FORM 10-K.--ANNUAL REPORT PURSUANT TO SECTION 13
         OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




(Mark One)	
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1998
                          -----------------

                               or

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
      THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to
                               --------    -------


                   US AIRWAYS GROUP, INC.
   (Exact name of registrant as specified in its charter)

            State of Incorporation: Delaware

       2345 Crystal Drive, Arlington, Virginia 22227
         (Address of principal executive offices)

                      (703) 872-5306
    (Registrant's telephone number, including area code)

            (Commission file number: 1-8444)
      (I.R.S. Employer Identification No: 54-1194634)


                       US AIRWAYS, INC.
  (Exact name of registrant as specified in its charter)

           State of Incorporation: Delaware

      2345 Crystal Drive, Arlington, Virginia 22227
        (Address of principal executive offices)

                     (703) 872-7000
   (Registrant's telephone number, including area code)

              (Commission file number: 1-8442)
        (I.R.S. Employer Identification No: 53-0218143)





Securities registered pursuant to Section 12(b) of the Act:

                                            Name of each exchange
  Registrant     Title of each class        on which registered
  ----------     -------------------        -------------------
US Airways          Common Stock              New York Stock
 Group, Inc.       par value $1.00               Exchange
                per share (Common Stock)

     Indicate by check mark whether the registrants (1) have filed 
all reports required to be filed by Section 13 or 15(d) of the 
Securities Exchange Act of 1934 during the preceding 12 months (or 
for such shorter period that the registrants were required to file 
such reports), and (2) have been subject to such filing 
requirements for the past 90 days.          Yes  X           No
                                                 --            --

     Indicate by check mark if disclosure of delinquent filers 
pursuant to Item 405 of Regulation S-K section 229.405 is not 
contained herein, and will not be contained, to the best of the 
registrants' knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of this Form 10-K 
or any amendment to this Form 10-K. [X]

     The aggregate market value of the voting stock of US Airways 
Group, Inc. held by non-affiliates on February 26, 1999 was 
approximately $3,691,000,000. On February 26, 1999, there were 
outstanding approximately 79,088,000 shares of Common Stock and 
1,000 shares of common stock of US Airways, Inc.

     The registrant US Airways, Inc. meets the conditions set 
forth in General Instructions I(1)(a) and (b) of Form 10-K and is 
therefore participating in the filing of this form in the reduced 
disclosure format permitted by such Instructions.

  Item of Form 10-K            Document Incorporated By Reference
  -----------------            ----------------------------------
Part III, Items 10, 11,         Proxy Statement* (excluding
  12 and 13                      therefrom the  subsections
                                 entitled "Human Resources
                                Committee Report on Executive
                                Compensation" and "Performance
                                          Graph")


*  Refers to the definitive Proxy Statement of US Airways Group, 
Inc., to be filed pursuant to Regulation 14A, relating to the 
Annual Meeting of Stockholders of US Airways Group, Inc. to be 
held on May 19, 1999.


             (this space intentionally left blank)

                       US AIRWAYS GROUP, INC.
                                AND
                          US AIRWAYS, INC.
                            FORM  10-K
                     YEAR ENDED DECEMBER 31, 1998

                        TABLE OF CONTENTS

                                                             Page
                                                             ----
PART I

Item 1.  Business                                             1
           Overview                                           1
           Airline Industry and the Company's                 3
             Position in the Marketplace
           Industry Regulation and Airport Access             4
           Certain Ownership Matters                          6
           Executive Officers                                 7
           Employees                                          8
           Aviation Fuel                                      10
           Use of Travel Agents and Commissions Expenses      10
           Computerized Reservation Systems                   11
           Frequent Traveler Program                          12
           Insurance                                          13

Item 2.  Properties                                           13
           Flight Equipment                                   13
           Ground Facilities                                  15
           Terminal Construction Projects                     15

Item 3.  Legal Proceedings                                    15

Item 4.  Submission of Matters to a Vote of Security Holders  17

PART II

Item 5A. Market for US Airways Group's Common                 17
           Equity and Related Stockholder Matters
             Stock Exchange Listing                           17
             Market Prices of Common Stock                    18
             Foreign Ownership Restrictions                   18

Item 5B. Market for US Airways' Common Equity                 18
           and Related Stockholder Matters

Item 6.  Selected Financial Data                              19
           Consolidated Statements of                         19
             Operations-US Airways Group
           Consolidated Balance Sheets                        19
             -US Airways Group
          Selected Operating and Financial                    20
            Statistics-US Airways





      (table of contents continued on following page)


                  US AIRWAYS GROUP, INC.
                           AND
                     US AIRWAYS, INC.
                        FORM  10-K
               YEAR ENDED DECEMBER 31, 1998

                   TABLE OF CONTENTS
                       (CONTINUED)

                                                             Page
                                                             ----

Item 7.  Management's Discussion and Analysis                 21
           of Financial Condition and Results of Operations
             Results of Operations                            30
             Liquidity and Capital Resources                  35

Item 7A. Quantitative and Qualitative Disclosures             39
              About Market Risk

Item 8A. Consolidated Financial Statements for                41
           US Airways Group, Inc.

Item 8B. Consolidated Financial Statements for                75
           US Airways, Inc.

Item 9.  Changes In and Disagreements with                    104
           Accountants on Accounting and Financial Disclosure

PART III

Item 10. Directors and Executive Officers of                  104
           US Airways Group and US Airways

Item 11. Executive Compensation                               104

Item 12. Security Ownership of Certain                        104
           Beneficial Owners and Management

Item 13. Certain Relationships and Related                    104
           Party Transactions

Part IV

Item 14. Exhibits, Financial Statement Schedules
           and Reports on Form 8-K                            105
              Consolidated Financial Statements               105
             Consolidated Financial Statement Schedules       105
             Exhibits                                         105
             Reports on Form 8-K                              109

SIGNATURES

         US Airways Group, Inc.                               110
         US Airways, Inc.                                     111







                (this space intentionally left blank)


PART I

ITEM 1.  BUSINESS

OVERVIEW

     US Airways Group, Inc. (US Airways Group or the 
Company) is organized under the laws of the State of 
Delaware. The Company's executive offices are located at 
2345 Crystal Drive, Arlington, Virginia 22227 (telephone 
number (703) 872-5306). US Airways Group changed its name 
from USAir Group, Inc. effective February 21, 1997.

     US Airways Group's primary business activity is the 
ownership of all the common stock of US Airways, Inc. (US 
Airways), Shuttle, Inc. (Shuttle), Allegheny Airlines, Inc. 
(Allegheny), Piedmont Airlines, Inc. (Piedmont), PSA 
Airlines, Inc. (PSA), US Airways Fuel Corporation (Fuel 
Corp.), US Airways Leasing and Sales, Inc. (US Airways 
Leasing and Sales), Material Services Company, Inc. (MSC) 
and Airways Assurance Limited, LLC (AAL). US Airways owns 
all of the common stock of USAM Corp. (USAM) (see 
"Computerized Reservation Systems" below for additional 
information related to USAM).

     US Airways, which is also organized under the laws of 
the State of Delaware, is the Company's principal operating 
subsidiary. US Airways is a certificated air carrier engaged 
primarily in the business of transporting passengers, 
property and mail. In 1998, US Airways accounted for 
approximately 90% of the Company's operating revenues on a 
consolidated basis. US Airways enplaned almost 58 million 
passengers in 1998 and is currently the sixth largest 
domestic air carrier (as ranked by revenue passenger miles 
(RPMs)). As of December 31, 1998, US Airways operated 376 jet 
aircraft (see Part I, Item 2 "Properties" for additional 
information related to aircraft operated by US Airways) and 
provided regularly scheduled service at 103 airports in the 
continental United States, Canada, Mexico, France, Germany, 
Italy, the Netherlands, Spain, the United Kingdom and the 
Caribbean. US Airways' executive offices are located at 2345 
Crystal Drive, Arlington, Virginia 22227 (telephone number 
(703) 872-7000). US Airways' internet address is 
www.usairways.com. US Airways changed its name from USAir, 
Inc. effective February 21, 1997.

     The Company's operations consist of two segments: US 
Airways and US Airways Express. As mentioned above, US 
Airways accounted for approximately 90% of the Company's 
operating revenues on a consolidated basis in 1998. In 
addition, the Company derived 90% of its operating revenues 
from scheduled-service passenger transportation in 1998. The 
Company's results are seasonal with operating results 
typically highest in the second and third quarters due to 
US Airways' combination of business traffic and North-South 
leisure traffic in the Eastern U.S. during those periods. 

     US Airways' major connecting hubs are at airports in 
Charlotte, Philadelphia and Pittsburgh. US Airways also has 
substantial operations at the Baltimore/Washington 
International Airport (BWI), Boston's Logan International 
Airport, New York's LaGuardia Airport (LaGuardia) and 
Washington's Ronald Reagan Washington National Airport 
(Reagan National). Measured by departures, US Airways is the 
largest or second largest airline at each of the foregoing 
airports and is the largest air carrier in many smaller 
eastern U.S. cities such as Albany, Buffalo, Hartford, 
Providence, Richmond, Rochester and Syracuse. US Airways is 
also the leading airline from the Northeast U.S. to Florida. 
US Airways currently has approximately 84% of its departures 
and approximately 56% of its capacity (available seat miles 
or ASMs) deployed in the Eastern U.S. (that portion of the 
U.S. east of the Mississippi River).

     As of December 31, 1998, US Airways had code share 
arrangements with nine air carriers which operate under the 
trade name "US Airways Express," including Allegheny, 
Piedmont and


                             1

PSA (see Part I, Item 2 "Properties" for information related 
to aircraft operated by the Company's three wholly-owned 
regional airlines). Typically under a code share arrangement 
one air carrier places its designator code and sells tickets 
on the flights of another air carrier (its code share 
partner). Through service agreements US Airways provides 
reservations and, at certain stations, ground support 
services, in return for service fees. The US Airways Express 
network feeds traffic into US Airways' route system at 
several points, primarily at US Airways' connecting hubs. As 
of December 31, 1998, US Airways Express served 169 airports 
in the continental U.S., Canada and the Bahamas, including 
69 airports also served by US Airways. During 1998, US 
Airways Express air carriers enplaned 12 million passengers 
(including 7 million passengers enplaned by Allegheny, 
Piedmont and PSA), approximately 59% of whom connected to 
US Airways flights.

     During the fourth quarter of 1996, US Airways began 
purchasing all of the capacity (ASMs) generated by 
Allegheny, Piedmont and PSA. US Airways determines the 
markets in which these air carriers operates, sets the fares 
in those markets and earns the related passenger 
transportation revenues. These agreements have no effect on 
the Company's results of operations (most of US Airways' 
revenues from these arrangements are reclassified to 
Passenger transportation revenues and the related expenses 
eliminated during consolidation of the Company's financial 
results). In January 1998, US Airways began purchasing the 
capacity of Mesa Airlines, Inc. (Mesa) in certain markets. 
Mesa operates regional jets in these markets as part of US 
Airways Express.

     US Airways also has a code share arrangement with 
Shuttle, which operates under the trade name "US Airways 
Shuttle." The US Airways Shuttle currently provides high 
frequency service between New York (LaGuardia) and Boston and 
between New York (LaGuardia) and Washington (Reagan National) 
(see Part I, Item 2 "Properties" for information related to 
aircraft operated by Shuttle). On December 30, 1997, the 
Company exercised its right to purchase the Shuttle from its 
prior owners. US Airways managed Shuttle's operations prior 
to the purchase. See Note 1(a) to the Company's Notes to 
Consolidated Financial Statements contained in Part II, Item 
8A of this report for additional information related to the 
Company's purchase of Shuttle.

     US Airways also code shares with the airline Deutsche 
BA on certain intra-Germany flights.

     US Airways Leasing and Sales, Fuel Corp., MSC and AAL 
operate in support of the Company's five airline 
subsidiaries in areas such as procurement, including the 
procurement of aviation fuel, assisting with maintenance 
contracts, the marketing of surplus assets and insurance.

     During 1997, US Airways terminated the remaining 
aspects of its relationship with British Airways Plc 
(British Airways), including the code sharing agreement 
between the two companies and certain other commercial 
arrangements (see Notes 7 and 11 to the Company's Notes to 
Consolidated Financial Statements for additional 
information). As discussed in Part I, Item 3 "Legal 
Proceedings," litigation remains outstanding between the 
Company and British Airways.

     The Company has agreements for the acquisition of up to 
400 new single-aisle aircraft and up to 30 new 
intercontinental-range widebody aircraft. As of December 31, 
1998, US Airways had introduced six of the new single-aisle 
aircraft into its operating fleet. Deliveries of the new 
widebody aircraft are scheduled to begin in the first 
quarter of the year 2000. The Company's aircraft acquisition 
agreements are discussed in detail in Part II, Item 7 
"Management's Discussion and Analysis of Financial Condition 
and Results of Operations" (hereafter referred to as "MD&A" 
in this section of this report) as well as Note 6(a) to the 
Company's Notes to Consolidated Financial Statements. 


                             2

AIRLINE INDUSTRY AND THE COMPANY'S POSITION IN THE
  MARKETPLACE

     Historically, the demand for air transportation has 
tended to mirror general economic conditions. Since early 
1995, general domestic economic conditions have been 
relatively favorable as has been the level of demand for air 
transportation. In addition, over the same time period, the 
Company's airline subsidiaries have experienced favorable 
pricing and capacity trends in the markets in which they 
operate.

     Most of the markets in which the Company's airline 
subsidiaries operate are highly competitive, especially with 
respect to leisure traffic. The Company's airline 
subsidiaries compete to varying degrees with other air 
carriers and with other forms of transportation. US Airways 
competes with at least one major airline on most of its 
routes between major cities. Airlines, including US Airways, 
typically use discount fares and other promotions to 
stimulate traffic during normally slack travel periods to 
generate cash flow and to increase relative market share in 
selected markets. Discount and promotional fares are often 
subject to various restrictions such as minimum stay 
requirements, advance ticketing, limited seating and refund 
penalties. US Airways has often elected to match discount or 
promotional fares initiated by other air carriers in certain 
markets in order to compete in those markets. Competition 
between air carriers also involves certain route structure 
characteristics, such as flight frequencies, availability of 
non-stop flights, markets served and the time certain 
flights are operated. To a lesser extent, competition can 
involve other products, such as in-flight food or amenities, 
frequent flier programs and airport clubs.

     Recent years have seen the entrance and growth of "low-
cost, low-fare" competitors in many of the markets in which 
the Company's airline subsidiaries operate. These 
competitors, based on low costs of operations and low fare 
structures, include Southwest Airlines Co. (Southwest) as 
well as a number of smaller start-up air carriers. Southwest 
has steadily increased operations within the Eastern U.S. 
since first offering service in this region in late 1993. 
During October 1996, Delta Air Lines, Inc. (Delta) launched 
a low-cost product called "Delta Express." Delta Express, 
which has grown substantially since its introduction, 
operates primarily within the Eastern U.S. US Airways has 
the highest cost structure of all major domestic air 
carriers. The Company considers the growth of low-cost, low-
fare competition in certain of its markets to be its 
foremost competitive threat.

     In the past, US Airways has in some cases responded to 
the entry of a low-cost, low-fare competitor into its markets 
by matching fares and, as a result of increased passenger 
traffic volumes related to lower fares, increasing the 
frequency of service in related markets, generally with the 
result of diluting US Airways' yield (Passenger 
transportation revenue per revenue passenger mile) in these 
markets. In some cases, US Airways has responded by reducing 
or eliminating service in affected markets. US Airways' 
Northeast-Florida service has been particularly affected by 
low-cost, low-fare competition. 

     The new contract between US Airways and its pilots that 
became effective on January 1, 1998 is helping US Airways to 
compete effectively with low-cost, low-fare competitors. 
Besides other cost-savings provisions (see related 
information under "Employees" below), the new contract 
allowed US Airways to introduce its own low-cost product, 
"MetroJet." MetroJet began operations on June 1, 1998 with 
five aircraft and service from BWI to four eastern cities. 
By the end of 1998, MetroJet had grown to 22 aircraft 
serving 16 cities. MetroJet is expected to operate 54 
aircraft by the end of 1999. The Company considers MetroJet 
to be an effective competitive response to low-cost, low-
fare competition.

     As mentioned in "Overview" above, a substantial portion 
of US Airways' current route structure is located in the 
Eastern U.S. Although a competitive strength in some regards, 
the regional concentration of significant operations results 
in US Airways being susceptible to changes in


                             3

certain regional conditions that may adversely affect the 
Company's results of operations and financial condition. The 
combination of a high cost structure and the regional 
concentration of operations has also contributed to US 
Airways being particularly vulnerable to competition from air 
carriers or operations with lower cost and fare structures. 

     The Company's long-term strategic objective is to 
establish US Airways as a competitive global airline. As part 
of its efforts to achieve this objective, US Airways has 
substantially expanded its international operations in recent 
years. US Airways has also introduced a new international 
business class product, "Envoy Class." In support of 
additional international growth plans, as well as its efforts 
to further enhance its international service, US Airways 
expects to add new Airbus widebody aircraft to its operating 
fleet beginning in the year 2000.

     The Company has also entered into agreements to acquire 
up to 400 Airbus single-aisle aircraft. These aircraft, 
members of the A320-Family, are expected to replace, at a 
minimum, US Airways' B737-200, DC-9-30 and MD80 aircraft 
fleets. The new Airbus aircraft are more fuel-efficient, 
less costly to maintain, have greater range capabilities and 
are expected to provide certain customer service benefits 
over the aircraft they are intended to replace. By the end 
of 1998, six new Airbus A320-Family aircraft had entered 
service with US Airways.

     The Company has taken other initiatives to improve its 
competitive position in the marketplace. In 1998, US Airways 
announced a marketing arrangement with American Airlines, 
Inc. (American). US Airways has also entered into a contract 
with The SABRE Group, Inc. (TSG) which is expected to provide 
substantial long-term cost savings and enhancements in the 
information services area. In addition, the Company added new 
regional jet service in 1998 on certain routes operated by 
US Airways Express. See MD&A for additional information 
related to the Company's efforts to improve its competitive 
position in the marketplace, including the acquisition of new 
aircraft.

INDUSTRY REGULATION AND AIRPORT ACCESS

     The Company's airline subsidiaries operate under 
certificates of public convenience and necessity issued by 
the U.S. Department of Transportation (DOT). Such 
certificates may be altered, amended, modified or suspended 
by the DOT if the public convenience and necessity so 
require, or may be revoked for failure to comply with the 
terms and conditions of the certificates. Airlines are also 
regulated by the U.S. Federal Aviation Administration (FAA), 
a division of the DOT, primarily in the areas of flight 
operations, maintenance, ground facilities and other 
technical matters. Pursuant to these regulations, the 
Company's airline subsidiaries have FAA-approved maintenance 
programs for each type of aircraft they operate that provides 
for the ongoing maintenance of such aircraft, ranging from 
frequent routine inspections to major overhauls. From time-
to-time, the FAA issues maintenance directives and other 
regulations affecting the Company's airline subsidiaries or 
one or more of the aircraft types they operate. In recent 
years, for example, the FAA has issued or proposed such 
mandates relating to, among other things, flight data 
recorders that measure more parameters than most original 
equipment flight data recorders, cargo hold fire 
detection/suppression systems, ground proximity warning 
systems, the retirement of older aircraft, collision 
avoidance systems, airborne windshear avoidance systems, 
noise abatement and increased inspections and maintenance 
procedures to be conducted on certain aircraft.

     The DOT allows local airport authorities to implement 
procedures designed to abate special noise problems, 
provided such procedures do not unreasonably interfere with 
interstate or foreign commerce or the national transporta-
tion system. Certain airports, including the major airports 
at Boston, Washington, D.C., Chicago, San Diego, San 
Francisco and Orange County (California), have established 
airport restrictions to limit noise, including restrictions 
on aircraft types to be used and limits on the number of 
hourly or daily operations or the time of such operations. 
In some instances these restrictions have caused 
curtailments in services or increases in operating


                             4

costs and such restrictions could limit the ability of US 
Airways to expand its operations at the affected airports. 
Authorities at other airports may consider adopting similar 
noise regulations. 

     The airline industry is also subject to increasingly 
stringent federal, state and local laws protecting the 
environment. Future regulatory developments could affect 
operations and increase operating costs for the airline 
industry, including the Company's airline subsidiaries.

     As with most domestic companies, the Company is subject 
to federal and state income taxes. The Company recognized 
certain income tax benefits totaling $467 million in 1997. 
These benefits were related to the Company reflecting for 
financial reporting purposes the future income tax benefits 
associated with net operating losses and other tax credits 
generated in prior years. As a result of recognizing these 
tax benefits, the Company's effective income tax rate for 
financial reporting purposes increased substantially in 
1998. See MD&A for additional information, including 
information related to the Company's expectation that the 
effective rate at which it pays cash income taxes will 
increase in 1999.

     The Company's airline subsidiaries are obligated to 
collect a federal excise tax on domestic and international 
air transportation (commonly referred to as the "ticket 
tax"). Effective for travel commencing October 1, 1997, 
legislation was enacted that reduced the domestic ticket tax 
from 10.0% of fare to 9.0% (decreasing to 8.0% on October 1, 
1998 and to 7.5% on October 1, 1999, remaining 7.5% through 
September 30, 2007), added a new segment fee of $1.00 per 
passenger (increasing to $3.00 by the year 2002, subject to 
adjustment for inflation thereafter through September 30, 
2007), changed the current $6.00 international departure tax 
to $12.00 and added a $12.00 international arrival tax (the 
latter two taxes each increased to $12.20 on January 1, 1999, 
subject to adjustment for inflation thereafter through 
September 30, 2007). The Company's airline subsidiaries 
collect these taxes, along with certain other U.S. and 
foreign taxes and user fees on air transportation, and pass 
through the collected amounts to the appropriate 
governmental agencies. The legislation also added a new 7.5% 
tax effective October 1, 1997 on certain purchases of 
frequent traveler program miles from domestic air carriers. 
Although such taxes are not operating expenses to the 
Company, they represent an additional cost to the Company's 
customers. Increases in such taxes can be detrimental to 
demand for air transportation and decreases can have a 
stimulative effect on demand.

     The Company's airline subsidiaries became obligated to 
pay the $.043 per gallon federal excise tax on 
transportation fuels on October 1, 1995. These taxes 
represent operating expenses to the Company and are 
reflected in the Company's statements of operations as a 
component of Aviation fuel expenses. US Airways recognized 
expenses of $40 million, $42 million and $43 million as a 
result of this tax in 1998, 1997 and 1996, respectively. See 
also "Aviation Fuel" below.

     Several domestic airports have recently sought to 
increase substantially the rates charged to air carriers and 
the ability of air carriers to contest such increases has 
been restricted by federal legislation, DOT regulations and 
judicial decisions. In addition, legislation that became 
effective June 1, 1992 allows public airports to impose 
passenger facility charges of up to $3 per departing or 
connecting passenger at such airports. Legislation was 
introduced in Congress in early 1999 that would permit 
airports to increase the passenger facility charges to $4 or 
$5 under certain circumstances. With certain exceptions, air 
carriers pass these charges on to passengers. The ability of 
US Airways to pass-through such fees to its customers is 
subject to various factors, including market conditions and 
competitive factors.

     The FAA has designated John F. Kennedy International 
Airport (Kennedy), Chicago O'Hare International Airport 
(O'Hare), LaGuardia and Reagan National as "high-density 
traffic airports" and limited the number of departure and 
arrival slots available to air carriers at those airports. 
Currently, slots at the high-density traffic airports may be 
voluntarily sold or transferred between


                             5

air carriers. The DOT has in the past reallocated slots to 
other air carriers and reserves the right to add or withdraw 
slots. In October 1997, the DOT awarded slots to several 
low-cost, low-fare air carriers, however, these slots were 
"created" and not confiscated from incumbent air carriers. 
Various amendments to the slot system, proposed from time-
to-time by the FAA, members of Congress and others, could, 
if adopted, significantly affect operations at the high-
density traffic airports or expand slot controls to other 
airports. Certain proposals could restrict the number of 
flights, limit the ownership transferability of slots, 
increase the risk of slot withdrawal, or otherwise decrease 
the value of slots. Legislation recently introduced in 
Congress would eliminate the high-density rule at Kennedy, 
O'Hare and LaGuardia in five years. Passage of such 
legislation could have a significant impact on the Company's 
results of operations and financial condition. US Airways 
and Shuttle hold a substantial number of slots at LaGuardia 
as well as Reagan National. These slots are valuable assets 
and important to the Company's overall business strategy. 
The Company cannot predict whether any of the current 
proposals before Congress will be adopted or, if adopted, 
precisely how their implementation would impact the 
operations of the Company's airline subsidiaries.

     Subsequent to several announcements of cooperative 
agreements between certain air carriers, including a 
marketing relationship between US Airways and American, the 
DOT enacted legislation that provides for increased scrutiny 
of certain airline joint ventures (US Airways' marketing 
relationship with American is discussed in MD&A). In 
addition, in April 1998, the DOT issued proposed rules 
designed to regulate perceived anti-competitive behavior 
directed at new entrants in the airline industry. Legislation 
has recently been enacted requiring, among other things, the 
National Research Council of the National Academy of Sciences 
to complete a comprehensive study pertaining to competitive 
issues in the airline industry prior to the DOT's 
implementation of any such rules. The Company cannot predict 
whether or when any such proposed rules will be adopted, or 
the effect, if any, of such legislation on the Company's 
operations. In early 1999, legislation was introduced in 
Congress that would impose, in some cases, substantial 
obligations on airlines by providing significant rights to 
passengers. The Company cannot predict whether, or in what 
form, any such legislation might be enacted.

     The availability of international routes to domestic air 
carriers is regulated by agreements between the U.S. and 
foreign governments. See MD&A for additional information 
related to the Company's international operations, including 
the Company's recent expansion of international operations 
and its efforts to introduce service in additional 
international markets.

CERTAIN OWNERSHIP MATTERS

     In 1998, the Company purchased 17.9 million shares of 
its common stock at a cost of $1.1 billion. Additional 
information related to the Company's purchases of its common 
stock can be found in MD&A. In addition, on March 12, 1998, 
Berkshire Hathaway, Inc. exercised its right to convert the 
Company's Series H Preferred Stock into 9.2 million shares of 
the Company's common stock. The Company subsequently retired 
the Series H Preferred Stock. The Company had previously 
retired its Series F Preferred Stock (May 1997), its Series T 
Preferred Stock (May 1997), and its Series B Preferred Stock 
(September 1997). With the retirement of these preferred 
stock issuances, the Company had retired all of its preferred 
stock and relieved itself of annual dividends of 
approximately $79 million. Additional information related to 
activity involving the Company's preferred stock issuances 
can be found in MD&A and in Notes 7 and 8(b) to the Company's 
Notes to Consolidated Financial Statements.


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                             6

EXECUTIVE OFFICERS

     The following individuals are the executive officers of 
US Airways Group and US Airways as of March 19, 1999:

Name              Age Position
----              --- --------
Stephen M. Wolf   57  Chairman, US Airways Group and
                      US Airways
Rakesh Gangwal    45  President and Chief Executive Officer
                      of US Airways Group and US Airways
Lawrence M. Nagin 58  Executive Vice President-Corporate 
                      Affairs and General Counsel, 
                      US Airways Group and US Airways
N. Bruce Ashby    38  Senior Vice President-Planning,
                      US Airways
Michelle V. Bryan 42  Senior Vice President-Human Resources,
                      US Airways
Christopher Doan  52  Senior Vice President-Maintenance,
                      US Airways
Thomas A. Mutryn  45  Senior Vice President-Finance and
                      Chief Financial Officer, US Airways 
                      Group and US Airways

     There are no family relationships among any of the 
officers listed above. No officer was selected pursuant to 
any arrangement between himself and any other person. 
Officers are elected annually to serve for the following 
year or until the election and qualification of their 
successors.

     The business experience of the officers listed in the 
table on the preceding page since at least January 1, 1994:

     Mr. Wolf is Chairman of the Board of Directors of US 
Airways Group and US Airways. He was elected to those 
positions upon joining both companies in January 1996. Mr. 
Wolf was Chief Executive Officer of US Airways Group from 
January 1996 until November 1998 and Chief Executive Officer 
of US Airways from January 1996 until May 1998. Immediately 
prior to joining US Airways, Mr. Wolf was a senior advisor 
to the investment bank Lazard Freres & Co. From 1987 to July 
1994, Mr. Wolf was Chief Executive Officer of UAL Corp. 
(UAL) and United Air Lines, Inc. (United) and became 
Chairman of each in 1988. Mr. Wolf is a Director of Philip 
Morris Companies, R.R. Donnelley & Sons Co., The Brookings 
Institution and the Alzheimer's Disease and Related 
Disorders Association. He is also a trustee of Northwestern 
University and Georgetown University.

     Mr. Gangwal was elected President and Chief Executive 
Officer of US Airways Group in November 1998 and President 
and Chief Executive Officer of US Airways in May 1998. Mr. 
Gangwal had been President and Chief Operating Officer of 
both companies since February 1996. From November 1994 until 
February 1996, Mr. Gangwal was Executive Vice President-
Planning and Development for Compagnie Nationale Air France. 
Mr. Gangwal previously served in a variety of management 
roles at United over an eleven-year period, culminating in 
the role of Senior Vice President-Planning. Mr. Gangwal is a 
Director of Boise Cascade Corp.

     Mr. Nagin practiced law with Skadden, Arps, Slate, 
Meagher & Flom LLP from August 1994 until he joined US 
Airways Group and US Airways in February 1996. He previously 
served in several executive positions at United and UAL from 
September 1988 to July 1994, culminating in the role of 
Executive Vice President-Corporate Affairs and General 
Counsel of United and UAL. From 1980-1988, Mr. Nagin was 
Senior Vice President and General Counsel of The Flying 
Tiger Line Inc. 

     From April 1996, Mr. Ashby served as Vice President-
Financial Planning and Analysis of US Airways until his 
election as Senior Vice President-Planning in January 1998. 
He previously served as Vice President-Marketing Development 
at Delta from June 1995 to April 1996, and in several 
management positions at United from January 1989 to June 
1995, including Vice President-Financial Planning and 
Analysis and Vice President and Treasurer.


                             7

     Ms. Bryan joined US Airways in 1983 as a staff 
attorney. She was elected Corporate Secretary and Assistant 
General Counsel of US Airways in 1988. In 1995, Ms. Bryan 
was named Vice President and Deputy General Counsel of 
US Airways, retaining her position as US Airways' Corporate 
Secretary. She was also named Corporate Secretary of 
US Airways Group in 1996. Ms. Bryan was elected Senior Vice 
President-Human Resources of US Airways in January 1999. 

     Mr. Doan joined US Airways in March of 1997. Prior to 
joining US Airways, Mr. Doan was Vice President of Technical 
Operations at Northwest Airlines, Inc. (Northwest). Mr. Doan 
served as an officer in a variety of maintenance-related 
positions at Northwest from 1985 through 1997. Prior to 
1985, Mr. Doan served for 18 years in maintenance-related 
management positions at Trans World Airlines, Inc.

     Mr. Mutryn joined US Airways Group and US Airways in 
November 1998 from United. At United, Mr. Mutryn served as 
Director of Financial Analysis and Vice President-Revenue 
Management from 1989 until his election as Vice President 
and Treasurer in July 1995. Mr. Mutryn held a variety of 
positions at American from 1983 to 1989. Mr. Mutryn is a 
member of the boards of directors of Galileo International, 
Inc. (Galileo) and Galileo Japan Partnership. 

