
access to, and cost of capital. We cannot predict whether we
will have sufficient liquidity or access to capital to withstand
the adverse impact of a prolonged decrease in passenger demand
or a substantial increase in costs caused by such global events.
Increases in insurance costs or reductions in insurance
    coverage may adversely impact our operations and financial
    results.
The terrorist attacks of September 11, 2001 led to a
significant increase in insurance premiums and a decrease in the
insurance coverage available to commercial airline carriers.
Accordingly, our insurance costs increased significantly and our
ability to continue to obtain insurance even at current prices
remains uncertain. In addition, AWA and other airlines have been
unable to obtain third party war risk (terrorism) insurance
at reasonable rates from the commercial insurance market and
have been obtaining this insurance through a special program
administered by the FAA. If the Federal insurance program
terminates, we would likely face a material increase in the cost
of war risk insurance. Because of competitive pressures in our
industry, our ability to pass additional insurance costs to
passengers is limited. As a result, further increases in
insurance costs or reductions in available insurance coverage
could harm our earnings.
30
Table of Contents
Our high level of fixed obligations limits our ability to
    fund general corporate requirements and obtain additional
    financing, limits our flexibility in responding to competitive
    developments and increases our vulnerability to adverse economic
    and industry conditions.
We have a significant amount of fixed obligations, including
debt, aircraft leases and financings, aircraft purchase
commitments, leases of airport and other facilities and other
cash obligations. As of March 31, 2005, we had
approximately $703.3 million of outstanding debt, of which
$182.4 million was secured. In addition, we had
$11.2 million of payments to satisfy capital lease
obligations and $3.2 billion of operating lease obligations
through lease expiration dates incurred primarily in connection
with off-balance sheet aircraft financings. See
"Managements' Discussion and Analysis of Financial
Condition and Results of Operations — Liquidity and
Capital Resources — Off Balance Sheet
Arrangements."
We also have guaranteed costs associated
with our regional alliance with Mesa and commitments to purchase
aircraft from Airbus. As a result of the substantial fixed costs
associated with these obligations:
•
A decrease in revenues results in a disproportionately greater
    percentage decrease in earnings.
•
We may not have sufficient liquidity to fund all of these fixed
    costs if our revenues decline or costs increase.
•
We may have to use our working capital to fund these fixed costs
    instead of funding general corporate requirements, including
    capital expenditures.
•
We may not have sufficient liquidity to respond to competitive
    developments and adverse economic conditions.
Our obligations also impair our ability to obtain additional
financing, if needed, and our flexibility in the conduct of our
business. Our existing indebtedness is secured by substantially
all of our assets, leaving us with limited collateral for
additional financing. Moreover, the terms of the government
guaranteed loan restrict our ability to incur additional
indebtedness or issue equity unless we use the proceeds of those
transactions to repay the loan, require prepayment if our
employee compensation costs exceed a certain threshold, require
us to maintain a minimum cash balance of $100 million, and
restrict our ability to take certain other actions, including
mergers and acquisitions, investments and asset sales.
Our ability to pay the fixed costs associated with our
contractual obligations depends on our operating performance and
cash flow, which in turn depend on general economic and
political conditions. A failure to pay our fixed costs or breach
of the contractual obligations could result in a variety of
adverse consequences, including the acceleration of our
indebtedness, the withholding of credit card proceeds by the
credit card servicers and the exercise of remedies by our
creditors and lessors. In such a situation, it is unlikely that
we would be able to fulfill our obligations under or repay the
accelerated indebtedness, make required lease payments or
otherwise cover our fixed costs.
Fluctuations in jet fuel costs could adversely affect our
    operating expenses and results.
The price and supply of jet fuel are unpredictable and fluctuate
based on events outside our control, including geopolitical
developments, supply interruptions, regional production patterns
and environmental concerns. Since jet fuel is the principal raw
material consumed by our business, accounting for 23% of our
total operating expenses in the first quarter of 2005 and 18% of
our total operating expenses in 2004, price escalations or
reductions in the supply of jet fuel will increase our operating
expenses and cause our operating results and net income to
decline. For example, based on our current level of fuel
consumption which includes our Mesa alliance, we estimate that a
one-cent per gallon increase in jet fuel prices will cause our
annual operating expense to increase by $5.7 million.
We have implemented a fuel-hedging program to manage the risk
and effect of fluctuating jet fuel prices on our business. Our
hedging program is intended to offset increases in jet fuel
costs by using fuel hedging instruments keyed to the future
price of heating oil, which is highly correlated to the price of
jet fuel delivered on the East Coast of the United States. Our
hedging program does not fully protect us against increasing jet
fuel costs because our hedging program does not cover all of our
projected jet fuel volumes for
31
Table of Contents
2005. Hedging transactions are in place with respect to
approximately 47% and 4% of remaining projected 2005 and 2006
jet fuel requirements, respectively. Furthermore, our ability to
effectively hedge jet fuel prices is limited because we purchase
a substantially larger portion of our jet fuel requirements on
the West Coast of the United States compared to our large
competitors and West Coast fuel prices are less correlated to
heating oil prices and other viable fuel hedging instruments
than East Coast fuel prices and, therefore, more difficult to
hedge. The effectiveness of our fuel-hedging program also may be
negatively impacted by continued instability in oil producing
regions such as the Middle East, Nigeria, Russia and Venezuela.
Because of our relatively low credit ratings, our
    borrowing costs may be high and our ability to incur additional
    debt may be impaired.
Our credit ratings are relatively low, with Moody's
assessment of AWA's senior implied rating and senior
unsecured debt rating at B3 and Caa2, respectively,
Standard & Poor's assessment of AWA's and
Holdings' corporate credit ratings at B- and AWA's
senior unsecured rating at CCC, and Fitch Ratings'
assessment of AWA's long-term and senior unsecured debt
rating at CCC. In addition, Standard & Poor's
recently placed AWA's aircraft debt on CreditWatch with
negative implications as part of a broader review of
aircraft-backed debt. Low credit ratings could cause our future
borrowing costs to increase, which would increase our interest
expense and could affect our earnings and our credit ratings
could adversely affect our ability to obtain additional
financing. The rating agencies base their ratings on our
financial performance and operations, our cash flow and
liquidity, the level of our indebtedness and industry conditions
in general. If our financial performance or industry conditions
do not improve, we may face future downgrades, which could
further negatively impact our borrowing costs and the prices of
our equity or debt securities. In addition, any downgrade of our
credit ratings may indicate a decline in our business and in our
ability to satisfy our obligations under our indebtedness.
Negotiations with labor unions could divert management
    attention and disrupt operations and new collective bargaining
    agreements or amendments to existing collective bargaining
    agreements could increase our labor costs and operating
    expenses.
Some of our employees are represented by unions and other groups
of our employees may seek union representation in the future.
Negotiations with the IBT for a second collective bargaining
agreement covering the Airline's mechanics and related
employees commenced on October 9, 2003 and are ongoing.
Negotiations with the AFA on a second contract covering the
Company's flight attendants commenced on February 4,
2004 and are ongoing. Negotiations with the IBT for an initial
contract covering the Airline's passenger service employees
commenced on April 5, 2005 and are ongoing. Negotiations
with the TWU for a second contract covering AWA's fleet
service employees are scheduled to commence on June 15,
2005.
We cannot predict the outcome of the negotiations with the IBT
or AFA or any future negotiations relating to union
representation or collective bargaining agreements. Agreements
reached in collective bargaining may increase operating expenses
and lower operating results and net income. This is particularly
significant because our current employee costs contribute
substantially to the low cost structure that we believe is one
of our competitive strengths and because we are required to
repay a portion of the government guaranteed loan if our labor
costs exceed a certain threshold. In addition, negotiations with
unions could divert management attention and disrupt operations,
which may result in increased operating expenses and lower net
income. If we are unable to negotiate acceptable collective
bargaining agreements, we might have to address the threat of,
or wait through, "cooling off" periods, which could be
followed by union-initiated work actions, including strikes.
Depending on the nature of the threat or the type and duration
of any work action, these actions could disrupt our operations
and, as a result, have a significant adverse affect on our
operating results.
Fluctuations in interest rates could adversely affect our
    liquidity, operating expenses and results.
A substantial portion of our indebtedness bears interest at
fluctuating interest rates based on the London interbank offered
rate for deposits of U.S. dollars, or LIBOR. LIBOR tends to
fluctuate based on general economic conditions, general interest
rates, including the prime rate, and the supply of and demand
for credit
32
Table of Contents
in the London interbank market. We have not hedged our interest
rate exposure and, accordingly, our interest expense for any
particular period may fluctuate based on LIBOR. To the extent
LIBOR increases, our interest expense will increase, in which
event, we may have difficulties making interest payments and
funding our other fixed costs and our available cash flow for
general corporate requirements may be adversely affected.
Our operating costs could increase as a result of past,
    current or new regulations that impose additional requirements
    and restrictions on airline operations.
The airline industry is heavily regulated. Both federal and
state governments from time to time propose new laws and
regulations that impose additional requirements and restrictions
on airline operations. Implementing these measures, such as
aviation ticket taxes and passenger safety measures, has
increased operating costs for us and the airline industry as a
whole. In addition, new security measures imposed by the ATSA,
or otherwise by Congress, the Department of Homeland Security or
the FAA as a result of concern over continuing terrorist threats
are expected to continue to increase costs for us and the
airline industry as a whole. Furthermore, certain governmental
agencies, such as the DOT and the FAA, have the authority to
impose mandatory orders, such as Airworthiness Directives in
connection with our aircraft and civil penalties for violations
of applicable laws and regulations, each of which can result in
material costs and adverse publicity. For example, the FAA from
time to time may require us to retrofit our aircraft to meet
enhanced safety standards. Depending on the implementation of
these laws, regulations and other measures, our operating costs
could increase significantly. We cannot predict which laws,
regulations and other measures will be adopted or what other
action regulators might take. Accordingly, we cannot guarantee
that future legislative and regulatory acts will not have a
material impact on our operating results.
Interruptions or disruptions in service at one our hub
    airports could have a material adverse impact on our
    operations.
We operate primarily through our hubs in Phoenix and Las Vegas.
A majority of our flights either originate or fly into one of
these hubs. A significant interruption or disruption in service
at one of our hubs could result in the cancellation or delay of
a significant portion of our flights and, as a result, could
have a severe impact on our business, operations and financial
performance.
The airline industry and the markets we serve are highly
    competitive and we may be unable to compete effectively against
    carriers with substantially greater resources or lower cost
    structures.
The airline industry and most of the markets we serve are highly
competitive. We compete with other airlines on the basis of
pricing, scheduling (frequency and flight times), on-time
performance, type of equipment, cabin configuration, amenities
provided to passengers, frequent flyer programs, the automation
of travel agent reservation systems, on-board products and other
services. We compete with other low cost carriers primarily on
the basis of pricing. Price competition occurs on a
market-by-market basis through price discounts, changes in
pricing structures, fare matching, target promotions and
frequent flyer initiatives. Most airlines will quickly match
price reductions in a particular market and certain airlines
have in the past engaged in retaliatory activities, including
steep pricing discounts in certain markets and termination of
alliance agreements, in response to changes in our pricing
structure. Our ability to compete on the basis of price is
limited by our fixed costs and depends on our ability to
maintain low operating costs. Our principal competitor,
Southwest Airlines, and certain other low cost carriers have
lower operating cost structures than we do. We also compete
against the legacy carriers, many of which offer more extensive
routes, frequencies and customer loyalty, marketing and
advertising programs and have substantially greater resources
than we do. We may be unable to compete effectively against
carriers with substantially greater resources or lower cost
structures.
Recent airline restructurings and bankruptcies could alter
    the competitive environment of the airline industry to our
    detriment.