EMPLOYEES

     As of December 31, 1998, on a full-time equivalent 
basis, US Airways employed approximately, 9,450 station 
personnel, 8,175 flight attendants, 7,025 mechanics and 
related employees, 4,775 pilots, 3,125 reservations 
personnel, and 5,650 personnel in administrative and 
miscellaneous job categories. As of December 31, 1998, on a 
full-time equivalent basis, the Company's remaining 
subsidiaries employed approximately 1,500 station personnel, 
1,125 pilots, 675 mechanics and related employees, 650 
flight attendants and 475 personnel in administrative and 
miscellaneous job categories.

     As of December 31, 1998, approximately 37,950, or 84%, 
of the employees of the Company's subsidiaries were covered 
by collective bargaining agreements with various labor 
unions, or will be covered by a collective bargaining 
agreement for which negotiations are in progress. 



     The status of US Airways' labor agreements as of 
December 31, 1998:

                                                     Date
                                                   Contract
Union (1) Class or Craft            Employees (2)  Amendable
-----     --------------            ---------      ---------

ALPA    Pilots                          4,775	      01/01/03
AFA     Flight attendants               8,175      01/01/97 (4)
CWA     Passenger service employees     8,900(3)          - (5)
IAMAW   Mechanics and related employees 7,025	      10/01/95 (4)
IAMAW   Fleet service employees         6,000	(3)          - (5)
TWU     Flight crew training instructors  117	      10/09/96 (4)
TWU     Flight simulator engineers         56      08/02/97 (4)
TWU     Dispatch employees                155      09/01/96 (4)

(1)  ALPA    Air Line Pilots Association, International
     AFA     Association of Flight Attendants
     CWA     Communications Workers of America
     IAMAW   International Association of Machinists and
               Aerospace Workers
     TWU     Transport Workers' Union
(2)  Approximate number of employees covered by the
       contract.
(3)  Estimated number of employees who will be covered under 
       the initial contract.
(4)  Currently in negotiations.
(5)  Initial contract in negotiations.



                             8

     A new five-year labor contract between US Airways and 
its pilots became effective January 1, 1998. This contract 
includes various provisions that the Company believes are 
helping US Airways to address its high cost structure, 
including linking the compensation of US Airways' pilots to 
the compensation of pilots at several other major domestic 
air carriers and allowing US Airways to launch its low-cost 
product, "MetroJet." As discussed in MD&A, US Airways faces 
significant pressure in certain markets from competitors 
with lower cost structures. Other provisions of the new 
contract include: an early retirement program for 325 
pilots; lump sum payments to pilots equal to 1% of annual 
salary for the calendar years 1999, 2001 and 2002 (payable 
in the subsequent calendar year); 11.5 million options to 
purchase US Airways Group common stock, to be issued ratably 
to pilots over the five-year life of the contract (with 
exercise prices established based on the fair market value 
of the Company's common stock over a time period preceding 
each grant); and certain job security provisions, including 
a "no furlough" clause for pilots on the seniority list on 
the effective date of the agreement.

     As discussed in MD&A, the Company recorded a $115 
million charge to Personnel costs during the fourth quarter 
of 1997 associated with the early retirement plan. 
US Airways expects to realize significant net long-term 
savings in both wages and benefits expenses as a result of 
the early retirement program. US Airways will recognize 
expenses for the lump sum payments, which are expected to 
total approximately $20 million, as an element of Personnel 
costs in the period in which they are earned. Additional 
information related to the stock options that will be 
granted to US Airways' pilots under the new contract can be 
found in Note 8(e) to the Company's Notes to Consolidated 
Financial Statements.

     During the third quarter of 1998, US Airways issued 
recall notices to all of its furloughed pilots. The recalls 
were part of US Airways' continuing planning process due to 
normal attrition, retirements and training requirements for 
the new single-aisle Airbus aircraft that have begun 
entering US Airways' operating fleet. US Airways had 
approximately 280 pilots on furlough prior to the recalls.

     On September 29, 1998, the IAMAW filed with the 
National Mediation Board (NMB) for mediation in its contract 
negotiations with US Airways covering approximately 7,025 
mechanics and related employees. The labor agreement 
covering these employees was amendable on October 1, 1995. 
Negotiations between the parties resumed in November 1998 
under the auspices of the NMB-appointed mediator.

     On June 23, 1998 the IAMAW filed with the NMB for 
mediation in its negotiations with US Airways for an initial 
contract covering approximately 6,000 fleet service 
employees. Following the NMB's appointment of a mediator, 
the IAMAW and US Airways reached a tentative agreement on 
August 17, 1998. The IAMAW failed to ratify the tentative 
agreement and the mediator reconvened the parties to resume 
negotiations on October 6, 1998. On March 4, 1998, the 
parties reached a new tentative agreement which will be 
voted on by the fleet services employees in the near future.

     US Airways is also in negotiations over amendable labor 
agreements with the Association of Flight Attendants 
covering flight attendants and with the Transport Workers 
Union covering flight crew training instructors, flight 
simulator engineers and dispatch employees. US Airways is 
also negotiating with the CWA with respect to an initial 
labor contract with US Airways covering approximately 8,900 
passenger service employees. On February 23, 1999, the 
parties filed with the NMB for a mediator to assist in the 
negotiations.

     The Company is unable to predict how long it will take 
to conclude collective bargaining talks with respect to 
labor contracts that are currently amendable or for labor 
contracts for which an initial contract is being negotiated 
or the ultimate outcome of these discussions. Under the 
Railway Labor Act, a labor contract does not "expire," but 
rather becomes amendable on a


                             9

certain date. Thirty days prior to that date, either party 
to the contract may give notice to the other of its 
intention to amend the contract, at which point the 
collective bargaining process begins. If, after a period of 
negotiations, the parties cannot reach an agreement, a 
federal mediator from the NMB is brought in to assist. The 
process of mediation continues until the NMB determines, at 
its sole discretion, that the parties have reached an 
impasse. At that point, the parties enter a thirty-day 
"cooling-off" period before either party may employ so-
called "self-help" (e.g., the imposition of contract changes 
or a lockout by the company or a strike by the union). While 
in negotiations and mediation, both parties must observe the 
status quo.

     As discussed in MD&A, US Airways announced certain 
efficiency measures in May 1997. These efficiency measures 
included US Airways' elimination of service on certain 
unprofitable routes and the consolidation of certain 
maintenance and reservations activities into fewer 
facilities. The Company estimates that approximately 750 
employees were displaced as a result of these efficiency 
measures.

     During December 1997, US Airways entered into a 25-year 
agreement with TSG under which TSG assumed responsibility for 
managing most of US Airways' information technology 
requirements. As a result of this agreement, approximately 
670 US Airways employees took positions with TSG on January 
1, 1998. See MD&A for additional information related to 
US Airways' agreement with TSG.

AVIATION FUEL

     Prices and availability of all petroleum products are 
subject to political, economic and market factors that are 
generally outside of the Company's control. Accordingly, the 
price and availability of aviation fuel, as well as other 
petroleum products, can be unpredictable. Because the 
operations of the Company's airline subsidiaries are 
dependent upon aviation fuel, significant increases in 
aviation fuel costs could materially and adversely affect the 
Company's results of operations and financial condition. For 
1998, 1997 and 1996, aviation fuel expenses were 8.2%, 10.5% 
and 10.8%, respectively, of US Airways' total operating 
expenses (as adjusted to exclude nonrecurring items and 
certain other expenses for comparability purposes).

     US Airways continually adjusts its aviation fuel 
procurement strategy in order to take advantage of the best 
available prices while at the same time ensuring that it has 
an adequate supply of aviation fuel to support its 
operations. In addition, US Airways may participate in 
arrangements designed to reduce its exposure to significant 
increases in the price of aviation fuel. These arrangements 
have the net effect of increasing or decreasing US Airways' 
aviation fuel expense in the period in which they are 
settled (see Note 2(a) to the Company's Notes to 
Consolidated Financial Statements for additional information 
related to such arrangements).

     See Part II, Item 6 "Selected Financial Data" for 
additional information related to aviation fuel. In 
addition, see "Industry Regulation and Airport Access" above 
for information related to certain taxes on aviation fuel.

USE OF TRAVEL AGENTS AND COMMISSIONS EXPENSES

     As is typical in the airline industry, a majority of 
the tickets for travel on the Company's airline subsidiaries 
are sold by travel agents. During 1998, travel agents 
accounted for approximately 74% of US Airways' ticket sales 
(as measured by gross fares). The comparable percentages for 
1997 and 1996 were 76% and 77%, respectively. A majority of 
the remaining ticket sales are through US Airways' in-house 
reservations function (see "Employees" above).

     The Company accounts for fees paid to travel agents in 
the Commissions line item on its Consolidated Statements of 
Operations (which are contained in Part II, Item 8A of this 
report).


                             10

Such fees are calculated in accordance with policies 
established by the Company. Fees paid to travel agents 
accounted for approximately 6.8%, 7.7% and 7.5% of US 
Airways' total operating expenses (as adjusted to exclude 
nonrecurring items and certain other expenses for 
comparability purposes) for the years 1998, 1997 and 1996, 
respectively.

     During September 1997, US Airways established a revised 
fee structure for base commissions paid to travel agents: 8% 
of ticket price on all domestic and international tickets 
issued by travel agents in the U.S., Puerto Rico, the U.S. 
Virgin Islands and Canada. US Airways' existing maximum 
payment of $25 one-way and $50 round-trip for tickets 
purchased in the U.S. and Puerto Rico for travel in and 
between the U.S., Puerto Rico, the U.S. Virgin Islands and 
Canada was not changed. Effective December 3, 1998, a 
maximum payment of $50 for one-way tickets and $100 for 
round-trip tickets for other international destinations for 
tickets purchased in the U.S., Puerto Rico and the U.S. 
Virgin Islands was instituted (prior to the revised rate 
structure, the standard commission rate was 10% of ticket 
price, subject to a maximum for domestic travel of $50 per 
round-trip ticket, but without any maximum limit for 
international travel). US Airways pays travel agents 
additional "incentive" commissions under certain 
circumstances, such as for reaching certain volume sales 
levels. Such incentive fees are typical in the airline 
industry.

     In April 1996, the Company began selling electronic 
tickets for travel on the Company's airline subsidiaries; 
travel agents obtained this capability in October 1996. By 
February 1999, "E Tickets" for travel on US Airways and its 
regional affiliates had exceeded 45% of all ticket sales. 
The Company believes that electronic ticketing helps to 
reduce distribution costs.

COMPUTERIZED RESERVATION SYSTEMS

     Computerized Reservation Systems (CRSs) play a 
significant role in the marketing and distribution of 
airline tickets. As mentioned above, travel agents sell 
tickets which generate the majority of US Airways' passenger 
revenues. Most travel agents use one or more CRSs to obtain 
information about airline schedules and fares and to book 
their clients' travel.

     On December 5, 1998, as part of a comprehensive 
information technology management agreement with TSG, US 
Airways' reservation, airport customer service and aircraft 
tracking systems were converted to the SABRE system. SABRE 
is the world's largest CRS system, as measured by revenues 
generated by travel agent subscribers. US Airways is also 
now using the SABRE O&D yield management system. US Airways 
anticipates significant long-term benefits from its 
transition to computer technologies obtained from TSG. See 
MD&A for additional information related to US Airways' 
information technology management agreement with TSG.

     On July 30, 1997, Galileo completed an initial public 
offering (IPO) and used the proceeds, together with the 
proceeds of bank financing, to purchase Apollo Travel 
Services Partnership (ATS). At that time, USAM owned 
approximately 21% of ATS. Immediately preceding the IPO, 
Galileo International Partnership (GIP) was merged with and 
into a wholly-owned limited liability company subsidiary of 
Galileo and USAM received shares in Galileo in the same 
proportion as its partnership interest in GIP. As part of 
the IPO, USAM sold some of its Galileo shares and its 
interest in Galileo was reduced from 11% to approximately 
6.7%. The transaction is discussed further in MD&A. 

     Galileo owns, operates and markets the Galileo CRS. The 
Galileo CRS is the world's second largest CRS system, as 
measured by revenues generated by travel agent subscribers.

     As of December 31, 1998, USAM owned approximately 6.7% 
of Galileo and held an 11% interest in Galileo Japan 
Partnership, which markets the Galileo CRS in Japan.


                             11

FREQUENT TRAVELER PROGRAM

     Under US Airways' Dividend Miles frequent traveler 
program (FTP), participants generally receive mileage credits 
equal to the greater of actual miles flown or 500 miles for 
each paid flight segment on US Airways (including MetroJet) 
or US Airways Express, or actual miles flown on one of US 
Airways' FTP airline partners. Participants generally receive 
a minimum of 500 mileage credits for each paid flight on US 
Airways Shuttle plus, through September 1999, additional 
mileage in American's FTP, the AAdvantage Program (as long as 
the passenger is also a member of AAdvantage). Participants 
flying on First Class or Envoy Class tickets generally 
receive additional mileage credits. Participants may also 
earn mileage credits by flying on FTP airline partners, 
utilizing certain credit cards, staying at participating 
hotels, renting cars from participating car rental companies 
and through other means. Mileage credits earned by FTP 
participants can be redeemed for various travel awards, 
including fare discounts, upgrades to First Class or Envoy 
Class and tickets on US Airways or on one of US Airways' FTP 
airline partners. Certain awards also include discount hotel 
and car rental awards. Mileage credits may not be brokered, 
bartered or sold, and have no cash value. 

     US Airways and its FTP airline partners limit the 
number of seats allocated per flight for award recipients by 
using various inventory management techniques. Award travel 
for all but the highest-level Dividend Miles participants is 
generally not permitted on blackout dates, which correspond 
to certain holiday periods or peak travel dates to foreign 
destinations. US Airways reserves the right to terminate 
Dividend Miles or portions of the program at any time. 
Program rules, partners, special offers, blackout dates, 
awards and requisite mileage levels for awards are subject 
to change without prior notice.

     US Airways uses the incremental cost method to account 
for liabilities associated with Dividend Miles. Estimated 
future travel awards are valued at the estimated average 
incremental cost of carrying one additional passenger. 
Incremental costs include unit costs for passenger food, 
beverages and supplies, fuel, reservations, communications, 
liability insurance and denied boarding compensation 
expenses. No profit or overhead margin is included in the 
accrual for incremental costs. US Airways periodically 
reviews the assumptions made to calculate its FTP liability 
for reasonableness and makes adjustments to these 
assumptions as necessary. No liability is recorded for 
hotel, car rental or most airline award certificates that 
are to be honored by other parties because there is no cost 
to US Airways for such awards. US Airways charges certain of 
its partner airlines for redemptions of awards for travel on 
its flights. Conversely, certain partner airlines charge US 
Airways for Dividend Miles earned by US Airways FTP 
participants on their flights. 

     As of December 31, 1998 and 1997, Dividend Miles 
participants had accumulated mileage credits for 
approximately 4,388,000 awards and 4,253,000 awards, 
respectively. Because US Airways expects that some potential 
awards will never be redeemed, calculations of FTP 
liabilities are based on approximately 86% of total 
accumulated mileage credits. Mileage credits for Dividend 
Miles participants who have accumulated less than the 
minimum number of mileage credits necessary to claim an 
award are excluded from calculations of FTP liabilities. 
Incremental changes in FTP liabilities resulting from 
participants earning or redeeming mileage credits or changes 
in assumptions used for the related calculations are 
recorded as part of the regular review process.

     During 1998, 1997 and 1996, US Airways' customers 
redeemed approximately 0.9 million, 0.9 million and 1.0 
million awards for free travel, respectively, representing 
approximately 5%, 5% and 6% of US Airways' RPMs in those 
years, respectively. These low percentages as well as the 
use of certain inventory management techniques (see above) 
minimize the displacement of revenue passengers by 
passengers traveling on Dividend Miles award tickets.


                             12

     In January 1999, US Airways announced changes to its 
FTP that take effect on July 1, 1999. Under current program 
guidelines, mileage credits do not expire. Mileage credits 
earned after December 31, 1999 may expire, in certain 
circumstances, under the new program guidelines. In 
addition, the number of mileage credits required for award 
travel redemption will change when the new program 
guidelines take effect. For example, the number of mileage 
credits necessary for an award for domestic travel will vary 
depending on the date of travel and whether or not the 
travel itinerary includes a Saturday night stay over.

     In July 1998, US Airways and American entered into 
agreements whereby participants of each airlines' FTP may 
redeem mileage credits for award travel on either airline. 
Participants may also "pool" mileage credits between FTPs. 
Each company compensates the other when relieved of an 
obligation to provide a travel award. 

     As mentioned previously, US Airways terminated its 
relationship with British Airways during 1997, including 
arrangements involving the two companies' frequent traveler 
programs.

INSURANCE

     The Company and its subsidiaries maintain insurance of 
the types and in amounts deemed adequate to protect 
themselves and their property. Principal coverage includes 
liability for bodily injury to or death of members of the 
public, including passengers; damage to property of the 
Company, its subsidiaries and others; loss of or damage to 
flight equipment, whether on the ground or in flight; fire 
and extended coverage; and workers' compensation and 
employer's liability. Coverage for environmental liabilities 
is expressly excluded from current insurance policies.



ITEM 2.  PROPERTIES

FLIGHT EQUIPMENT

     As of December 31, 1998, US Airways and Shuttle operated the 
following jet aircraft:

                   Passenger   Average
    Type           Capacity   Age (years) Owned(4) Leased(5) Total
    ----           --------   ----------- -------  --------- -----
Boeing 767-200ER         200        9.5          8         4     12
Boeing 757-200           182        8.2         23        11     34
Boeing 727-200 (1)       161       26.7         12         -     12
Boeing 737-400           144        9.0         19        35     54
McDonnell Douglas MD-80  142       16.8         15        16     31
Boeing 737-300           126       11.7         11        74     85
Airbus A319              120        0.2          -         6      6
Boeing 737-200 (2)       109       16.7         54        10     64
Douglas DC-9-30 (3)      100       24.1         43         7     50
Fokker 100                97        8.1         36         4     40
                                   ----        ---       ---    ---
                                   13.7        221       167    388
                                    ====        ===       ===    ===

(1)  Operated by Shuttle (see Note 1(a) to the Company's Notes 
     to Consolidated Financial Statements for information
     related to the Company's purchase of Shuttle in 1997).
(2)  US Airways purchased two leased B737-200 aircraft in 
     January 1999. 
(3)  US Airways retired three owned DC-9-30 aircraft during the 
     first quarter of 1999. 
(4)  Of the owned aircraft, 91 were pledged as collateral for
     various secured financing obligations aggregating $1.9
     billion as of December 31, 1998. 
(5)  The terms of the leases expire between 1999 and 2018.


                             13


     As of December 31, 1998, the Company's three wholly-owned 
regional airline subsidiaries operated the following turboprop 
aircraft:

                  Passenger    Average
    Type           Capacity   Age (years) Owned(4) Leased(5) Total
    ----           --------   ----------- -------  --------- -----
de Havilland Dash 8 (1)  37          8.0       29        68      97
Dornier 328-110          32          3.3        -        26      26
                                    ----       --        --     ---
                                     7.0       29        94     123
                                     ====       ==        ==     ===

(1) An additional leased Dash 8 aircraft was added in
    January 1999.
(2) The terms of the leases expire between 1999 and 2012.


     The Company has agreements for the acquisition of up to 
400 new single-aisle aircraft and up to 30 new 
intercontinental-range widebody aircraft. As of December 31, 
1998, US Airways had added six of the new single-aisle 
aircraft into its operating fleet. US Airways expects to 
take delivery of 33 additional new single-aisle aircraft in 
1999. US Airways plans to retire 24 older aircraft during 
1999. Deliveries of the new widebody aircraft are scheduled 
to begin in the first quarter of the year 2000. The 
Company's aircraft acquisition agreements are discussed in 
detail in MD&A as well as Note 6(a) to the Company's Notes 
to Consolidated Financial Statements. The Company has 
recently signed a letter of intent to purchase nine new Dash 
8 aircraft in 1999 from Bombardier Aerospace, the 
manufacturer of these aircraft. In addition, upon completion 
of a definitive purchase agreement, the Company plans to 
extend the leases on ten Dash 8 aircraft currently operated 
by the Company's regional airline subsidiaries (the leases 
are scheduled to expire in 1999).

     The Company's airline subsidiaries maintain inventories 
of spare engines, spare parts, accessories and other 
maintenance supplies sufficient to meet their operating 
requirements.

     As of December 31, 1998, the Company's airline 
subsidiaries, principally US Airways, owned or leased the 
following aircraft which were not considered part of the 
operating fleets presented in the tables above. These 
aircraft were either parked in storage facilities or, as 
shown in the far right column, leased or subleased to third 
parties.


                               Average                          Leased/
          Type               Age (years) Owned  Leased  Total  Subleased
          ----               ----------- -----  ------  -----  ---------
British Aerospace BAe-146-200     13.9     -      11       11      11
British Aerospace Jetstream 3100  11.7     -      14       14      14
Douglas DC-9-30                   25.6     1       -        1       -
Fokker F28-1000                   25.5    16       -       16      16
Fokker F28-4000                   13.0     -      11       11      11
                                  ----    --      --       --      --
                                  16.9    17      36       53      52
                                  ====    ==      ==       ==      ==


     See Note 6(b) to the Company's Notes to Consolidated 
Financial Statements for additional information related to 
third party lease arrangements involving flight equipment.

     US Airways and Shuttle are participants in the Civil 
Reserve Air Fleet (CRAF), a voluntary program administered by 
the Air Mobility Command (AMC). The General Services 
Administration of the U.S. government requires that airlines 
participate in CRAF in order to receive U.S. government 
business. The U.S. government is US Airways' largest 
customer. US Airways' and Shuttle's commitments under CRAF 
are to provide up to eleven B767-200ER and four B727-200 
aircraft, respectively, in support of military operations, 
most likely aeromedical missions, as specified by the AMC. US 
Airways and Shuttle would be reimbursed at prescribed rates 
if these aircraft were activated under the CRAF program. To 
date, the AMC has not requested US Airways or Shuttle to 
activate any of their aircraft under CRAF.


                             14

GROUND FACILITIES

     US Airways leases the majority of its ground 
facilities, including executive and administrative offices 
in Arlington, Virginia adjacent to Reagan National; its 
principal operating, overhaul and maintenance bases at the 
Pittsburgh and Charlotte/Douglas International Airports; 
major training facilities in Pittsburgh and Charlotte; 
central reservations offices in several cities; and line 
maintenance bases and local ticket, cargo and administrative 
offices throughout its system. US Airways owns a building 
and vacant land in Fairfax County (Virginia), a training 
facility in Winston-Salem (North Carolina) and reservations 
facilities in San Diego and Orlando. The property in Fairfax 
County is not used as part of the Company's operations and 
is currently available for sale.

     In 1998, US Airways closed its maintenance facilities in 
Roanoke (Virginia), Greensboro (North Carolina) and Winston-
Salem (see related information in MD&A). The work performed 
at these locations was transferred to other US Airways 
maintenance facilities.

TERMINAL CONSTRUCTION PROJECTS

The Company's airline subsidiaries utilize public airports 
for their flight operations under lease arrangements with the 
government entities that own or control these airports. 
Airport authorities frequently require airlines to execute 
long-term leases to assist in obtaining financing for 
terminal and facility construction. Any future requirements 
for new or improved airport facilities and passenger 
terminals at airports at which the Company's airline 
subsidiaries operate could result in additional expenditures 
and long-term commitments for these subsidiaries. Several 
significant projects which affect large airports on US 
Airways' route system are discussed below.

In 1998, US Airways reached an agreement with the 
Philadelphia Authority for Industrial Development (PAID) and 
the City of Philadelphia to construct a new international 
terminal and a new US Airways Express terminal at the 
Philadelphia International Airport, one of US Airways' 
connecting hubs and US Airways' principal international 
gateway. The international terminal will include 12 gates for 
widebody aircraft and new federal inspection facilities and 
is expected to be completed in 2001. The new US Airways 
Express facility will be capable of accommodating 
approximately 30 regional aircraft and is expected to be 
completed in 2000. PAID has issued $443.7 million in airport 
revenue bonds to finance the two terminals, ramp control 
tower, and related projects. Upon completion of the project, 
US Airways expects that its annual cost of operations will 
increase by approximately $30 million.

In 1993, US Airways and the City of Philadelphia reached an 
agreement to proceed with certain capital improvements at 
Philadelphia International Airport. These improvements 
include approximately $136 million in various terminal 
renovations and improvements, including the construction of a 
new US Airways club and $220 million to expand the runway 
used primarily by regional aircraft. The terminal renovations 
and improvements were completed in 1998 and increased US 
Airways annual cost of operations by approximately $7 
million. The runway expansion project is expected to be 
completed in late 1999. US Airways expects that its annual 
costs of operations at Philadelphia International Airport 
will increase by approximately $9 million once construction 
of the runway is complete.

ITEM 3.  LEGAL PROCEEDINGS

     US Airways is involved in legal proceedings arising out 
of an aircraft accident in September of 1994 near Pittsburgh 
in which 127 passengers and five crew members lost their 
lives. With respect to this accident, the National 
Transportation Safety Board (NTSB) held hearings in January 
and November of 1995, and is scheduled to hold a final 
hearing on March 23, 1999 before issuing its final accident 
investigation report. Wrongful death cases are pending in a 
consolidated multi-district


                             15

litigation in U.S. District Court for the Western District of 
Pennsylvania and in state court in Cook County, Illinois. 
Although US Airways has settled over 80% of the cases and 
claims arising from the Pittsburgh accident, it expects that 
it will be at least a year before all of the settlements 
and/or related litigation are concluded. A trial has been set 
for November 1999 in the Illinois litigation. US Airways is 
fully insured with respect to this litigation and, therefore, 
believes that the litigation will not have a material adverse 
effect on the Company's financial condition or results of 
operations.

     In September 1997, The Boeing Company (Boeing) filed 
suit against US Airways in state court in King County, 
Washington seeking unspecified damages, estimated at 
approximately $220 million, for alleged breach of two 
aircraft purchase agreements concerning, respectively, eight 
B757-200 aircraft and 40 B737-Series aircraft. On October 
31, 1997, US Airways filed an answer and counterclaims to 
Boeing's complaint denying liability and seeking recovery 
from Boeing of approximately $35 million in equipment 
purchase deposits. On April 23, 1998 the parties reached a 
settlement terminating all obligations with respect to both 
purchase agreements. Pursuant to the settlement, the 
litigation has been dismissed with prejudice as to both 
Boeing's claims and US Airways' counterclaims.

     In October 1995, US Airways terminated for cause an 
agreement with In-Flight Phone Corporation (IFPC). IFPC was 
US Airways' provider of on-board telephone and interactive 
data systems. The IFPC system had been installed in 
approximately 80 aircraft prior to the date of termination of 
the agreement. On December 6, 1995, IFPC filed suit against 
US Airways in Illinois state court seeking equitable relief 
and damages in excess of $186 million. US Airways believes 
that its termination of its agreement with IFPC was 
appropriate and that it is owed significant damages from 
IFPC. US Airways has filed a counterclaim against IFPC 
seeking compensatory damages in excess of $25 million and 
punitive damages in excess of $25 million. In January 1997, 
IFPC filed for protection from its creditors under Chapter 11 
of the Bankruptcy Code. The parties stipulated to lift the 
automatic stay provided for in the Bankruptcy Code which 
could allow IFPC's and US Airways' claims to be fully 
litigated. The Company is unable to predict at this time the 
ultimate resolution or potential financial impact of these 
proceedings on the Company's financial condition or results 
of operations.

     On July 30, 1996, the Company and US Airways initiated a 
lawsuit in U.S. District Court for the Southern District of 
New York against British Airways, BritAir Acquisition Corp., 
Inc., American and American's parent company, AMR Corp. The 
Company and US Airways claimed that British Airways, in 
pursuit of an alliance with American, is responsible for 
breaches of fiduciary duty to the Company and US Airways and 
violated certain provisions of the January 21, 1993 
Investment Agreement between the Company and British Airways 
(the Investment Agreement). The lawsuit also claims that the 
defendants have committed violations of U.S. antitrust laws. 
In response to the defendants' Motion to Dismiss, the Court 
sustained US Airways' claims for breach of contract against 
British Airways. The Court dismissed the remaining claims 
against British Airways and all claims against American. On 
February 6, 1998, British Airways filed its answer to the 
complaint along with counterclaims against the Company and US 
Airways. British Airways' counterclaims alleged that US 
Airways breached various provisions of the Investment 
Agreement and that US Airways breached the Code Share 
Agreement between British Airways and US Airways by providing 
certain allegedly confidential information to specific third 
parties. In addition, British Airways seeks a declaratory 
judgment regarding certain payment obligations under its wet 
lease arrangement with US Airways. British Airways claimed 
damages of $16.7 million for the termination of the code 
share relationship and an unspecified amount of damages for 
its remaining claims. On January 29, 1999, the Company, US 
Airways and British Airways jointly filed a pretrial order 
with the Court, and on February 5, 1999, the Court placed the 
lawsuit on its trial-ready calendar. On February 5, 1999, 
British Airways filed a motion for summary judgment seeking 
dismissal of the Company's and US Airways' claims and a 
finding that the Company and US Airways are liable for breach 
of the Code Share Agreement. Subsequently, the Company and 


                             16

US Airways filed a memorandum of law opposing British 
Airways' motion. The Company is unable to predict at this 
time the ultimate resolution or potential financial impact of 
these proceedings on the Company's financial condition or 
results of operations.

     In May 1995, the Company, US Airways and the Retirement 
Income Plan for US Airways, Inc. (the Pilots Pension Plan) 
were sued in federal district court for the District of 
Columbia by 481 active and retired pilots alleging that 
defendants had incorrectly interpreted the Pilots Pension 
Plan provisions and erroneously calculated benefits under the 
Pilots Pension Plan. The plaintiffs sought damages in excess 
of  $70 million. In May 1996, the court issued a decision 
granting US Airways' Motion to Dismiss the majority of the 
complaint for lack of jurisdiction, deciding that the dispute 
must be resolved through the arbitration process under the 
Railway Labor Act because the Pilots Pension Plan was 
collectively bargained. The court retained jurisdiction over 
one count of the complaint alleging a violation of a 
disclosure requirement under the Employee Retirement Income 
Security Act. The plaintiffs have attempted to appeal the 
district court's dismissal before the U.S. Court of Appeals 
for the District of Columbia. In January of 1998, the Court 
of Appeals dismissed plaintiff's appeal for lack of 
jurisdiction because the lower court order was not final. The 
plaintiffs moved for an order certifying the lower court 
order as final. The district court granted the motion to 
certify and the plaintiffs appealed to the United States 
Court of Appeals for the District of Columbia. In February 
1999, the United States Court of Appeals upheld the District 
Court's decision originally granted in May 1996 in US 
Airways' favor.

     In February of 1998 a purported class action complaint 
was filed by a travel agency in Puerto Rico against seven 
major U.S. airlines, including US Airways. The complaint 
alleges that the defendant airlines are undercompensating 
Puerto Rican travel agents in connection with the agents' 
sale of travel. The plaintiffs allege that the airlines are 
contractually obligated to pay a 10% commission and that the 
defendant airlines breached that contract as a result of the 
introduction of commission caps limiting commission payable 
with respect to a single trip to a stated dollar amount and 
reducing certain commissions to 8%. The plaintiffs have 
stated their damages for the class in the amount of $150 
million. On December 22, 1998, after the filing of various 
motions by the defendants and some preliminary discussions, 
the plaintiffs dismissed this action without the payment of 
any amount by US Airways.

     The City and County of San Francisco have sued a number 
of San Francisco International Airport tenants for the 
recovery of approximately $18 million of costs incurred with 
respect to the characterization and cleanup of soil and 
groundwater contamination at the airport. The City and County 
of San Francisco has identified US Airways as a potentially 
responsible party. The City and County of San Francisco and 
US Airways recently entered into an agreement in principle to 
resolve this matter and expect to finalize the agreement by 
April 1, 1999.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders 
during the fourth quarter of 1998.

PART II

ITEM 5A.  MARKET FOR US AIRWAYS GROUP'S COMMON EQUITY AND 
RELATED STOCKHOLDER MATTERS

STOCK EXCHANGE LISTING

     US Airways Group's Common Stock, $1 par value (Common 
Stock), is traded on the New York Stock Exchange (Symbol U). 
As of February 26, 1999, there were approximately 25,000 
stockholders of record. These stockholders reside throughout 
the United States and in other countries.


                             17

MARKET PRICES OF COMMON STOCK

     The high and low sale prices of the Company's Common 
Stock as reported on the New York Stock Exchange Composite 
Tape were:

            Period             High            Low
            ------             ----            ---
     1998   Fourth Quarter  $ 58  9/16      $ 34  3/4
            Third Quarter     83  1/4         47
            Second Quarter    82  1/8         63  5/8
            First Quarter     76  7/8         56  9/16

     1997   Fourth Quarter    65  3/4         39  15/16
            Third Quarter     43  1/8         32  7/8
            Second Quarter    38  1/4         23  1/8
            First Quarter     26  3/4         19  1/4

     Holders of Common Stock are entitled to receive such 
dividends as may be lawfully declared by the Company's board 
of directors. The Company has not paid dividends on its 
Common Stock since the second quarter of 1990. As of the date 
of this report, the Company's board of directors had not 
authorized the resumption of dividends on the Company's 
Common Stock and there can be no assurance when or if such 
dividend payments will resume.

FOREIGN OWNERSHIP RESTRICTIONS

     Under current federal law, non-U.S. citizens cannot own 
or control more than 25% of the outstanding voting securities 
of a domestic air carrier. The Company believes that it was 
in compliance with this statute during the time period 
covered by this report.

ITEM 5B.  MARKET FOR US AIRWAYS' COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS

     US Airways Group owns all of US Airways' outstanding 
common stock, par value $1 (US Airways Common Stock). US 
Airways' board of directors has not authorized the payment of 
dividends on US Airways' Common Stock since 1988. 

     Currently, the amount of dividends that US Airways can 
pay on its common stock is materially limited by a covenant 
contained in its 9 5/8% Senior Notes. However, this covenant 
does not restrict US Airways from loaning or advancing funds 
to US Airways Group. 




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                             18



ITEM 6.  SELECTED FINANCIAL DATA

CONSOLIDATED STATEMENTS OF OPERATIONS-US AIRWAYS GROUP (IN MILLIONS, EXCEPT 
PER SHARE AMOUNTS) (1)

                           1998    1997    1996    1995    1994
                           ----    ----    ----    ----    ----
Operating Revenues      $ 8,688 $ 8,514 $ 8,142 $ 7,474 $ 6,997
Operating Expenses        7,674   7,930   7,705   7,153   7,489
                           ----    ----    ----    ----    ----
Operating Income (Loss) $ 1,014 $   584 $   437 $   322 $  (491)
Income (Loss)
  Before Taxes          $   902 $   672 $   275 $   128 $  (685)
Provision (Credit) for
  Income Taxes              364    (353)     12       9       -
                           ----    ----    ----    ----    ----
Net Income (Loss)       $   538 $ 1,025 $   263 $   119 $  (685)
Net Earnings Applicable
  to Common
  Stockholders          $   532 $   961 $   175 $    34 $  (763)

Basic Earnings (Loss)
  per Common Share (2)  $  5.75 $ 12.32 $  2.73 $  0.55 $(12.73)
Diluted Earnings (Loss)
  per Common Share (2)  $  5.60 $  9.87 $  2.35 $  0.55 $(12.73)
Cash dividends per
  Common Share          $     - $     - $     - $     - $     -




CONSOLIDATED BALANCE SHEETS-US AIRWAYS GROUP (IN MILLIONS)

                                    As of December 31,
                           ------------------------------------
                           1998    1997    1996    1995    1994
                           ----    ----    ----    ----    ----

Total Assets            $ 7,870 $ 8,372 $ 7,531 $ 6,955 $ 6,808
Long-Term 
  Obligations (3) (4)   $ 3,266 $ 4,142 $ 4,552 $ 4,572 $ 4,699
Series B Preferred
  Stock (4)             $     - $     - $   213 $   213 $   213
Common Stockholders'
  Equity (Deficit) (4)  $   593 $   725 $  (798)$(1,049)$(1,110)
Total Stockholders'
 Equity (Deficit) (4)   $   593 $   725 $  (584)$  (836)$  (897)

Shares of Common Stock
  Outstanding (5)          83.8    91.5    64.3    63.4    61.1

(1)  Certain years include nonrecurring items, activity that 
     is reported as "nonrecurring items" by the Company in 
     its various filings from time-to-time with the U.S. 
     Securities and Exchange Commission (See Note 14 to the 
     Company's Notes to Consolidated Financial Statements 
     for related information).
(2)  During 1997, the Company adopted Statement of Financial 
     Accounting Standards No. 128, "Earnings per Share" 
     (SFAS 128). SFAS 128 established new guidelines for 
     calculating earnings per common share. The Company's 
     Earnings (Loss) per Common Share figures for the years 
     1994 through 1996 have been restated to conform with 
     the provisions of SFAS 128.
(3)  Includes long-term debt, capital leases, postretirement 
     benefits other than pensions (noncurrent) and 
     outstanding redeemable preferred stock.
(4)  1996, 1995 and 1994 do not include any effects from 
     deferred dividends on preferred stock. See Notes 7 and 
     8(b) to the Company's Notes to Consolidated Financial 
     Statements contained in Part II, Item 8A of this report 
     for additional information related to the Company's 
     preferred stock and related activity.
(5)  1998 and 1997 activity included conversions of 
     preferred stock into Common Stock. See Notes 7 and 8(b) 
     to the Company's Notes to Consolidated Financial 
     Statements for additional information.

Note:  Numbers may not add or calculate due to rounding.








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                             19


SELECTED OPERATING AND FINANCIAL STATISTICS-US AIRWAYS (1)





                           1998    1997    1996    1995    1994
                           ----    ----    ----    ----    ----

Revenue passengers
   (thousands)*          57,990  58,659  56,640  56,674  59,495
Total RPMs (millions)(2) 41,370  41,749  39,220  38,079  38,395
RPMs (millions)*         41,253  41,579  38,943  37,618  37,941
Total ASMs (millions)(3) 56,861  58,500  57,208  58,678  61,540
ASMs (millions)*         56,723  58,294  56,885  58,163  61,027
Passenger load factor*(4)  72.7%   71.3%   68.5%   64.7%   62.2%
Break-even load
  factor (5)               65.7%   66.4%   67.9%   64.9%   67.3%
Yield* (6)                17.02c  17.10c  17.46c  16.66c  15.61c
Passenger revenue
  per ASM*(7)             12.38c  12.20c  11.95c  10.78c   9.70c
Revenue per ASM(8)        13.80c  13.50c  13.19c  11.80c  10.59c
Cost per ASM(9)           12.34c  12.33c  12.69c  11.40c  11.02c
Average passenger
  journey (miles)*          711     709     688     664     638
Average stage
  length (miles)*           597     591     578     560     536
Revenue aircraft miles
  (millions)*               422     435     426     444     473
Cost of aviation fuel
  per gallon(10)          51.83c  67.47c  70.51c  56.83c  55.79c
Cost of aviation fuel
  per gallon, excluding
  fuel taxes (11)         45.95c  61.26c  64.09c  53.23c  53.28c
Gallons of aviation fuel
  consumed (millions)     1,109   1,129   1,107   1,137   1,205
Operating aircraft
  at year-end               376     376     390     394     424
Full-time equivalent
  employees at year-end  38,210  38,533  40,160  39,891  42,399

* Scheduled service only (excludes charter service).
 c cents.
 
(1)  Operating statistics include free frequent travelers 
     and the related miles they flew. Operating statistics 
     exclude flights operated by US Airways under a wet 
     lease arrangement with British Airways Plc (the "wet 
     lease arrangement," which ended May 31, 1996). 
     Nonrecurring items and certain revenues and expenses 
     have been excluded from US Airways' financial results 
     for purposes of financial statistical calculation and 
     to provide better comparability between periods. 
     Nonrecurring items include those items reported as 
     "nonrecurring items" by US Airways in its various 
     filings from time-to-time with the U.S. Securities and 
     Exchange Commission (see Note 13 to US Airways' Notes 
     to Consolidated Financial Statements for additional 
     information). Revenues and expenses associated with 
     US Airways' capacity purchase arrangements with certain 
     affiliated airlines and the wet lease arrangement are 
     also excluded from financial statistical calculations
     (see Notes 10(a) and 10(b) to US Airways' Notes to 
     Consolidated Financial Statements for additional
     information).
(2)  Revenue Passenger Miles (RPMs) - revenue passengers 
     multiplied by the number of miles they flew.
(3)  Available Seat Miles (ASMs) - seats available 
     multiplied by the number of miles flown (a measure of 
     capacity).
(4)  Percentage of aircraft seating capacity that is
     actually utilized (RPMs/ASMs).
(5)  Percentage of aircraft seating capacity utilized that 
     equates to US Airways breaking-even at the pre-tax 
     income level.
(6)  Passenger transportation revenue divided by RPMs.
(7)  Passenger transportation revenue divided by ASMs (a 
     measure of unit revenue).
(8)  Total Operating Revenues divided by ASMs (a measure of 
     unit revenue).
(9)  Total Operating Expenses divided by ASMs (a measure of 
     unit cost).
(10) Includes the base cost of aviation fuel, fuel taxes and 
     transportation charges.
(11) Includes the base cost of aviation fuel and 
     transportation charges.




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                             20


Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS

                              GENERAL INFORMATION

     A "forward-looking information" which is subject to a number of risks 
and uncertainties. The preparation of forward-looking information requires 
the use of estimates of future revenues, expenses, activity levels and 
economic and market conditions, many of which are outside the Company's 
control. Among the specific factors that could cause actual results to 
differ materially from those set forth in the forward-looking information 
are the following: economic conditions, labor costs, aviation fuel costs, 
competitive pressures on pricing-particularly from competitors with lower 
cost structures, weather conditions, government legislation, consumer 
perceptions of the Company's products, demand for air transportation in the 
markets in which the Company operates and other risks and uncertainties 
listed from time to time in the Company's reports to the United States 
Securities and Exchange Commission (SEC). Other factors and assumptions not 
identified above are also involved in the preparation of forward-looking 
information, and the failure of such other factors and assumptions to be 
realized may also cause actual results to differ materially from those 
discussed. The Company assumes no obligation to update such estimates to 
reflect actual results, changes in assumptions or changes in other factors 
affecting such estimates.

     Except where noted, the following discussion relates primarily to the 
results of operations, financial condition and future prospects of US 
Airways. US Airways is the Company's principal operating subsidiary, 
accounting for 90% of the Company's operating revenues for 1998 (on a 
consolidated basis).

                               FINANCIAL OVERVIEW

     For 1998, the Company's operating income was $1.0 billion, income 
before taxes was $902 million, net income was $538 million and earnings per 
common share (EPS) was $5.60 on a diluted basis. For 1997, the Company 
recognized operating income, income before taxes, net income and EPS on a 
diluted basis of $584 million, $672 million, $1.0 billion and $9.87, 
respectively. The comparative amounts for 1996 were $437 million, $275 
million, $263 million and $2.35, respectively. The Company's financial 
results for each of these years include the nonrecurring items detailed in 
"Results of Operations" below.

     Excluding nonrecurring items, the Company's operating income has 
increased significantly on a year over year basis for the last three years. 
This improvement is primarily attributable to relatively favorable domestic 
economic and industry conditions and overall favorable capacity and pricing 
trends in markets served by the Company's airline subsidiaries. In addition, 
US Airways' improved operational performance, marketing efforts and the 
positive influence of certain revenue enhancement and cost-reduction 
initiatives have also contributed. Comparisons of net income over the last 
three years are affected by certain tax benefits the Company recorded in 
1997, which also had the effect of substantially increasing the Company's 
effective tax rate for financial reporting purposes in 1998 (see also 
"Income Taxes" below).






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                                       21

                             NEW STRATEGIC FOUNDATION

     The Company has established a new foundation on which it is moving 
forward with achieving its long-term strategic objective of establishing US 
Airways as a competitive global airline:

    - a new labor contract between US Airways and its pilots; 

    - an agreement with a subsidiary of Airbus Industrie G.I.E. (Airbus) to
      purchase up to 430 new aircraft, including both single-aisle
      A320-Family aircraft and intercontinental-range widebody aircraft; 

    - an expanded and substantially improved line of products, including 
new
      international service and a new international business class product,
      "Envoy Class;"

    - the purchase of Shuttle, Inc. (Shuttle), which operates under the
      trade name "US Airways Shuttle;"

    - a marketing arrangement with American Airlines, Inc. (American);

    - "MetroJet," the Company's competitive response to low-cost, low-fare
      competition; 

    - a contract with The SABRE Group, Inc. (TSG) that is expected to 
provide
      substantial long-term cost savings and enhancements in the 
information
      services area; and

    - new regional jet service on certain routes operated by US Airways
      Express.

     A new five-year labor contract between US Airways and its pilots became 
effective January 1, 1998. This contract includes various provisions that 
the Company believes are helping US Airways to address its high cost 
structure, including linking the compensation of US Airways' pilots to the 
compensation of pilots at several other major domestic air carriers. The new 
contract was a key factor in the Company's decision to finalize its single-
aisle aircraft order with Airbus and also includes provisions that allowed 
US Airways to launch its low-cost product, MetroJet.

     As of the date of this report, March 19, 1999, US Airways had acquired 
ten Airbus A320-Family single-aisle aircraft, including one A320 and nine 
A319 aircraft. The Company has 118 additional A320-Family aircraft on firm 
order, including 29 to be delivered during the remainder of 1999 and 89 
scheduled for delivery in the years 2000 through 2002. The Company's 
aircraft acquisition agreement with Airbus also includes 112 aircraft 
subject to reconfirmation prior to scheduled delivery and options for 160 
additional aircraft. The Company anticipates that the new Airbus single-
aisle aircraft will ultimately replace, at a minimum, US Airways' B737-200, 
DC-9-30 and MD-80 aircraft fleets. The new Airbus aircraft are more fuel-
efficient, less costly to maintain, have greater range capabilities and are 
expected to provide certain customer service benefits over the aircraft 
they are intended to replace. However, certain expenses such as aircraft 
rent will likely increase in conjunction with the acquisition of the new 
aircraft. The Company has also entered into an agreement with CFM 
International, Inc. (CFMI) for jet engines to power the new Airbus A320-
Family aircraft. As part of its agreement with CFMI, GE Engine Services, 
Inc. will maintain these engines under an up to 20-year agreement. 

     On July 2, 1998, the Company announced that it had reached an 
agreement with Airbus for the purchase of up to 30 widebody A330-300 
aircraft. The agreement includes seven firm aircraft orders, seven aircraft 
subject to reconfirmation prior to scheduled delivery and options for 16 
additional aircraft.  Of the seven firm-order A330-300 aircraft, six are 
scheduled for delivery in the year 2000 and one in early 2001. Orders 
subject to reconfirmation are for aircraft that are tentatively scheduled 
for delivery beginning in the fourth quarter of the year 2000. The Company 

                                        22

can substitute other Airbus widebody aircraft for the A330-300s, including 
the A330-200 or members of the A340-Series, for orders other than the first 
seven aircraft. In October 1998, the Company reached an agreement with 
Pratt & Whitney for jet engines to power US Airways' new Airbus widebody 
aircraft and to provide long-term maintenance for the engines. The new 
widebody aircraft are expected to operate primarily in transatlantic 
markets. See Note 6(a) to the Company's Notes to Consolidated Financial 
Statements contained in Part II, Item 8A of this report and "Liquidity and 
Capital Resources" below for additional information related to the 
Company's commitments to purchase flight equipment. 

     US Airways added additional transatlantic service during 1998: 
Philadelphia-London (Gatwick Airport) and Philadelphia-Amsterdam in April 
1998, Pittsburgh-Paris in October 1998 and a second Philadelphia-London 
flight in early November 1998. US Airways expects to reinstate a second 
Philadelphia-Paris flight in Summer 1999 (US Airways temporarily suspended 
a second Philadelphia-Paris flight in order to add Pittsburgh-Paris 
service). Also in 1998, US Airways applied to the U.S. Department of 
Transportation (DOT) for authority to operate Philadelphia-Milan service 
using seven weekly frequencies recently made available pursuant to an 
agreement between the U.S. and Italy. US Airways participated vigorously in 
the DOT's Italy proceedings. However, in February 1999 the DOT selected 
Delta Air Lines, Inc. (Delta) over US Airways for the new Italy route. US 
Airways has also filed with the DOT for authority to serve London's 
Heathrow Airport (Heathrow) from Boston, Charlotte, Philadelphia and 
Pittsburgh. US Airways continues to explore additional international 
opportunities. US Airways' transatlantic capacity (as measured by available 
seat miles or ASMs) for 1998 was 142% higher than for 1995, the year before 
US Airways began to bolster its international operations. 

     In December 1997, in support of its growing international presence, US 
Airways launched an improved international business class product called 
"Envoy Class." Envoy Class offers travelers sleeper-quality seats, personal 
in-arm video entertainment systems, First Class-style dining among other 
amenities, all at business class fares. US Airways has also announced a 
major expansion and improvements to its facilities at Philadelphia, 
including a new international terminal and a new facility for US Airways 
Express operations. Philadelphia International Airport is US Airways' 
primary international gateway. As discussed above, the Company has also 
entered into agreements to acquire new widebody, intercontinental-range 
Airbus aircraft.

     On March 11, 1999, US Airways announced that it had obtained 
commercially viable takeoff and landing rights at London's Gatwick Airport 
that will permit initiation of the long-awaited service from Charlotte. 
Specific service plans will be announced soon. 

     US Airways anticipates moving its operations at Gatwick Airport to 
Heathrow when possible (the availability of operating rights at Heathrow is 
currently constrained by the bilateral aviation treaty between the U.S. and 
the United Kingdom). Talks between the U.S. and the U.K. government aimed 
at negotiating a new bilateral aviation treaty with the U.K. were suspended 
in October 1998, however, informal talks resumed in mid-February 1999. In 
addition, according to press reports, British Airways Plc (British Airways) 
and American have decided to phase in their proposed alliance over a four 
to five year period rather than seek government approval for all aspects of 
the alliance at this time. The U.K. has stated that it would favor an 
incremental liberalization of the aviation treaty. These changes in the 
British position could make it more difficult for other airlines, including 
US Airways, to obtain the rights and access to slots (takeoff and landing 
rights) necessary to operate flights to Heathrow. US Airways believes that 
a new aviation treaty between the two countries is a prerequisite for US 
Airways' obtaining the right to serve Heathrow and has proposed that the 
U.S. government renounce the treaty in order to permit negotiation of a new 
liberal agreement. US Airways continues to explore opportunities to further 
its growth in European markets, especially in light of the Company's recent 
order for new widebody aircraft.

                                       23

     On December 30, 1997, the Company purchased Shuttle. Shuttle, which 
operates under the trade name "US Airways Shuttle," currently provides high 
frequency service between New York (LaGuardia) and Boston and between New 
York (LaGuardia) and Washington (Reagan National). Shuttle owns twelve 
B727-200 aircraft (see also "Liquidity and Capital Resources" below). The 
Company is currently revamping the US Airways Shuttle product, which will 
include upgrading Shuttle's fleet.

     On April 23, 1998, US Airways and American announced a marketing 
relationship that gives customers of both companies important new benefits, 
including combined access to both frequent traveler programs: US Airways' 
Dividend Miles and American's AAdvantage. Under the program, effective 
August 1, 1998, members who belong to Dividend Miles and AAdvantage are 
able to claim awards for travel on both airlines. In addition, US Airways 
Club and American's Admiral Club members now enjoy reciprocal access to 
each airlines' airport clubs. During August 1998, the second phase of the 
marketing relationship was launched: enabling Dividend Miles and AAdvantage 
members who belong to both programs to combine miles when claiming a travel 
award on either airline. The third phase of the relationship, allowing 
AAdvantage members to earn AAdvantage miles as well as Dividend Miles on 
certain US Airways Shuttle flights (through September 1999), was unveiled 
in early October 1998. 

     US Airways also believes that "code-sharing" with American on certain 
flights would be beneficial to its customers. However, because certain 
types of code-sharing are subject to provisions in the labor contracts of 
both airlines, US Airways has no plans to implement domestic code-sharing 
between the "mainline" operations of the airlines unless pressured to do so 
for competitive reasons. Code-sharing on the regional air carriers of both 
airlines, US Airways Express and American Eagle, is expected to be 
implemented in early 1999 on certain flight segments.

     Legislation has recently been enacted that would provide for increased 
scrutiny of certain airline joint ventures by the DOT. In April 1998, the 
DOT issued proposed rules designed to regulate perceived anti-competitive 
behavior directed at new entrants in the airline industry. Legislation has 
recently been enacted requiring among other things, the National Research 
Council of the National Academy of Sciences to complete a comprehensive 
study pertaining to competitive issues in the airline industry prior to the 
DOT's implementation of any such rules. The Company cannot predict whether 
or when any such proposed rules will be adopted.

     On June 1, 1998, US Airways launched MetroJet, its competitive 
response to low-cost, low-fare competition, with five Boeing B737-200 
aircraft and service between Baltimore/Washington International Airport and 
four eastern cities. MetroJet offers travelers single-class service, 
convenient schedules, assigned seating and low fares, in addition to the 
other benefits available to customers of US Airways. MetroJet's operational 
performance has exceeded management's expectations. MetroJet operated 22 
aircraft with service to 16 cities at the end of 1998. MetroJet, which can 
comprise up to 25% of the US Airways system (as measured by revenue block 
hours), is expected to operate 54 aircraft by the end of 1999. 

     In December 1997, US Airways entered into an agreement with TSG under 
which TSG assumed responsibility, as of January 1, 1998, for substantially 
all of US Airways' information technology requirements. The agreement with 
TSG is expected to result in substantial information system enhancements and 
efficiencies, particularly in the areas of reservations, passenger check-in, 
yield management and aircraft and crew scheduling. Under the terms of the 
agreement, TSG purchased US Airways' information systems and related assets. 
On January 1, 1998, in conjunction with US Airways' agreement with TSG, 670 
US Airways information services employees took positions with TSG and TSG 
assumed management and operation of US Airways' data processing facilities, 
data and voice networks and substantially all other information technologies 
activities. US Airways and TSG achieved a significant milestone on December 
5, 1998, when US Airways' reservation, 

                                        24

airport customer service and aircraft tracking systems were converted to the 
SABRE system. US Airways is also now using the SABRE O&D yield management 
system. See "Results of Operations" below for additional information related 
to US Airways' agreement with TSG.

     As of December 31, 1998, there were twelve regional jets operating as 
part of US Airways Express. These aircraft add a great deal of flexibility 
to the US Airways system as they can operate effectively in markets 
generally too small for US Airways' jet service and with stage lengths too 
great for turboprop aircraft. Under its agreement with its pilots, because 
US Airways has recalled all of its furloughed pilots (approximately 280 
pilots), the Company has the option to increase the number of regional jets 
operating as part of US Airways Express to 35. In addition, two of the 
Company's wholly-owned regional airlines added a total of ten deHavilland 
Dash 8 turboprop aircraft to their fleets in 1998. The Company has recently 
signed a letter of intent to purchase nine new Dash 8 aircraft in 1999 from 
Bombardier Aerospace, the manufacturer of these aircraft. In addition, upon 
completion of a definitive purchase agreement, the Company plans to extend 
the leases on ten Dash 8 aircraft currently operated by the Company's 
regional airline subsidiaries (the leases are scheduled to expire in 1999).

                          CURRENT COMPETITIVE POSITION

     The Company's foremost competitive threat continues to be the growth 
of low-cost, low-fare competition in its primary operating region, the 
Eastern U.S. Currently, approximately 84% of US Airways' departures and 
approximately 56% of its capacity (ASMs) are located within this region. US 
Airways' estimated origin/destination passenger overlap with low-cost, low-
fare competition is approximately 35% of its traffic base.

     Before October 1996, the primary low-cost, low-fare competition 
confronted by the Company's airline subsidiaries included Southwest 
Airlines Co. (Southwest) and a number of smaller, start-up air carriers. 
Southwest has steadily increased operations within the Eastern U.S. since 
first offering service in this region in late 1993. In October 1996, Delta, 
a major air carrier that was itself experiencing pressure from low-cost, 
low-fare competition, launched a low-cost product called "Delta Express." 
Delta Express currently operates 37 aircraft predominantly in Eastern U.S. 
markets. In addition, recent reports indicate that United Air Lines, Inc. 
(United) is considering adding "Shuttle by United" service at Northern 
Virginia's Dulles International Airport in conjunction with a planned 
expansion of operations at that facility. Shuttle by United, United's low-
cost product, currently operates exclusively in the Western U.S.  

     Direct competition with low-cost, low-fare competitors has typically 
resulted in the dilution of yield realized by the Company's airline 
subsidiaries. US Airways' Northeast-Florida service has been particularly 
affected by low-cost, low-fare competition. US Airways has the highest unit 
operating cost (operating cost per ASM or cost per ASM) of all major 
domestic air carriers. US Airways' cost per ASM was 12.34 cents for 1998. By 
contrast, Southwest reported unit operating costs for 1998 of 7.32 cents. 
Although Delta reported an overall unit operating cost of 8.86 cents for 
calendar year 1998, its Delta Express product is purported to have a unit 
operating cost of approximately 7.50 cents. 

     On June 1, 1998, US Airways launched MetroJet, its competitive 
response to the low-cost, low-fare threat. As discussed above in "New 
Strategic Foundation," MetroJet has grown considerably since its launch and 
is exceeding management's expectations operationally. The Company believes 
that MetroJet represents a significant improvement in the Company's 
competitive position, especially in markets in which the Company's airline 
subsidiaries face low-cost, low-fare competition.

     As mentioned above, US Airways has the highest unit operating cost of 
all the major domestic air carriers. US Airways believes that it has taken 
steps important to addressing its high 

                                        25

cost structure and enhancing its competitive position. US Airways' new 
five-year contract with its pilots, which became effective January 1, 1998, 
and the introduction of new Airbus aircraft into its operating fleet are 
two of the most important. The pilot's contract includes a "parity" 
provision linking compensation of US Airways' pilots to the weighted 
average pilot cost at four of the largest domestic airlines, plus 1%. The 
contract also includes provisions that allowed the Company to establish its 
own low-cost product, MetroJet, as well as add regional jets to US Airways 
Express. The new Airbus aircraft that US Airways began taking delivery of 
in late 1998 are also expected to have a positive effect on US Airways' 
unit operating cost, as discussed above in "New Strategic Foundation." The 
Company has also completed a substantial portion of its project to revamp 
its information services function, a project that is also discussed above 
in "New Strategic Foundation." It is noteworthy that US Airways' unit 
operating cost for 1998 was relatively unchanged versus 1997, in spite of 
the costs of launching MetroJet, integrating a new aircraft type into its 
operating fleet and its information systems projects. However, if fuel 
costs are equalized between the two years, US Airways' unit operating cost 
for 1998 was 2.6% higher than for 1997.

     In May 1997, US Airways announced certain efficiency measures 
including retiring 22 aircraft from its operating fleet, including its last 
five F28-4000 aircraft and 17 older DC-9-30 aircraft (all of these aircraft 
had been retired by the end of February 1998), ending unprofitable service 
to nine cities and eliminating other routes that had not been profitable 
(completed during early September 1997) and closing a flight crew base 
(February 1998), two reservations centers (October 1997) and three 
maintenance facilities (September 1998). The Company recognized certain 
nonrecurring charges as a result of these actions (nonrecurring items are 
discussed in "Results of Operations" below). In September 1997, US Airways 
decided to retire its remaining DC-9-30 aircraft earlier than previously 
planned resulting in an additional nonrecurring charge. US Airways 
anticipates that deliveries of new Airbus single-aisle aircraft will 
mitigate the effects of DC-9-30 retirements on its financial results and 
capacity. As discussed in "Results of Operations" below, US Airways expects 
to moderately increase the size of its operations in 1999. 

                           CERTAIN OWNERSHIP MATTERS

     In January 1998, the Company announced plans to purchase up to 2.3 
million shares of its common stock. The program was authorized by the 
Company's board of directors in conjunction with US Airways' agreement to 
provide up to 2.3 million stock options to its pilots in 1998. In February 
1998, the Company's board of directors announced certain actions aimed at 
increasing shareholder value, including a second common stock buy-back 
program, authorizing the purchase of up to $500 million of the Company's 
common stock. The Company announced a third common stock buy-back program in 
September 1998 for the purchase of up to five million shares and a fourth 
common stock buy-back program in November 1998 for the purchase of up to 
$500 million of the Company's common stock. In 1998, the Company purchased 
17.9 million shares of its common stock at a cost of $1.1 billion, including 
completing the first three stock purchase programs and $178 million of 
shares under the fourth program.

     On March 12, 1998, Berkshire Hathaway, Inc. exercised its right to 
convert the Company's Series H Preferred Stock into 9.2 million shares of 
the Company's Common Stock. The Company subsequently retired its Series H 
Preferred Stock. The Company had previously retired its Series F Preferred 
Stock (May 1997), its Series T Preferred Stock (May 1997), and its Series B 
Preferred Stock (September 1997). With the retirement of these preferred 
stock issuances, the Company had retired all of its preferred stock and 
relieved itself of annual dividends of approximately $79 million. See Notes 
7 and 8(b) to the Company's Notes to Consolidated Financial Statements for 
additional information.

     See "Liquidity and Capital Resources" below for additional information 
related to the Company's common stock purchases and preferred stock 
retirements. In addition, see "Results of 

                                        26

Operations" below for information related to certain preferred stock 
conversion (into common stock) transactions. 

                                    INCOME TAXES

     During the fourth quarter of 1997, the Company recognized income tax 
benefits of $467 million. These income tax benefits, which are reflected in 
the line item, "Provision (Credit) for Income Taxes" on the Company's 
Consolidated Statements of Operations (which are included in Part II, Item 
8A of this report), stem primarily from net operating losses and other tax 
credits generated in prior years. The Company recognized these income tax 
benefits for financial reporting purposes based on its expectations of 
future earnings levels and the fact that certain of these income tax 
benefits do not expire or would be realized in future periods irrespective 
of future earnings levels.

     Excluding the effect of the income tax benefits recognized in the 
fourth quarter, the Company's effective income tax rate for financial 
reporting purposes for 1997 was approximately 17%. As a result of 
recognizing the income tax benefits in 1997, the Company's effective income 
tax rate for financial reporting purposes for 1998 increased to 
approximately 40%. The Company expects its effective income tax rate for 
financial reporting purposes to remain at approximately 40% for 1999. 

     The rate at which the Company pays cash taxes on pre-tax income was 
approximately 15% for 1997, 19% for 1998 and is expected to increase to at 
least 30% in 1999. The increase expected for 1999 is due to the Company's 
utilization of net operating losses and investment tax credits in 1998 and 
the expected utilization of its remaining alternative minimum tax credit 
carryforwards in 1999.

     See Note 3 to the Company's Notes to Consolidated Financial Statements 
for additional information related to income taxes, including the 
components of the Company's deferred income tax assets and liabilities.

                            EFFECTS OF THE YEAR 2000

     The Company has or is currently operating computer software 
applications, systems and products that support important business 
functions, including reservations, accounting and flight operations 
systems, that will not properly process dates on or after January 1, 2000 
(commonly referred to as the "Year 2000" problem). In order to address this 
situation, the Company has implemented a plan that addresses the Company's 
information technology and non-information technology arenas. The Company 
has two teams of full-time staff in place. One team is coordinating the 
conversion of the Company's information technology to systems managed by 
TSG, including the Year 2000 (Y2K) compliance for those systems, as further 
described below. A second team, headed by the Company's chief information 
officer, is coordinating Y2K compliance efforts for non-information 
technology systems. This team has engaged the consulting arm of a "big 
five" public accounting firm to assist them with their efforts. This team 
is reviewing the level of the Company's Y2K compliance, and recommending 
such remedial measures as is necessary.