The terrorist attacks of September 11, 2001, the continued
military presence in Iraq and Afghanistan, increased competition
from low cost carriers and soft economic conditions have led to
the airline industry's
33
Table of Contents
significant losses since 2001. Largely as a result of these
losses, ATA Airlines, U.S. Airways, Aloha Airlines,
Hawaiian Airlines and United Airlines filed for bankruptcy
protection. Because bankruptcy protection may allow for greater
flexibility in reducing costs by voiding contracts and
renegotiating existing business obligations, current and future
airline bankruptcies could have a substantial impact on industry
competition. Continued weakness in the airline industry also may
result in additional industry consolidation, greater reliance on
industry alliances and increased price competition among the
existing airlines, each of which could dramatically alter
competitive environments in the markets we serve.
Our business is sensitive to general economic conditions,
    unforeseen events and seasonal fluctuations. As a result, our
    prior performance is not necessarily indicative of our future
    results.
The air travel business historically fluctuates on a seasonal
basis and in response to general economic conditions. Due to the
greater demand for air and leisure travel during the summer
months, revenues in the airline industry in the second and third
quarters of the year tend to be greater than revenues in the
first and fourth quarters of the year. In addition, the airline
industry is highly susceptible to unforeseen events that result
in declines in revenues or increased costs, such as political
instability, regional hostilities, terrorist attacks, recession,
fuel price escalation, inflation, infectious disease outbreaks,
adverse weather conditions, consumer preferences, labor
instability or regulatory oversight. Also, our results of
operations for interim periods are not necessarily indicative of
those for an entire year and our prior results are not
necessarily indicative of our future results.
We depend on the expertise of our management team. If key
    individuals leave unexpectedly, our business and operations
    could suffer.
Many of our executive officers are key to the management of our
business and operations. Our future success depends on our
ability to retain these officers and other capable managers.
Although we believe we could replace key personnel given
adequate prior notice, the unexpected departure of key executive
officers could cause substantial disruption to our business and
operations. In addition, we may not be able to retain and
recruit talented personnel without incurring substantial costs.
Moreover, we must repay a portion of the government guaranteed
loan if our labor costs exceed a certain threshold. As a result,
our ability to spend additional amounts to retain and recruit
talented personnel is limited.
The stockholders who effectively control the voting power
    of Holdings could take actions that would favor their own
    personal interests to the detriment of our interests.
Currently, two stockholders collectively control more than 50%
of the total voting power of Holdings. These stockholders, TPG
Partners, L.P. and TPG Parallel I, L.P, or collectively,
the TPG Stockholders, are controlled by the same company, TPG
Advisors, Inc. Since TPG Advisors, Inc. is an investment firm,
its strategic objectives may be different than both the
short-term or long-term objectives of our board of directors and
management. We cannot guarantee that the TPG Stockholders will
not try to influence Holdings' business in a way that would
favor their own personal interests to the detriment of our
interests and those of our other stockholders.
We are at risk of losses and adverse publicity stemming
    from any accident involving any of our aircraft.
If one of our aircraft were to crash or be involved in an
accident, we could be exposed to significant tort liability.
There can be no assurance that the insurance we carry to cover
damages arising from any future accidents will be adequate. In
the event that our insurance is not adequate, we may be forced
to bear substantial losses from an accident. Claims resulting
from an accident in excess of our insurance coverage would harm
our business and results of operations. Accidents could also
result in unforeseen mechanical and maintenance costs. In
addition, any accident involving an aircraft that we operate
could create a public perception that our aircraft are not safe
or reliable, which could harm our reputation, result in air
travelers being reluctant to fly on our aircraft and harm our
business.
34
Table of Contents
Our operations are often affected by factors beyond our
    control, including traffic congestion at airports, weather
    conditions and increased security measures, any of which could
    harm our financial condition and results of operations.
Like other airlines, our operations are subject to delays caused
by factors beyond our control, including air traffic congestion
at airports, adverse weather conditions and increased security
measures, such as those required to be implemented under the
ATSA. During periods of fog, snow, rain, storms or other adverse
weather conditions, flights may be cancelled or significantly
delayed. Cancellations and delays frustrate passengers, reduce
aircraft utilization and increase costs, all of which in turn
affect profitability. As a result, cancellations or delays could
harm our financial condition and results of operations.
We rely heavily on automated systems to operate our
    business and any failure of these systems could harm our
    business.
We depend on automated systems to operate our business,
including our computerized airline reservation system, our
telecommunication systems and our website. In 2004,
approximately 96% of our tickets were issued electronically. Our
website and reservation system must be able to accommodate a
high volume of traffic and deliver important flight information.
Substantial or repeated website, reservations system or
telecommunication systems failures could reduce the
attractiveness of our services and could cause our customers to
purchase tickets from another airline. Any disruption in these
systems could result in the loss of important data, increase our
expenses and generally harm our business.
Shares of our Class B common stock issuable upon
    exercise or conversion of outstanding securities could adversely
    affect our stock price and dilute the ownership interests of
    existing stockholders.
Sales and potential sales of substantial amounts of our
Class B common stock or securities exercisable for or into
our Class B common stock in the public market, or the
perception that these sales could occur, could adversely affect
the market price of our Class B common stock. A substantial
number of additional shares of our Class B common stock are
issuable upon the conversion or exercise of outstanding
securities. As of April 25, 2005, the outstanding shares of
our Class B common stock were subject to dilution by:
•
19,692,000 shares of Class B common stock that are
    issuable upon the exercise, at a price of $3.00 per share,
    of certain warrants issued in connection with the government
    guaranteed loan, including 18,754,000 shares of
    Class B common stock issuable upon exercise of a warrant
    issued to the Air Transportation Stabilization Board, or
    ATSB; and
•
10,924,364 shares of our Class B common stock that are
    issuable upon the exercise of outstanding options.
In addition, 859,117 shares of Class B common stock
are issuable upon conversion of the outstanding shares of
Holdings' Class A common stock held by the TPG
Stockholders (but subject to certain contractual restrictions on
transfer), up to 8,095,842 shares of Holdings'
Class B common stock are issuable upon the exchange of
AWA's 7.25% senior exchangeable notes due 2023 (which
exchange may not occur until the trading price of Holdings'
Class B common stock reaches certain thresholds, or other
triggering events occur) and up to approximately
9,400,000 shares of Holdings' Class B common
stock are issuable upon conversion of Holdings'
7.5% convertible senior notes due 2009. Holdings has
registered either the issuance or resale of all of these shares,
meaning that upon exercise, exchange or conversion, as
applicable, such shares could be sold in the public market at
any time.
The conversion or exercise of some or all of these notes,
warrants and options will dilute the ownership interests of
existing stockholders and any sales in the public market of our
Class B common stock issuable upon such conversion or
exercise could adversely affect prevailing market prices of our
Class B common stock. In addition, the existence of the
notes, warrants and options may encourage short selling by
market participants because conversion or exercise of the notes
or warrants could depress the price of our Class B common
stock.
35
Table of Contents
Provisions in our charter documents might deter
    acquisition bids for us.
Holdings' Certificate of Incorporation and Bylaws contain
provisions that, among other things:
•
authorize Holdings' board of directors to issue preferred
    stock ranking senior to our Class B common stock without
    any action on the part of the stockholders;
•
establish advance notice procedures for stockholder proposals,
    including nominations of directors, to be considered at
    stockholders' meetings;
•
authorize Holdings' board of directors to fill vacancies on
    the board resulting from an increase in the authorized number of
    directors or any other cause; and
•
restrict the ability of stockholders to call special meetings of
    stockholders.
These provisions might make it more difficult for a third party
to acquire us, even if doing so would benefit the stockholders.
Our stock price may continue to be volatile and could
    decline substantially.
The stock market has, from time to time, experienced extreme
price and volume fluctuations. Many factors may cause the market
price for the Class B common stock to decline including,
among others, the following:
•
our operating results failing to meet the expectations of
    securities analysts or investors in any quarter;
•
downward revisions in securities analysts' estimates;
•
material announcements by us or our competitors;
•
public sales of a substantial number of shares of our
    Class B common stock;
•
governmental regulatory action; and
•
adverse changes in general market conditions or economic trends.
Item 3. Quantitative and Qualitative Disclosures about
Market Risk.
Market Risk Sensitive Instruments
(a)
Commodity Price Risk
As of March 31, 2005, the Company had entered into costless
collar transactions, which establish an upper and lower limit on
heating oil futures prices. These transactions are in place with
respect to approximately 47% and 4% of remaining projected 2005
and 2006 fuel requirements, respectively, including 58% related
to the second quarter of 2005, 46% related to the third quarter
of 2005 and 38% related to the fourth quarter of 2005. See
"Risk Factors Relating to America West and Industry
Related Risks — Fluctuations in fuel costs could
adversely affect our operating expenses and results."
The use of such hedging transactions in the Company's fuel
hedging program could result in the Company not fully benefiting
from certain declines in heating oil futures prices or certain
declines in the differential between jet fuel and heating oil
futures prices. At March 31, 2004, the Company estimates
that a 10% increase in heating oil futures prices would increase
the fair value of the costless collar transactions by
approximately $29.7 million. The Company estimates that a
10% decrease in heating oil futures prices would decrease the
fair value of the costless collar transactions by approximately
$26.3 million.
As of April 25, 2005, approximately 47% and 5% of
AWA's remaining 2005 and 2006 projected fuel requirements,
respectively, are hedged.
36
Table of Contents
(b)
Interest Rate Risk
The Company's exposure to interest rate risk relates
primarily to its variable rate long-term debt obligations. At
March 31, 2005, the Company's variable-rate long-term
debt obligations of approximately $500.9 million
represented approximately 71% of its total long-term debt. If
interest rates increased 10% in 2005, the impact on the
Company's results of operations would not be material.
Item 4.
Controls And Procedures.
(a)
Evaluation of disclosure controls and procedures.
An evaluation was performed under the supervision and with the
participation of Holdings' and AWA's management,
including the Chief Executive Officer (the "CEO") and
Chief Financial Officer (the "CFO"), of the
effectiveness of the design and operation of our disclosure
controls and procedures (as defined in the rules promulgated
under the Exchange Act) as of March 31, 2005. Based on that
evaluation, our management, including the CEO and CFO, concluded
that our disclosure controls and procedures were effective as of
March 31, 2005.
(b)
Changes in internal control over financial reporting.
In connection with the preparation of our Annual Report on
Form 10-K for the fiscal year ended December 31, 2004,
our management, in consultation with the Audit Committee of
Holdings' Board of Directors, identified a material
weakness in our disclosure controls and procedures associated
with the accounting for AWA's fuel hedging program that
resulted in a need to restate our financial statements for prior
periods, as described below.
In February 2005, management undertook a review of AWA's
accounting for its fuel hedging transactions. As a result of
this review, management concluded that AWA's fuel hedging
transactions did not qualify for hedge accounting under
U.S. generally accepted accounting principles and that the
Company's financial statements for prior periods required
restatement to reflect the fair value of fuel hedging contracts
in the balance sheets and statements of stockholders equity and
comprehensive income of Holdings and AWA. The Company concluded
that these accounting errors were the result of deficiencies in
its internal control over financial reporting, from the lack of
effective reviews of hedge transaction documentation and of
quarterly mark-to-market accounting entries on open fuel hedging
contracts by personnel at an appropriate level.
To correct this material weakness, we have implemented a review
process that verifies the quarterly mark-to-market adjustment on
open fuel hedging positions. In addition, the Company will
utilize the mark-to-market method of accounting for its fuel
hedging instruments going forward until such time it is able to
implement processes and controls necessary to ensure that
appropriate hedge documentation is obtained at hedge inception.
At that time, the Company will evaluate whether it will re-apply
hedge accounting.
Other than the actions mentioned above, there has been no change
to the Company's internal control over financial reporting
that occurred during the quarter ended March 31, 2005 that
has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial
reporting.
(c)
Limitation on the effectiveness of controls.