     The Company has a long-term information technology relationship with 
TSG pursuant to which it has been converting many of its information 
technology systems to those provided by TSG. TSG has reported that a 
majority of its primary "host" systems (including systems for reservations, 
flight operations and cargo) are already Y2K compliant. The balance of TSG 
systems to which the Company will be converting to are scheduled to be Y2K 
compliant no later than August 1, 1999. TSG has agreed to remediate all 
non-Y2K compliant systems that are covered by the Company's relationship 
with TSG, but that are not being converted to a TSG system. These 
remediation efforts are scheduled for completion by August 1, 1999.

                                        27

     TSG has also informed the Company that it is in the process of 
communicating with TSG's own third party vendors concerning the Y2K 
compliance of their products and services.

     The Company operates computer software and systems that are not Y2K 
compliant, and that are not covered by the TSG relationship. This includes 
both information technology and non-information technology systems (such as 
fax machines, miscellaneous airport devices and aircraft avionics). 

     The Company has completed an inventory of items with possible Y2K 
problems. The Company has prioritized these items and has implemented a 
program to assess, remediate and test the non-discretionary (including 
mission critical) systems based on this prioritization. The Company 
completed the assessment of all non-discretionary (including mission 
critical) items as of January 31, 1999. The Company plans to complete the 
remediation of all non-discretionary systems by August 31, 1999. The 
Company is also working with the U.S. Federal Aviation Administration (FAA) 
to ensure full compliance with any FAA Y2K requirements.

     The Company has also commenced airport and facility reviews. This 
entails reviewing the Y2K compliance of the systems in those locations over 
which the Company has little or no control, such as certain flight 
information displays, elevators, security and other miscellaneous airport 
devices. The Company completed these reviews as of December 31, 1998. The 
Company is also participating in Y2K review efforts being coordinated on an 
industry-wide basis by the Airline Transport Association and the 
International Air Transport Association.

     The Company has identified and prioritized its supplier base, and has 
commenced formal contact with these vendors to determine their Y2K status 
based on such prioritization, and any possible impact on the Company. 
Approximately 90% of these vendors have been contacted with 65% vendor 
responses returned. The Company will track these responses and evaluate its 
long-term relationship with these vendors based on the responses it 
receives.

     Although TSG has notified the Company that it believes that its Y2K 
compliance program is on schedule, there can be no assurance that the 
compliance program will be completed in a timely manner. The Company 
expects to remediate or replace all non-compliant internal mission critical 
non-TSG systems by August 31, 1999. The Company has comprehensive Y2K 
compliance monitoring and risk mitigation programs covering all of its 
mission critical business partners, including airports and suppliers of 
goods and services. Despite these efforts, there can be no assurance that 
the Company's own computer software and systems, those of its suppliers, 
the airports at which the Company operates, or the air traffic control 
system managed by the FAA will be made Y2K compliant in a timely manner. 
Any such failures could have a material adverse effect on the business, 
financial condition and results of operations of the Company.

     The Company is establishing contingency plans in the event that any 
mission critical system is not Y2K compliant by the date required. These 
plans will entail finding alternative vendors/suppliers who are Y2K 
compliant, purchasing additional products and inventories/supplies and 
reverting to manual systems or workarounds, prior to December 31, 1999. In 
the event that the Company is required to implement a contingency plan, it 
believes that the result may be significant delays in operations and flight 
cancellations. In the event that such delays and flight cancellations 
occur, it is possible, depending on the extent of the delays and 
cancellations, that there could be a material adverse impact on the 
Company's financial condition and results of operations.

     As of December 31, 1998, aggregate expenses incurred by the Company to 
become Y2K compliant, apart from expenses related to the TSG relationship, 
have amounted to approximately $2 million. The Company expects to spend an 
additional $8 million, apart from the TSG relationship, in order to become 
fully Y2K compliant. These amounts are also exclusive of any

                                        28

replacement equipment that may become necessary and have not yet been 
identified. With respect to the cost of TSG's Y2K compliance program, the 
Company cannot completely quantify the costs for Y2K compliance on its 
information technology systems because such costs have been incorporated 
into the costs of the broader conversion plan to TSG systems. However, the 
Company anticipates incurring $32 million in expenses for TSG services 
which are related solely to Y2K compliance efforts on the systems, 
unrelated to the broader conversion plan. The Company paid TSG $21 million 
for these services in 1998 and expects to pay TSG an additional $11 million 
in 1999 for these services. Overall, the Company believes that the cost of 
becoming Y2K compliant is not expected to have a material adverse effect on 
the business, financial condition or results of operations of the Company.

                                OTHER INFORMATION

     In October 1998, US Airways launched an on-line internet reservation 
system called "Personal TravelWorks." The new system offers customers the 
ability to make their own travel arrangements for flights on US Airways, 
its low-cost product MetroJet, US Airways Shuttle and US Airways Express. 
Visitors to US Airways' internet site, www.usairways.com, and MetroJet's 
internet site, www.flymetrojet.com, can make travel reservations, purchase 
tickets, and obtain flight schedules, ticket prices and other travel 
information on-line.

     On September 29, 1998, the International Association of Machinists and 
Aerospace Workers (IAMAW) filed with the National Mediation Board (NMB) for 
mediation in its contract negotiations with US Airways covering 
approximately 7,025 mechanics and related employees. The labor agreement 
covering these employees was amendable on October 1, 1995. Negotiations 
between the parties resumed in November 1998 under the auspices of the NMB-
appointed mediator.

     On June 23, 1998 the IAMAW filed with the NMB for mediation in its 
negotiations with US Airways for an initial contract covering approximately 
6,000 fleet service employees. Following the NMB's appointment of a 
mediator, the IAMAW and US Airways reached a tentative agreement on August 
17, 1998. The IAMAW failed to ratify the tentative agreement and the 
mediator reconvened the parties to resume negotiations in October 1998. On 
March 4, 1999, the parties reached a new tentative agreement which will be 
voted on by the fleet service employees in the near future.

     US Airways is also in negotiations over amendable labor agreements 
with the Association of Flight Attendants covering flight attendants and 
with the Transport Workers Union covering flight crew training instructors, 
flight simulator engineers and dispatch employees. US Airways is also 
negotiating with the Communications Workers of America with respect to an 
initial labor contract with US Airways covering approximately 8,900 
passenger service employees. On February 23, 1999, the parties filed with 
the NMB for a mediator to assist in the negotiations. 

     US Airways is unable to determine the timing of when any of these 
negotiations will be concluded and new or amended contracts established, or 
the final terms and conditions of new or amended contracts. See Part I, 
Item 1 "Business: Employees" for additional information related to the 
Company's workforce, including the status of all of US Airways' labor 
contracts.

     In September 1997, The Boeing Company (Boeing) filed suit against US 
Airways in state court in King County, Washington seeking unspecified 
damages, estimated at approximately $220 million, for alleged breach of two 
aircraft purchase agreements concerning, respectively, eight B757-200 
aircraft and 40 B737-Series aircraft. On October 31, 1997, US Airways filed 
an answer and counterclaims to Boeing's complaint denying liability and 
seeking recovery from Boeing of approximately $35 million in equipment 
purchase deposits. On April 23, 1998 the parties reached a settlement 
terminating all obligations with respect to both purchase agreements.

                                        29

Pursuant to the settlement, the litigation has been dismissed with 
prejudice as to both Boeing's claims and US Airways' counterclaims.

     The Company and its subsidiaries are subject to a wide range of 
government regulation. Besides taxes on income, property and aviation fuel, 
among other taxes, the Company's airline subsidiaries are subject to 
numerous safety, maintenance and environmental-related mandates. The 
Company's airline subsidiaries also collect various taxes from their 
customers, such as the federal excise tax on domestic air transportation 
(commonly referred to as the "ticket tax"), and pass through the collected 
amounts to the appropriate governmental agencies. Although taxes such as 
the ticket tax are not operating expenses to the Company, they represent an 
additional cost to the Company's customers. Increases in such taxes can be 
detrimental to demand for air transportation and decreases can have a 
stimulative effect on demand. In addition, especially in regards to 
international operations and certain high-traffic domestic airports, the 
Company's airline subsidiaries are subject to certain restrictions on when 
and where they can operate. Changes in government regulation can have a 
material impact on the Company's results of operations and financial 
condition. Besides the effect of certain additional taxes on the Company's 
results of operations and financial condition, the Company's financial 
performance can be materially affected by the ability of the Company to 
pass through additional costs to its customers. Additional information 
related to government regulation can be found in Part I, Item 1 of this 
report under "Business: Industry Regulation and Airport Access."

RESULTS OF OPERATIONS

     The following section pertains to activity included in the Company's 
Consolidated Statements of Operations and to changes in selected US Airways 
operating and financial statistics (which are contained in Part II, Item 8A 
and Part II, Item 6 of this report, respectively). Except where noted, 
operating statistics referred to in this section are for scheduled service 
only.

                              1998 COMPARED WITH 1997

     As mentioned above, the Company purchased Shuttle on December 30, 
1997. Because the Company's acquisition of Shuttle was accounted for using 
the purchase method, only Shuttle's financial results post-acquisition are 
included in the Company's results of operations.

Operating Revenues-Passenger transportation revenues increased $114 million 
or 1.5%, including an increase of $172 million attributable to Shuttle, an 
increase of $34 million attributable to the Company's three wholly-owned 
regional airlines, partially offset by a $91 million decrease in 
US Airways' passenger transportation revenues. The increase in Passenger 
transportation revenues for the Company's three wholly-owned regional 
airlines is due primarily to an increase in revenue passenger miles (RPMs). 
The decrease for US Airways is due primarily to a decrease in both RPMs and 
yield. See "Selected US Airways Operating and Financial Statistics" below 
for additional information related to US Airways' passenger transportation 
revenues. Cargo and Freight revenues decreased due primarily to lower mail 
volume in 1998. In addition, activity during the third quarter of 1997 was 
favorably affected by an employee strike at United Parcel Service. Other 
operating revenues increased 11.8% due principally to revenues generated 
from sales of capacity (ASMs) on a non-owned US Airways Express air carrier 
(the agreement began in January 1998), an increase in frequent traveler 
mileage credits sold to partners in US Airways' Dividend Miles frequent 
traveler program and an increase in cancellation fees revenues. The 
increased revenues resulting from sales of capacity on the US Airways 
Express air carrier are partially offset by increased expenses recognized 
in the Other operating expenses category related to purchases of the 
capacity (see below).

                                        30

Operating Expenses-The Company recognized certain activity including 
nonrecurring items in both 1998 and 1997. The table below shows where these 
items were recorded in the Company's Consolidated Statements of Operations 
(dollars in millions; brackets indicate an expense, except for the tax 
benefits recognized in 1997).

                                                  1998      1997
                                                  ----      ----

Operating Expenses
     Personnel costs (1)                          $  -      $(122)
     Aircraft rent (2)                               3          1
     Other rent and landing fees (3)                 -         (5)
     Depreciation and amortization (4)               -        (89)
                                                   ---        ---
                                                     3       (215)
Other Income (Expense)
     Gains on sales of interests in affiliates (5)   -        180
                                                   ---        ---
                                                     -        180
                                                   ---        ---
Net amount reflected in Income Before Taxes       $  3      $ (35)
                                                   ===        ===

Provision (Credit) for Income Taxes (6)           $  -      $(467)
                                                   ===       ====

(1)  Includes a $115 million charge recognized in the fourth quarter of 
1997 
     in accordance with Statement of Financial Accounting Standards (SFAS) 
     No. 88, "Employers' Accounting for Settlements and Curtailments of 
     Defined Benefit Pension Plans and for Termination Benefits" (SFAS 88). 
     The charge relates to an early retirement program offered to 325 
     US Airways pilots. This program is expected to result in significant 
     net long-term savings in both wages and benefits expenses. The 
remaining 
     $7 million represents severance for employees displaced as a result of 
     certain efficiency measures the Company announced in the second 
quarter 
     of 1997 (see "Current Competitive Position" above).
(2)  Aircraft rent credits recognized in conjunction with US Airways' 
     disposal (1998) or subleasing (1997) of nonoperating British Aerospace 
     BAe-146-200 (BAe-146) aircraft. During 1994, US Airways accrued a 
     substantial portion of the future rent obligations related to these 
     aircraft (US Airways removed these aircraft from its operating fleet 
in 
     1991).
(3)  Accrual of future lease obligations at certain facilities abandoned as 
a 
     result of the efficiency measures the Company announced in May 1997. 
See 
     also "Current Competitive Position" above.
(4)  Charges stem mainly from analyses performed in accordance with the 
     provisions of SFAS No. 121, "Accounting for the Impairment of Long-
Lived 
     Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121). In 
     general, SFAS 121 requires an impairment charge to be recognized when 
     the net undiscounted future cash flows from an asset's use (including 
     any anticipated proceeds from disposition) are less than the asset's 
     current book value and the asset's current book value exceeds its fair 
     value. The impairment charge reflects writing-down the asset to fair 
     value. The 1997 charges include an $18 million impairment charge 
related 
     to US Airways' retirement of 17 DC-9-30 aircraft as a result of the 
     efficiency measures the Company announced in May 1997 and a $59 
million 
     impairment charge resulting from US Airways' late-September 1997 
     decision to retire its remaining DC-9-30 aircraft over the next 
several 
     years. US Airways suspended its DC-9-30 "hush-kit" program in 
     conjunction with its decision to retire this fleet-type. US Airways 
     plans to retire 16 DC-9-30 aircraft in 1999 with its last DC-9-30 
     aircraft expected to be retired in early 2002. The remaining 
components 
     of this charge relate to facilities abandoned as a result of the 
     efficiency measures the Company announced in May 1997. See also 
"Current 
     Competitive Position" above.
(5)  Resulted from USAM Corp.'s (USAM) sale of its investment in Apollo 
     Travel Services Partnership and a sell-down of its interest in Galileo 
     International, Inc. (Galileo), both of which occurred in July 1997.
(6)  As discussed under Provision (Credit) for Income Taxes below, US 
Airways 
     recognized certain tax benefits totaling $467 million in the fourth 
     quarter of 1997.

Excluding nonrecurring items (see above), Personnel costs increased 
marginally as decreases in stock-based compensation, medical and dental 
expenses were more than offset by the effects of including Shuttle's 
personnel costs in the Company's 1998 financial results and higher 
training-related activity in 1998. The increased training-related activity 
stems from US Airways' integration of new Airbus aircraft into its 
operating fleet (training for pilots, flight attendants and mechanics) and 
the implementation of several new information systems managed by TSG 
(training for customer service and reservations employees). Personnel costs 
decreases resulting from employees who took positions with TSG at the 
beginning of 1998 (see "New Strategic Foundation" above) were mitigated by 
increases in employees in other employee classifications, most notably 
pilots (recalls from furlough). See also Other operating expenses below. 
Aviation fuel expenses decreased significantly due primarily to lower 
average fuel prices in 1998. 

                                        31

Commissions expenses also decreased significantly reflecting the revised 
commission rate structure the Company established in September 1997. 
Aircraft rent expenses in 1997 were adversely affected by adjustments 
totaling $15 million recorded during 1997 related to US Airways' F28-4000 
aircraft. In 1998, US Airways bought four previously-leased operating 
aircraft upon lease expiry. US Airways added six leased Airbus A319 
aircraft to its operating fleet in December 1998 (see also "New Strategic 
Foundation" above and "Liquidity and Capital Resources" below). Aircraft 
maintenance decreased $27 million or 5.9% if Shuttle's maintenance expenses 
are excluded. US Airways' maintenance expenses for 1997 were adversely 
affected by the timing of when certain expenses were recorded associated 
with "power-by-the-hour" maintenance service agreements. In addition, 
expenses stemming from unserviceable (scrap) maintenance materials, 
primarily related to JT8D jet engines, were $24 million higher in 1997. US 
Airways is realizing cost savings from its power-by-the-hour maintenance 
arrangements. Depreciation and amortization expenses were relatively 
unchanged if nonrecurring items are excluded. US Airways expects 
amortization of costs capitalized as part of the conversion to TSG 
information systems to increase Depreciation and amortization expenses by 
approximately $22 million in 1999. Other operating expenses increased $208 
million or 16.5% due primarily to expenses associated with US Airways' 
information services management contract with TSG (see "Effects of the Year 
2000" above for related information), amounts recorded during the second 
quarter of 1998 related to US Airways' settlement of litigation with Boeing 
(as discussed above under "Other Information") and expenses associated with 
purchases of capacity from a non-owned US Airways Express air carrier. As a 
result of US Airways' information services agreement with TSG, certain 
expenses categorized as Personnel costs and Depreciation and amortization 
in 1997 have been supplanted by expenses categorized as Other operating 
expenses (e.g., outside services).

Other Income (Expense)-Interest income was relatively unchanged year-over-
year, but decreased 27.3% for the fourth quarter of 1998 compared to the 
fourth quarter of 1997 due to a decrease in cash equivalents and short-term 
investments. The decrease can be linked to the Company's common stock 
purchase activity and increased purchase deposits for new flight equipment 
(see "Certain Ownership Matters" above and "Liquidity and Capital 
Resources" below, respectively). Interest expense decreased as the result 
of less outstanding long-term debt. In 1998, besides normal principal 
repayments, US Airways retired early certain debt with principal amounts 
totaling $434 million. The decrease in Interest capitalized reflects 
US Airways' write-off of capitalized interest on equipment purchase 
deposits with Boeing in conjunction with the settlement of litigation 
between US Airways and Boeing (as discussed above under "Other 
Information") partially offset by capitalized interest on equipment 
purchase deposits for new Airbus aircraft. The decrease in Equity in 
earnings of affiliates results from USAM discontinuing the equity method of 
accounting for certain investments in July 1997. In 1998, US Airways 
recognized gains in the Other, net category totaling $17 million related to 
asset dispositions. The comparable amount for 1997 was $18 million. In 
addition, US Airways incurred prepayment penalties of $15 million 
associated with the early extinguishment of its $300 million principal 
amount 10% Senior Notes in July 1998.

Provision (Credit) for Income Taxes-The Company's effective income tax rate 
for financial reporting purposes increased to approximately 40% for 1998 
from approximately 17% for 1997 as the result of the Company recognizing 
certain income tax benefits during the fourth quarter of 1997. See related 
discussion under "Income Taxes" above.

Preferred Dividend Requirement-With the retirement of the Company's 
Series H Preferred Stock in March 1998, the Company no longer has preferred 
stock outstanding. In addition to dividends on the Series H Preferred 
Stock, the preferred dividend requirement of $64 million for 1997 reflects 
dividend requirements for the Company's Series F and Series T Preferred 
Stock, both of which were retired in May 1997, and its Series B Preferred 
Stock, which was retired in September 1997.

                                        32

Earnings per Common Share-EPS calculations have been affected by: the 
conversion of the Series F Preferred Stock into common stock (14.5 million 
shares) in May 1997; the purchase of the remaining shares of Series F 
Preferred stock (1.0 million equivalent shares of common stock) in May 
1997; the purchase of the Series T Preferred Stock (3.8 million equivalent 
shares of common stock) in May 1997; the conversion/redemption of the 
Series B Preferred Stock (in total, 10.6 million equivalent shares of 
common stock); the conversion of the Series H Preferred stock into common 
stock (9.2 million shares) in March 1998; and the purchase of 17.9 million 
shares of common stock (treasury stock) in 1998.

Selected US Airways Operating and Financial Statistics-A 0.8% decrease in 
RPMs and a 0.5% decrease in yield resulted in a 1.3% decrease in US 
Airways' Passenger transportation revenues year-over-year. For the fourth 
quarter of 1998 compared to the fourth quarter of 1997, RPMs increased 
2.1%, but yield fell 4.6%. The yield decrease quarter-over-quarter is 
attributable to an increase in US Airways' capacity (ASMs), an increase in 
average stage length and increased competitive pressures-both in terms of 
capacity and fares in certain markets (particularly in Florida and European 
markets). Although MetroJet's growth positively influences US Airways' unit 
operating cost (cost per ASM) its growth puts downward pressure on yield.

     US Airways' unit operating cost was relatively unchanged as the 
effects of a 2.8% decrease in capacity were offset by a decrease in the 
expense basis used for the calculation (nonrecurring items, which are 
discussed above, are excluded from unit operating cost calculations for 
comparability purposes). US Airways retired six DC-9-30 aircraft from its 
operating fleet in 1998 and added six new A319 aircraft to its operating 
fleet in the fourth quarter of 1998.

     US Airways' capacity (ASMs) is expected to increase approximately 8% 
for 1999 compared to 1998, composed of an increase of 460% for MetroJet, an 
increase of 23% for transatlantic service and a decrease of 4% for 
US Airways' higher-cost mainline operations. This growth is distributed by 
quarter as follows: in the first quarter of 1999, year-over-year capacity 
growth will be approximately 4%; in the second quarter, approximately 6.5%; 
in the third quarter, approximately 10.5% and in the fourth quarter, 
approximately 10%. US Airways expects to take delivery of 33 new Airbus 
single-aisle aircraft in 1999, including 22 A319s and eleven A320s. The 
Company plans to retire 24 older aircraft during 1999. In addition, US 
Airways believes that it is a real possibility that its unit revenue 
(revenue per ASM) for 1999 will decline more than its unit cost (cost per 
ASM).

Supplemental Information-In 1998, the Company adopted the following 
accounting standards for financial reporting purposes: SFAS No. 130, 
"Reporting Comprehensive Income" (SFAS 130); SFAS No. 131, "Disclosures 
about Segments of an Enterprise and Related Information" (SFAS 131); SFAS 
No. 132, "Employers' Disclosures about Pensions and Other Postretirement 
Benefits" (SFAS 132); and Statement of Financial Position 98-1, "Accounting 
for the Costs of Computer Software Developed or Obtained for Internal Use" 
(SOP 98-1). SFAS 130 established standards for the reporting and 
presentation of comprehensive income and its components in financial 
statements. SFAS 131 prescribes standards for defining operating segments 
and the reporting of certain information regarding operating segments. SFAS 
132 revised disclosure requirements with respect to employer pension and 
benefit plans. SOP 98-1 provides guidance on accounting for the costs of 
computer software developed or obtained for internal use. The adoption of 
these accounting standards had no effect on the Company's financial 
condition or results of operations. 

     In June 1998, the Financial Accounting Standards Board adopted SFAS 
No. 133, "Accounting for Derivative Instruments and Hedging Activitiesz" 
(SFAS 133). SFAS 133, which the Company must adopt for financial reporting 
purposes beginning January 1, 2000, establishes accounting and reporting 
standards for derivative financial instruments and for hedging activities. 
The Company does not believe that implementing SFAS 133 will materially 
impact its financial 

                                        33

condition or results of operations. This conclusion is based on US Airways' 
current limited participation in contracts involving derivative financial 
instruments and hedging transactions. 

                             1997 COMPARED WITH 1996

Operating Revenues-US Airways' Passenger transportation revenues increased 
$313 million (4.6%) resulting from a 6.8% increase in revenue passenger 
miles (RPMs) partially offset by a 2.1% decrease in yield. The main factors 
that contributed to the improved performance in 1997 are similar to those 
factors that favorably affected the Company's financial results for 1998, 
as discussed above. In addition, the Company estimates that severe winter 
weather within the Eastern U.S. and a partial shutdown of the federal 
government adversely affected first quarter 1996 revenues by approximately 
$55 million. Inclement weather (hurricanes) during the third quarter of 
1996 adversely affected Passenger transportation revenues by an estimated 
$10 million. Cargo and freight revenues increased due primarily to volume 
factors. Other revenues for 1996 included $13 million from an aircraft wet 
lease arrangement between US Airways and British Airways. The wet lease 
arrangement was terminated in May 1996 (see also Other below).

Operating Expenses-As presented in a table under "1998 Compared With 1997," 
the Company recognized certain nonrecurring items during 1997. In addition, 
the Company recognized certain nonrecurring items during 1996, both related 
to US Airways' nonoperating BAe-146 aircraft, including a $23 million 
credit to Aircraft rent (reversal of previously accrued lease obligations) 
and a credit of $7 million to Aircraft maintenance (reversal of previously 
accrued lease return provisions).

     Excluding the nonrecurring items recognized in 1997 (see above) and 
profit sharing expenses totaling $122 million recorded during 1996, 
Personnel costs expenses were relatively unchanged. The profit sharing 
expenses recognized during 1996 were associated with US Airways' 1992 
Salary Reduction Program (the Company's obligations under this plan ended 
with a payment to participants in early March 1997; there were no similar 
expenses during 1997). The Company's defined benefit pension and 
postretirement benefit expenses decreased due primarily to higher interest 
rates (discount factors) used for 1997 calculations. Medical and dental 
expenses were marginally higher year-over-year. Expenses associated with 
stock appreciation rights (SARs) were $33 million for 1997 and $42 million 
for 1996.

     Commissions expenses increased marginally year-over-year, but 
decreased 8.2% if activity for fourth quarter 1997 is compared to fourth 
quarter 1996 due primarily to a revised commission rate structure 
established during September 1997. Excluding the effects of nonrecurring 
items (see above), Aircraft rent expenses increased due primarily to net 
rent expense adjustments totaling $15 million recorded during 1997 related 
to certain F28-4000 aircraft. Other rent and landing fees expenses were 
relatively unchanged if the effects of the nonrecurring items (see above) 
are excluded. Aircraft maintenance expenses increased due to an increase of 
approximately $23 million related to unserviceable (scrap) Pratt & Whitney 
JT8D jet engine parts, other adjustments to spare parts totaling 
approximately $13 million, increases in the cost of certain JT8D jet engine 
parts and expenses attributable to certain timing factors associated with 
the "power-by-the-hour" jet engine maintenance contracts US Airways entered 
into during the fourth quarters of both 1997 and 1996. US Airways signed a 
ten-year power-by-the-hour maintenance agreement with Rolls Royce Canada 
Limitee during December 1997 covering jet engines originally manufactured 
by Rolls Royce Plc. US Airways entered into a similar ten-year agreement 
with the General Electric Company (GE) during the fourth quarter of 1996 
for US Airways' GE-manufactured jet engines. In addition, 1996 activity 
included a nonrecurring expense credit (see above). Other selling expenses 
increased primarily related to higher credit card fees. Depreciation and 
amortization expenses decreased 1.5% if nonrecurring items (see above) are 
excluded. Other includes expenses totaling $36 million recorded during the 
fourth quarter of 1997 related to US Airways' new information technology 
management agreement with

                                        34

TSG. Also, US Airways experienced increases in certain sales and traffic-
related expenses during 1997. 1996 activity included expenses of $13 
million associated with US Airways' wet lease arrangement with British 
Airways (see also Other revenues above).  

Other Income (Expense)-Equity in earnings of affiliates decreased due to 
USAM discontinuing the equity method of accounting for certain investments 
after July 1997. The amount recorded in Gains on sales of interests in 
affiliates is related to USAM's sale of certain investments (see "1998 
Compared With 1997"). Other, net activity in 1997 included $18 million 
related to US Airways' sale of eleven nonoperating aircraft. 1996 activity 
included losses totaling $9 million related to US Airways' sale of eight 
nonoperating aircraft and an expense item of $10 million related to 
US Airways' settlement of litigation involving certain travel agencies.

Provision (Credit) for Income Taxes-During the fourth quarter of 1997, the 
Company recognized certain income tax benefits totaling $467 million. See 
"1998 Compared With 1997" for additional information. The Company was 
subject to federal alternative minimum tax for 1997 and 1996 as well as 
income taxes in certain states. The Company was not subject to regular 
federal income tax during 1997 and 1996 as the result of using federal 
income tax net operating loss carryforwards.

Earnings per Common Share-During the third quarter of 1997, most of the 
Series B Preferred Stock was converted into 10.6 million shares of Common 
Stock. During the second quarter of 1997, most of the Series F Preferred 
Stock was converted into 14.5 million shares of Common Stock. For full-year 
1997, on a weighted average basis, these transactions had the effect of 
increasing shares of Common Stock outstanding by 12.6 million shares. 

     The Company adopted SFAS No. 128, "Earnings per Share" (SFAS 128) 
during 1997. The Company's EPS figures for 1996 have been restated to 
conform to the provisions of SFAS 128. The implementation of SFAS 128 did 
not have a material impact on the Company's EPS disclosures.

Selected US Airways Operating and Financial Statistics-A 6.8% increase in 
RPMs more than offset the effects on US Airways' Passenger transportation 
revenues of a 2.1% decrease in yield. The yield decrease is primarily 
attributable to competitive pressures and matters related to the ticket tax 
(see also "1998 Compared With 1997" above). An increase in US Airways' 
average passenger journey also negatively affected yield. US Airways 
selectively increased fares in certain markets up to 5% in both March and 
September 1997.

     US Airways' unit operating cost decreased slightly due primarily to a 
2.3% increase in total capacity (nonrecurring items, which are discussed 
above, are excluded from unit operating cost calculations for comparability 
purposes). The capacity (ASMs) increase is primarily the result of higher 
aircraft utilization rates during 1997 partially offset by fewer operating 
aircraft in US Airways' fleet during 1997. Aircraft utilization was 
adversely affected by inclement weather during both the first and third 
quarters of 1996 (see also Passenger transportation revenues above). During 
fourth quarter 1997, as compared to fourth quarter 1996, however, capacity 
decreased 4.2% as the result of schedule changes implemented during third 
quarter 1997 (see also "1998 Compared With 1997" above).

LIQUIDITY AND CAPITAL RESOURCES

     As of December 31, 1998, the Company's Cash, Cash equivalents and 
Short-term investments totaled $1.2 billion. The Company's ratio of current 
assets to current liabilities ("current ratio") was 1.0 and 1.3 as of 
December 31, 1998 and 1997, respectively (the Company's Consolidated 
Balance Sheets are contained in Part II, Item 8A of this report). The 
decrease is principally attributable to the Company's common stock purchase 
activity and purchase deposits for flight

                                        35

equipment, both of which are discussed below. The Company's debt to equity 
ratio improved to 3.4 as of December 31, 1998 from 3.6 as of December 31, 
1997 (calculations exclude amounts related to redeemable preferred stock), 
reflecting a $358 million increase in Stockholders' Equity which resulted 
from the conversion of the Series H Preferred Stock into Common Stock 
during the first quarter of 1998 (see "Certain Ownership Matters" above), 
significant reductions in outstanding long-term debt (see below), partially 
offset by the effects of the Company's common stock purchase programs (see 
below).

     For 1998, the Company's operating activities provided net cash of $1.3 
billion (as presented in the Company's Consolidated Statements of Cash 
Flows, which are contained in Part II, Item 8A of this report). For 1997 
and 1996, the Company's operating activities provided net cash of $870 
million and $1.0 billion, respectively. Operating cash flows during 1997 
were adversely affected by profit sharing payments totaling $129 million 
and the effects of remitting to the federal government ticket taxes 
totaling $180 million collected from passengers in 1996. The profit sharing 
payments the Company made to employees during the first quarter of 1997 
ended the Company's obligation for profit sharing under its 1992 Salary 
Reduction Plan (the liability had been accrued in prior years). With the 
reinstatement of the ticket tax during March 1997, the Company resumed 
ticket tax remittances to the federal government (see "Other Information" 
above). The ticket tax was not in effect during the periods January 1, 
1996-August 26, 1996 and January 1, 1997-March 6, 1997. Approximately 0.2 
million, 3.9 million and 0.6 million SARs were exercised during 1998, 1997 
and 1996, respectively, resulting in cash outflows of $8 million, $55 
million and $5 million during 1998, 1997 and 1996, respectively. The 
Company's 1992 Stock Option Plan ceased as of August 1, 1998. USAM received 
dividends/partnership distributions from its CRS investments of $3 million, 
$18 million and $49 million during 1998, 1997 and 1996, respectively, as 
reflected in the Other operating adjustments category in the Company's 
Consolidated Statements of Cash Flows (see additional information related 
to USAM's CRS investments below). 

     US Airways contributed $53 million and $113 million to its defined 
benefit plans in 1998 and 1997, respectively. In addition, US Airways made 
a $100 million payment to a Voluntary Employee Beneficiary Association 
(VEBA) trust in December 1998. The contribution to the VEBA trust is 
reflected as an operating use of cash in the Company's Consolidated 
Statements of Cash Flows. US Airways estimates that it will need to 
contribute $50 million to its defined benefit plans in 1999 in order to 
meet statutory minimum pension funding requirements. US Airways' estimates 
of future pension plan contributions are subject to change, including the 
possibility of US Airways contributing to these pension plans in excess of 
minimum funding requirements. US Airways' new labor contract with its 
pilots includes a provision for early retirement that could result in the 
funding of certain pilot pension plans in excess of funding minimums (see 
related discussion in "Results of Operations" above).

     The Company expects decreases in certain future operating cash 
outflows as US Airways replaces several older, diverse aircraft types with 
newer, more efficient aircraft, but may experience increases in certain 
other future operating cash outflows as the result of US Airways' growth 
plans, including costs associated with integrating new aircraft types into 
its operating fleet. As discussed under "Income Taxes" above, the Company 
expects the rate at which it pays cash income taxes to increase in 1999.

     For 1998, investing activities included cash outflows of $642 million 
related to capital expenditures and cash inflows of $301 million related to 
asset dispositions. Capital expenditures included $274 million for new 
aircraft (including purchase deposits), $52 million to purchase four 
aircraft upon lease expiry, with the balance related to obtaining computer 
equipment and software (primarily related to US Airways' information 
services management agreement with TSG), other ground equipment and 
miscellaneous assets. Asset dispositions included proceeds of $189 million 
from the sale-leaseback of six new Airbus aircraft, proceeds of $47 million 
from

                                        36

US Airways' sale of substantially all of its information systems and 
related assets to TSG and proceeds of $38 million from US Airways' sale of 
17 nonoperating aircraft. Restricted cash and investments increased $41 
million due primarily to US Airways' return to using cash to collateralize 
letters of credit for workers' compensation policies (US Airways previously 
collateralized such policies with certain owned flight equipment). The net 
cash used for investing activities during 1998 was $103 million.

     Investing activities during 1997 included cash outflows of $280 
million for capital expenditures and cash inflows of $85 million related to 
asset dispositions. Progress payments for new aircraft totaled $77 million 
for 1997. US Airways' cash outflows related to asset acquisitions include 
$126 million for aircraft and aircraft-related assets. US Airways purchased 
nine aircraft upon lease expiry during 1997, including four BAe-146 
aircraft that were sold to third parties immediately following their 
purchase. Asset dispositions included cash inflows related to US Airways' 
sale of certain nonoperating aircraft. Investing activities during 1997 
also included proceeds of $162 million that resulted from USAM's sale of 
its interest in ATS and proceeds of $62 million related to USAM's sell-down 
of its interest in Galileo. On December 30, 1997, the Company purchased 
Shuttle for $190 million. Short-term investments increased $235 million 
from the year-end 1996 balance due primarily to cash flows generated from 
operations exceeding immediate operational and other needs. The net cash 
used for investing activities during 1997 was $372 million.

     Investing activities during 1996 included cash outflows of $181 
million for capital expenditures, including $82 million for aircraft-
related assets and $99 million related to the purchase of rotables, various 
ground support equipment and computer equipment. Short-term investments 
increased $604 million during the year as the Company's operations 
generated significantly more cash than needed to fulfill immediate 
operational needs. Net cash used by investing activities during 1996 was 
$754 million.

     Net cash used for financing activities in 1998 was $1.6 billion. 
Besides scheduled principal repayments of $152 million, US Airways retired 
early certain long-term debt with a face amount of $434 million in 1998. On 
July 1, 1998, US Airways retired its 10% Senior Notes, which had a 
principal amount of $300 million. The transaction resulted in a cash 
outflow of $315 million, including prepayment penalties of $15 million. 
Annual interest payments associated with the debt obligations retired early 
totaled $38 million. US Airways also paid $75 million to retire the first 
series of its 1993 Pass-Through Certificates in August 1998. The retirement 
was according to the terms of the obligation (no prepayment penalties). In 
1998, the Company purchased 17.9 million shares of Common Stock in open 
market transactions. The related cash outflows totaled $1.1 billion. See 
"Certain Ownership Matters" above for additional information. On March 12, 
1998, the holders of the Company's Series H Preferred Stock exercised their 
right to convert those shares into shares of the Company's Common Stock. As 
a result of the conversion transactions, the Company issued 9.2 million 
shares of Common Stock and retired its Series H Preferred Stock. The 
Company paid dividends totaling $6 million to holders of its Series H 
Preferred Stock in 1998 prior to that series conversion into Common Stock. 
Annual dividend requirements for the Series H Preferred Stock were $33 
million. The Company had previously retired its Series F and T Preferred 
Stock in May 1997 and its Series B Preferred Stock in September 1997.

     Net cash used for financing activities in 1997 was $355 million. The 
Company paid dividends totaling $181 million to holders of its outstanding 
preferred stock during 1997. In May 1997, the Company repurchased the 
Series T Preferred Stock and 1,940.636 shares of Series F Preferred Stock 
from British Airways for a combined $127 million. British Airways converted 
the remaining Series F shares into Common Stock and subsequently sold those 
shares to third parties. In August 1997, the Company exercised its right to 
redeem all 4,263,000 outstanding depositary shares representing its Series 
B Preferred Stock. All but approximately 6,000

                                        37

depositary shares were converted into Common Stock prior to the redemption 
date. The related cash outflows were $0.3 million. Proceeds resulting from 
stock options exercises totaled $39 million for 1997. 

     Net cash used by financing activities in 1996 was $209 million. In the 
third quarter of 1996, US Airways paid-off certain long-term debt with a 
principal amount of $43 million for one of the Company's regional airline 
subsidiaries (the affiliated company repaid US Airways during December 
1996). Also in 1996, the Company paid dividends of $83 million on its 
outstanding Senior Preferred Stock. The Company had previously deferred 
dividends on all of its outstanding series of preferred stock beginning in 
September 1994. 

     US Airways sold $263 million principal amount of Enhanced Equipment 
Notes (the Enhanced Notes) during the first quarter of 1996 through a 
private placement offering under SEC Regulation 144A. US Airways used the 
proceeds from the offering as part of the funds necessary to repay in full 
the indebtedness incurred in connection with certain B757-200 aircraft 
delivered to US Airways in 1995 and 1994. The transaction is reflected on 
the Company's Consolidated Statements of Cash Flows as proceeds from the 
issuance of debt of $103 million and a "noncash" issuance of debt of $160 
million. The noncash component reflects proceeds that US Airways directed 
to reduce debt and pay underwriter's fees at the time of the offering. 
US Airways used the cash proceeds it received from the offering and 
additional funds to make debt repayments of $106 million immediately 
following the offering. The Enhanced Notes are secured by nine B757-200 
aircraft. US Airways filed a Form S-4 Registration Statement with the SEC 
during July 1996 in connection with its offer to exchange registered 
Enhanced Notes for the privately-placed Enhanced Notes. The exchange offer 
was completed in August 1996. The exchange offer did not result in cash 
inflows or outflows with the exception of filing fees and certain 
administrative costs.

     Although the Company has significantly reduced its outstanding debt 
and preferred stock obligations over the last several years, the Company 
continues to be highly leveraged. The Company and its subsidiaries require 
substantial working capital in order to meet scheduled debt and lease 
payments and to finance day-to-day operations. The Company's agreements to 
acquire up to 430 new Airbus aircraft, accompanying jet engines and 
ancillary assets have increased the Company's financing needs, besides 
adding to the Company's financial obligations. Eastern U.S. operations 
comprise a substantial portion of the route structure of the Company's 
airline subsidiaries. Although a competitive strength in some regards, the 
regional concentration of significant operations results in the Company 
being susceptible to changes in certain regional conditions that may 
adversely affect the Company's financial condition or results of 
operations. The combination of a high cost structure and the regional 
concentration of operations has also contributed to US Airways being 
particularly vulnerable to low cost, low fare competition. Adverse changes 
in certain factors that are generally outside the Company's control, such 
as an economic downturn, additional government regulation, intensified 
competition from lower-cost competitors or increases in the cost of 
aviation fuel, could have a materially adverse effect on the Company's 
financial condition, results of operations and future prospects. The 
Company's financial condition and results of operations are also 
particularly susceptible to adverse changes in general economic and market 
conditions due to US Airways' high cost structure relative to its major 
competitors (see related discussion above under "Current Competitive 
Position").

     As of December 31, 1998, the minimum determinable payments associated 
with the Company's aircraft acquisition agreements for Airbus aircraft 
(including progress payments, payments at delivery, buyer-furnished 
equipment, spares, capitalized interest, penalty payments, cancellation 
fees and/or nonrefundable deposits) are currently estimated at $1.3 billion 
in 1999, $2.1 billion in 2000 and $9 million in 2001. If the Company takes 
delivery of all of the Airbus aircraft it currently has on firm order, the 
aggregate payments for aircraft and related expenditures in connection with 
the acquisition of the aircraft could approximate $4.8 billion.

                                        38

The Company estimates that non-aircraft capital expenditures for 1999 will 
total approximately $100 million. The Company expects to satisfy its short-
term liquidity requirements through a combination of third-party financing, 
cash on hand and cash generated from operations. The Company expects to 
finance a substantial portion of the cost of new aircraft with a 
combination of enhanced equipment trust certificates or similar debt and/or 
leveraged leases. The Company has obtained committed financing for the 
first 17 new aircraft to be delivered in 1999 and commitments that it 
believes will provide financing for at least 25% of the anticipated 
purchase price of its remaining firm-order Airbus aircraft. However, 
additional financing or internally-generated funds will be needed to 
satisfy the Company's capital commitments for the balance of firm-order 
aircraft commitments and for other aircraft-related expenditures. Other 
capital expenditures, such as for training simulators, rotables and other 
aircraft components, are also expected to increase in conjunction with the 
acquisition of the new aircraft and jet engines. There can be no assurance 
that sufficient financing will be available for all aircraft and other 
capital expenditures not covered by committed financing. 

     On April 15, 1998, Standard & Poor's (S&P) raised its credit ratings 
of US Airways Group and US Airways and removed all ratings from 
CreditWatch, where they were placed on October 1, 1997. S&P cited "sharply 
improved operating performance" among other factors for its decision to 
raise the credit ratings. On April 23, 1998, Moody's Investors Service 
(Moody's) also raised its credit ratings of the Company and US Airways. 
Credit ratings issued by agencies such as S&P and Moody's affect a 
company's ability to issue debt or equity securities and the effective rate 
at which such financings are undertaken.

     Historically, the Company has used certain risk management strategies 
to reduce its exposure to certain market uncertainties. Such strategies 
have included entering into financial contracts which the Company believes 
helps it to reduce its exposure to significant increases in the price of 
aviation fuel, although the Company was not party to any such contracts as 
of December 31, 1998. US Airways has hedged certain foreign-denominated 
debt to maturity. This arrangement fixes the cost of the debt in U.S. 
dollars. US Airways periodically reviews the financial condition of each 
counterparty to any such financial contracts. US Airways believes that the 
potential for default by the counterparty to the foreign currency contract 
is negligible. Although such financial contracts involve certain inherent 
risks and costs, US Airways believes that such arrangements can reduce its 
exposure to significant increases in aviation fuel prices and the value of 
certain foreign currencies. See Note 2(a) to the Company's Notes to 
Consolidated Financial Statements for additional information. See also 
"Results of Operations" above related to a recently issued accounting 
standard that will affect the Company's accounting for such financial 
instruments.

Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's primary market risk exposures include commodity price 
risk (i.e., the price paid to obtain aviation fuel), interest rate risk, 
equity price risk and foreign currency exchange rate risk. The potential 
impact of adverse increases in the aforementioned risks and general 
strategies employed by the Company to manage such risks are discussed 
below.

                              COMMODITY PRICE RISK

     Prices and availability of all petroleum products are subject to 
political, economic and market factors that are generally outside of the 
Company's control. Accordingly, the price and availability of aviation 
fuel, as well as other petroleum products, can be unpredictable. Because 
the operations of the Company's airline subsidiaries are dependent upon 
aviation fuel, significant increases in aviation fuel costs could 
materially and adversely affect the Company's results of operations and 
financial condition. For 1998, aviation fuel expenses represented 8.1% of 
the Company's total operating expenses (as adjusted to exclude certain 
nonrecurring items). Based upon the Company's 1998 fuel consumption, a one 
cent change in the average annual price per

                                        39

gallon of aircraft fuel would increase the Company's annual aviation fuel 
expenses by $12 million. See related information in Part I, Item 1 
"Business: Aviation Fuel."

     The Company's airline subsidiaries continually adjust their aviation 
fuel procurement strategies in order to take advantage of the best 
available prices while at the same time ensuring that they have an adequate 
supply of aviation fuel to support operations. In addition, US Airways may 
participate in arrangements designed to reduce its exposure to significant 
increases in the price of aviation fuel. These arrangements have the net 
effect of increasing or decreasing US Airways' aviation fuel expense in the 
period in which they are settled (see Note 2(a) to the Company's Notes to 
Consolidated Financial Statements for additional information related to 
such arrangements).

                              INTEREST RATE RISK

     Exposure to interest rate risk relates primarily to the Company's cash 
equivalents and short-term investments portfolios and long-term debt 
obligations.

     Considering the Company's average balance and typically short duration 
of Cash equivalents and Short-term investments during 1998, an assumed 10% 
decrease in the average interest earned on these financial instruments 
would not materially impact the Company's results of operations. The 
Company's short-term investment portfolio is considered "available-for-
sale" in accordance with the provisions of Statement of Financial 
Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity 
Securities"(SFAS 115).

     As of December 31, 1998, the Company had $92 million of variable-rate 
debt outstanding; assuming a 10% increase in average interest rates during 
1999 as compared to 1998, interest expense would increase $1 million. 
Additional information regarding the Company's long-term debt obligations 
(in millions):

                          Expected Maturity Date                   12/31/98
                 -------------------------------------------         Fair
                    1999  2000  2001  2002  2003 Thereafter  Total   Value
                    ----  ----  ----  ----  ---- ----------  -----   -----

Fixed-rate debt      $60  $106  $232   $60   $179    $1,270  $1,907  $2,144
  Weighted avg.
   interest rate     8.5%  8.9%  8.5% 10.0%   8.8%     9.8%
Variable-rate debt   $ 4  $  4  $  5   $ 6   $  7    $  66   $   92  $   99
  Weighted avg.
   interest rate     9.4%  9.4%  9.4%  9.4%  9.4%      9.4%

     The Company is highly leveraged and has entered into agreements to 
acquire up to 430 new aircraft and accompanying jet engines. These 
agreements increase the Company's financing needs and will result in a 
significant increase in its financial obligations. The Company's efforts to 
reduce its exposure to interest rate risk have included the early 
retirement of certain long-term debt and other obligations and scheduled 
retirement of other debt obligations (see Notes 4, 7 and 8(b) to the 
Company's Notes to Consolidated Financial Statements for additional 
information). These efforts contributed to recent improvements to the 
Company's credit ratings issued by Standard & Poor's and Moody's Investors 
Service.

                                EQUITY PRICE RISK

     The Company holds 7,000,400 shares of common stock of Galileo 
International, Inc. (Galileo). This investment is considered "available-
for-sale"in accordance with the provisions of SFAS 115. As of December 31, 
1998, the aggregate quoted fair value of the Company's Galileo investment 
was $301 million, including an aggregate unrealized gain of $269 million 
(excluding income tax effects). The market risk associated with these 
equity securities is the potential loss in fair value resulting from a 
decrease in the market price of the common stock. Based on the value

                                        40

of the Company's Galileo investment as of December 31, 1998, a 10% decrease 
in the fair value of this investment would result in a decrease of $30 
million in the value of the investment (excluding income tax effects).

                        FOREIGN CURRENCY EXCHANGE RATE RISK

     An aggregate of $31 million of future principal payments of the 
Company's long-term debt due 1999 through 2000 is payable in Japanese Yen, 
as discussed in Note 2(a) to the Company's Notes to Consolidated Financial 
Statements. This foreign currency exposure has been hedged to maturity by 
the Company's participation in foreign currency contracts.

Item 8A.  CONSOLIDATED FINANCIAL STATEMENTS FOR US AIRWAYS GROUP, INC.

                          INDEPENDENT AUDITORS' REPORTS

The Stockholders and Board of Directors
US Airways Group, Inc.:

We have audited the accompanying consolidated balance sheets of US Airways 
Group, Inc. and subsidiaries as of December 31, 1998 and 1997, and the 
related consolidated statements of operations, cash flows, and changes in 
stockholders' equity (deficit) for each of the years in the three year 
period ended December 31, 1998. These consolidated financial statements are 
the responsibility of the Company's management. Our responsibility is to 
express an opinion on these consolidated financial statements based on our 
audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of US 
Airways Group, Inc. and subsidiaries as of December 31, 1998 and 1997, and 
the results of their operations and their cash flows for each of the years 
in the three year period ended December 31, 1998, in conformity with 
generally accepted accounting principles.


                                                     KPMG LLP

Washington, D. C.
February 24, 1999





                    (this space intentionally left blank)

                                     41


US Airways Group, Inc.

Consolidated Statements of Operations
Year Ended December 31,
-------------------------------------------------------------------------
(dollars in millions, except per share amounts)

                                                 1998      1997      1996
                                                 ----      ----      ----

Operating Revenues
   Passenger transportation                    $7,826    $7,712    $7,371
   Cargo and freight                              168       181       163
   Other                                          694       621       608
                                                -----     -----     -----
     Total Operating Revenues                   8,688     8,514     8,142

Operating Expenses
   Personnel costs                              3,101     3,179     3,196
   Aviation fuel                                  623       805       825
   Commissions                                    519       595       586
   Aircraft rent                                  440       475       437
   Other rent and landing fees                    417       420       412
   Aircraft maintenance                           448       451       373
   Other selling expenses                         342       346       331
   Depreciation and amortization                  318       401       316
   Other                                        1,466     1,258     1,229
                                                -----     -----     -----
     Total Operating Expenses                   7,674     7,930     7,705
                                                -----     -----     -----
     Operating Income                           1,014       584       437

Other Income (Expense)
   Interest income                                111       108        75
   Interest expense                              (223)     (256)     (267)
   Interest capitalized                             3        13         8
   Equity in earnings of affiliates                 1        30        37
   Gains on sales of interests in affiliates        -       180         - 
   Other, net                                      (4)       13       (15)
                                                -----     -----     -----
     Other Income (Expense), Net                 (112)       88      (162)
                                                -----     -----     -----
Income Before Taxes                               902       672       275
   Provision (Credit) for Income Taxes            364      (353)       12
                                                -----     -----     -----
Net Income                                        538     1,025       263
   Preferred Dividend Requirement                  (6)      (64)      (88)
                                                -----     -----     -----
Earnings Applicable to Common Stockholders     $  532    $  961    $  175
                                                =====     =====     =====

Earnings per Common Share
  Basic                                        $ 5.75    $12.32    $ 2.73
  Diluted                                      $ 5.60    $ 9.87    $ 2.35

Shares Used for Computation (000)
  Basic                                       92,413   78,054    64,021
  Diluted                                     96,211  103,180    94,834



See accompanying Notes to Consolidated Financial Statements.



                                      42


<TABLE>
US Airways Group, Inc.
Consolidated Balance Sheets
December 31, 
--------------------------------------------------------------------------------
(dollars in millions, except per share amount)

                         ASSETS
<CAPTION>
                                                             1998         1997
                                                             ----         ----
<S>                                                        <C>          <C>
Current Assets
   Cash                                                    $   29       $   18
   Cash equivalents                                           583        1,076
   Short-term investments                                     598          870
   Receivables, net                                           355          300
   Materials and supplies, net                                228          226
   Deferred income taxes                                      347          147
   Prepaid expenses and other                                 224          140
                                                            -----        -----
      Total Current Assets                                  2,364        2,777
Property and Equipment
   Flight equipment                                         5,188        5,221
   Ground property and equipment                              915          877
   Less accumulated depreciation and amortization          (2,641)      (2,528)
                                                            -----        -----
                                                            3,462        3,570
   Purchase deposits                                          198          155
                                                            -----        -----
      Total Property and Equipment, Net                     3,660        3,725
Other Assets
   Goodwill, net                                              593          616
   Other intangibles, net                                     475          371
   Investment in marketable equity securities                 301          190
   Deferred income taxes                                        -          270
   Other assets, net                                          477          423
                                                            -----        -----
      Total Other Assets                                    1,846        1,870
                                                            -----        -----
                                                           $7,870       $8,372
                                                            =====        =====
   LIABILITIES & STOCKHOLDERS' EQUITY          
Current Liabilities
   Current maturities of long-term debt                    $   71       $  186
   Accounts payable                                           430          323
   Traffic balances payable and unused tickets                752          707
   Accrued aircraft rent                                      166          187
   Accrued salaries, wages and vacation                       329          311
   Other accrued expenses                                     521          492
                                                            -----        -----
      Total Current Liabilities                             2,269        2,206
Long-Term Debt, Net of Current Maturities                   1,955        2,426
Deferred Credits and Other Liabilities
   Accrued aircraft rent                                      332          322
   Deferred gains, net                                        337          332
   Postretirement benefits other than pensions, noncurrent  1,240        1,173
   Noncurrent employee benefit liabilities and other        1,144          830
                                                            -----        -----
      Total Deferred Credits and Other Liabilities	          3,053        2,657
Commitments and Contingencies
Redeemable Cumulative Convertible Preferred Stock
   Series H, no par value, 358,000 shares authorized,
      issued and outstanding as of December 31, 1997            -          358
Stockholders' Equity
   Common stock, par value $1 per share, issued
      101,177,000 shares and 91,482,000 shares,
      respectively                                            101           91
   Paid-in capital                                          2,283        1,906
   Retained earnings (deficit)                               (748)      (1,280)
   Common stock held in treasury, at cost, 
      17,422,000 shares and 40,000 shares, respectively    (1,069)          (3)
   Deferred compensation                                      (99)         (80)
   Accumulated other comprehensive income, net of
      income tax effect                                       125	           91
                                                            -----        -----
      Total Stockholders' Equity                              593	          725
                                                            -----        -----
                                                           $7,870       $8,372
                                                            =====        =====

See accompanying Notes to Consolidated Financial Statements.

                                       43
</TABLE>


US Airways Group, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31,                                                 
------------------------------------------------------------------------
(in millions)

                                                  1998      1997    1996
                                                 -----     -----   -----
Cash and Cash equivalents at beginning of year  $1,094    $  951  $  882
                                                 -----     -----   -----
Cash flows from operating activities
 Net income                                        538     1,025     263
 Adjustments to reconcile net income to net cash
  provided by (used for) operating activities
   Depreciation and amortization                   318       401     316
   Losses (gains) on dispositions of property      (17)      (16)      1
   Gains on sales of interests in affiliates         -      (180)      -
   Amortization of deferred gains and credits      (28)      (28)    (28)
   Other                                            72        35      38
   Changes in certain assets and liabilities
    Decrease (increase) in receivables             (55)       40     (15)
    Decrease (increase) in materials and supplies,
     prepaid expenses and pension assets          (154)       38     (45)
    Decrease (increase) in deferred income taxes   193      (454)      -
    Increase (decrease) in traffic balances
     payable and unused tickets                     45       (14)    108
    Increase (decrease) in accounts payable
     and accrued expenses                          272       (36)    316
   Increase (decrease) in postretirement 
    benefits other than pensions, noncurrent        67        59      78
                                                 -----     -----   -----
      Net cash provided by (used for) 
       operating activities                      1,251       870   1,032

Cash flows from investing activities
 Capital expenditures                             (642)     (280)   (181)
 Proceeds from the sale-leaseback of aircraft      189         -       -
 Proceeds from dispositions of property            112        85      25
 Acquisition of Shuttle, Inc.                        -      (190)      -
 Proceeds from sales of interests in affiliates      -       224       -
 Decrease (increase) in short-term investments     275      (235)   (604)
 Decrease (increase) in restricted cash 
  and investments                                  (41)       18      11
 Other                                               4         6      (5)
                                                 -----     -----   -----
      Net cash provided by (used for)
       investing activities                       (103)     (372)   (754)

Cash flows from financing activities
 Issuances of debt                                   -         -     103
 Principal payments on long-term debt             (556)      (88)   (236)
 Issuances of Common Stock                           8        39       4
 Purchases of Common Stock                      (1,081)        -       -
 Sales of treasury stock                             5         2       3
 Redemptions of preferred stock,
  including redemption premiums                      -      (127)      -
 Dividends paid on preferred stock                  (6)     (181)    (83)
                                                 -----     -----   -----
      Net cash provided by (used for)
       financing activities                     (1,630)     (355)   (209)
                                                 -----     -----   -----
Net increase (decrease) 
 in Cash and Cash equivalents                     (482)      143      69
                                                 -----     -----   -----
Cash and Cash equivalents at end of year        $  612    $1,094  $  951
                                                 =====     =====   =====

Noncash investing and financing activities
 Conversions of preferred stock
  into Common Stock                             $  358    $  497  $    -
 Net unrealized gain on
  available-for-sale securities,
  net of income tax effect                      $   73    $  104  $    -
 Reductions of aircraft - related
  purchase deposits                             $   61    $    -  $    -
 Issuances of debt - refinancing
  of debt secured by aircraft                   $    -    $    -  $  160
 Reductions of debt - refinancing
  of debt secured by aircraft                   $    -    $    -  $  154
 Issuances of debt - aircraft acquisitions      $    -    $    -  $   29
 Acquisition of Shuttle, Inc.
  Fair value of assets acquired                 $    -    $  258  $    -
  Cash paid                                     $    -    $ (190) $    -
                                                 -----     -----   -----
  Liabilities assumed                           $    -    $   68  $    -
                                                 =====     =====   =====

Supplemental Information
 Cash paid during the year for interest,
  net of amounts capitalized                    $  233    $  246  $  261
 Net cash paid during the year for income taxes $  234    $   95  $   12

See accompanying Notes to Consolidated Financial Statements.


                                        44


<TABLE>
US Airways Group, Inc.  
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
Three Years Ended December 31, 1998
------------------------------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share amounts)

<CAPTION>                                                                              Accumulated other comprehensive
                                                                                      income, net of income tax effect
                                                                                      --------------------------------
                                                                                         Unrealized     Adjustment
                        Series B                     Retained    Common      Deferred      gain on      for minimum         Compre-
                        Preferred  Common  Paid-in  earnings   Stock held    compen-   available-for     pension            hensive
                          Stock     Stock  capital  (deficit)  in treasury   sation  -sale securities*  liability*  Total   income
                        ---------  ------  -------  ---------  -----------  -------- -----------------  ----------- ------- -------
<S>                        <C>     <C>     <C>       <C>        <C>           <C>          <C>            <C>      <C>       <C>
Balance as of
  December 31, 1995        $ 213   $  63   $1,363    $(2,298)   $     -       $(99)        $  -           $(78)    $  (836)

Grant of 635,000 shares 
  of restricted stock and
  2,415,000 options            -       1       21          -          -        (22)           -              -           -

Acquisition of 118,000
  shares of Common Stock
  from certain employees       -       -        -          -         (3)         -            -              -          (3)

Exercise of 435,000 options    -       -        4          -          3          -            -              -           7

Reversion of 96,000 shares
  of previously-granted 
  non-vested stock             -       -       (1)         -          -          1            -              -           -

Dividends declared 
  (preferred stock)
  Series H -$133.74 per share  -       -        -        (48)         -          -            -              -         (48)
  Series F -$902.14 per share  -       -        -        (27)         -          -            -              -         (27)
  Series T -$799.91 per share  -       -        -         (8)         -          -            -              -          (8)

Amortization of deferred
  compensation                 -       -        -         -           -         25            -              -          25

Adjustment for minimum
  pension liability*           -       -        -         -           -          -            -             43          43   $   43

Net income                     -       -        -       263           -          -            -              -         263      263
                            ----    ----    -----    ------      ------        ---          ---            ---      ------    -----
   Total comprehensive 
     income                                                                                                                  $  306
                                                                                                                              =====
Balance as of 
  December 31, 1996        $ 213   $  64   $1,387   $(2,118)    $     -       $(95)       $   -           $(35)    $  (584)

Conversion of 4,257,000
  depositary shares         (213)     11      202         -           -          -            -              -           -

Conversion of 28,000 
  shares of Series F 
  Preferred Stock              -      14      262         -           -          -            -              -         276

Grant of 162,000 shares of 
  non-vested stock             -       -        4         -           -         (4)           -              -           -

Reversion of 89,000 shares
  of previously-granted
  non-vested stock             -       -       (1)        -           -          1            -              -           -

Acquisition of 125,000
  shares of Common Stock
  from certain employees       -       -        -         -          (5)         -            -              -          (5)

Exercise of 2,119,000
  Options                      -       2       43         -           2          -            -              -          47

Dividends declared
  (preferred stock)
  Series H -$225.24 per share  -       -        -       (81)          -          -            -              -         (81)
  Series F -$1,137.00
    per share                  -       -        -       (34)          -          -            -              -         (34)
  Series T -$991.22 per share  -       -        -       (10)          -          -            -              -         (10)
  Series B -$13.49 per share   -       -        -       (56)          -          -            -              -         (56)

Redemption premiums on
  repurchases of Redeemable
  Cumulative Convertible
  Preferred Stock              -       -        -        (6)          -          -            -              -          (6)

                                                    (continued on following page)

                                                             45

</TABLE>
<TABLE>
US Airways Group, Inc.  
Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Continued)
Three Years Ended December 31, 1998
------------------------------------------------------------------------------------------------------------------------------------
(dollars in millions, except per share amounts)

<CAPTION>                                                                              Accumulated other comprehensive
                                                                                      income, net of income tax effect
                                                                                      --------------------------------
                                                                                         Unrealized     Adjustment
                        Series B                     Retained    Common      Deferred      gain on      for minimum         Compre-
                        Preferred  Common  Paid-in  earnings   Stock held    compen-   available-for     pension            hensive
                          Stock     Stock  capital  (deficit)  in treasury   sation  -sale securities*  liability*  Total   income
                        ---------  ------  -------  ---------  -----------  -------- -----------------  ----------- ------- -------
<S>                        <C>     <C>     <C>       <C>        <C>           <C>          <C>            <C>      <C>       <C>
Amortization of
  deferred compensation        -       -        -         -           -         18            -              -          18

Tax benefit from employee
  stock option exercises       -       -        9         -           -          -            -              -           9

Unrealized gain on
  available-for-sale
  securities*                  -       -        -         -           -          -          104              -         104   $  104

Adjustment for minimum
  pension liability*           -       -        -         -           -          -            -             22          22       22

Net income                     -       -        -     1,025           -          -            -              -       1,025    1,025
                            ----    ----    -----    ------      ------        ---          ---            ---      ------    -----
   Total comprehensive
     Income                                                                                                                  $1,151
                                                                                                                              =====
Balance as of 
  December 31, 1997        $   -   $  91   $1,906   $(1,280)    $    (3)      $(80)        $104           $(13)    $   725

Purchase of 17,924,000
  shares of Common Stock       -       -        -         -      (1,099)         -            -              -      (1,099)

Conversion of 358,000
  shares of Series H
  Preferred Stock              -       9      349         -           -          -            -              -         358

Grant of 453,000 shares
  of non-vested stock
  and 2,300,000 stock
  options                      -       -       30         -          17        (47)           -              -           -

Reversion of 71,000
  shares of previously-
  granted non-vested stock     -       -       (2)        -           -          2            -              -           -

Acquisition of 91,000
  shares of Common Stock
  from certain employees       -       -        -         -          (4)         -            -              -          (4)

Exercise of 704,000 
  stock options                -       1       (6)        -          20          -            -              -          15

Dividends paid-Series H
  Preferred Stock
  $18.50 per share             -       -        -        (6)          -          -            -              -          (6)

Amortization of deferred
  Compensation                 -       -        -         -           -         26            -              -          26

Tax benefit related to
  employee stock option
  exercises                    -       -        6         -           -          -            -              -           6

Unrealized gain on
  available-for-sale
  securities*                  -       -        -         -           -          -           73              -          73   $   73

Adjustment for minimum
  pension liability*           -       -        -         -           -          -            -            (39)        (39)     (39)

Net income                     -       -        -       538           -          -            -              -         538      538
                            ----    ----    -----    ------      ------        ---          ---            ---      ------    -----
   Total comprehensive
     Income                                                                                                                  $  572
                                                                                                                              =====
Balance as of 
  December 31, 1998        $   -   $ 101  $ 2,283   $  (748)    $(1,069)      $(99)        $177           $(52)    $   593
                            ====    ====    =====    ======      ======        ===          ===            ===      ======

* Net of income tax effect

See accompanying Notes to Consolidated Financial Statements. 