We believe that a controls system, no matter how well designed
and operated, cannot provide absolute assurance that the
objectives of the controls system are met and no evaluation of
controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been
detected. Our disclosure controls and procedures are designed to
provide reasonable assurance of achieving their objectives, and,
following the changes in our internal controls implemented prior
to the filing of this report, the CEO and CFO believe that our
disclosure controls and procedures were effective at the
"reasonable assurance" level as of March 31, 2005.
37
Table of Contents
PART II — OTHER INFORMATION
Item 2.
Changes in Securities, Use of Proceeds and Issuer Purchases
    of Equity Securities
The following table sets forth all purchases made by us or any
"affiliated purchaser" as defined in
Rule 10b-18(a)(3) of the Securities Exchange Act of 1934,
as amended, of our Class B common stock during each month
within the first quarter of 2005. No purchases were made
pursuant to a publicly announced repurchase plan or program.
(d)
Maximum Number
(c)
(or Approximate
Total Number of
Dollar Value) of
(a)
Shares Purchased as
Shares that May Yet
Total Number of
(b)
Part of Publicly
be Purchased Under
Shares Purchased
Average Price
Announced Plans or
the Plans or
Period
(1)
Paid per Share
Programs
Programs
January 1, 2005 - January 31, 2005
65,400
4.81
—
—
February 1, 2005 - February 28, 2005
18,800
5.15
—
—
March 1, 2005 - March 31, 2005
12,000
4.61
—
—
(1)
Amounts consist of shares of our Class B common stock
    purchased on the open market by the America West Holdings
    Corporation Future Care 401(k) Plan.
Item 4. Submission of Matters to a Vote of Security
Holders.
None.
Item 6.
Exhibits
Exhibit
Number
Description and Method of Filing
10
.1+
Annual Incentive Bonus Plan.
31
.1
Certification of Holdings' Chief Executive Officer pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of
    1934, as amended.
31
.2
Certification of Holdings' Chief Financial Officer pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of
    1934, as amended.
31
.3
Certification of AWA's Chief Executive Officer pursuant to
    Rule 13a-14(a) under the Securities Exchange Act of 1934,
    as amended.
31
.4
Certification of AWA's Chief Financial Officer pursuant to
    Rule 13a-14(a) under the Securities Exchange Act of 1934,
    as amended.
32
.1
Certification of Holdings' Chief Executive Officer and
    Chief Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.
32
.2
Certification of AWA's Chief Executive Officer and Chief
    Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.
(+)
Represents a management contract or compensatory plan or
    arrangement.
38
Table of Contents
AMERICA WEST HOLDINGS CORPORATION
March 31, 2005
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICA WEST HOLDINGS CORPORATION
By
/s/
Derek J. Kerr
Derek J. Kerr
Senior Vice President and Chief Financial Officer
DATED: April 25, 2005
39
Table of Contents
AMERICA WEST AIRLINES, INC.
March 31, 2005
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICA WEST AIRLINES, INC.
By
/s/
Derek J. Kerr
Derek J. Kerr
Senior Vice President and Chief Financial Officer
DATED: April 25, 2005
40
Table of Contents
Exhibit Index
Exhibit
Number
Description and Method of Filing
10
.1+
Annual Incentive Bonus Plan.
31
.1
Certification of Holdings' Chief Executive Officer pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of
    1934, as amended.
31
.2
Certification of Holdings' Chief Financial Officer pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of
    1934, as amended.
31
.3
Certification of AWA's Chief Executive Officer pursuant to
    Rule 13a-14(a) under the Securities Exchange Act of 1934,
    as amended.
31
.4
Certification of AWA's Chief Financial Officer pursuant to
    Rule 13a-14(a) under the Securities Exchange Act of 1934,
    as amended.
32
.1
Certification of Holdings' Chief Executive Officer and
    Chief Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.
32
.2
Certification of AWA's Chief Executive Officer and Chief
    Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.
(+) Represents a management contract or compensatory plan or
arrangement.
41
Table of Contents
Through
and
including                     ,
2005 (the 25th day after the date of this prospectus), all
dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
Rights Offering
US AIRWAYS GROUP, INC.
9,090,909 Shares of Common Stock
Issuable upon the
Exercise of Rights
to Subscribe for
Such Shares
Prospectus
Merrill Lynch & Co.
,
2005
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses Of Issuance And Distribution.
The following table shows the costs and expenses, other than
dealer manager and structuring advisory fees, payable in
connection with the sale and distribution of the securities
being registered. Except as otherwise noted, the registrant will
pay all of these amounts. All amounts are estimated.
Securities and Exchange Commission Registration Fee
$
17,655
National Association of Securities Dealers, Inc. Filing Fee
*
New York Stock Exchange Listing Fees
*
Printing Expenses
*
Legal Fees and Expenses
*
Accounting Fees and Expenses
*
Transfer Agent and Registrar Agent Fees
*
Miscellaneous
*
Total
$
[  ]
*
To be provided by amendment.
Item 14. Indemnification Of Directors And
Officers.
Under Section 145 of the Delaware General Corporation Law
(the "DGCL"), a corporation may indemnify any person
in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative (other than a derivative action by or in the right
of such corporation) who is or was a director, officer, employee
or agent of such corporation, or serving at the request of such
corporation in such capacity for another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in
connection with such action, suit or proceeding, if such person
acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of such
corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
The DGCL also permits indemnification by a corporation under
similar circumstances for expenses (including attorneys'
fees) actually and reasonably incurred by such persons in
connection with the defense or settlement of a derivative
action, except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have
been adjudged to be liable to such corporation unless the
Delaware Court of Chancery or the court in which such action or
suit was brought shall determine upon application that such
person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
The DGCL provides that the indemnification described above shall
not be deemed exclusive of other indemnification that may be
granted by a corporation under its bylaws, disinterested
directors' vote, stockholders' vote, agreement or
otherwise.
The DGCL also provides corporations with the power to purchase
and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation in a similar
capacity for another corporation, partnership, joint venture,
trust or other enterprise, against any liability asserted
against him or her in any such capacity, or arising out of his
or her status as such, whether or not the corporation would have
the power to indemnify him or her against such liability as
described above.
II-1
Table of Contents
US Airways Group's certificate of incorporation
provides that US Airways Group shall indemnify its officers
and directors to the full extent authorized or permitted by
applicable law. US Airways Group's certificate of
incorporation and bylaws provide that US Airways Group
shall also indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of US Airways Group), by reason of the fact that
such person is or was a director or officer of US Airways
Group, or is or was a director or officer of US Airways
Group serving at the request of US Airways Group as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding
if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best
interests of US Airways Group, and, with respect to any
criminal action or proceeding, had no reasonable cause to
believe such person's conduct was unlawful.
US Airways Group also maintains insurance for officers and
directors against certain liabilities, including liabilities
under the Securities Act. The effect of this insurance is to
indemnify any officer or director of US Airways Group
against expenses, including without limitation, attorneys'
fees, judgments, fines and amounts paid in settlement, incurred
by an officer or director upon a determination that such person
acted in good faith. The premiums for such insurance are paid by
US Airways Group.
Under separate indemnification agreements with US Airways
Group, each officer and director of US Airways Group is
indemnified against all liabilities relating to his or her
position as an officer or director of US Airways Group, to
the fullest extent permitted under applicable law.
The foregoing statements are subject to the detailed provisions
of Section 145 of the DGCL.
Item 15.
Recent Sales of Unregistered Securities
Not applicable
Item 16.
Exhibits And Financial Statement Schedules.
(a) The following exhibits are filed herewith or
incorporated herein by reference:
Exhibits
Exhibits required to be filed by Item 601 of
Regulation S-K.
Where the amount of securities
authorized to be issued under any of US Airways
Group's long-term debt agreements does not exceed
10 percent of the US Airways Group's assets,
under paragraph (b)(4)(iii) of Item 601 of
Regulation S-K, in lieu of filing such as an exhibit, the
US Airways Group hereby agrees to furnish to the SEC upon
request a copy of any agreement with respect to such long-term
debt.
Designation
Description
2
.1
Agreement and Plan of Merger, dated May 19, 2005, by and
    among US Airways Group, Inc. and America West Holdings
    Corporation (incorporated by reference to Exhibit 2.1 to
    US Airways Group's Registration Statement on
    Form S-4 filed on June 28, 2005) (Pursuant to
    item 601(b)(2) of Regulation S-K promulgated by the
    SEC, the exhibits and schedules to the Agreement and Plan of
    Merger have been omitted. Such exhibits and schedules are
    described in the Agreement and Plan of Merger. US Airways
    Group hereby agrees to furnish to the SEC, upon its request, any
    or all of such omitted exhibits or schedules)
3
.1
Amended and Restated Certificate of Incorporation of
    US Airways Group, Inc., effective as of March 31, 2003
    (incorporated by reference to Exhibit 3.1 to
    US Airways Group's Registration Statement on
    Form 8-A filed on May 14, 2003)
II-2
Table of Contents
Designation
Description
3
.2
Amended and Restated Bylaws of US Airways Group, Inc.,
    effective as of March 31, 2003 (incorporated by reference
    to Exhibit 3.2 to US Airways Group's Registration
    Statement on Form 8-A filed on May 14, 2003)
3
.3
Form of Second Amended and Restated Certificate of Incorporation
    of US Airways Group, Inc. (incorporated by reference to
    Exhibit 3.3 of US Airways Group's Registration
    Statement on Form S-4 filed on June 28, 2005)
3
.4
Form of Second Amended and Restated Bylaws of US Airways
    Group, Inc. (incorporated by reference to Exhibit 3.4 of
    US Airways Group's Registration Statement on
    Form S-4 filed on June 28, 2005)
4
.1
US Airways Group, Inc. Class A-1 Warrant to purchase
    shares of Class A Common Stock, dated March 31, 2003,
    issued to General Electric Capital Corporation (incorporated by
    reference to Exhibit 4.1 to US Airways Group's
    Registration Statement on Form 8-A filed on May 14,
    2003)
4
.2
US Airways Group, Inc. Class A-1 Warrant to purchase
    shares of Class A Common Stock, dated March 31, 2003,
    issued to Bank of America, N.A. (incorporated by reference to
    Exhibit 4.2 to US Airways Group's Registration
    Statement on Form 8-A filed on May 14, 2003)
4
.3
US Airways Group, Inc. Class A-1 Warrant to purchase
    shares of Class A Common Stock, dated March 31, 2003,
    issued to Retirement Systems of Alabama Holdings LLC
    (incorporated by reference to Exhibit 4.3 to
    US Airways Group's Registration Statement on
    Form 8-A filed on May 14, 2003)
4
.4
US Airways Group, Inc. Class A-1 Warrant to purchase
    shares of Class A Common Stock, dated March 31, 2003,
    issued to Retirement Systems of Alabama Holdings LLC
    (incorporated by reference to Exhibit 4.4 to
    US Airways Group's Registration Statement on
    Form 8-A filed on May 14, 2003)
4
.5
US Airways Group, Inc. Class A-1 Warrant to purchase
    shares of Class A Common Stock, dated March 31, 2003,
    issued to ATSB Securities Trust u/a/d March 31, 2003
    (incorporated by reference to Exhibit 4.5 to
    US Airways Group's Registration Statement on
    Form 8-A filed on May 14, 2003)
4
.6
Form of Class A-1 Warrants (incorporated by reference to
    Exhibit 4.3 to US Airways Group's Registration
    Statement on Form S-8 filed on July 31, 2003)
4
.7***
Form of Rights Certificate
5
.1***
Opinion of Elizabeth K. Lanier, Executive Vice
    President — Corporate Affairs and General Counsel of
    US Airways Group regarding legality of securities being
    registered
10
.1
Loan Agreement dated March 31, 2003 among US Airways,
    Inc. and Phoenix American Financial Services, Inc., Bank of
    America, N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit 10.5 to
    US Airways' Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2003)
10
.2
Amendment No. 1 dated December 18, 2003 to Loan
    Agreement dated March 31, 2003 among US Airways, Inc.
    and Phoenix American Financial Services, Inc., Bank of America,
    N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit 10.1 to
    US Airways' Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2004)
10
.3
Amendment No. 2 dated March 12, 2004 to Loan Agreement
    dated March 31, 2003 among US Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board. (incorporated by
    reference to Exhibit 10.2 to US Airways'
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2004)
10
.4
Amendment No. 3 dated May 21, 2004 to Loan Agreement
    dated March 31, 2004 among US Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board (incorporated by
    reference to Exhibit 10.1 to US Airways'
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2004)
II-3
Table of Contents
Designation
Description
10
.5
Amendment No. 4 dated July 13, 2004 to Loan Agreement
    dated March 31, 2004 among US Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board (incorporated by
    reference to Exhibit 10.2 to US Airways'
    Quarterly Report for the quarter ended June 30, 2004)
10
.6
Amendment No. 5 dated December 28, 2004 to Loan
    Agreement dated March 31, 2004 among US Airways, Inc.
    and Phoenix American Financial Services, Inc., Bank of America,
    N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit 10.6 to
    US Airways Group's Registration Statement on
    Form S-4 (File No. 333-126162), filed with the SEC on
    June 28, 2005)
10
.7
Final Order (I) Authorizing Debtors' Use of Cash
    Collateral and (II) Providing Adequate Protection Pursuant
    to Bankruptcy Rules 4001(b) and 4001(d) (incorporated by
    reference to Exhibit 99.1 to US Airways Group's
    Current Report on Form 8-K dated October 14, 2004)
10
.8
Motion to Authorize and Approve (1) The Primary
    Tranche A Lender Assignment, (2) The Alternate
    Tranche A Lender Assignment, and (3) Amendment
    No. 5 to the Loan Agreement pursuant to 11 U.S.C.
    Sections 105, 363, 1108, and Bankruptcy Rules 4001 and 6004
    (incorporated by reference to Exhibit 99.1 to
    US Airways Group's Current Report on Form 8-K
    dated December 28, 2004)
10
.9
Order Approving (1) The Primary Tranche A Lender
    Assignment, (2) The Alternate Tranche A Lender
    Assignment, and (3) Amendment No. 5 to Loan Agreement
    pursuant to 11 U.S.C. Sections 105, 363, 1108, and
    Bankruptcy Rules 4001 and 6004 (incorporated by reference
    to Exhibit 99.2 to US Airways Group's Current
    Report on Form 8-K dated December 28, 2004)
10
.10
Master Memorandum of Understanding among US Airways Group,
    Inc., US Airways, Inc., and General Electric Capital
    Corporation acting through its agent GE Capital Aviation
    Services, Inc. and General Electric Company,
    GE Transportation Component (incorporated by reference to
    Exhibit 10.9 to US Airways Groups' Annual Report
    on Form 10-K for the year ended December 31, 2004)*
10
.11
A319/A320/A321 Purchase Agreement dated as of October 31,
    1997 between US Airways Group and AVSA, S.A.R.L.
    ("AVSA"), an affiliate of aircraft manufacturer Airbus
    Industrie G.I.E. (incorporated by reference to Exhibit 10.1
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended September 30, 1997)*
10
.12
Amendment No. 1 dated as of June 10, 1998 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.2 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 1998)*
10
.13
Amendment No. 2 dated as of January 19, 1999 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.3 to US Airways Group's
    Annual Report on Form 10-K for the year ended December 31,
    1998)*
10
.14
Amendment No. 3 dated as of March 31, 1999 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 1999)*
10
.15
Amendment No. 4 dated as of August 31, 1999 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.2 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 1999)*
10
.16
Amendment No. 5 dated as of October 29, 1999 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.6 to US Airways Group's
    Annual Report on Form 10-K for the year ended December 31,
    1999)*
II-4
Table of Contents
Designation
Description
10
.17
Amendment No. 6 dated as of April 19, 2000 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2000)*
10
.18
Amendment No. 7 dated as of June 29, 2000 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2000)*
10
.19
Amendment No. 8 dated as of November 27, 2000 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.9 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2000)*
10
.20
Amendment No. 9 dated as of December 29, 2000 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.10 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2000)*
10
.21
Amendment No. 10 dated as of April 9, 2001 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2001)*
10
.22
Amendment No. 11 dated as of July 17, 2002 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit 10.1 to US Airways
    Group's Quarterly Report on Form 10-Q for the quarter
    ended June 30, 2002)*
10
.23
Amendment No. 12 dated as of March 29, 2003 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit 10.1 to US Airways
    Group's Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2003)*
10
.24
Amendment No. 13 dated August 30, 2004 to the Airbus
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit 10.2 to
    US Airways' Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004)*
10
.25
Amendment No. 14 dated December 22, 2004 to the Airbus
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit 10.4 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2005)*
10
.26
Amendment No. 15 dated January 17, 2005 to the Airbus
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit 10.5 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2005)*
10
.27
A330/A340 Purchase Agreement dated as of November 24, 1998
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.4 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 1998)*
10
.28
Amendment No. 1 dated as of March 23, 2000 to
    A330/A340 Purchase Agreement dated November 24, 1998
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.2 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2000)*
10
.29
Amendment No. 2 dated as of June 29, 2000 to A330/A340
    Purchase Agreement dated November 24, 1998 between
    US Airways Group and AVSA (incorporated by reference to
    Exhibit 10.2 to US Airways Group's Quarterly
    Report on Form 10-Q for the quarter ended June 30,
    2000)*
II-5
Table of Contents
Designation
Description
10
.30
Amendment No. 3 dated as of November 27, 2000 to
    A330/A340 Purchase Agreement dated November 24, 1998
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.14 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2000)*
10
.31
Amendment No. 4 dated as of September 20, 2001 to
    A330/A340 Purchase Agreement dated November 24, 1998
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.16 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2001)*
10
.32
Amendment No. 5 dated as of July 17, 2002 to A330/A340
    Purchase Agreement dated November 24, 1998 between
    US Airways Group and AVSA, S.A.R.L. (incorporated by
    reference to Exhibit 10.2 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2002)*
10
.33
Amendment No. 6 dated as of March 29, 2003 to
    A330/A340 Purchase Agreement dated November 24, 1998
    between US Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit 10.2 to US Airways
    Group's Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2003)*
10
.34
Amendment No. 7 dated August 30, 2004 to the Airbus
    A330/A340 Purchase Agreement dated November 24, 1998
    between US Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit 10.3 to
    US Airways, Inc.'s Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2004)*
10
.35
Amendment No. 8 dated December 22, 2004 to the Airbus
    A330/A340 Purchase Agreement dated as of November 24, 1998
    between US Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit 10.6 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2005)*
10
.36
Amendment No. 9 dated November 24, 1998 to the Airbus
    A330/A340 Purchase Agreement between US Airways Group, Inc.
    and AVSA, S.A.R.L. (incorporated by reference to
    Exhibit 10.7 to US Airways Group's Quarterly
    Report on Form 10-Q for the quarter ended March 31,
    2005)*
10
.37
Letter Agreement dated December 17, 2004 between
    US Airways Group, Inc. and US Airways, Inc. and Airbus
    North America Sales Inc. (incorporated by reference to
    Exhibit 99.2 to US Airways Group's Current Report
    on Form 8-K dated February 3, 2005)
10
.38
Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.1
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2003)*
10
.39
Amendment No. 1 dated as of November 4, 2003 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to
    Exhibit 10.22 to US Airways Group's Annual Report
    on Form 10-K for the year ended December 31, 2003)*
10
.40
Amendment No. 2 dated as of November 21, 2003 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to
    Exhibit 10.23 to US Airways Group's Annual Report
    on Form 10-K for the year ended December 31, 2003)*
10
.41
Amendment No. 3 dated as of February 9, 2004 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.4
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2004)*
10
.42
Amendment No. 4 dated as of August 4, 2004 to Embraer
    Aircraft Purchase Agreement dated as of May 9, 2003 between
    US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.4
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2004)*
II-6
Table of Contents
Designation
Description
10
.43
Amendment No. 5 dated as of September 3, 2004 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.5
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2004)*
10
.44
Amendment No. 6 dated as of January 25, 2005 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.9
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2005)*
10
.45
Amendment No. 1 dated January 6, 2004 to the Letter
    Agreement DCT-022/03 dated May 9, 2003 between
    US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.5
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2004)*
10
.46
Post-Petition Purchase Agreement Modification and Aircraft
    Financing Term Sheet between US Airways, Inc.,
    Embraer-Empresa Brasileira de Aeronautica S.A., dated
    December 16, 2004 (incorporated by reference to
    Exhibit 10.8 of US Airways Group's Quarterly
    Report on Form 10-Q for the quarter ended March 31,
    2005)
10
.47
Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May 9, 2003 between US Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit 10.2
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2003)*
10
.48
Contract Change Order 1 dated January 27, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May 9, 2003 between US Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit 10.6
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2004)*
10
.49
Contract Change Order 2 dated February 9, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May 9, 2003 between US Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit 10.7
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2004)*
10
.50
Contract Change Order 3 dated February 26, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May 9, 2003 between US Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit 10.8
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2004)*
10
.51
Investment Agreement, dated as of September 26, 2002, by
    and between the Retirement Systems of Alabama and
    US Airways Group, Inc. (incorporated by reference to
    Exhibit 10.1 to US Airways Group's Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 2002)
10
.52
Amendment No. 1 dated as of January 17, 2003 to the
    Investment Agreement, entered into as of September 26, 2002
    and amended and restated as of January 17, 2003 by and
    between the Retirement Systems of Alabama and US Airways
    Group, Inc. (incorporated by reference to Exhibit 10.37 to
    US Airways Group's Annual Report on Form 10-K for
    the year ended December 31, 2002)
10
.53
Amendment No. 2, dated as of March 30, 2003, to the
    Investment Agreement, dated as of September 26, 2002, by
    and among The Retirement Systems of Alabama, Retirement Systems
    of Alabama Holdings, LLC and US Airways Group, Inc.