                                                                  46

</TABLE>



                          US AIRWAYS GROUP, INC.
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)  BASIS OF PRESENTATION AND NATURE OF OPERATIONS

     The accompanying Consolidated Financial Statements include the 
accounts of US Airways Group, Inc. (US Airways Group or the Company) and 
its wholly-owned subsidiaries US Airways, Inc. (US Airways), Shuttle, Inc. 
(Shuttle), Allegheny Airlines, Inc. (Allegheny), Piedmont Airlines, Inc. 
(Piedmont), PSA Airlines, Inc. (PSA), US Airways Leasing and Sales, Inc. 
(US Airways Leasing and Sales), US Airways Fuel Corporation (Fuel Corp.), 
Airways Assurance Limited (AAL) and Material Services Company, Inc. (MSC). 
All significant intercompany accounts and transactions have been 
eliminated.

     US Airways is the Company's principal operating subsidiary and 
accounted for approximately 90% of the Company's operating revenues in 1998 
on a consolidated basis. US Airways is a major United States air carrier 
engaged primarily in the business of transporting passengers, property and 
mail. US Airways enplaned 58 million passengers during 1998 and is 
currently the sixth largest domestic air carrier, as ranked by total 
revenue passenger miles (RPMs). US Airways operates predominantly in the 
Eastern U.S. with major connecting hubs at airports in Charlotte, 
Philadelphia and Pittsburgh. US Airways also has substantial operations at 
Baltimore/Washington International Airport, Boston's Logan International 
Airport, New York's LaGuardia Airport (LaGuardia) and Washington's Ronald 
Reagan Washington National Airport (Reagan National).

     US Airways' results include the results of its wholly-owned subsidiary 
USAM Corp. (USAM). As of December 31, 1998, USAM owned approximately 6.7% 
of Galileo International, Inc. (Galileo), which provides electronic global 
distribution services for the travel industry, and 11% of the Galileo Japan 
Partnership (GJP). GJP markets the Galileo Computer Reservation System 
(Galileo CRS) in Japan. USAM accounts for its investment in Galileo using 
the cost method (see Note 1(g)). USAM accounts for its investment in GJP 
using the equity method because it is represented on the board of directors 
and therefore participates in policy making processes. Until July 1997, as 
discussed in Note 10, USAM held interests in the Galileo International 
Partnership and the Apollo Travel Services Partnership and accounted for 
these investments using the equity method. 

     Allegheny, Piedmont and PSA (which enplaned 7 million passengers in 
1998) are regional air carriers that, along with six non-owned regional 
airline franchisees, form "US Airways Express." US Airways Express also 
has a majority of its operations in the Eastern U.S.  

     On December 30, 1997, the Company purchased Shuttle for $190 million. 
Shuttle's assets include twelve B727-200 aircraft and takeoff and landing 
rights at both LaGuardia and Reagan National airports. Shuttle, which 
operates under the trade name "US Airways Shuttle," provides high-
frequency service between New York (LaGuardia) and Boston and between New 
York (LaGuardia) and Washington (Reagan National). For accounting purposes 
the acquisition was treated as a purchase and, accordingly, Shuttle's 
results of operations for December 31, 1997 and for subsequent periods have 
been included in the Company's Consolidated Statements of Operations. In 
addition, Shuttle's assets and liabilities were re-valued at fair value as 
of the acquisition date and included in the Company's Consolidated Balance 
Sheets as of December 31, 1997. The purchase of Shuttle resulted in 
goodwill, as discussed in Note 1(f).

     Fuel Corp. was established in 1987 primarily to serve as a fuel 
wholesaler to US Airways, in certain circumstances. MSC performs a function 
similar to Fuel Corp., selling aviation fuel to US Airways Express carriers 
and also assisting the US Airways Express carriers with major

                                      47

maintenance and procurement contracts. US Airways Leasing and Sales' main 
function is remarketing US Airways' surplus or inactive aircraft.

     AAL was incorporated in June 1998 and is a wholly-owned subsidiary of 
US Airways Group. AAL is a captive insurance company that was formed to 
manage a portion of US Airways' airline hull and liability insurance needs. 
A portion of the premium paid by US Airways to AAL is commission revenues 
to AAL and the remaining premium is used to obtain policies from insurance 
underwriters.

     The preparation of financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions that affect the reported amounts of assets and liabilities and 
disclosure of contingent assets and liabilities at the date of the 
financial statements and the reported amounts of revenues and expenses 
during the reporting period. Actual results could differ from those 
estimates. 

     Certain 1997 and 1996 amounts have been reclassified to conform with 
1998 classifications.

     (b)  OPERATING ENVIRONMENT

     Most of the operations of the Company's airline subsidiaries are in 
competitive markets. Competitors include other air carriers along with 
other methods of transportation. 

     US Airways has the highest unit operating costs among the major 
domestic air carriers. The growth and expansion of competitors with lower 
cost and fare structures in its markets has put considerable pressure on US 
Airways to reduce its operating costs in order to maintain competitiveness. 
In addition, although a competitive strength in some regards, the 
concentration of significant operations in the Eastern U.S. results in US 
Airways being susceptible to changes in certain regional conditions that 
may have an adverse effect on the Company's results of operations and 
financial condition. In addition, the Company's agreements to acquire up to 
430 new Airbus aircraft, accompanying jet engines and ancillary assets are 
expected to increase its financing needs and result in a significant 
increase in its financial obligations (see Note 6(a) for additional 
information).

     Personnel costs represent the Company's largest expense category. As 
of December 31, 1998, the Company's various subsidiaries employed 
approximately 42,625 full-time equivalent employees. Approximately 37,950 
(84%) of the Company's employees are covered by collective bargaining 
agreements with various unions or will be covered by collective bargaining 
agreements for which initial negotiations are in progress. A new five-year 
contract between US Airways and its pilots became effective January 1, 
1998. US Airways' contracts with its mechanics and related employees, 
flight attendants, flight crew training instructors, flight simulator 
engineers and dispatch employees are currently amendable; talks with 
respect to new contracts are ongoing. US Airways is also negotiating with 
representatives of its fleet service and passenger service employees with 
respect to initial labor contracts. The Company cannot predict the ultimate 
outcome of any of these negotiations or the timing of any new agreements. 
US Airways believes that its new contract with its pilots is helping it to 
address its high cost structure.

     The operations of the Company's airline subsidiaries are largely 
dependent on the availability of aviation fuel. The availability and price 
of aviation fuel is largely determined by actions generally outside of the 
Company's control. The Company's airline subsidiaries have a diversified 
aviation fuel supplier network and use certain risk management techniques 
(see Note 2(a)) in order to help ensure aviation fuel availability and 
partially protect themselves from temporary aviation fuel price 
fluctuations.

                                      48

     (c)  CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

     All highly liquid investments purchased within three months of 
maturity are classified as Cash equivalents. Short-term investments consist 
primarily of certificates of deposit and commercial paper purchased with 
maturities greater than three months but less than one year.

     The Company classifies securities underlying its Cash equivalents and 
Short-term investments as "available-for-sale" in accordance with 
Statement of Financial Accounting Standards No. 115, "Accounting for 
Certain Investments in Debt and Equity Securities" (SFAS 115). Cash 
equivalents are stated at cost, which approximates fair value due to the 
highly liquid nature and short maturities of the underlying securities. 
Short-term investments are stated at fair value with the offsetting 
unrecognized gain or loss reflected as a separate component of 
Stockholders' Equity within Accumulated other comprehensive income, net of 
income tax effect.  See also Note 8(f). 

     (d)  MATERIALS AND SUPPLIES, NET

     Inventories of materials and supplies are valued at the lower of cost 
or fair value. Costs are determined using average costing methods and are 
charged to operations as consumed. An allowance for obsolescence is 
provided for flight equipment expendable and repairable parts.  

     (e)  PROPERTY AND EQUIPMENT

     Property and equipment is stated at cost or, if acquired under capital 
lease, at the lower of the present value of minimum lease payments or fair 
value of the asset at the inception of the lease. Interest expenses related 
to the acquisition of certain property and equipment are capitalized as an 
additional cost of the asset or as a leasehold improvement if the asset is 
leased. Costs of major improvements are capitalized for both owned and 
leased assets. Maintenance and repairs are recognized as operating expenses 
as incurred. 

     Depreciation and amortization expense for principal asset 
classifications is calculated on a straight-line basis to an estimated 
residual value. Depreciable lives are 11-20 years for operating flight 
equipment (except for B727-200 aircraft which are being depreciated over 2-
3 years to a residual value of $1-$2 million), 25-30 years for facilities 
and 3-10 years for other ground property and equipment. Improvements to 
leased assets are depreciated over the term of the lease of the related 
asset. The cost of property acquired under capital lease is amortized on a 
straight-line basis to Depreciation and amortization expense over the term 
of the lease. When property and equipment is sold or retired any gain or 
loss is recognized in the Other, net category of Other Income (Expense). 

     The Company monitors the recoverability of the carrying value of its 
long-lived assets. Under the provisions of Statement of Financial 
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived 
Assets and Long-Lived Assets to Be Disposed Of" (SFAS 121), the Company 
recognizes an "impairment charge" when the net undiscounted future cash 
flows from an asset's use (including any proceeds from disposition) are 
less than the asset's carrying value and the asset's carrying value exceeds 
its fair value. The impairment charge reflects writing-down the asset to 
fair value. See Note 14(b) for impairment charges recognized by US Airways 
during 1997.

     (f)  GOODWILL AND OTHER INTANGIBLES, NET

     Goodwill, the cost in excess of fair value of identified net assets 
acquired, is amortized on a straight-line basis over 40 years. The $629 
million goodwill resulting from the acquisitions of Pacific Southwest 
Airlines (Pacific Southwest) and Piedmont Aviation, Inc. (Piedmont 
Aviation), both in 1987, is amortized as depreciation and amortization 
expense. As of December 31, 1998 and 1997, accumulated amortization related 
to the Pacific Southwest and

                                      49

Piedmont Aviation acquisitions was $176 million and $160 million, 
respectively. Goodwill of $4 million resulting from USAM's computer 
reservation system investment is being amortized as a component of Other 
Income (Expense), consistent with the classification of the related income 
from this investment. As of December 31, 1998 and 1997, USAM's related 
accumulated amortization was $1 million. As of December 31, 1998 and 1997, 
goodwill resulting from the acquisition of Shuttle was $140 million and 
$143 million, respectively (includes an adjustment for deferred income 
taxes during 1998). Shuttle's goodwill is amortized as depreciation and 
amortization expense. As of December 31, 1998, Shuttle's accumulated 
amortization was $4 million (see also Note 1(a)).

     The Company periodically evaluates whether goodwill is impaired by 
comparing the goodwill balances with estimated future undiscounted cash 
flows which, in the Company's judgment, are attributable to the goodwill. 
This analysis is performed separately for the goodwill which resulted from 
each acquisition.

     Other intangible assets consist mainly of purchased operating rights 
at various airports, capitalized software costs and the intangible asset 
associated with the underfunded amounts of certain pension plans. The cost 
of operating rights and capitalized software costs are amortized on a 
straight-line basis over the expected periods of benefit as depreciation 
and amortization expense. Operating rights, which are valued at purchase 
cost or appraised value if acquired with Pacific Southwest, Piedmont 
Aviation or Shuttle, are amortized over periods ranging from seven to 25 
years and capitalized software costs are amortized over five years. The 
intangible pension asset is recognized in accordance with Statement of 
Financial Accounting Standards No. 87, "Employers' Accounting for 
Pensions"  (SFAS 87) (see Note 8(f)). As of December 31, 1998 and 1997, 
accumulated amortization related to other intangible assets was $169 
million and $149 million, respectively.

     Based on the most recent analyses, the Company believes that goodwill 
and other intangible assets were not impaired as of December 31, 1998.

     (g)  INVESTMENT IN MARKETABLE EQUITY SECURITIES

     USAM's investment in Galileo which is accounted for under the cost 
method, is classified as "available-for-sale" under SFAS 115 and recorded 
at fair value. See also Notes 2(b), 8(f) and 10.
 
     (h)  OTHER ASSETS, NET

     Other assets, net consist primarily of noncurrent pension assets, 
restricted cash and investments, unamortized debt issuance costs and a 
long-term receivable from British Airways Plc (British Airways). Restricted 
cash and investments are deposits in trust accounts to collateralize 
letters of credit and workers' compensation policies. The long-term 
receivable from British Airways resulted from the relinquishment by US 
Airways of three U.S. to London routes. See also Notes 2(b) and 11.

     (i)  FREQUENT TRAVELER PROGRAM
 
    US Airways accrues the estimated incremental cost of travel awards 
earned by participants in its "Dividend Miles" frequent traveler program 
when requisite mileage award levels are achieved. US Airways also sells 
mileage credits to participating partners in Dividend Miles. The resulting 
revenues are recorded as Other operating revenues during the period in 
which the credits are sold. 

     In 1998, US Airways and American Airlines, Inc. (American) announced a 
marketing relationship that gives customers combined access to both 
companies' frequent traveler programs. Under the program, members who 
belong to US Airways' Dividend Miles and American's

                                      50

AAdvantage are able to claim awards for airline travel on both airlines and 
to combine miles when claiming travel awards on either airline. Each 
airline compensates the other when relieved of an obligation to provide a 
travel award.

     (j)  DEFERRED GAINS, NET

     Gains on aircraft sale and leaseback transactions are deferred and 
amortized over the terms of the leases as a reduction of the related 
aircraft rent expense.

     (k)  PASSENGER TRANSPORTATION REVENUES

     Passenger ticket sales are recognized as Passenger transportation 
revenues when the transportation service is rendered or the ticket 
otherwise expires. At the time of sale, a liability is established (Traffic 
balances payable and unused tickets) and subsequently relieved either 
through carriage of the passenger, through billing from another air carrier 
which provided the service, upon expiration of the ticket or by refund to 
the passenger.

     (l)  STOCK-BASED COMPENSATION

     The Company applies the provisions of Accounting Principles Board 
Opinion No. 25, "Accounting for Stock Issued to Employees," (APB 25) to 
account for awards of stock-based compensation granted to employees.  See 
also Note 8(e).

     (m)  OTHER SELLING EXPENSES

     Other selling expenses include credit card fees, computerized 
reservations systems fees and advertising and promotional expenses. 
Advertising and promotional expenses for 1998, 1997 and 1996 were $36 
million, $46 million and $51 million, respectively (such costs are expensed 
when incurred).

     (n)  EARNINGS PER COMMON SHARE

     Earnings per Common Share (EPS) is presented on both a basic and 
diluted basis in accordance with the provisions of Statement of Financial 
Accounting Standards No. 128, "Earnings per Share" (SFAS 128). The 
Company adopted SFAS 128 during 1997. The Company's EPS figures for 1996 
have been restated to conform with the provisions of SFAS 128.

     Basic EPS is computed by dividing net income, after deducting 
preferred stock dividend requirements, by the weighted average number of 
shares of common stock outstanding during the period. Diluted EPS reflects 
the maximum dilution that would result after giving effect to dilutive 
stock options and to the assumed conversion of any dilutive convertible 
preferred stock issuance. The table on the following page presents the 
computation of basic and diluted EPS (in millions, except per share 
amounts) for the years ended December 31, 1998, 1997 and 1996.







                      (this space intentionally left blank)


                                      51

<TABLE>
<CAPTION>
                                                        1998     1997    1996
                                                        ----     ----    ----
<S>                                                     <C>      <C>     <C>
Earnings applicable to common stockholders:
Earnings applicable to common stockholders (basic)      $532     $961    $175
  Preferred dividend requirement                           6       58      48
                                                         ---    -----     ---
  Earnings applicable to common stockholders (diluted)  $538   $1,019    $223
                                                         ===    =====     ===
Common shares:
Weighted average common shares outstanding (basic)        92       78      64
Incremental shares related to outstanding stock options    2        2       1
Incremental shares related to convertible preferred
  stock issuances                                          2       23      30
                                                         ---    -----     ---
Weighted average common shares outstanding (diluted)      96      103      95
                                                         ===    =====     ===

EPS-Basic                                              $5.75   $12.32   $2.73
EPS-Diluted                                            $5.60    $9.87   $2.35

     Note: EPS amounts may not recalculate due to rounding.
</TABLE>



2.  FINANCIAL INSTRUMENTS

     (a)  TERMS OF CERTAIN FINANCIAL INSTRUMENTS

     On January 1, 1998, as part of a comprehensive information technology 
services agreement with The SABRE Group, Inc. (TSG), TSG granted US Airways 
two tranches of stock options (TSGH Stock Options) to acquire up to 
6,000,000 shares of Class A Common Stock, $.01 par value, of The SABRE 
Group Holding, Inc. (TSGH Common Stock), TSG's parent company. Each tranche 
includes 3,000,000 stock options. Stock options in the first tranche have 
an exercise price of $27 and are exercisable from June 30, 1999 until 
December 31, 1999, but are subject to a $90 per share cap on the fair 
market value of the underlying common stock. Stock options in the second 
tranche have an exercise price of $27 and are exercisable during a ten-year 
period beginning January 2, 2003, but are subject to a $127 per share cap 
on the fair market value of the underlying common stock. Under certain 
circumstances, and under certain conditions, US Airways may select an 
alternative vehicle of substantially equivalent value in place of receiving 
TSGH Common Stock.

     The Company uses risk management strategies to reduce its exposure to 
certain market uncertainties. US Airways is party to financial contracts 
which it believes help to reduce its exposure to significant increases in 
the price of aviation fuel. US Airways has also hedged certain foreign-
denominated debt to maturity. US Airways periodically reviews the financial 
condition of each counterparty to these financial contracts and believes 
that the potential for default by any of the current counterparties is 
negligible. 

     US Airways continually adjusts its aviation fuel procurement strategy 
in order to take advantage of the best available prices while at the same 
time ensuring that it has an adequate supply of aviation fuel to support 
its operations. In addition, US Airways may participate in arrangements 
designed to reduce its exposure to significant increases in the price of 
aviation fuel. These arrangements have the net effect of increasing or 
decreasing US Airways' aviation fuel expense in the period in which they 
are settled.  While US Airways was not a participant in fuel swap contracts 
as of December 31, 1998, US Airways previously entered into fuel swap 
contracts that resulted in US Airways receiving or making payments based on 
the difference between a fixed price and a variable price per notional 
gallon for specified petroleum products. The total notional gallons under 
these contracts were approximately 47 million as of December 31, 1997 (US 
Airways entered into contracts prior to December 31, 1997 which effectively 
closed certain hedging arrangements covering approximately 17 million 
gallons). For contracts open as of December 31, 1997, US Airways paid fixed 
prices ranging from $0.496 to $0.600 per notional gallon and received a 
variable price per gallon based on market prices.

                                      52

     An aggregate of $31 million of future principal payments of US 
Airways' long-term debt due 1999 through 2000 is payable in Japanese Yen. 
This foreign currency exposure has been hedged to maturity by US Airways' 
participation in foreign currency contracts. Net settlements will be 
recorded as adjustments to Interest expense.

     (b)  FAIR VALUE OF FINANCIAL INSTRUMENTS

     In accordance with the provisions of SFAS 115, the fair values for US 
Airways' short-term and marketable equity security investments are 
determined based upon quoted market prices. Restricted cash is carried at 
cost which approximates fair value. At December 31, 1998 and 1997, US 
Airways' long-term investments represent ownership interests in privately 
held companies which have no readily determinable market values. The 
Company estimated the fair values of its note receivable and long-term debt 
by discounting expected future cash flows using current rates offered to 
the Company for note receivables and debt with similar maturities. The 
estimated fair value of the TSGH Stock Options was calculated using the 
Black-Scholes stock option pricing model and is presented in the table 
below in accordance with Statement of Financial Accounting Standards No. 
119, "Disclosures about Derivative Financial Instruments and Fair Value of 
Financial Instruments" (SFAS 119). These financial instruments are 
classified as held for "purposes other than trading" under SFAS 119 due 
primarily to certain restrictions, including limitations on US Airways' 
ability to exercise or sell these stock options. The fair values of foreign 
currency and fuel swap contracts are obtained from dealer quotes. These 
values represent the estimated amount US Airways would receive or pay to 
terminate such agreements as of the valuation date.

     The estimated fair values of the Company's financial instruments, none 
of which are held for trading purposes, are summarized as follows (in 
millions; brackets denote a liability):


<TABLE>
<CAPTION>
                                                                     December 31,
                                                       ------------------------------------------
                                                              1998                  1997
                                                       --------------------  --------------------
                                                       Carrying  Estimated   Carrying  Estimated
                                                        Amount   Fair Value   Amount   Fair Value
                                                       --------  ----------  --------  ----------
<S>                                                    <C>        <C>         <C>        <C>
Short-term investments (1)                             $  598     $  598      $  870     $  870
Investment in marketable equity securities (1)            301        301         190        190
Restricted cash and long-term investments (2)             113        114          72         72
Note receivable (2)                                        27         27          30         30
TSGH Stock Options                                          -        119           -          -
Long-term debt (excludes capital lease obligations)    (1,999)    (2,244)     (2,578)    (2,862)
Redeemable preferred stock                                  -          -        (358)      (589)
Foreign currency contracts:
  In a net receivable (payable) position                    -         (1)          -         (3)
Fuel swap contracts:
  In a net receivable (payable) position                    -          -           -         (1)

(1) Classified as "available-for-sale" in accordance with SFAS 115. See also Notes 1(c) and 1(g).
(2) Carrying amount included in Other assets, net on the Company's Consolidated Balance Sheets,
    except for the current portion of the note receivable ($6 million) which is included in
    Receivables, net.

</TABLE>


3.  INCOME TAXES

     The Company accounts for income taxes according to the provisions of 
Statement of Financial Accounting Standards No. 109, "Accounting for Income 
Taxes" (SFAS 109). The Company files a consolidated federal income tax 
return with its wholly-owned subsidiaries. 

     During 1997, the Company determined that it was appropriate to 
significantly reduce the valuation allowance applicable to its deferred tax 
assets. The Company believed, based on prior earnings and future earnings 
projections, that it was more likely than not that the Company would

                                      53

be able to utilize tax benefits accumulated through December 31, 1997 in 
future periods. Accordingly, as of December 31, 1997, previous valuation 
allowances were substantially removed, resulting in a net deferred tax 
asset and an income tax credit for 1997.

     The components of the Company's provision (credit) for income taxes 
are as follows (in millions):

                                              1998      1997     1996
                                              ----      ----     ----
Current provision: 
  Federal                                     $155     $ 101      $ 6
  State                                         16         7        3
                                               ---      ----       --
    Total current provision                    171       108        9
                                               ---      ----       --
Deferred provision:
  Federal                                      166      (406)       -
  State                                         27       (55)       3
                                               ---      ----       --
    Total deferred provision                   193      (461)       3
                                               ---      ----       --
Provision (credit) for income taxes           $364     $(353)     $12
                                               ===      ====       ==

     In 1998, the Company was subject to federal alternative minimum tax 
(AMT). Approximately $494 million in federal regular net operating loss 
carryforwards and approximately $661 million in state net operating loss 
carryforwards were utilized to reduce the federal and state current tax 
liabilities.

     The significant components of deferred income tax provision (credit) 
for the years ended December 31, 1998, 1997 and 1996 are as follows (in 
millions):

                                              1998      1997     1996
                                              ----      ----     ----
Deferred tax provision (exclusive of the
  other components listed below)              $193     $ 181    $ 115
Decrease in the valuation allowance for
  deferred tax assets                            -      (642)    (112)
                                               ---      ----     ----
    Total                                     $193     $(461)   $   3
                                               ===      ====     ====

     A reconciliation of taxes computed at the statutory federal tax rate 
on earnings before income taxes to the provision (credit) for income taxes 
is provided below (in millions):

                                                   1998     1997     1996
                                                   ----     ----     ----
Tax provision computed at federal statutory rate   $316    $ 235    $  96
Book expenses not deductible for tax purposes        19       17       18
State income tax provision (credit), net of
  federal tax benefit                                28      (31)       5
Reduction of federal valuation allowance              -     (569)    (104)
Other                                                 1       (5)      (3)
                                                    ---     ----     ----
Provision (credit) for income taxes                $364    $(353)   $  12
                                                    ===     ====     ====

Effective tax rate                                   40%     (52)%      4%
                                                    ===     ====     ====








                      (this space intentionally left blank)



                                      54

     The tax effects of temporary differences that give rise to significant 
portions of the deferred tax assets and liabilities as of December 31, 1998 
and 1997 (in millions):

                                                        1998        1997
                                                        ----        ----
Deferred tax assets:
  Leasing transactions                                $  172      $  171
  Tax benefits purchased/sold                             19          31
  Gain on sale and leaseback transactions                130         125
  Employee benefits                                      709         683
  Net operating loss carryforwards                         8         194
  Alternative minimum tax credit carryforwards           157         158
  Investment tax credit carryforwards                      -          18
  Other deferred tax assets                              105          95
                                                       -----       -----
    Total gross deferred tax assets                    1,300       1,475
  Less valuation allowance                                (2)         (1)
                                                       -----       -----
    Net deferred tax assets                            1,298       1,474
Deferred tax liabilities:
  Depreciation and amortization                          913         941
  Other deferred tax liabilities                         106          63
                                                       -----       -----
    Total deferred tax liabilities                     1,019       1,004
                                                       -----       -----
    Net deferred tax assets                           $  279      $  470
                                                       =====       =====

    The valuation allowance for deferred tax assets increased approximately 
$269 thousand in 1998 and decreased approximately $642 million in 1997.

     Included in the deferred tax assets at December 31, 1998, among other 
items, are $482 million related to obligations of postretirement medical 
benefits and $157 million of alternative minimum tax credits, which do not 
expire. During 1998, the Company increased deferred tax assets and reduced 
goodwill by $2 million to adjust Shuttle's deferred tax assets acquired on 
December 30, 1997. There were no federal regular or alternative minimum tax 
net operating loss carryforwards remaining at December 31, 1998. The 
Company had state net operating loss carryforwards of $260 million as of 
December 31, 1998. In prior years, investment tax credit benefits were 
recorded using the "flow through" method as a reduction of the federal 
income tax provision. No new investment tax credits were generated during 
1998, 1997 or 1996, and all prior year investment tax credits were used by 
December 31, 1998. Certain changes in stock ownership can result in a 
limitation on the amount of net operating loss and tax credit carryovers 
that can be utilized each year. The Company determined it has undergone 
such an ownership change that did not impact the utilization of federal tax 
attributes during 1998. Furthermore, the Company does not believe that 
alternative minimum tax credits available as of December 31, 1998 will be 
limited in future years as a result of the ownership change. The federal 
income tax returns of the Company through 1986 have been examined and 
settled with the Internal Revenue Service.

     The Company believes that a significant portion of the deferred tax 
assets will be realized through projected taxable income and reversals of 
existing taxable temporary differences. The deferred tax assets and 
liabilities disclosed above exclude tax assets and liabilities which arise 
as a result of including certain transactions in the equity section of the 
balance sheet, net of tax. These tax attributes include a noncurrent 
deferred tax liability of $95 million and $56 million as of December 31, 
1998 and 1997, respectively, for unrealized gains on available-for-sale 
investments pursuant to SFAS 115 and a noncurrent deferred tax asset of $33 
million and $3 million as of December 31, 1998 and 1997, respectively, 
relating to the equity adjustment for the minimum pension liability for US 
Airways' defined benefit plans. 




                   (this space intentionally left blank)

                                      55

     The following table is a summary of pretax book income and taxable 
income prior to net operating loss carryforwards for the last three years 
(in millions):

                                         1998     1997     1996
                                         ----    ------    ----
Pretax book income                       $902    $  672    $275
Taxable income                           $975    $1,053    $285

     The reasons for significant differences between taxable income and 
pretax book income in 1997 primarily relate to employee pension and 
postretirement benefit costs, certain aircraft impairment charges and lease 
accruals, and other employee related accruals. See also Note 14.

4.  LONG-TERM DEBT, INCLUDING CAPITAL LEASE OBLIGATIONS

     Details of long-term debt are as follows (in millions):
                                                             December 31,
                                                          -----------------
-
                                                           1998        1997
                                                           ----        ----
Senior Debt:
  10% Senior Notes due 2003                              $    -      $  300
  9 5/8% Senior Notes due 2001                              175         175
  5.7% to 11.7% Equipment Financing Agreements,
    Installments due 1999 to 2016                         1,795       2,045
  8.6% Airport Facility Revenue Bond due 2022                28          28
  7.4% Aircraft Purchase Deposit Financing*                   -          29
  Other                                                       1           1
                                                          -----       -----
                                                          1,999       2,578
Capital Lease Obligations                                    27          34
                                                          -----       -----
  Total                                                   2,026       2,612
Less Current Maturities                                     (71)       (186)
                                                          -----       -----
                                                         $1,955      $2,426
                                                          =====       =====

*  See related information under Note 6(c) (regarding settlement of
   litigation between the Company and The Boeing Company (Boeing)).

     Maturities of long-term debt and debt under capital leases for the 
next five years (in millions):

                  1999               $   71
                  2000                  115
                  2001                  240
                  2002                   69
                  2003                  191
            Thereafter                1,340
                                      -----
                                     $2,026
                                      =====

     Interest rates on $92 million principal amount of long-term debt as of 
December 31, 1998 are subject to adjustment to reflect prime rate and other 
rate changes.

     Equipment financings totaling $1.8 billion were collateralized by 
aircraft and engines with a net book value of approximately $1.9 billion as 
of December 31, 1998.

     In 1998, the Company retired early certain long-term debt with a 
principal amount of $434 million, including US Airways' 10% Senior Notes. 
The retirement of the 10% Senior Notes resulted in a cash outflow of $315 
million, including prepayment penalties of $15 million.

5.  EMPLOYEE PENSION AND BENEFIT PLANS

     Substantially all of the Company's employees meeting certain service 
and other requirements are eligible to participate in various pension, 
medical, life insurance, disability and survivorship and employee stock 
ownership plans.

                                      56

     (a)  DEFINED BENEFIT AND OTHER POSTRETIREMENT BENEFIT PLANS

     The Company sponsors several qualified and nonqualified defined 
benefit plans and other postretirement benefit plans for certain employees. 
Liabilities related to pension plans covering foreign employees are 
calculated in accordance with generally accepted accounting principles and 
funded in accordance with the laws of the individual country.