    (incorporated by reference to Exhibit 10.1 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2003)
10
.54
Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and Retirement Systems of Alabama Holdings LLC (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Registration Statement on Form 8-A filed on May 14,
    2003)
10
.55
Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and ATSB Securities Trust u/a/d March 31, 2003
    (incorporated by reference to Exhibit 10.2 to
    US Airways Group's Registration Statement on
    Form 8-A filed on May 14, 2003)
II-7
Table of Contents
Designation
Description
10
.56
First Amendment dated as of June 25, 2003 to the
    Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and ATSB Securities Trust u/a/d March 31, 2003
    (incorporated by reference to Exhibit 10.6 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended June 30, 2003)
10
.57
Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and General Electric Capital Corporation (incorporated by
    reference to Exhibit 10.3 to US Airways Group's
    Registration Statement on Form 8-A filed on May 14,
    2003)
10
.58
Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and Bank of America, N.A. (incorporated by reference to
    Exhibit 10.4 to US Airways Group's Registration
    Statement on Form 8-A filed on May 14, 2003)
10
.59†
2003 Stock Incentive Plan of US Airways Group, as amended
    and restated (incorporated by reference to Exhibit 4.4 of
    US Airways Group's Registration Statement on
    Form S-8 filed on June 3, 2004)
10
.60†
US Airways Group, Inc. 2003 Nonemployee Director Stock
    Incentive Plan (incorporated by reference to Exhibit 10.4
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2003)
10
.61†
First Amendment to the US Airways Group, Inc. 2003
    Nonemployee Director Stock Incentive Plan (incorporated by
    reference to Exhibit 10.54 of US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2004)
10
.62†
US Airways Group, Inc. 2003 Nonemployee Director Deferred
    Stock Unit Plan (incorporated by reference to Exhibit 10.5
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2003)
10
.63†
First Amendment to the US Airways Group, Inc. 2003
    Nonemployee Director Deferred Stock Unit Plan (incorporated by
    reference to Exhibit 10.10 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2004)
10
.64†
Second Amendment to the US Airways Group, Inc. 2003
    Nonemployee Director Deferred Stock Unit Plan (incorporated by
    reference to Exhibit 10.57 of US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2004)
10
.65†
US Airways Funded Executive Defined Contribution Plan
    (incorporated by reference to Exhibit 10.1 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2003)
10
.66†
First Amendment to the US Airways Funded Executive Defined
    Contribution Plan dated January 26, 2004 (incorporated by
    reference to Exhibit 10.4 to US Airways, Inc.'s
    Quarterly Report for the quarter ended June 30, 2004)
10
.67†
Second Amendment to the US Airways Funded Executive Defined
    Contribution Plan (incorporated by reference to
    Exhibit 10.5 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
10
.68†
Third Amendment to the US Airways Funded Executive Defined
    Contribution Plan (incorporated by reference to
    Exhibit 10.6 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
10
.69†
US Airways Unfunded Executive Defined Contribution Plan
    (incorporated by reference to Exhibit 10.2 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2003)
10
.70†
First Amendment to the US Airways Unfunded Executive
    Defined Contribution Plan dated January 26, 2004
    (incorporated by reference to Exhibit 10.7 to
    US Airways, Inc.'s Quarterly Report for the quarter
    ended June 30, 2004)
10
.71†
Second Amendment to the US Airways Unfunded Executive
    Defined Contribution Plan (incorporated by reference to
    Exhibit 10.8 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
II-8
Table of Contents
Designation
Description
10
.72†
Third Amendment to the US Airways Unfunded Executive
    Defined Contribution Plan (incorporated by reference to
    Exhibit 10.9 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
10
.73†
Employment Agreement between US Airways Group, Inc. and
    US Airways, Inc. and its President and Chief Executive
    Officer effective May 19, 2004 (incorporated by reference
    to Exhibit 10.6 to US Airways, Inc.'s Quarterly
    Report for the quarter ended September 30, 2004)
10
.74†
Employment Agreement between US Airways, Inc. and
    David N. Siegel effective March 11, 2002 (incorporated
    by reference to Exhibit 10.41 to US Airways,
    Inc.'s Annual Report on Form 10-K for the year ended
    December 31, 2001)
10
.75†
First Amendment effective March 31, 2003 to the Employment
    Agreement dated March 11, 2002 between US Airways,
    Inc. and David N. Siegel (incorporated by reference to
    Exhibit 10.1 to US Airways, Inc.'s Quarterly
    Report on Form 10-Q for the quarter ended March 31,
    2003)
10
.76†
Separation Agreement between US Airways Group, Inc.,
    US Airways, Inc. and David N. Siegel dated
    April 23, 2004 (incorporated by reference to
    Exhibit 10.10 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
10
.77†
Supplemental Separation Agreement between US Airways Group,
    Inc., US Airways, Inc. and David N. Siegel dated
    May 19, 2004 (incorporated by reference to
    Exhibit 10.11 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
10
.78†
Employment Agreement between US Airways, Inc. and its
    Executive Vice President — Corporate Affairs and
    General Counsel effective March 1, 2003 (incorporated by
    reference to Exhibit 10.5 to US Airways, Inc.'s
    Annual Report on Form 10-K for the year ended
    December 31, 2003)
10
.79†
Severance Agreement between US Airways, Inc., and
    Neal S. Cohen effective April 8, 2002 (incorporated by
    reference to Exhibit 10.8 to US Airways, Inc.'s
    Annual Report on Form 10-K for the year ended
    December 31, 2002)
10
.80†
First Amendment effective March 31, 2003 to the Severance
    Agreement dated April 8, 2002 between US Airways, Inc.
    and Neal S. Cohen (incorporated by reference to
    Exhibit 10.2 to US Airways, Inc.'s Quarterly
    Report on Form 10-Q for the quarter ended March 31,
    2003)
10
.81†
Separation and Consulting Agreement between US Airways
    Group, Inc., US Airways, Inc. and Neal S. Cohen
    effective April 30, 2004 (incorporated by reference to
    Exhibit 10.12 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
10
.82†
Severance Agreement between US Airways, Inc. and its
    Executive Vice President — Operations effective
    July 26, 2002 (incorporated by reference to
    Exhibit 10.9 to US Airways, Inc.'s Annual Report
    on Form 10-K for the year ended December 31, 2002)
10
.83†
First Amendment effective March 31, 2003 to the Severance
    Agreement dated June 26, 2002 between US Airways, Inc.
    and the Executive Vice President — Operations
    (incorporated by reference to Exhibit 10.3 to
    US Airways, Inc.'s Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2003)
10
.84†
Severance Agreement between US Airways, Inc. and the Senior
    Vice President — Marketing effective June 26,
    2002 (incorporated by reference to Exhibit 10.14 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2003)
10
.85†
First Amendment effective March 31, 2003 to the Severance
    Agreement dated June 26, 2002 between US Airways, Inc.
    and the Senior Vice President — Marketing
    (incorporated by reference to Exhibit 10.15 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2003)
10
.86†
Agreement between US Airways, Inc. and David N. Siegel with
    respect to certain employment arrangements effective
    March 11, 2002 (incorporated by reference to
    Exhibit 10.49 to US Airways, Inc.'s Annual Report
    on Form 10-K for the year ended December 31, 2001)
II-9
Table of Contents
Designation
Description
10
.87†
Severance Agreement between US Airways, Inc. and its Senior
    Vice President — Employee Relations effective
    April 8, 2002 (incorporated by reference to
    Exhibit 10.10 to US Airways, Inc.'s Annual Report
    on Form 10-K for the year ended December 31, 2002)
10
.88†
First Amendment dated March 31, 2003 to the Severance
    Agreement dated as April 8, 2002 between US Airways,
    Inc. and its Senior Vice President — Labor Relations
    (incorporated by reference to Exhibit 10.33 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2004)
10
.89†
Agreement between US Airways, Inc. and its Senior Vice
    President — Labor Relations with respect to certain
    employment arrangements effective July 25, 2002
    (incorporated by reference to Exhibit 10.18 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2002)
10
.90†
Agreement between US Airways, Inc. and its Senior Vice
    President — Marketing with respect to certain
    employment arrangements effective July 25, 2002
    (incorporated by reference to Exhibit 10.18 to Amendment
    No. 1 to US Airways, Inc.'s Annual Report on
    Form 10-K for the year ended December 31, 2003)
10
.91†
Agreement between US Airways, Inc. and its Senior Vice
    President — Marketing with respect to certain
    employment arrangements effective October 20, 2004
    (incorporated by reference to Exhibit 10.35 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2004)
10
.92†
Agreement between US Airways, Inc. and its Executive Vice
    President — Operations with respect to certain
    employment arrangements effective July 25, 2002
    (incorporated by reference to Exhibit 10.17 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2002)
10
.93†
Agreement between US Airways, Inc. and its Executive Vice
    President — Operations with respect to certain
    employment arrangements effective October 20, 2004
    (incorporated by reference to Exhibit 10.37 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2004)
10
.94†
Agreement between US Airways, Inc. and its Executive Vice
    President — Corporate Affairs, General Counsel and
    Secretary with respect to certain employment arrangements
    effective October 20, 2004 (incorporated by reference to
    Exhibit 10.38 to US Airways, Inc.'s Annual Report
    on Form 10-K for the year ended December 31, 2004)
10
.95†
Agreement between US Airways, Inc. and its Senior Vice
    President — Labor Relations with respect to certain
    employment arrangements effective October 20, 2004
    (incorporated by reference to Exhibit 10.40 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2004)
10
.96
Investment Agreement, dated as of March 15, 2005 among
    Wexford Capital LLC, Republic Airways Holdings Inc.,
    US Airways Group, Inc. and US Airways, Inc.
    (incorporated by reference to Exhibit 10.3 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2005)*
10
.97
Investment Agreement, dated as of May 19, 2005, by and
    among Peninsula Investment Partners, L.P., US Airways,
    Group, Inc. and its successors and America West Holdings
    Corporation (incorporated by reference to Exhibit 10.3 to
    the Current Report on Form 8-K filed by America West
    Holdings Corporation on May 25, 2005)
10
.98
Investment Agreement, dated as of May 19, 2005, by and
    among ACE Aviation Holdings, Inc., US Airways, Group, Inc.
    and its successors and America West Holdings Corporation
    (incorporated by reference to Exhibit 10.4 to the Current
    Report on Form 8-K filed by America West Holdings
    Corporation on May 25, 2005)
10
.99
Investment Agreement, dated as of May 19, 2005, by and
    among Par Investment Partners, L.P., US Airways, Group,
    Inc. and its successors and America West Holdings Corporation
    (incorporated by reference to Exhibit 10.2 to the Current
    Report on Form 8-K filed by America West Holdings
    Corporation on May 25, 2005)
II-10
Table of Contents
Designation
Description
10
.100
Investment Agreement, dated as of May 19, 2005, by and
    among Eastshore Aviation, LLC, US Airways, Group, Inc. and
    its successors and America West Holdings Corporation
    (incorporated by reference to Exhibit 10.1 to the Current
    Report on Form 8-K filed by America West Holdings
    Corporation on May 25, 2005)
10
.101
Investment Agreement, dated May 27, 2005, by and among
    Wellington Investment Management Company, LLP, America West
    Holdings Corporation and US Airways Group, Inc.
    (incorporated by reference to Exhibit 10.1 to the Current
    Report on Form 8-K filed by America West Holdings
    Corporation on June 2, 2005)
10
.102
Voting Agreement, dated May 19, 2005, among TPG Partners,
    L.P., TPG Parallel I, L.P., Air Partners II, L.P. and
    US Airways Group, Inc. (incorporated by reference to
    Exhibit 2.1 to the Current Report on Form 8-K filed by
    America West Holdings Corporation on May 25, 2005)
10
.103
First Supplemental Order (I) Authorizing Debtors' Use of
    Cash Collateral (II) Providing Adequate Protection Pursuant to
    Bankruptcy Rules 4001(b) and 4001(d) (incorporated by
    reference to Exhibit 99.1 to US Airways Group's
    Current Report on Form 8-K dated January 13, 2005)
10
.104
Junior Secured Debtor-in-Possession Credit Facility Agreement
    dated as of February 18, 2005 among US Airways, Inc.,
    as Debtor and Debtor-in-Possession under Chapter 11 of the
    Bankruptcy Code as Borrower, US Airways Group, Inc., PSA
    Airlines, Inc., and Material Services, Inc., Debtors and
    Debtors-in-Possession under Chapter 11 of the Bankruptcy
    Code as Guarantors, and Eastshore Aviation, LLC, as Lender
    (incorporated by reference to Exhibit 99 to US Airways
    Group's Current Report on Form 8-K dated
    February 28, 2005)
10
.105
Amendment No. 1 dated as of May 19, 2005 to Junior
    Secured Debtor-in-Possession Credit Facility Agreement dated as
    of February 18, 2005 among US Airways, Inc., as Debtor
    and Debtor-in-Possession under Chapter 11 of the Bankruptcy
    Code as Borrower, US Airways Group, Inc., PSA Airlines,
    Inc., and Material Services, Inc., Debtors and
    Debtors-in-Possession under Chapter 11 of the Bankruptcy
    Code as Guarantors, and Eastshore Aviation, LLC, as Lender
    (incorporated by reference to Exhibit 10.105 to US Airways
    Group's Registration Statement on Form S-4 (File
    No. 333-126162), filed with the SEC on June 28, 2005)
21
.1
Subsidiaries of US Airways Group (incorporated by reference
    to Exhibit 21.1 to the Annual Report on Form 10-K for
    the year ended December 31, 2004 filed by US Airways Group
    on March 1, 2005)
23
.1**
Consent of KPMG LLP, Independent Registered Public Accounting
    Firm of US Airways Group
23
.2**
Consent of KPMG LLP, Independent Registered Public Accounting
    Firm of America West Holdings
23
.3**
Consent of PricewaterhouseCoopers LLP
23
.4***
Consent of Elizabeth K. Lanier (included in Exhibit 5.1)
24
.1
Powers of Attorney signed by the directors of US Airways
    Group, authorizing their signatures on this report (included on
    signature page)
99
.1
Form of Stockholders Agreement among ACE Aviation Holdings, PAR
    Investment Partners, L.P., Peninsula Investment Partners, L.P.,
    Eastshore Aviation, LLC and US Airways Group, Inc.
    (incorporated by reference to Exhibit 99.2 to the Current
    Report on Form 8-K filed by America West Holdings
    Corporation on May 25, 2005)
99
.2***
Instructions as to Use of US Airways Group, Inc.
    Subscription Rights Certificates
* Portions of this exhibit have
been omitted under a request for confidential treatment and
filed separately with the United States Securities and Exchange
Commission.
** Filed herewith.
*** To be filed by amendment.
† Management contract or
compensatory plan or arrangement.
II-11
Table of Contents
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
1)
To file, during any period in which offers or sales are being
    made, a post-effective amendment to this registration statement:
a)
to include any prospectus required by Section 10(a)(3) of
    the Securities Act of 1933;
b)
to reflect in the prospectus any facts or events arising after
    the effective date of the registration statement (or the most
    recent post-effective amendment thereof) which, individually or
    in the aggregate, represent a fundamental change in the
    information set forth in the registration statement. To reflect
    in the prospectus any facts or events arising after the
    effective date of the registration statement (or the most recent
    post-effective amendment thereof) which, individually or in the
    aggregate, represents a fundamental change in the information
    set forth in the registration statement. Notwithstanding the
    foregoing, any increase or decrease in volume of securities
    offered (if the total dollar value of securities offered would
    not exceed that which was registered) and any deviation from the
    low or high end of the estimated maximum offering range may be
    reflected in the form of prospectus filed with the Commission
    pursuant to Rule 424(b) if, in the aggregate, the changes
    in volume and price represent no more than a 20% change in the
    maximum aggregate offering price set forth in the
    "Calculation of Registration Fee" table in the
    effective registration statement.
c)
To include any material information with respect to the plan of
    distribution not previously disclosed in the registration
    statement or any material change to such information in the
    registration statement.
2)
That, for the purpose of determining any liability under the
    Securities Act of 1933, each such post-effective amendment shall
    be deemed to be a new registration statement relating to the
    securities offered therein, and the offering of such securities
    at that time shall be deemed to be the initial bona fide
    offering thereof.
3)
To remove from registration by means of a post-effective
    amendment any of the securities being registered which remain
    unsold at the termination of the offering.
4)
That, for purposes of determining any liability under the
    Securities Act of 1933, each filing of the Registrant's
    annual report under Section 13(a) or Section 15(d) of
    the Securities Exchange Act of 1934 (and, where applicable, each
    filing of an employee benefit plan's annual report under
    Section 15(d) of the Securities Exchange Act of 1934) that
    is incorporated by reference in this registration statement
    shall be deemed to be a new registration statement relating to
    the securities offered therein, and the offering of such
    securities at that time shall be deemed to be the initial bona
    fide offering thereof.
In the event a claim of indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the
Registrant in a successful defense of any action, suit or
proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by
the final adjudication of such issue.
II-12
Table of Contents
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF ARLINGTON, COMMONWEALTH OF VIRGINIA,
ON JUNE 29, 2005.
US AIRWAYS GROUP, INC.
By:
/s/ Bruce R. Lakefield
Name: Bruce R. Lakefield
Title: President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each individual whose
signature appears below constitutes and appoints Ronald E.
Stanley and Elizabeth K. Lanier and each of them, his true and
lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this
registration statement and to file the same with all exhibits
thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof. This power of attorney may
be executed in counterparts.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE
TITLE
DATE
/s/ Bruce R. Lakefield
Bruce
    R. Lakefield
Director, President and Chief Executive Officer (Principal
    Executive Officer)
June 29, 2005
/s/ Ronald E. Stanley
Ronald
    E. Stanley
Executive Vice President — Finance and Chief Financial
    Officer (Principal Financial Officer)
June 29, 2005
/s/ Anita P. Beier
Anita
    P. Beier
Senior Vice President — Finance and Controller
    (Principal Accounting Officer)
June 29, 2005
/s/ Dr. David G. Bronner
Dr.
    David G. Bronner
Director and Chairman
June 29, 2005
/s/ Thomas R. Harter
Thomas
    R. Harter
Director
June 29, 2005
/s/ Magdalena Jacobsen
Magdalena
    Jacobsen
Director
June 29, 2005
II-13
Table of Contents
SIGNATURE
TITLE
DATE
/s/ Robert L. Johnson
Robert
    L. Johnson
Director
June 29, 2005
/s/ Cheryl G. Krongard
Cheryl
    G. Krongard
Director
June 29, 2005
/s/ Joseph J. Mantineo
Joseph
    J. Mantineo
Director
June 29, 2005
/s/ John A. McKenna, Jr.
John
    A. McKenna, Jr.
Director
June 29, 2005
/s/ Hans Mirka
Hans
    Mirka
Director
June 29, 2005
/s/ George M. Philip
George
    M. Philip
Director
June 29, 2005
/s/ William D. Pollock
William
    D. Pollock
Director
June 29, 2005
/s/ James M. Simon
James
    M. Simon
Director
June 29, 2005
/s/ William T. Stephens
William
    T. Stephens
Director
June 29, 2005
II-14
Table of Contents
EXHIBIT INDEX
Exhibit No.
Description
2
.1
Agreement and Plan of Merger, dated May 19, 2005, by and
    among US Airways Group, Inc. and America West Holdings
    Corporation (incorporated by reference to Exhibit 2.1 to
    US Airways Group's Registration Statement on
    Form S-4 filed on June 28, 2005) (Pursuant to
    item 601(b)(2) of Regulation S-K promulgated by the
    SEC, the exhibits and schedules to the Agreement and Plan of
    Merger have been omitted. Such exhibits and schedules are
    described in the Agreement and Plan of Merger. US Airways
    Group hereby agrees to furnish to the SEC, upon its request, any
    or all of such omitted exhibits or schedules)
3
.1
Amended and Restated Certificate of Incorporation of
    US Airways Group, Inc., effective as of March 31, 2003
    (incorporated by reference to Exhibit 3.1 to
    US Airways Group's Registration Statement on
    Form 8-A filed on May 14, 2003)
3
.2
Amended and Restated Bylaws of US Airways Group, Inc.,
    effective as of March 31, 2003 (incorporated by reference
    to Exhibit 3.2 to US Airways Group's Registration
    Statement on Form 8-A filed on May 14, 2003)
3
.3
Form of Second Amended and Restated Certificate of Incorporation
    of US Airways Group, Inc. (incorporated by reference to
    Exhibit 3.3 of US Airways Group's Registration
    Statement on Form S-4 filed on June 28, 2005)
3
.4
Form of Second Amended and Restated Bylaws of US Airways
    Group, Inc. (incorporated by reference to Exhibit 3.4 of
    US Airways Group's Registration Statement on
    Form S-4 filed on June 28, 2005)
4
.1
US Airways Group, Inc. Class A-1 Warrant to purchase
    shares of Class A Common Stock, dated March 31, 2003,
    issued to General Electric Capital Corporation (incorporated by
    reference to Exhibit 4.1 to US Airways Group's
    Registration Statement on Form 8-A filed on May 14,
    2003)
4
.2
US Airways Group, Inc. Class A-1 Warrant to purchase
    shares of Class A Common Stock, dated March 31, 2003,
    issued to Bank of America, N.A. (incorporated by reference to
    Exhibit 4.2 to US Airways Group's Registration
    Statement on Form 8-A filed on May 14, 2003)
4
.3
US Airways Group, Inc. Class A-1 Warrant to purchase
    shares of Class A Common Stock, dated March 31, 2003,
    issued to Retirement Systems of Alabama Holdings LLC
    (incorporated by reference to Exhibit 4.3 to
    US Airways Group's Registration Statement on
    Form 8-A filed on May 14, 2003)
4
.4
US Airways Group, Inc. Class A-1 Warrant to purchase
    shares of Class A Common Stock, dated March 31, 2003,
    issued to Retirement Systems of Alabama Holdings LLC
    (incorporated by reference to Exhibit 4.4 to
    US Airways Group's Registration Statement on
    Form 8-A filed on May 14, 2003)
4
.5
US Airways Group, Inc. Class A-1 Warrant to purchase
    shares of Class A Common Stock, dated March 31, 2003,
    issued to ATSB Securities Trust u/a/d March 31, 2003
    (incorporated by reference to Exhibit 4.5 to
    US Airways Group's Registration Statement on
    Form 8-A filed on May 14, 2003)
4
.6
Form of Class A-1 Warrants (incorporated by reference to
    Exhibit 4.3 to US Airways Group's Registration
    Statement on Form S-8 filed on July 31, 2003)
4
.7***
Form of Rights Certificate
5
.1***
Opinion of Elizabeth K. Lanier, Executive Vice
    President — Corporate Affairs and General Counsel of
    US Airways Group regarding legality of securities being
    registered
10
.1
Loan Agreement dated March 31, 2003 among US Airways,
    Inc. and Phoenix American Financial Services, Inc., Bank of
    America, N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit 10.5 to
    US Airways' Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2003)
Table of Contents
Exhibit No.
Description
10
.2
Amendment No. 1 dated December 18, 2003 to Loan
    Agreement dated March 31, 2003 among US Airways, Inc.
    and Phoenix American Financial Services, Inc., Bank of America,
    N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit 10.1 to
    US Airways' Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2004)
10
.3
Amendment No. 2 dated March 12, 2004 to Loan Agreement
    dated March 31, 2003 among US Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board. (incorporated by
    reference to Exhibit 10.2 to US Airways'
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2004)
10
.4
Amendment No. 3 dated May 21, 2004 to Loan Agreement
    dated March 31, 2004 among US Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board (incorporated by
    reference to Exhibit 10.1 to US Airways'
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2004)
10
.5
Amendment No. 4 dated July 13, 2004 to Loan Agreement
    dated March 31, 2004 among US Airways, Inc. and
    Phoenix American Financial Services, Inc., Bank of America, N.A.
    and the Air Transportation Stabilization Board (incorporated by
    reference to Exhibit 10.2 to US Airways'
    Quarterly Report for the quarter ended June 30, 2004)
10
.6
Amendment No. 5 dated December 28, 2004 to Loan
    Agreement dated March 31, 2004 among US Airways, Inc.
    and Phoenix American Financial Services, Inc., Bank of America,
    N.A. and the Air Transportation Stabilization Board
    (incorporated by reference to Exhibit 10.6 to
    US Airways Group's Registration Statement on
    Form S-4 (File No. 333-126162), filed with the SEC on
    June 28, 2005)
10
.7
Final Order (I) Authorizing Debtors' Use of Cash
    Collateral and (II) Providing Adequate Protection Pursuant
    to Bankruptcy Rules 4001(b) and 4001(d) (incorporated by
    reference to Exhibit 99.1 to US Airways Group's
    Current Report on Form 8-K dated October 14, 2004)
10
.8
Motion to Authorize and Approve (1) The Primary
    Tranche A Lender Assignment, (2) The Alternate
    Tranche A Lender Assignment, and (3) Amendment
    No. 5 to the Loan Agreement pursuant to 11 U.S.C.