     The following table sets forth changes in the fair value of plan 
assets, benefit obligations and the funded status of the plans as of 
September 30, 1998 and 1997, (except for subsidiaries other than
US Airways which are as of December 31, 1998 and 1997), in addition to the 
amounts recognized in the Company's Consolidated Balance Sheets as of 
December 31, 1998 and 1997, respectively (in millions):


<TABLE>
<CAPTION>
                                                                                         Other
                                                              Defined Benefit        Postretirement
                                                             Pension Plans (1)          Benefits
                                                             -----------------       ---------------
                                                              1998        1997       1998      1997
                                                              ----        ----       ----      ----
<S>                                                        <C>          <C>       <C>       <C>
Fair value of plan assets at the beginning of the period   $ 3,154      $2,492    $     -   $     -
  Actual return on plan assets                                 254         590          -         -
  Acquisition                                                    -          30          -         -
  Employer contributions                                        39         171         31        28
  Plan participants' contributions                               -           -          2         1
  Gross benefits paid                                         (210)       (129)       (33)      (29)
                                                            ------       -----      -----    ------
Fair value of plan assets at the end of the period           3,237       3,154          -         -
                                                            ------       -----     ------    ------

Benefit obligation at the beginning of the period            3,912       3,168      1,018       951
  Service cost                                                 144         131         37        35
  Interest cost                                                296         259         77        71
  Plan participants' contributions                               -           -          2         1
  Plan amendments                                                -          39          -         -
  Actuarial (gain) loss                                        531         295        128       (32)
  Acquisition (2)                                                -          34          -        21
  Settlements                                                    1           -          -         -
  Special termination benefits (3)                               -         115          -         -
  Gross benefits paid (4)                                     (210)       (129)       (33)      (29)
                                                            ------       -----     ------    ------
Benefit obligation at the end of the period                  4,674       3,912      1,229     1,018
                                                            ------       -----     ------    ------

Funded status of the plan                                   (1,437)       (758)    (1,229)   (1,018)
  Unrecognized actuarial (gain) loss                         1,018         476         66       (62)
  Unrecognized prior service cost                               91          97       (117)     (130)
  Unrecognized transition obligation                           (20)        (25)         -         -
  Contributions for October to December                         21           2         27         7
                                                            ------       -----     ------    ------
Net liability recognized in the Company's
  Consolidated Balance Sheets                              $  (327)     $ (208)   $(1,253)  $(1,203)
                                                            ======       =====     ======    ======
Components of the amounts recognized in the Company's Consolidated Balance Sheets:

Prepaid benefit cost                                       $   310      $  283    $     -   $     -
Accrued benefit cost                                          (637)       (491)    (1,253)   (1,203)
Adjustment for minimum pension liability                      (180)       (111)         -         -
Intangible asset                                                95          95          -         -
Accumulated other comprehensive income                          85          16          -         -
                                                            ------      ------     ------    ------
Net liability recognized in the Company's
  Consolidated Balance Sheets                            $    (327)    $  (208)   $(1,253)  $(1,203)
                                                            ======      ======     ======    ======

(1) For plans with accumulated benefit obligations in excess of plan assets the aggregate
    accumulated benefit obligations and plan assets were $3,640 million and $3,179 million,
    respectively, as of September 30, 1998, and $608 million and $457 million, respectively, as of
    September 30, 1997 (except for subsidiaries other than US Airways which are as of
    December 31, 1998 and 1997, respectively).

                    (notes to the tables are continued on the following page)

                                                57

                            (notes are continued from preceding page)

(2) The Company purchased Shuttle in 1997. See Note 1(a).
(3) Related to an early retirement plan offered to US Airways' pilots, recorded in accordance with
    Statement of Financial Accounting Standards No. 88 "Employers' Accounting for Settlements and
    Curtailments of Defined Benefit Pension Plans and for Termination Benefits" (SFAS 88).
(4) Gross benefits paid in 1998 include lump sum payments for pilots made pursuant to the special
    termination benefits charge of $115 million in 1997. See (3) above.
</TABLE>



     The following table presents the weighted average assumptions used to 
determine the actuarial present value of Pension Benefits and Other 
Postretirement Benefits: 

                                                                 Other
                                      Defined Benefit        Postretirement
                                       Pension Plans            Benefits
                                      ----------------       ---------------
                                      1998        1997       1998      1997
                                      ----        ----       ----      ----
Discount rate                         6.8%        7.5%       6.8%      7.5%
Expected return on plan assets        9.5%        9.5%         NA        NA
Rate of compensation increase         3.3%        3.3%       4.6%      4.7%

     The assumed health care cost trend rate is 4.5% in 1999 and 
thereafter. The assumed health care cost trend rate has a significant 
effect on amounts reported for retiree health care plans. A 1% change in 
the health care cost trend would have the following effects on Other 
Postretirement Benefits as of September 30, 1998 (in millions):

                                              1% Increase      1% Decrease
                                              -----------      -----------
Effect on total service and interest costs       $ 17             $ (13)
Effect on postretirement benefit obligation      $163             $(126)

     Total periodic cost for Pension Benefits and Other Postretirement 
Benefits (in millions):

                                                                 Other
                                      Defined Benefit        Postretirement
                                       Pension Plans            Benefits
                                    ------------------     ----------------
                                    1998   1997   1996     1998  1997  1996	
                                    ----   ----   ----     ----  ----  ----
Service cost                       $ 144  $ 131  $ 148     $ 37  $ 35  $ 44
Interest cost                        296    259    254       77    71    75
Expected return on plan assets      (279)  (237)  (218)       -     -     -
Amortization of:
  Transition asset                    (5)    (5)    (5)       -     -     -
  Prior service cost                   4      6      4      (12)  (12)  (12)
  Actuarial (gain)/loss               17     17     36       (1)   (4)    1
                                    ----   ----   ----      ---   ---   ---
Net periodic cost                    177    171    219      101    90   108
Settlements/curtailments               1      -      -        -     -     -
Special termination benefits           -    115      -        -     -     -
                                    ----   ----   ----      ---   ---   ---
Total periodic cost                $ 178  $ 286  $ 219     $101  $ 90  $108
                                    ====   ====   ====      ===   ===   ===

     The Company recorded a $1 million charge to Personnel costs for the 
termination of two pension plans in 1998 and a $115 million charge to 
Personnel costs in 1997 related to an early retirement program offered to 
325 US Airways pilots. These charges were recorded in accordance with 
SFAS 88.

     See Note 8(f) for the amount included within other comprehensive 
income arising from a change in the additional minimum pension liability.

     (b)  DEFINED CONTRIBUTION PENSION PLANS

    Expenses related to these plans, excluding expenses related to the US 
Airways Employee Stock Ownership Plan (ESOP) and any profit sharing 
contributions, were approximately $40 million, $59 million and $56 million 
for the years 1998, 1997 and 1996, respectively. Expenses for 1998 include 

                                      58

a $17 million credit related to a favorable legal settlement regarding 
employer matching contributions. See Notes 5(d) and 5(e) for information 
related to the Company's ESOP and profit sharing contributions.

     (c)  POSTEMPLOYMENT BENEFITS

     The Company provides certain postemployment benefits to its employees. 
Such benefits include disability-related and workers' compensation benefits 
and severance payments for certain employees. The Company accrues for the 
cost of such benefit expenses once an appropriate triggering event has 
occurred.

     (d)  EMPLOYEE STOCK OWNERSHIP PLAN

     In August 1989, US Airways established an ESOP. US Airways Group sold 
2,200,000 shares of its common stock to an Employee Stock Ownership Trust 
(the Trust) to hold on behalf of US Airways' employees, exclusive of 
officers, in accordance with the terms of the Trust and the ESOP. The 
trustee placed those shares in a suspense account pending their release and 
allocation to employees. US Airways provided financing to the Trust in the 
form of a 9 3/4% loan for $111 million for its purchase of shares and US 
Airways contributed an additional $2 million to the Trust. US Airways makes 
a yearly contribution to the Trust sufficient to cover the Trust's debt 
service requirement. The contributions are made in amounts equal to the 
periodic loan payments as they come due, less dividends available for loan 
payment. Since the Company did not pay dividends on any shares held by the 
Trust for the years ended December 31, 1998, 1997 and 1996, the Trust did 
not utilize dividends to service its debt during those periods. The initial 
maturity of the loan is 30 years. As the loan is repaid over time, the 
trustee systematically releases shares of the common stock from the 
suspense account and allocates them to participating employees. Each 
participant's allocation is based on the participant's compensation, the 
total compensation of all ESOP participants and the total number of shares 
being released. For each year after 1989, a minimum of 71,933 shares are 
released from the suspense account and allocated to participant accounts. 
If US Airways Group's return on sales equals or exceeds four percent in a 
given year, more shares are released and repayment of the loan is 
accelerated. See also Note 5(e) regarding the profit sharing component of 
US Airways' ESOP. Annual contributions made by US Airways, and therefore 
loan repayments made by the Trust, were $27 million in 1998, and $11 
million in each of 1997 and 1996. The interest portion of these 
contributions was $10 million in 1998, 1997 and 1996, respectively. 
Approximately 946,000 shares of US Airways Group common stock have been 
released or committed to be released as of December 31, 1998. US Airways 
recognized compensation expense related to the ESOP of $8 million in 1998, 
$11 million in 1997 and $4 million in 1996 based on shares allocated to 
employees (the "shares allocated" method). Deferred compensation related 
to the ESOP amounted to approximately $65 million, $72 million and $84 
million as of December 31, 1998, 1997 and 1996, respectively.

     See Note 1(l) with respect to the Company's accounting policies for 
stock-based compensation.

     (e)  PROFIT SHARING PLANS

     In exchange for temporary wage and salary reductions and other 
concessions during a twelve month period in 1992 and 1993, including 
certain ongoing work rule and medical benefits concessions and the freeze 
of the defined benefit plan for certain non-contract employees, certain US 
Airways employees participated in a profit sharing program and were granted 
stock options to purchase US Airways Group common stock (see related 
discussion under Note 8(e)). This profit sharing program was designed to 
recompense those US Airways employees whose pay was reduced in an amount 
equal to (i) two times salary foregone plus (ii) one time salary foregone 
(subject to a minimum of $1,000) for the freeze of the defined benefit 
pension plan for certain non-contract employees. US Airways recognized 
charges of $214 million related to this program,

                                      59

including $122 million in 1996. Cash distributions to participants of $214 
million were made under this program. After a first quarter 1997 payment of 
$129 million, US Airways' obligations under this profit sharing program 
were satisfied and this program ceased.

     US Airways' ESOP and Defined Contribution Retirement Program (DCRP) 
each have profit sharing components. Under the ESOP, each eligible US 
Airways employee receives shares of US Airways Group common stock based on 
his or her compensation relative to the total compensation of all 
participants and the number of shares of US Airways Group common stock in 
the allocation pool. When US Airways Group's return on sales equals or 
exceeds certain prescribed levels, US Airways increases its contribution, 
which effectively increases the number of shares of US Airways Group common 
stock in the allocation pool (see Note 5(d)). US Airways' ESOP-related 
expenses included $4 million and $7 million in 1998 and 1997, respectively, 
related to this profit sharing program. US Airways did not make any 
provision for profit sharing contributions in connection with the profit 
sharing component of the ESOP during 1996. Under the DCRP, US Airways makes 
additional contributions to participant accounts when US Airways Group 
achieves certain prescribed pre-tax margin levels (see Note 5(b)). US 
Airways' 1998, 1997 and 1996 results of operations reflect expenses of $27 
million, $24 million and $5 million, respectively, for the profit sharing 
component of the DCRP.

6.  COMMITMENTS AND CONTINGENCIES

     (a)  COMMITMENTS TO PURCHASE FLIGHT EQUIPMENT

     On October 31, 1997, the Company entered into agreements with AVSA, 
S.A.R.L. (AVSA), an affiliate of aircraft manufacturer Airbus Industrie 
G.I.E. (Airbus), and CFM International, Inc. (CFMI) for the acquisition of 
up to 400 Airbus A320-Family aircraft and accompanying jet engines. The 
A320-Family aircraft are single-aisle aircraft that include the Airbus 
A319, A320 and A321. 

     As of December 31, 1998, the Company had 122 A320-Family aircraft on 
firm order, 112 aircraft subject to reconfirmation prior to scheduled 
delivery and options for 160 additional aircraft. With respect to the firm-
order aircraft, 33 are expected to be delivered in 1999 and 89 are expected 
to be delivered in the years 2000 through 2002 (43 of the aircraft 
scheduled for delivery in the years 2000 to 2002 time period are subject to 
cancellation with 18 month notice and payment of a cancellation fee). 
During the fourth quarter of 1998, US Airways accepted delivery of and 
placed into operational service six A319 aircraft acquired under these 
agreements. The Company anticipates that the new Airbus single-aisle 
aircraft will replace, at a minimum, US Airways' B737-200, DC-9-30 and MD-
80 aircraft. US Airways has an agreement with GE Engine Services, Inc. for 
the maintenance of the engines that power these aircraft. 

     In July 1998, the Company reached an agreement with Airbus for the 
purchase of up to 30 widebody A330-300 aircraft. The agreement includes 
seven firm aircraft orders, seven aircraft subject to reconfirmation prior 
to scheduled delivery and options for 16 additional aircraft. Of the seven 
firm-order A330-300 aircraft, six are scheduled for delivery in the year 
2000 and one in early 2001. Orders subject to reconfirmation are for 
aircraft that are tentatively scheduled for delivery beginning in the 
fourth quarter of 2000. The Company can substitute other Airbus widebody 
aircraft for the A330-300s, including the A330-200 or members of the A340-
Series, for orders other than the first seven aircraft. In October 1998, 
the Company reached an agreement with Pratt & Whitney for jet engines to 
power these aircraft and to provide long-term maintenance for the engines. 
These new widebody aircraft are expected to eventually supplant US Airways' 
B767-200ER fleet in transatlantic markets.

     As of December 31, 1998, the minimum determinable payments associated 
with the Company's aircraft acquisition agreements for Airbus aircraft 
(including progress payments,

                                      60

payments at delivery, buyer-furnished equipment, spares, capitalized 
interest, penalty payments, cancellation fees and/or nonrefundable 
deposits) were estimated at $1.3 billion in 1999, $2.1 billion in 2000 and 
$9 million in 2001. 

     US Airways has a commitment to purchase hush-kits for certain of its 
B737-200 aircraft. The installation of hush-kits will allow these aircraft 
to meet certain statutory noise level requirements. The expected payments 
associated with this commitment are approximately $21 million, all of which 
are expected to occur in 1999.

     In February 1999, the Company signed a letter of intent to purchase 
nine new Dash 8 aircraft in 1999 from Bombardier Aerospace, the 
manufacturer of these aircraft. In addition, upon completion of a 
definitive purchase agreement, the Company plans to extend the leases on 
ten Dash 8 aircraft currently operated by the Company's regional airline 
subsidiaries (the leases are scheduled to expire in 1999).

     (b)  LEASES

     The Company's airline subsidiaries lease certain aircraft, engines and 
ground equipment, in addition to the majority of their ground facilities. 
Ground facilities include executive offices, maintenance facilities and 
ticket and administrative offices. Public airports are utilized for flight 
operations under lease arrangements with the municipalities or agencies 
owning or controlling such airports. Substantially all leases provide that 
the lessee shall pay taxes, maintenance, insurance and certain other 
operating expenses applicable to the leased property. Some leases also 
include renewal and purchase options. The Company subleases certain leased 
aircraft and ground facilities under noncancelable operating leases 
expiring in various years through the year 2018. See also Note 6(a). 

     The following amounts related to capital leases are included in 
property and equipment (in millions):
                                       December 31,
                                      -------------
                                      1998     1997
                                      ----     ----
Flight equipment                      $ 82     $ 81
Less accumulated amortization          (60)     (55)
                                       ---      ---
                                      $ 22     $ 26
                                       ===      ===

     As of December 31, 1998, obligations under capital and noncancelable 
operating leases for future minimum lease payments (in millions):

                                                Capital     Operating
                                                 Leases       Leases
                                                 ------      --------
1999                                              $10        $  794
2000                                                7           763
2001                                                5           761
2002                                                5           698
2003                                                5           688
Thereafter                                          4         5,413
                                                   --         -----
  Total minimum lease payments                     36         9,117
  Less sublease rental receipts                     -           (62)
                                                              -----
  Total minimum operating lease payments                     $9,055
                                                              =====
  Less amount representing interest                (9)
                                                   --
  Present value of future minimum capital
    lease payments                                 27
  Less current obligations under capital leases    (7)
                                                   --
  Long-term obligations under  capital leases     $20
                                                   ==

     For 1998, 1997 and 1996, rental expense under operating leases was 
$755 million, $804 million and $787 million, respectively. Rental expense 
for 1998, 1997 and 1996 excludes credits of $3 million, $1 million and $23 
million, respectively, related to US Airways' subleasing of British

                                      61

Aerospace Bae-146-200 (Bae-146) aircraft (see Note 14). Rental expense for 
1997 also excludes $5 million related to expenses recognized by US Airways 
in conjunction with certain efficiency measures (see Note 14(b)).

     The Company's airline subsidiaries also lease certain owned flight 
equipment under noncancelable operating leases that expire in the years 
1999 and 2000. The future minimum rental receipts associated with these 
leases are $7 million in 1999 and $1 million in 2000. 

     The following amounts relate to aircraft leased under such agreements 
as reflected in flight equipment (in millions):

                                       December 31,
                                     --------------
                                     1998      1997
                                     ----      ----
    Flight equipment                 $ 52      $ 53
    Less accumulated amortization     (37)      (32)
                                      ---       ---
                                     $ 15      $ 21
                                      ===       ===

     (c)  LEGAL PROCEEDINGS

     US Airways is involved in legal proceedings arising out of an aircraft 
accident in September of 1994 near Pittsburgh in which 127 passengers and 
five crew members lost their lives. With respect to this accident, the 
National Transportation Safety Board (NTSB) held hearings in January and 
November of 1995, and is scheduled to hold a final hearing on March 23, 
1999 before issuing its final accident investigation report. Wrongful death 
cases are pending in a consolidated multi-district litigation in U.S. 
District Court for the Western District of Pennsylvania and in state court 
in Cook County, Illinois. Although US Airways has settled over 80% of the 
cases and claims arising from the Pittsburgh accident, it expects that it 
will be at least a year before all of the settlements and/or related 
litigation are concluded. A trial has been set for November 1999 in the 
Illinois litigation. US Airways is fully insured with respect to this 
litigation and, therefore, believes that the litigation will not have a 
material adverse effect on the Company's financial condition or results of 
operations.

     In September 1997, Boeing filed suit against US Airways in state court 
in King County, Washington seeking unspecified damages, estimated at 
approximately $220 million, for alleged breach of two aircraft purchase 
agreements concerning, respectively, eight B757-200 aircraft and 40 B737-
Series aircraft. On October 31, 1997, US Airways filed an answer and 
counterclaims to Boeing's complaint denying liability and seeking recovery 
from Boeing of approximately $35 million in equipment purchase deposits. On 
April 23, 1998 the parties reached a settlement terminating all obligations 
with respect to both purchase agreements. Pursuant to the settlement, the 
litigation has been dismissed with prejudice as to both Boeing's claims and 
US Airways' counterclaims.

     In October 1995, US Airways terminated for cause an agreement with In-
Flight Phone Corporation (IFPC). IFPC was US Airways' provider of on-board 
telephone and interactive data systems. The IFPC system had been installed 
in approximately 80 aircraft prior to the date of termination of the 
agreement. On December 6, 1995, IFPC filed suit against US Airways in 
Illinois state court seeking equitable relief and damages in excess of $186 
million. US Airways believes that its termination of its agreement with 
IFPC was appropriate and that it is owed significant damages from IFPC. US 
Airways has filed a counterclaim against IFPC seeking compensatory damages 
in excess of $25 million and punitive damages in excess of $25 million. In 
January 1997, IFPC filed for protection from its creditors under Chapter 11 
of the Bankruptcy Code. The parties stipulated to lift the automatic stay 
provided for in the Bankruptcy Code which could allow IFPC's and US 
Airways' claims to be fully litigated. The Company is unable to predict at 
this time the ultimate resolution or potential financial impact of these 
proceedings on the Company's financial condition or results of operations.

                                      62

     On July 30, 1996, the Company and US Airways initiated a lawsuit in 
U.S. District Court for the Southern District of New York against British 
Airways, BritAir Acquisition Corp., Inc., American and American's parent 
company, AMR Corp. The Company and US Airways claimed that British Airways, 
in pursuit of an alliance with American, is responsible for breaches of 
fiduciary duty to the Company and US Airways and violated certain 
provisions of the January 21, 1993 Investment Agreement between the Company 
and British Airways (the Investment Agreement). The lawsuit also claims 
that the defendants have committed violations of U.S. antitrust laws. In 
response to the defendants' Motion to Dismiss, the Court sustained 
US Airways' claims for breach of contract against British Airways. The 
Court dismissed the remaining claims against British Airways and all claims 
against American. On February 6, 1998, British Airways filed its answer to 
the complaint along with counterclaims against the Company and US Airways. 
British Airways' counterclaims alleged that US Airways breached various 
provisions of the Investment Agreement and that US Airways breached the 
Code Share Agreement between British Airways and US Airways by providing 
certain allegedly confidential information to specific third parties. In 
addition, British Airways seeks a declaratory judgment regarding certain 
payment obligations under its wet lease arrangement with US Airways. 
British Airways claimed damages of $16.7 million for the termination of the 
code share relationship and an unspecified amount of damages for its 
remaining claims. On January 29, 1999, the Company, US Airways and British 
Airways jointly filed a pretrial order with the Court, and on February 5, 
1999, the Court placed the lawsuit on its trial-ready calendar. On February 
5, 1999, British Airways filed a motion for summary judgment seeking 
dismissal of the Company's and US Airways' claims and a finding that the 
Company and US Airways are liable for breach of the Code Share Agreement. 
Subsequently, the Company and US Airways filed a memorandum of law opposing 
British Airways' motion. The Company is unable to predict at this time the 
ultimate resolution or potential financial impact of these proceedings on 
the Company's financial condition or results of operations.

     In May 1995, the Company, US Airways and the Retirement Income Plan 
for US Airways, Inc. (the Pilots Pension Plan) were sued in federal 
district court for the District of Columbia by 481 active and retired 
pilots alleging that defendants had incorrectly interpreted the Pilots 
Pension Plan provisions and erroneously calculated benefits under the 
Pilots Pension Plan. The plaintiffs sought damages in excess of  $70 
million. In May 1996, the court issued a decision granting US Airways' 
Motion to Dismiss the majority of the complaint for lack of jurisdiction, 
deciding that the dispute must be resolved through the arbitration process 
under the Railway Labor Act because the Pilots Pension Plan was 
collectively bargained. The court retained jurisdiction over one count of 
the complaint alleging a violation of a disclosure requirement under the 
Employee Retirement Income Security Act. The plaintiffs have attempted to 
appeal the district court's dismissal before the U.S. Court of Appeals for 
the District of Columbia. In January of 1998, the Court of Appeals 
dismissed plaintiff's appeal for lack of jurisdiction because the lower 
court order was not final. The plaintiffs moved for an order certifying the 
lower court order as final. The district court granted the motion to 
certify and the plaintiffs appealed to the United States Court of Appeals 
for the District of Columbia. In February 1999, the United States Court of 
Appeals upheld the District Court's decision originally granted in May 1996 
in US Airways' favor.

     In February of 1998 a purported class action complaint was filed by a 
travel agency in Puerto Rico against seven major U.S. airlines, including 
US Airways. The complaint alleges that the defendant airlines are 
undercompensating Puerto Rican travel agents in connection with the agents' 
sale of travel. The plaintiffs allege that the airlines are contractually 
obligated to pay a 10% commission and that the defendant airlines breached 
that contract as a result of the introduction of commission caps limiting 
commission payable with respect to a single trip to a stated dollar amount 
and reducing certain commissions to 8%. The plaintiffs have stated their 
damages for the class in the amount of $150 million. On December 22, 1998, 
after the filing of various motions by the defendants and some preliminary 
discussions, the plaintiffs dismissed this action without the payment of 
any amount by US Airways.

                                      63

     The City and County of San Francisco have sued a number of San 
Francisco International Airport tenants for the recovery of approximately 
$18 million of costs incurred with respect to the characterization and 
cleanup of soil and groundwater contamination at the airport. The City and 
County of San Francisco has identified US Airways as a potentially 
responsible party. The City and County of San Francisco and US Airways 
recently entered into an agreement in principle to resolve this matter and 
expect to finalize the agreement by April 1, 1999.

     (d)  GUARANTEES

     US Airways guarantees the payment of principal and interest on special 
facility revenue bonds issued by certain municipalities to build or improve 
airport and maintenance facilities. Under related lease arrangements, US 
Airways is required to make rental payments sufficient to pay maturing 
principal and interest payments on the bonds. As of December 31, 1998 the 
principal amount of these bonds outstanding was $77 million.  

     (e)  CONCENTRATION OF CREDIT RISK

     The Company invests available cash in money market securities of 
various banks, commercial paper of financial institutions and other 
companies with high credit ratings and securities backed by the United 
States government.

     As of December 31, 1998, most of the Company's receivables related to 
tickets sold to individual passengers through the use of major credit cards 
or to tickets sold by other airlines and used by passengers on the 
Company's airline subsidiaries. These receivables are short-term, generally 
being settled within 17 days after sale. Bad debt losses, which have been 
minimal in the past, have been considered in establishing allowances for 
doubtful accounts. 

     The Company does not believe it is subject to any significant 
concentration of credit risk.

7.  REDEEMABLE PREFERRED STOCK

     As of December 31, 1998, the Company had no outstanding redeemable 
preferred stock. As discussed below, the Company retired two series of 
redeemable preferred stock during May 1997 and a third series during March 
1998.  

     As of December 31, 1997, 358,000 shares of the Company's 9 1/4% Series 
H Senior Cumulative Convertible Preferred Stock, without par value (Series 
H Preferred Stock), were outstanding. The Series H Preferred Stock was 
issued in exchange for the Company's 9 1/4% Series A Cumulative Convertible 
Redeemable Preferred Stock, without par value (Series A Preferred Stock), 
during August 1997. The terms of Series H Preferred Stock were 
substantially similar to the terms of the Series A Preferred Stock. On 
March 12, 1998, the holders of the Company's Series H Preferred Stock 
exercised their right to convert those shares into shares of the Company's 
Common Stock. As a result of the conversion transactions, the Company 
issued 9.2 million shares of Common Stock and retired its Series H 
Preferred Stock.

     On May 21, 1997, British Airways Plc (British Airways) converted 
28,059.364 shares of Series F Cumulative Convertible Senior Preferred 
Stock, without par value (Series F Preferred Stock) into 14.5 million 
shares of Common Stock, which it then sold to third parties. On May 22, 
1997, US Airways Group repurchased the remaining outstanding shares of 
Series F Preferred Stock (1,940.636 shares) and all of the Series T-1 
Cumulative Convertible Exchangeable Senior Preferred Stock, without par 
value (Series T-1 Preferred Stock), and the Series T-2 Cumulative 
Convertible Exchangeable Senior Preferred Stock, without par value (Series 
T-2 Preferred Stock) (the Series T-1 Preferred Stock and the Series T-2 
Preferred Stock are collectively referred to herein as the Series T 
Preferred Stock) for $126 million (which included a premium of $5 million 
for the shares 

                                      64

of Series F Preferred Stock repurchased and $1 million for the Series T 
Preferred Stock). British Airways' holdings stemmed from a 1993 investment 
agreement between the two companies which was terminated in March 1997. The 
Company believes that British Airways held no ownership interest in the 
Company after May 22, 1997.

     The Company paid dividends totaling $6 million, $81 million and $48 
million to the holders of the Series H Preferred Stock (including amounts 
related to the former Series A Preferred Stock) during 1998, 1997 and 1996, 
respectively. In addition, the Company paid dividends totaling $44 million 
and $35 million on its Series F and Series T Preferred Stock during 1997 
and 1996, respectively. Dividend payments during 1997 and 1996 for all 
three series included dividends deferred from prior periods and accrued 
dividends (interest) on deferred dividends. The Company deferred dividend 
payments on all its outstanding preferred stock issuances beginning with 
dividends payable on September 30, 1994. After a March 1997 dividend 
payment, the Company had paid all dividends in arrears and had resumed 
regular quarterly dividend payments on its outstanding redeemable preferred 
stock issuances. As mentioned above, the Series H Preferred Stock was 
converted into shares of Common Stock during March 1998 and the Series F 
and Series T Preferred Stock were converted into shares of Common 
Stock/repurchased during May 1997.

8.  STOCKHOLDERS' EQUITY

     (a)  PREFERRED STOCK AND SENIOR PREFERRED STOCK

     As of December 31, 1998, the Company had 5.0 million authorized shares 
of  Preferred Stock, without nominal or par value, and 3.0 million 
authorized shares of Senior Preferred Stock, without nominal or par value, 
none of which were issued and outstanding.  See also Note 7. 

     (b)  SERIES B PREFERRED STOCK

     During August 1997, the Company notified the holders of its publicly-
held Series B Cumulative Convertible Preferred Stock (Series B Preferred 
Stock) that it would redeem all 4,263,000 outstanding depositary shares 
representing shares of Series B Preferred Stock on September 15, 1997 at 
$51.75 per depositary share plus accrued dividends of $0.3646 per 
depositary share. Because conversion into Common Stock was financially 
advantageous to the holders, all but approximately 6,000 depositary shares 
were converted prior to the redemption date resulting in the issuance of 
10.6 million shares of Common Stock.

     The Company paid dividends totaling $56 million to the holders of the 
Series B Preferred Stock during 1997 prior to its conversion/redemption. 
The Company did not make any dividend payments on the Series B Preferred 
Stock during 1996. Dividend payments during 1997 included dividends 
deferred from prior periods. The Company deferred dividend payments on all 
its outstanding preferred stock issuances beginning with dividends payable 
on September 30, 1994. After an April 1997 dividend payment, the Company 
had paid all dividends in arrears and had resumed regular quarterly 
dividend payments on this preferred stock issuance.

     (c)  COMMON STOCK

     As of December 31, 1998, the Company had 150.0 million authorized 
shares of common stock, par value $1.00 per share (Common Stock), of which 
101.2 million shares were issued (including shares of Common Stock held in 
treasury as discussed in Note 8(d)) and 19.1 million shares were reserved 
for offerings under employee stock purchase, stock option, stock incentive 
and employee retirement plans.

                                      65

     The Company has not paid dividends on its Common Stock since the 
second quarter of 1990. There can be no assurance when or if the Company 
will resume dividend payments on its Common Stock.

     The Company, organized under the laws of the State of Delaware, is 
subject to Sections 160 and 170 of the Delaware General Corporation Law 
(Delaware Law) with respect to the payment of dividends on or the 
repurchase or redemption of its capital stock. As of December 31, 1998, the 
Company does not believe that Delaware Law placed any material restrictions 
on the Company's ability to pay dividends or its ability to repurchase or 
redeem its capital stock.

     See Notes 7 and 8(b) for information related to preferred stock 
converted into Common Stock during 1998 and 1997.

      (d)  TREASURY STOCK

     The Company held 17.4 million shares and 40,000 shares of Common Stock 
in treasury as of December 31, 1998 and 1997, respectively. 

     The Company announced and completed three common stock purchase plans 
during 1998, one authorized for 2.3 million shares to offset stock options 
granted to US Airways' pilots in January 1998, one authorized for $500 
million of Common Stock and one authorized for 5.0 million shares. The 
Company purchased 14.5 million shares of stock under these three plans. In 
November 1998, the Company announced a fourth common stock purchase plan 
that authorized the purchase of up to $500 million of Common Stock. As of 
December 31, 1998, the Company had purchased 3.5 million shares for $178.4 
million under the fourth plan.