    Sections 105, 363, 1108, and Bankruptcy Rules 4001 and 6004
    (incorporated by reference to Exhibit 99.1 to
    US Airways Group's Current Report on Form 8-K
    dated December 28, 2004)
10
.9
Order Approving (1) The Primary Tranche A Lender
    Assignment, (2) The Alternate Tranche A Lender
    Assignment, and (3) Amendment No. 5 to Loan Agreement
    pursuant to 11 U.S.C. Sections 105, 363, 1108, and
    Bankruptcy Rules 4001 and 6004 (incorporated by reference
    to Exhibit 99.2 to US Airways Group's Current
    Report on Form 8-K dated December 28, 2004)
10
.10
Master Memorandum of Understanding among US Airways Group,
    Inc., US Airways, Inc., and General Electric Capital
    Corporation acting through its agent GE Capital Aviation
    Services, Inc. and General Electric Company,
    GE Transportation Component (incorporated by reference to
    Exhibit 10.9 to US Airways Groups' Annual Report
    on Form 10-K for the year ended December 31, 2004)*
10
.11
A319/A320/A321 Purchase Agreement dated as of October 31,
    1997 between US Airways Group and AVSA, S.A.R.L.
    ("AVSA"), an affiliate of aircraft manufacturer Airbus
    Industrie G.I.E. (incorporated by reference to Exhibit 10.1
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended September 30, 1997)*
10
.12
Amendment No. 1 dated as of June 10, 1998 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.2 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 1998)*
10
.13
Amendment No. 2 dated as of January 19, 1999 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.3 to US Airways Group's
    Annual Report on Form 10-K for the year ended December 31,
    1998)*
Table of Contents
Exhibit No.
Description
10
.14
Amendment No. 3 dated as of March 31, 1999 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 1999)*
10
.15
Amendment No. 4 dated as of August 31, 1999 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.2 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 1999)*
10
.16
Amendment No. 5 dated as of October 29, 1999 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.6 to US Airways Group's
    Annual Report on Form 10-K for the year ended December 31,
    1999)*
10
.17
Amendment No. 6 dated as of April 19, 2000 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2000)*
10
.18
Amendment No. 7 dated as of June 29, 2000 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2000)*
10
.19
Amendment No. 8 dated as of November 27, 2000 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.9 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2000)*
10
.20
Amendment No. 9 dated as of December 29, 2000 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.10 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2000)*
10
.21
Amendment No. 10 dated as of April 9, 2001 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2001)*
10
.22
Amendment No. 11 dated as of July 17, 2002 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit 10.1 to US Airways
    Group's Quarterly Report on Form 10-Q for the quarter
    ended June 30, 2002)*
10
.23
Amendment No. 12 dated as of March 29, 2003 to
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit 10.1 to US Airways
    Group's Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2003)*
10
.24
Amendment No. 13 dated August 30, 2004 to the Airbus
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit 10.2 to
    US Airways' Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2004)*
10
.25
Amendment No. 14 dated December 22, 2004 to the Airbus
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit 10.4 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2005)*
10
.26
Amendment No. 15 dated January 17, 2005 to the Airbus
    A319/A320/A321 Purchase Agreement dated October 31, 1997
    between US Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit 10.5 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2005)*
Table of Contents
Exhibit No.
Description
10
.27
A330/A340 Purchase Agreement dated as of November 24, 1998
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.4 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 1998)*
10
.28
Amendment No. 1 dated as of March 23, 2000 to
    A330/A340 Purchase Agreement dated November 24, 1998
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.2 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2000)*
10
.29
Amendment No. 2 dated as of June 29, 2000 to A330/A340
    Purchase Agreement dated November 24, 1998 between
    US Airways Group and AVSA (incorporated by reference to
    Exhibit 10.2 to US Airways Group's Quarterly
    Report on Form 10-Q for the quarter ended June 30,
    2000)*
10
.30
Amendment No. 3 dated as of November 27, 2000 to
    A330/A340 Purchase Agreement dated November 24, 1998
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.14 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2000)*
10
.31
Amendment No. 4 dated as of September 20, 2001 to
    A330/A340 Purchase Agreement dated November 24, 1998
    between US Airways Group and AVSA (incorporated by
    reference to Exhibit 10.16 to US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2001)*
10
.32
Amendment No. 5 dated as of July 17, 2002 to A330/A340
    Purchase Agreement dated November 24, 1998 between
    US Airways Group and AVSA, S.A.R.L. (incorporated by
    reference to Exhibit 10.2 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2002)*
10
.33
Amendment No. 6 dated as of March 29, 2003 to
    A330/A340 Purchase Agreement dated November 24, 1998
    between US Airways Group and AVSA, S.A.R.L. (incorporated
    by reference to Exhibit 10.2 to US Airways
    Group's Quarterly Report on Form 10-Q for the quarter
    ended March 31, 2003)*
10
.34
Amendment No. 7 dated August 30, 2004 to the Airbus
    A330/A340 Purchase Agreement dated November 24, 1998
    between US Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit 10.3 to
    US Airways, Inc.'s Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2004)*
10
.35
Amendment No. 8 dated December 22, 2004 to the Airbus
    A330/A340 Purchase Agreement dated as of November 24, 1998
    between US Airways Group, Inc. and AVSA, S.A.R.L.
    (incorporated by reference to Exhibit 10.6 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2005)*
10
.36
Amendment No. 9 dated November 24, 1998 to the Airbus
    A330/A340 Purchase Agreement between US Airways Group, Inc.
    and AVSA, S.A.R.L. (incorporated by reference to
    Exhibit 10.7 to US Airways Group's Quarterly
    Report on Form 10-Q for the quarter ended March 31,
    2005)*
10
.37
Letter Agreement dated December 17, 2004 between
    US Airways Group, Inc. and US Airways, Inc. and Airbus
    North America Sales Inc. (incorporated by reference to
    Exhibit 99.2 to US Airways Group's Current Report
    on Form 8-K dated February 3, 2005)
10
.38
Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.1
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2003)*
10
.39
Amendment No. 1 dated as of November 4, 2003 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to
    Exhibit 10.22 to US Airways Group's Annual Report
    on Form 10-K for the year ended December 31, 2003)*
Table of Contents
Exhibit No.
Description
10
.40
Amendment No. 2 dated as of November 21, 2003 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to
    Exhibit 10.23 to US Airways Group's Annual Report
    on Form 10-K for the year ended December 31, 2003)*
10
.41
Amendment No. 3 dated as of February 9, 2004 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.4
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2004)*
10
.42
Amendment No. 4 dated as of August 4, 2004 to Embraer
    Aircraft Purchase Agreement dated as of May 9, 2003 between
    US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.4
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2004)*
10
.43
Amendment No. 5 dated as of September 3, 2004 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.5
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2004)*
10
.44
Amendment No. 6 dated as of January 25, 2005 to
    Embraer Aircraft Purchase Agreement dated as of May 9, 2003
    between US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.9
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2005)*
10
.45
Amendment No. 1 dated January 6, 2004 to the Letter
    Agreement DCT-022/03 dated May 9, 2003 between
    US Airways Group, Inc. and Empresa Brasileira de
    Aeronautica S.A. (incorporated by reference to Exhibit 10.5
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2004)*
10
.46
Post-Petition Purchase Agreement Modification and Aircraft
    Financing Term Sheet between US Airways, Inc.,
    Embraer-Empresa Brasileira de Aeronautica S.A., dated
    December 16, 2004 (incorporated by reference to
    Exhibit 10.8 of US Airways Group's Quarterly
    Report on Form 10-Q for the quarter ended March 31,
    2005)
10
.47
Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May 9, 2003 between US Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit 10.2
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2003)*
10
.48
Contract Change Order 1 dated January 27, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May 9, 2003 between US Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit 10.6
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2004)*
10
.49
Contract Change Order 2 dated February 9, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May 9, 2003 between US Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit 10.7
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2004)*
10
.50
Contract Change Order 3 dated February 26, 2004 to
    Bombardier CRJ Aircraft Master Purchase Agreement dated as of
    May 9, 2003 between US Airways Group, Inc. and
    Bombardier, Inc. (incorporated by reference to Exhibit 10.8
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended March 31, 2004)*
10
.51
Investment Agreement, dated as of September 26, 2002, by
    and between the Retirement Systems of Alabama and
    US Airways Group, Inc. (incorporated by reference to
    Exhibit 10.1 to US Airways Group's Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 2002)
10
.52
Amendment No. 1 dated as of January 17, 2003 to the
    Investment Agreement, entered into as of September 26, 2002
    and amended and restated as of January 17, 2003 by and
    between the Retirement Systems of Alabama and US Airways
    Group, Inc. (incorporated by reference to Exhibit 10.37 to
    US Airways Group's Annual Report on Form 10-K for
    the year ended December 31, 2002)
Table of Contents
Exhibit No.
Description
10
.53
Amendment No. 2, dated as of March 30, 2003, to the
    Investment Agreement, dated as of September 26, 2002, by
    and among The Retirement Systems of Alabama, Retirement Systems
    of Alabama Holdings, LLC and US Airways Group, Inc.
    (incorporated by reference to Exhibit 10.1 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2003)
10
.54
Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and Retirement Systems of Alabama Holdings LLC (incorporated by
    reference to Exhibit 10.1 to US Airways Group's
    Registration Statement on Form 8-A filed on May 14,
    2003)
10
.55
Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and ATSB Securities Trust u/a/d March 31, 2003
    (incorporated by reference to Exhibit 10.2 to
    US Airways Group's Registration Statement on
    Form 8-A filed on May 14, 2003)
10
.56
First Amendment dated as of June 25, 2003 to the
    Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and ATSB Securities Trust u/a/d March 31, 2003
    (incorporated by reference to Exhibit 10.6 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended June 30, 2003)
10
.57
Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and General Electric Capital Corporation (incorporated by
    reference to Exhibit 10.3 to US Airways Group's
    Registration Statement on Form 8-A filed on May 14,
    2003)
10
.58
Registration Rights Agreement made and entered into as of
    March 31, 2003 by and between US Airways Group, Inc.
    and Bank of America, N.A. (incorporated by reference to
    Exhibit 10.4 to US Airways Group's Registration
    Statement on Form 8-A filed on May 14, 2003)
10
.59†
2003 Stock Incentive Plan of US Airways Group, as amended
    and restated (incorporated by reference to Exhibit 4.4 of
    US Airways Group's Registration Statement on
    Form S-8 filed on June 3, 2004)
10
.60†
US Airways Group, Inc. 2003 Nonemployee Director Stock
    Incentive Plan (incorporated by reference to Exhibit 10.4
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2003)
10
.61†
First Amendment to the US Airways Group, Inc. 2003
    Nonemployee Director Stock Incentive Plan (incorporated by
    reference to Exhibit 10.54 of US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2004)
10
.62†
US Airways Group, Inc. 2003 Nonemployee Director Deferred
    Stock Unit Plan (incorporated by reference to Exhibit 10.5
    to US Airways Group's Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2003)
10
.63†
First Amendment to the US Airways Group, Inc. 2003
    Nonemployee Director Deferred Stock Unit Plan (incorporated by
    reference to Exhibit 10.10 to US Airways Group's
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2004)
10
.64†
Second Amendment to the US Airways Group, Inc. 2003
    Nonemployee Director Deferred Stock Unit Plan (incorporated by
    reference to Exhibit 10.57 of US Airways Group's
    Annual Report on Form 10-K for the year ended
    December 31, 2004)
10
.65†
US Airways Funded Executive Defined Contribution Plan
    (incorporated by reference to Exhibit 10.1 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2003)
10
.66†
First Amendment to the US Airways Funded Executive Defined
    Contribution Plan dated January 26, 2004 (incorporated by
    reference to Exhibit 10.4 to US Airways, Inc.'s
    Quarterly Report for the quarter ended June 30, 2004)
10
.67†
Second Amendment to the US Airways Funded Executive Defined
    Contribution Plan (incorporated by reference to
    Exhibit 10.5 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
Table of Contents
Exhibit No.
Description
10
.68†
Third Amendment to the US Airways Funded Executive Defined
    Contribution Plan (incorporated by reference to
    Exhibit 10.6 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
10
.69†
US Airways Unfunded Executive Defined Contribution Plan
    (incorporated by reference to Exhibit 10.2 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2003)
10
.70†
First Amendment to the US Airways Unfunded Executive
    Defined Contribution Plan dated January 26, 2004
    (incorporated by reference to Exhibit 10.7 to
    US Airways, Inc.'s Quarterly Report for the quarter
    ended June 30, 2004)
10
.71†
Second Amendment to the US Airways Unfunded Executive
    Defined Contribution Plan (incorporated by reference to
    Exhibit 10.8 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
10
.72†
Third Amendment to the US Airways Unfunded Executive
    Defined Contribution Plan (incorporated by reference to
    Exhibit 10.9 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
10
.73†
Employment Agreement between US Airways Group, Inc. and
    US Airways, Inc. and its President and Chief Executive
    Officer effective May 19, 2004 (incorporated by reference
    to Exhibit 10.6 to US Airways, Inc.'s Quarterly
    Report for the quarter ended September 30, 2004)
10
.74†
Employment Agreement between US Airways, Inc. and
    David N. Siegel effective March 11, 2002 (incorporated
    by reference to Exhibit 10.41 to US Airways,
    Inc.'s Annual Report on Form 10-K for the year ended
    December 31, 2001)
10
.75†
First Amendment effective March 31, 2003 to the Employment
    Agreement dated March 11, 2002 between US Airways,
    Inc. and David N. Siegel (incorporated by reference to
    Exhibit 10.1 to US Airways, Inc.'s Quarterly
    Report on Form 10-Q for the quarter ended March 31,
    2003)
10
.76†
Separation Agreement between US Airways Group, Inc.,
    US Airways, Inc. and David N. Siegel dated
    April 23, 2004 (incorporated by reference to
    Exhibit 10.10 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
10
.77†
Supplemental Separation Agreement between US Airways Group,
    Inc., US Airways, Inc. and David N. Siegel dated
    May 19, 2004 (incorporated by reference to
    Exhibit 10.11 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
10
.78†
Employment Agreement between US Airways, Inc. and its
    Executive Vice President — Corporate Affairs and
    General Counsel effective March 1, 2003 (incorporated by
    reference to Exhibit 10.5 to US Airways, Inc.'s
    Annual Report on Form 10-K for the year ended
    December 31, 2003)
10
.79†
Severance Agreement between US Airways, Inc., and
    Neal S. Cohen effective April 8, 2002 (incorporated by
    reference to Exhibit 10.8 to US Airways, Inc.'s
    Annual Report on Form 10-K for the year ended
    December 31, 2002)
10
.80†
First Amendment effective March 31, 2003 to the Severance
    Agreement dated April 8, 2002 between US Airways, Inc.
    and Neal S. Cohen (incorporated by reference to
    Exhibit 10.2 to US Airways, Inc.'s Quarterly
    Report on Form 10-Q for the quarter ended March 31,
    2003)
10
.81†
Separation and Consulting Agreement between US Airways
    Group, Inc., US Airways, Inc. and Neal S. Cohen
    effective April 30, 2004 (incorporated by reference to
    Exhibit 10.12 to US Airways, Inc.'s Quarterly
    Report for the quarter ended June 30, 2004)
10
.82†
Severance Agreement between US Airways, Inc. and its
    Executive Vice President — Operations effective
    July 26, 2002 (incorporated by reference to
    Exhibit 10.9 to US Airways, Inc.'s Annual Report
    on Form 10-K for the year ended December 31, 2002)
10
.83†
First Amendment effective March 31, 2003 to the Severance
    Agreement dated June 26, 2002 between US Airways, Inc.
    and the Executive Vice President — Operations
    (incorporated by reference to Exhibit 10.3 to
    US Airways, Inc.'s Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2003)
Table of Contents
Exhibit No.
Description
10
.84†
Severance Agreement between US Airways, Inc. and the Senior
    Vice President — Marketing effective June 26,
    2002 (incorporated by reference to Exhibit 10.14 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2003)
10
.85†
First Amendment effective March 31, 2003 to the Severance
    Agreement dated June 26, 2002 between US Airways, Inc.
    and the Senior Vice President — Marketing
    (incorporated by reference to Exhibit 10.15 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2003)
10
.86†
Agreement between US Airways, Inc. and David N. Siegel with
    respect to certain employment arrangements effective
    March 11, 2002 (incorporated by reference to
    Exhibit 10.49 to US Airways, Inc.'s Annual Report
    on Form 10-K for the year ended December 31, 2001)
10
.87†
Severance Agreement between US Airways, Inc. and its Senior
    Vice President — Employee Relations effective
    April 8, 2002 (incorporated by reference to
    Exhibit 10.10 to US Airways, Inc.'s Annual Report
    on Form 10-K for the year ended December 31, 2002)
10
.88†
First Amendment dated March 31, 2003 to the Severance
    Agreement dated as April 8, 2002 between US Airways,
    Inc. and its Senior Vice President — Labor Relations
    (incorporated by reference to Exhibit 10.33 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2004)
10
.89†
Agreement between US Airways, Inc. and its Senior Vice
    President — Labor Relations with respect to certain
    employment arrangements effective July 25, 2002
    (incorporated by reference to Exhibit 10.18 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2002)
10
.90†
Agreement between US Airways, Inc. and its Senior Vice
    President — Marketing with respect to certain
    employment arrangements effective July 25, 2002
    (incorporated by reference to Exhibit 10.18 to Amendment
    No. 1 to US Airways, Inc.'s Annual Report on
    Form 10-K for the year ended December 31, 2003)
10
.91†
Agreement between US Airways, Inc. and its Senior Vice
    President — Marketing with respect to certain
    employment arrangements effective October 20, 2004
    (incorporated by reference to Exhibit 10.35 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2004)
10
.92†
Agreement between US Airways, Inc. and its Executive Vice
    President — Operations with respect to certain
    employment arrangements effective July 25, 2002
    (incorporated by reference to Exhibit 10.17 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2002)
10
.93†
Agreement between US Airways, Inc. and its Executive Vice
    President — Operations with respect to certain
    employment arrangements effective October 20, 2004
    (incorporated by reference to Exhibit 10.37 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2004)
10
.94†
Agreement between US Airways, Inc. and its Executive Vice
    President — Corporate Affairs, General Counsel and
    Secretary with respect to certain employment arrangements
    effective October 20, 2004 (incorporated by reference to
    Exhibit 10.38 to US Airways, Inc.'s Annual Report
    on Form 10-K for the year ended December 31, 2004)
10
.95†
Agreement between US Airways, Inc. and its Senior Vice
    President — Labor Relations with respect to certain
    employment arrangements effective October 20, 2004
    (incorporated by reference to Exhibit 10.40 to
    US Airways, Inc.'s Annual Report on Form 10-K for
    the year ended December 31, 2004)
10
.96
Investment Agreement, dated as of March 15, 2005 among
    Wexford Capital LLC, Republic Airways Holdings Inc.,
    US Airways Group, Inc. and US Airways, Inc.
    (incorporated by reference to Exhibit 10.3 to
    US Airways Group's Quarterly Report on Form 10-Q
    for the quarter ended March 31, 2005)*
Table of Contents
Exhibit No.
Description
10
.97
Investment Agreement, dated as of May 19, 2005, by and
    among Peninsula Investment Partners, L.P., US Airways,
    Group, Inc. and its successors and America West Holdings
    Corporation (incorporated by reference to Exhibit 10.3 to
    the Current Report on Form 8-K filed by America West
    Holdings Corporation on May 25, 2005)
10
.98
Investment Agreement, dated as of May 19, 2005, by and
    among ACE Aviation Holdings, Inc., US Airways, Group, Inc.
    and its successors and America West Holdings Corporation
    (incorporated by reference to Exhibit 10.4 to the Current
    Report on Form 8-K filed by America West Holdings
    Corporation on May 25, 2005)
10
.99
Investment Agreement, dated as of May 19, 2005, by and
    among Par Investment Partners, L.P., US Airways, Group,
    Inc. and its successors and America West Holdings Corporation
    (incorporated by reference to Exhibit 10.2 to the Current
    Report on Form 8-K filed by America West Holdings
    Corporation on May 25, 2005)
10
.100
Investment Agreement, dated as of May 19, 2005, by and
    among Eastshore Aviation, LLC, US Airways, Group, Inc. and
    its successors and America West Holdings Corporation
    (incorporated by reference to Exhibit 10.1 to the Current
    Report on Form 8-K filed by America West Holdings
    Corporation on May 25, 2005)
10
.101
Investment Agreement, dated May 27, 2005, by and among
    Wellington Investment Management Company, LLP, America West
    Holdings Corporation and US Airways Group, Inc.
    (incorporated by reference to Exhibit 10.1 to the Current
    Report on Form 8-K filed by America West Holdings
    Corporation on June 2, 2005)
10
.102
Voting Agreement, dated May 19, 2005, among TPG Partners,
    L.P., TPG Parallel I, L.P., Air Partners II, L.P. and
    US Airways Group, Inc. (incorporated by reference to
    Exhibit 2.1 to the Current Report on Form 8-K filed by
    America West Holdings Corporation on May 25, 2005)
10
.103
First Supplemental Order (I) Authorizing Debtors' Use of
    Cash Collateral (II) Providing Adequate Protection Pursuant to
    Bankruptcy Rules 4001(b) and 4001(d) (incorporated by
    reference to Exhibit 99.1 to US Airways Group's
    Current Report on Form 8-K dated January 13, 2005)
10
.104
Junior Secured Debtor-in-Possession Credit Facility Agreement
    dated as of February 18, 2005 among US Airways, Inc.,
    as Debtor and Debtor-in-Possession under Chapter 11 of the
    Bankruptcy Code as Borrower, US Airways Group, Inc., PSA
    Airlines, Inc., and Material Services, Inc., Debtors and
    Debtors-in-Possession under Chapter 11 of the Bankruptcy
    Code as Guarantors, and Eastshore Aviation, LLC, as Lender
    (incorporated by reference to Exhibit 99 to US Airways
    Group's Current Report on Form 8-K dated
    February 28, 2005)
10
.105
Amendment No. 1 dated as of May 19, 2005 to Junior
    Secured Debtor-in-Possession Credit Facility Agreement dated as
    of February 18, 2005 among US Airways, Inc., as Debtor
    and Debtor-in-Possession under Chapter 11 of the Bankruptcy
    Code as Borrower, US Airways Group, Inc., PSA Airlines,
    Inc., and Material Services, Inc., Debtors and
    Debtors-in-Possession under Chapter 11 of the Bankruptcy
    Code as Guarantors, and Eastshore Aviation, LLC, as Lender
    (incorporated by reference to Exhibit 10.105 to US Airways
    Group's Registration Statement on Form S-4 (File
    No. 333-126162), filed with the SEC on June 28, 2005)
21
.1
Subsidiaries of US Airways Group (incorporated by reference
    to Exhibit 21.1 to the Annual Report on Form 10-K for
    the year ended December 31, 2004 filed by US Airways Group
    on March 1, 2005)
23
.1**
Consent of KPMG LLP, Independent Registered Public Accounting
    Firm of US Airways Group
23
.2**
Consent of KPMG LLP, Independent Registered Public Accounting
    Firm of America West Holdings
23
.3**
Consent of PricewaterhouseCoopers LLP
23
.4***
Consent of Elizabeth K. Lanier (included in Exhibit 5.1
24
.1
Powers of Attorney signed by the directors of US Airways
    Group, authorizing their signatures on this report (included on
    signature page)
Table of Contents
Exhibit No.
Description
99
.1
Form of Stockholders Agreement among ACE Aviation Holdings, PAR
    Investment Partners, L.P., Peninsula Investment Partners, L.P.,
    Eastshore Aviation, LLC and US Airways Group, Inc.
    (incorporated by reference to Exhibit 99.2 to the Current
    Report on Form 8-K filed by America West Holdings
    Corporation on May 25, 2005)
99
.2***
Instructions as to Use of US Airways Group, Inc.
    Subscription Rights Certificates
* Portions of this exhibit have
been omitted under a request for confidential treatment and
filed separately with the United States Securities and Exchange
Commission.
** Filed herewith.
*** To be filed by amendment.
† Management contract or
compensatory plan or arrangement.