     During 1998 and 1997, employees surrendered 91,000 shares and 125,000 
shares of Common Stock, respectively, to the Company in lieu of cash 
payments to satisfy tax withholding requirements related to the vesting of 
certain Common Stock grants. The Company has typically reissued such shares 
upon the exercise of stock options held by employees.

     (e)  STOCK-BASED COMPENSATION

     As of December 31, 1998, approximately 18.2 million shares of Common 
Stock were reserved for future grants of Common Stock or the possible 
exercise of stock options issued under the Company's five stock option and 
incentive plans. The Company accounts for stock-based compensation using 
the intrinsic value method as prescribed under APB 25. In accordance with 
APB 25, the Company recognized compensation expense (an element of 
Personnel costs) related to Common Stock grants of $7 million, $6 million 
and $12 million in 1998, 1997 and 1996, respectively, and compensation 
expense related to stock option grants of $12 million, $1 million and $8 
million in 1998, 1997 and 1996, respectively. In addition, the Company 
recognized compensation expense related to stock appreciation rights 
(SARs), the Company's only variable stock-based compensation instrument, of 
$1 million, $33 million and $42 million in 1998, 1997 and 1996, 
respectively. Deferred compensation related to Common Stock grants was $22 
million and $7 million as of December 31, 1998 and 1997, respectively, and 
deferred compensation related to stock option grants was $13 million and $1 
million as of December 31, 1998 and 1997. Deferred compensation is 
amortized as Personnel costs over the applicable vesting period. The 
Company granted 0.5 million, 0.2 million and 0.6 million shares of Common 
Stock during 1998, 1997 and 1996, respectively. The weighted average fair 
value per share of Common Stock granted in 1998, 1997 and 1996 was $52, $25 
and $17, respectively.

     A new five-year labor contract between US Airways and its pilots 
became effective January 1, 1998. A provision of the labor contract 
established the 1998 Pilot Stock Option Plan of US Airways Group, Inc. 
(1998 Plan). The 1998 Plan authorizes the Company to grant in six

                                      66

separate series 11.5 million stock option awards to its pilots over the 
five-year life of the labor contract (with exercise prices established 
based on the fair market value of the Company's common stock over a time 
period preceding each grant). Options granted under the first series and 
second through fifth series are subject to a two-year and one-year vesting 
period, respectively. Options granted under the last series are not subject 
to any vesting period. All awards under the 1998 Plan expire ten years 
after grant.

      The 1997 Stock Incentive Plan of US Airways Group, Inc. (1997 Plan), 
which became effective during March 1997, authorizes the Company to grant 
Common Stock and stock option awards to non-officer key employees provided 
that no more than 750,000 shares of Common Stock are issued as a result of 
the awards. The 1996 Stock Incentive Plan of US Airways Group, Inc. (1996 
Plan), which became effective during May 1996 and encompasses the Company's 
former 1988 Stock Incentive Plan of USAir Group, Inc., authorizes the 
Company to grant Common Stock and stock option awards to key employees 
provided that no more than 8.4 million shares of Common Stock are issued as 
a result of the awards. All stock option awards under the 1997 Plan and 
1996 Plan expire after a period of ten years and one month from date of 
grant. Under both plans, the Company uses its discretion in setting the 
vesting rate of each award. All awards granted prior to December 31, 1998 
have a vesting period of five years or less.

      Under the 1992 Stock Option Plan of US Airways Group, Inc. (1992 
Plan), certain employees whose pay was reduced, generally during a 12 month 
period in 1992 and 1993, received stock options to purchase 50 shares of 
Common Stock at a price of $15 per share for each $1,000 of salary 
reduction. Participating employees had five years from the grant date to 
exercise such stock options (see Note 5(e) for related information). 
Effective November 1, 1996, the Company added a SAR feature to the 1992 
Plan and granted SARs to stock option holders on a one-for-one basis. For 
each SAR, the holder was entitled to receive a cash distribution equal to 
the excess of the fair market value of a share of Common Stock above $15. 
The exercise of any SAR canceled its tandem stock option and, conversely, 
the exercise of any stock option canceled its tandem SAR. The SARs had the 
same expiration date as the tandem stock options. In August 1998, the 
remaining awards under the 1992 Plan expired and the plan ceased. The 1984 
Stock Option and Stock Appreciation Rights Plan of US Airways Group, Inc. 
(1984 Plan) authorized the Company to grant stock option and SAR awards to 
key employees provided that no more than 600,000 shares of Common Stock 
were issued as a result of the awards. All awards under the 1984 Plan 
expire after a period of ten years and one month from date of grant. No 
SARs awarded under the 1984 Plan were outstanding as of December 31, 1998. 
The Company may no longer grant awards under the 1992 and 1984 Plans. All 
awards previously granted under both of these plans have vested.

      The US Airways Group, Inc. Nonemployee Director Stock Incentive Plan 
(Director Plan), which became effective during May 1996, authorizes the 
Company to grant stock option awards to each nonemployee director provided 
that no more than 70,000 shares of Common Stock are issued as a result of 
the awards. All stock option awards under the Director Plan expire after 
ten years from date of grant and are subject to a one-year vesting period.







                 (this space intentionally left blank)

                                      67

     The following table summarizes stock option transactions pursuant to 
the Company's various stock option and incentive plans for the years ended 
December 31, 1998, 1997 and 1996:

                           1998             1997             1996
                      ---------------- ---------------- ----------------
                              Weighted         Weighted         Weighted
                              Average          Average          Average
                              Exercise         Exercise         Exercise
                      Options  Price   Options  Price   Options  Price
                      ------- -------- ------- -------- ------- --------
                       (000)            (000)            (000)
Stock Options
-------------
Outstanding at
beginning of year      4,633    $18     9,782    $17     8,426    $17
  Granted (1)          2,598    $61       951    $27        97    $17
  Granted (2)          2,300    $51         -      -     2,415    $13
  Exercised             (704)   $20    (2,119)   $19      (435)   $15
  Forfeited (3)(4)      (945)   $53    (3,795)   $16      (673)   $16
  Expired                (14)   $15      (186)   $24       (48)   $32
                       -----           ------            -----
Outstanding at
end of year            7,868    $37     4,633    $18     9,782    $17

Exercisable at
end of year            2,558            2,792            7,802

(1) Exercise price equal to the fair market value of a share of Common 
Stock
    at date of grant; includes 466,250, 50,000 and 20,000 stock options 
that
    were repriced during 1998, 1997 and 1996, respectively.
(2) Exercise price was lower than the fair market value of a share of 
Common
    Stock at measurement date for grant.
(3) Activity during 1998, 1997 and 1996 includes cancellation of repriced
    stock options. See (1) above.
(4) Activity during 1998, 1997 and 1996 includes 0.1 million, 3.5 million 
and
    0.6 million stock options, respectively, that were forfeited as a 
result
    of their tandem SAR being exercised.

     The weighted average fair value per stock option for stock options 
which have an exercise price equal to the fair market value of a share of 
Common Stock at date of grant was $34, $18 and $12 for 1998, 1997 and 1996, 
respectively. The weighted average fair value per stock option for stock 
options which have an exercise price lower than the fair market value of a 
share of Common Stock at date of grant was $41 and $13 for 1998 and 1996, 
respectively (no such grants during 1997).

                             Stock Options              Stock Options
                              Outstanding                Exercisable
                 ----------------------------------  ---------------------
                               Weighted
                   Number       Average    Weighted               Weighted
                 of Options    Remaining   Average                 Average
    Range of     Outstanding  Contractual  Exercise    Number     Exercise
Exercise Prices  at 12/31/98     Life       Price    Exercisable    Price
---------------  -----------  -----------  --------  -----------  --------
                    (000)      (years)                 (000)
$ 4.00 to $12.00       89         5.9         $ 8         89         $ 8
$12.01 to $20.00    2,516         7.1         $14      1,901         $13
$20.01 to $40.00      936         6.4         $25        428         $24
$40.01 to $60.00    3,415         9.3         $50        139         $47
$60.01 to $76.00      912         9.6         $70          -           -

     During 1995, the Financial Accounting Standards Board adopted 
Statement of Financial Accounting Standards No. 123, "Accounting for 
Stock-Based Compensation" (SFAS 123), which requires the use of fair value 
techniques to determine compensation expense associated with stock-based 
compensation. Although the Company has opted to continue to apply the 
provisions of APB 25 to determine compensation expense, as permitted under 
SFAS 123, the Company is obligated to disclose certain information 
including pro forma net income and earnings per share as if SFAS 123 had 
been adopted by the Company to measure compensation expense. Had 
compensation cost been measured in accordance with SFAS 123, the Company's

                                      68

net income and earnings per common share would have been reduced to the pro 
forma numbers indicated in the table below. In order to calculate the pro 
forma net income information presented below, the Company used the Black-
Scholes stock option-pricing model with the following weighted-average 
assumptions for 1998, 1997 and 1996, respectively: stock volatility of 
51.4%, 52.6% and 50.1%; risk-free interest rates of 5.5%, 6.6% and 6.2%; 
expected stock option life of eight years, eight years and nine years; and 
no dividend yield.

                                          1998     1997      1996
                                          ----     ----      ----
                                    (in millions, except per share data)

Net Income               As reported      $538    $1,025     $263
                         Pro forma        $507    $1,018     $248

Earnings Applicable to   As reported      $532      $961     $175
  Common Stockholders    Pro forma        $500      $954     $159

EPS-Basic (1)            As reported     $5.75    $12.32    $2.73
                         Pro forma       $5.41    $12.23    $2.49

EPS-Diluted (1)          As reported     $5.60     $9.87    $2.35
                         Pro forma       $5.33     $9.83    $2.21

(1) The Company's EPS figures (as reported and pro forma) for 1996 have 
been
    restated to conform with SFAS 128 (see Note 1(n)).

     The pro forma net income and EPS information presented above reflects 
stock options granted during 1995 and in later years. Therefore, the full 
impact of calculating compensation expense for stock options under SFAS 123 
is not reflected in the pro forma net income and earnings per common share 
amounts above because compensation expense is recognized over the stock 
option's vesting period and compensation expense for stock options granted 
prior to January 1, 1995 is not considered.

     (f)  ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX EFFECT

     The Company adopted Statement of Financial Accounting Standards No. 
130, "Reporting Comprehensive Income"(SFAS 130), effective January 1, 
1998. SFAS 130 establishes standards for the reporting and presentation of 
comprehensive income and its components in financial statements. 
Comprehensive income encompasses net income and "other comprehensive 
income," which includes all other non-owner transactions and events that 
change stockholders' equity. The Company's other comprehensive income 
includes unrealized gains on available-for-sale securities and an 
adjustment for minimum pension liability, both shown net of income tax 
effects.

     Unrealized gains on available-for-sale securities are accounted for in 
accordance with SFAS 115. The Company records an adjustment to 
Stockholders' Equity (Deficit) to reflect differences between the fair 
value of investments in marketable equity securities and short-term 
investments (both types of investments are considered "available-for-
sale" under SFAS 115) and their respective carrying values at each balance 
sheet date. In accordance with SFAS 87, the Company recorded an Adjustment 
for minimum pension liability as of December 31, 1998, 1997 and 1996. SFAS 
87 requires the recognition of an additional minimum pension liability for 
each defined benefit plan for which the accumulated benefit obligation 
exceeds the fair value of the plan's assets and accrued pension costs. An 
offsetting intangible asset is recognized for each additional minimum 
pension liability recorded. Because each intangible asset recognized is 
limited to the amount of unrecognized prior service cost, any balance is 
reflected as a reduction of Stockholders' Equity (Deficit).

                                      69



     As presented in the accompanying Consolidated Statements of Changes in 
Stockholders' Equity (Deficit), the Company recognized comprehensive income 
of $572 million for the year ended December 31, 1998, including net income 
of $538 million and other comprehensive income of $34 million. For the year 
ended December 31, 1997, the Company recognized comprehensive income of 
$1,151 million, including net income of $1,025 million and other 
comprehensive income of $126 million. For the year ended December 31, 1996, 
the Company recognized comprehensive income of $306 million, including net 
income of $263 million and other comprehensive income of $43 million.

     The components of other comprehensive income and the related income 
tax effects are as follows (in millions):


<TABLE>
<CAPTION>
                                   1998                       1997                       1996
                         -------------------------  -------------------------  ------------------------
                         Before    Tax       Net    Before    Tax       Net    Before    Tax       Net
                          tax     effect    of tax   tax     effect    of tax   tax     effect    of tax
                         effect  (expense)  effect  effect  (expense)  effect  effect  (expense)  effect
                         ------  ---------  ------  ------  ---------  ------  ------  ---------  ------
<S>                       <C>      <C>       <C>     <C>      <C>       <C>     <C>      <C>       <C> 
Unrealized gain on
    available-for-sale
    securities:
  Unrealized gains during
    the period            $112     $(39)     $ 73    $160     $(56)     $104    $  -     $  -      $  -
  Reclassification 
    adjustment for gains
    included in net income
    during the period        -        -         -       -        -         -       -        -         -
                           ---      ---       ---     ---      ---       ---     ---      ---       ---
  Net unrealized gains     112      (39)       73     160      (56)      104       -        -         -
Change in adjustment for 
  minimum pension 
  liability                (69)      30       (39)     19        3        22      43        -        43
                           ---      ---       ---     ---      ---       ---     ---      ---       ---
Other comprehensive 
  income                  $ 43	    $ (9)     $ 34    $179     $(53)     $126    $ 43     $  -      $ 43
                           ===      ===       ===     ===      ===       ===     ===      ===       ===

</TABLE>



9.  OPERATING SEGMENTS AND RELATED DISCLOSURES

     In 1998, the Company adopted Statement of Financial Accounting 
Standards No. 131 "Disclosure about Segments of an Enterprise and Related 
Information" (SFAS 131). SFAS 131 establishes standards for reporting 
information about operating segments in annual financial statements and 
requires selected information about operating segments in interim financial 
statements. SFAS 131 also establishes standards for related disclosures 
about products and services, and geographic areas. Operating segments are 
defined as components of an enterprise about which separate financial 
information is available that is evaluated regularly by the chief operating 
decision maker in deciding how to allocate resources and in assessing 
performance.

     The Company has two reportable operating segments: US Airways and US 
Airways Express. The US Airways segment includes the operations of US 
Airways (excluding USAM) and Shuttle. The US Airways Express segment 
includes the operations of the Company's three wholly-owned regional 
airlines and activity resulting from a marketing agreement with a non-owned 
US Airways Express air carrier. Both reportable operating segments are 
engaged in the business of transporting passengers, property and mail, but 
have different operating and economic characteristics. US Airways offers 
air transportation using exclusively jets. Its cost structure is higher 
than US Airways Express due to, among other things, higher labor and 
operating equipment costs. US Airways Express provides air transportation 
using primarily turboprop aircraft. Its route network is designed to feed 
traffic into US Airways' route system at several points, primarily at US 
Airways' hubs. All Other (as presented in the table on the following page) 
reflects the activity of subsidiaries other than those included in the 
Company's two reportable operating segments. See also Notes 1 (a) and 1 
(b).

     The accounting policies of the segments are the same as those 
described in the summary of significant accounting policies (see Note 1). 
Intersegment sales are accounted for at fair value as if the sales were to 
third parties. The Company evaluates segment performance based on several 
factors, of which the primary financial measure is income before taxes.

                                       70

<TABLE>
     Financial information for each reportable operating segment is set forth
below (millions):
<CAPTION>
                                                Year ended December 31,
                                                -----------------------
                                            1998          1997          1996
                                            ----          ----          ----
<S>                                       <C>           <C>           <C>
Operating Revenues:
     US Airways external                  $7,956        $7,842        $7,485
     US Airways intersegment                  62            55            74
     US Airways Express external             727           616           584
     US Airways Express intersegment          26            26            35
     All Other                                 5            56            73
     Intersegment elimination                (88)          (81)         (109)
                                           -----         -----         -----
                                          $8,688        $8,514        $8,142
                                           =====         =====         =====

Depreciation and amortization:
     US Airways                           $  304        $  387        $  303
     US Airways Express                       14            14            13
     All Other                                 -             -             -
                                           -----         -----         -----
                                          $  318        $  401        $  316
                                           =====         =====         =====

Interest income:
     US Airways                           $  182        $  114        $   80
     US Airways Express                        2             2             3
     All Other                                22            25            29
     Intercompany elimination                (95)          (33)          (37)
                                           -----         -----         -----
                                          $  111        $  108        $   75
                                           =====         =====         =====

Interest expense:
     US Airways	                           $  235        $  267        $  284
     US Airways Express                        4             5             5
     All Other                                79            17            15
     Intercompany elimination                (95)          (33)          (37)
                                           -----         -----         -----
                                          $  223        $  256        $  267
                                           =====         =====         =====

Equity in earnings of affiliates:
     US Airways                           $    -        $    -        $    -
     US Airways Express                        -             -             -
     All Other (1)                             1            30            37
                                           -----         -----         -----
                                          $    1        $   30        $   37
                                           =====         =====         =====

Income (Loss) Before Taxes:
     US Airways                           $  775        $  338        $  107
     US Airways Express                      155           118            54
     All Other (1)                           (28)          216           114
                                           -----         -----         -----
                                          $  902        $  672        $  275
                                           =====         =====         =====
Assets (2):
     US Airways                           $7,164        $7,893        $7,234
     US Airways Express                      167           177           193
     All Other                               539           302           104
                                           -----         -----         -----
                                          $7,870        $8,372        $7,531
                                           =====         =====         =====

Capital Expenditures:
     US Airways                           $  624        $  271        $  176
     US Airways Express                        5             8             4
     All Other                                13             1             1
                                           -----         -----         -----
                                          $  642        $  280        $  181
                                           =====         =====         =====

(1)  See related information in Note 10.
(2)  Substantially all located in the United States.

     Information concerning operating revenues (based on RPMs and yield) in
principal geographic areas is as follows (millions):

                                            1998          1997          1996
                                            ----          ----          ----

United States                             $8,143        $7,977        $7,818
Foreign                                      545           537           324
                                           -----         -----         -----
                                          $8,688        $8,514        $8,142
                                           =====         =====         =====
</TABLE>
                                     71


10.  USAM'S SALE OF CERTAIN INVESTMENTS

      As of December 31, 1996 and prior to the events described below, USAM 
owned 11% of the Galileo International Partnership (GIP) and approximately 
21% of the Apollo Travel Services Partnership (ATS).  GIP owned and 
operated the Galileo CRS and ATS marketed the Galileo CRS in the U.S. and 
Mexico.

     On July 30, 1997, Galileo completed an initial public offering (IPO) 
and used the proceeds, together with the proceeds of bank financing, to 
purchase ATS. Immediately preceding the IPO, GIP was merged with and into a 
wholly-owned limited liability company subsidiary of Galileo and USAM 
received common stock shares in Galileo in the same proportion as its 
partnership interest in GIP. As part of the IPO, USAM sold some of its 
Galileo shares and its interest in Galileo was reduced from 11% to 
approximately 6.7%. USAM received proceeds of $62 million and recognized a 
pre-tax gain of $50 million from the sell-down of its interest in Galileo 
and received proceeds of $162 million and recognized a pre-tax gain of $130 
million in connection with the ATS sale.

     As of December 31, 1998, USAM owned approximately 6.7% of Galileo and 
11% of GJP.  USAM applies the provisions of SFAS 115 to account for its 
remaining investment in Galileo, which is classified as "available-for-
sale."

     USAM received distributions from GIP and GJP of $2 million and $1 
million, respectively, during 1998, and $13 million and $1 million, 
respectively, during 1997. USAM also received a distribution from ATS of $5 
million in 1997. 

11.  RELATED PARTY TRANSACTIONS

     US Airways wet leased B767-200ER aircraft, including cockpit and cabin 
crews, to British Airways in order to serve three routes between the U.S. 
and London beginning in June 1993 and ending in May 1996. During 1996, US 
Airways recognized other operating revenues of $13 million related to these 
arrangements which were offset by an equal amount of other operating 
expenses. US Airways also had various agreements with British Airways for 
ground handling at certain airports, contract training and other services. 
US Airways recognized other operating revenues of $2 million for the first 
five months of 1997 and $6 million for the year 1996 related to services US 
Airways performed for British Airways. 

     US Airways terminated the code share and other business arrangements 
between the two companies effective March 29, 1997. See Note 7 for 
additional information related to the Company's relationship with British 
Airways.

     During 1998 and 1997, employees surrendered 91,000 shares and 125,000 
shares of Common Stock, respectively, to the Company in lieu of cash 
payments to satisfy tax withholding requirements related to the vesting of 
certain Common Stock grants (see also Note 8(d)).







                    (this space intentionally left blank)



                                     72

12.  VALUATION AND QUALIFYING ACCOUNTS
                                                  Allowance For
                                       ----------------------------------
                                       Uncollectible          Inventory
                                         Accounts            Obsolescence
                                       -------------         ------------
                                                  (in millions)

Balance as of December 31, 1995            $ 12                  $164
     Additions charged to expense            11                    11
     Amounts charged to allowance           (11)                  (29)
                                            ---                   ---
Balance as of December 31, 1996              12                   146
     Additions charged to expense            14                    10
     Amounts charged to allowance            (9)                   (9)
     Other (1)                                1                     1
                                            ---                   ---
Balance as of December 31, 1997              18                   148
     Additions charged to expense             9                    12
     Amounts charged to allowance            (5)                  (45)
                                            ---                   ---
Balance as of December 31, 1998            $ 22                  $115
                                            ===                   ===

(1)  Reserves of Shuttle, which was acquired by US Airways Group in 1997 
(see Note 1(a)).

<TABLE>
13.  SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<CAPTION>
                                    First      Second      Third      Fourth
                                   Quarter     Quarter     Quarter    Quarter
                                   -------     -------     -------    -------

                                    (in millions, except per share amounts)
<S>                                 <C>         <C>         <C>        <C>
1998
Operating Revenues                  $2,063      $2,297      $2,208     $2,121
Operating Income                    $  192      $  374      $  270     $  178
Net Income	                         $   98      $  194      $  142     $  104
Earnings Applicable to 
  Common Stockholders               $   92      $  194      $  142     $  104
Earnings per Common Share
     Basic                          $ 0.98      $ 1.99      $ 1.54     $ 1.20
     Diluted                        $ 0.96      $ 1.95      $ 1.51     $ 1.18

1997
Operating Revenues                  $2,101      $2,213      $2,115     $2,085
Operating Income                    $  176      $  256      $   83     $   70
Net Income                          $  153      $  206      $  187     $  479
Earnings Applicable to
  Common Stockholders               $  132      $  182      $  176     $  471
Earnings per Common Share
     Basic                          $ 2.05      $ 2.53      $ 2.10     $ 5.16
     Diluted                        $ 1.45      $ 1.92      $ 1.82     $ 4.66

See also Note 14.

Note:	 The sum of the four quarters may not equal the totals for the year due
to rounding.
</TABLE>



14.  NONRECURRING ITEMS AND SIGNIFICANT QUARTERLY ADJUSTMENTS

     (a)  1998     

     The Company's results for 1998 include one nonrecurring item recorded 
by US Airways during the third quarter related to the early termination of 
leases for two BAe-146 aircraft. US Airways reversed $3 million of 
previously accrued rent obligations related to these aircraft (recorded as 
a credit to Aircraft rent expense).

                                     73

     (b)  1997

     The Company's results for 1997 include certain nonrecurring items 
recorded by US Airways: (i) $122 million in Personnel costs (including a 
fourth quarter charge of $115 million related to an early retirement 
program for pilots (see also Note 5(a)) and a second quarter charge of $7 
million related to estimated employee severance payments due to efficiency 
measures US Airways announced during May 1997); (ii) a $1 million credit to 
Aircraft rent due to the reversal of previously accrued lease obligations 
upon the subleasing of an additional BAe-146 aircraft, recognized in the 
second quarter (see also Note 14(c) below); (iii) $5 million in Other rent 
and landing fees (including a third quarter charge of $2 million to write-
down certain equipment to be disposed of and a second quarter charge of $3 
million to write-off lease obligations at certain facilities to be 
abandoned (net of any anticipated sublease revenues), both related to the 
May 1997 efficiency measures); (iv) $89 million in Depreciation and 
amortization (including third quarter charges of $11 million related to the 
May 1997 efficiency measures to write-down certain equipment to be disposed 
of and a $59 million SFAS 121 impairment charge resulting from US Airways' 
September 1997 decision to retire its remaining DC-9-30 aircraft over the 
next several years, and second quarter charges of $1 million to write-off 
certain leasehold improvements and an $18 million SFAS 121 impairment 
charge to write-down certain DC-9-30 aircraft, both related to the May 1997 
efficiency measures); and (v) $180 million in Gains on sales of interests 
in affiliates which resulted from USAM's sale of certain investments as 
discussed in Note 10. The Company also recognized certain tax benefits in 
1997, as discussed in Note 3.

     (c)  1996

     The Company's results for 1996 include two nonrecurring items recorded 
by US Airways during the second quarter of 1996 related to US Airways' 
subleasing of eleven non-operating BAe-146 aircraft. US Airways reversed $23 
million of previously accrued rent obligations related to these aircraft 
against Aircraft rent expense and reversed $7 million against Aircraft 
maintenance expense related to previously accrued lease return provisions. 









                   (this space intentionally left blank)



                                     74

ITEM 8B.  CONSOLIDATED FINANCIAL STATEMENTS FOR US AIRWAYS, INC.

                         INDEPENDENT AUDITORS' REPORT

The Stockholder and Board of Directors
US Airways, Inc.:

We have audited the accompanying consolidated balance sheets of US Airways, 
Inc. and subsidiary as of December 31, 1998 and 1997, and the related 
consolidated statements of operations, cash flows, and changes in 
stockholder's equity (deficit) for each of the years in the three year 
period ended December 31, 1998. These consolidated financial statements are 
the responsibility of the Company's management. Our responsibility is to 
express an opinion on these consolidated financial statements based on our 
audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of US 
Airways, Inc. and subsidiary as of December 31, 1998 and 1997, and the 
results of their operations and their cash flows for each of the years in 
the three year period ended December 31, 1998, in conformity with generally 
accepted accounting principles.



                                                       KPMG LLP

Washington, D. C.
February 24, 1998








                    (this space intentionally left blank)



                                     75

<TABLE>
US Airways, Inc.
Consolidated Statements of Operations
Year Ended December 31,
-----------------------------------------------------------------------------
(in millions)
<CAPTION>
                                                 1998        1997        1996
                                                 ----        ----        ----
<S>                                            <C>         <C>         <C>
Operating Revenues
  Passenger transportation                     $7,021      $7,112      $6,799
  US Airways Express transportation revenues      711         605         145
  Cargo and freight                               164         177         159
  Other                                           660         607         601
                                                 ----       -----        ----
    Total Operating Revenues                    8,556       8,501       7,704

Operating Expenses
  Personnel costs                               2,888       3,012       3,041
  Aviation fuel                                   575         761         781
  Commissions                                     474         554         547
  Aircraft rent                                   381         416         387
  Other rent and landing fees                     381         402         394
  Aircraft maintenance                            357         387         312
  Other selling expenses                          336         346         331
  Depreciation and amortization                   290         385         301
  US Airways Express capacity purchases           550         486          93
  Other                                         1,334       1,166       1,148
                                                -----       -----       -----
    Total Operating Expenses                    7,566       7,915       7,335
                                                -----       -----       -----
    Operating Income                              990         586         369

Other Income (Expense)
  Interest income                                 182         112          76
  Interest expense                               (224)       (260)       (284)
  Interest capitalized                            (10)         12           8
  Equity in earnings of affiliates                  1          30          37
  Gains on sales of interests in affiliates         -         180           -
  Other, net                                       (3)         13         (15)
                                                 ----       -----        ----
    Other Income (Expense), Net                   (54)         87        (178)
                                                 ----       -----        ----
Income Before Taxes                               936         673         191
  Provision (Credit) for Income Taxes             377        (379)          8
                                                 ----       -----        ----  
Net Income                                     $  559      $1,052      $  183
                                                 ====       =====        ====




See accompanying Notes to Consolidated Financial Statements.

                                      76
</TABLE>


<TABLE>
US Airways, Inc.
Consolidated Balance Sheets
December 31,
----------------------------------------------------------------------------
(dollars in millions, except per share amount)
<CAPTION>
             ASSETS                                         1998        1997
                                                            ----        ----
<S>                                                     <C>         <C>
Current Assets
  Cash                                                  $     21    $     17
  Cash equivalents                                           583       1,075
  Short-term investments                                     598         870
  Receivables, net                                           351         296
  Receivables from related parties, net                      169         195
  Materials and supplies, net                                202         200
  Deferred income taxes                                      291         150
  Prepaid expenses and other                                 174         132
                                                            ----        ----
    Total Current Assets                                   2,389       2,935
Property and Equipment
  Flight equipment                                         4,924       4,968
  Ground property and equipment                              886         851
  Less accumulated depreciation and amortization          (2,528)     (2,429)
                                                           -----       -----
                                                           3,282       3,390
  Purchase deposits                                            -          70
                                                           -----       -----
    Total Property and Equipment, Net                      3,282       3,460
Other Assets
  Goodwill, net                                              457         473
  Other intangibles, net                                     391         283
  Investment in marketable equity securities                 301         190
  Receivable from parent company                             306         210
  Deferred income taxes                                        -         221
  Other assets, net                                          572         493
                                                           -----        ----
    Total Other Assets                                     2,027       1,870
                                                           -----       -----
                                                          $7,698      $8,265
                                                           =====       =====

    LIABILITIES & STOCKHOLDER'S EQUITY
Current Liabilities
  Current maturities of long-term debt                   $    71     $   186
  Accounts payable                                           379         297
  Traffic balances payable and unused tickets                757         702
  Accrued aircraft rent                                      155         177
  Accrued salaries, wages and vacation                       323         306
  Other accrued expenses                                     470         463
                                                           -----       -----
    Total Current Liabilities                              2,155       2,131
Long-term Debt, Net of Current Maturities                  1,954       2,425
Deferred Credits and Other Liabilities
  Accrued aircraft rent                                      330         319
  Deferred gains, net                                        335         330
  Postretirement benefits other than pensions, noncurrent  1,217       1,152
  Noncurrent employee benefit liabilities and other        1,105         806
                                                           -----       -----
    Total Deferred Credits and Other Liabilities           2,987       2,607

Commitments and Contingencies

Stockholder's Equity
  Common stock, par value $1 per share, authorized
    1,000 shares, issued and outstanding 1,000 shares         -            -
  Paid-in capital                                         2,431        2,425
  Retained earnings (deficit)                              (855)      (1,414)
  Receivable from parent company                         (1,099)           -
  Accumulated other comprehensive income, 
    net of income tax effect                                125           91
                                                          -----        -----
    Total Stockholder's Equity                              602        1,102
                                                          -----        -----
                                                         $7,698       $8,265
                                                          =====        =====

See accompanying Notes to Consolidated Financial Statements.





                                     77
</TABLE>


<TABLE>
US Airways, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31,
------------------------------------------------------------------------------
(in millions)
<CAPTION>
                                                      1998      1997   1996 
                                                      ----      ----   ----
<C>                                                  <S>      <S>     <S>
Cash and Cash equivalents at beginning of year       $1,092   $  950  $ 880
                                                      -----    -----   ----
Cash flows from operating activities
  Net income                                            559    1,052    183
  Adjustments to reconcile net income to net cash
   provided by (used for) operating activities
     Depreciation and amortization                      290      385    301
     Losses (gains) on dispositions of property         (17)     (15)     2
     Gains on sales of interests in affiliates            -     (180)     -
     Amortization of deferred gains and credits         (26)     (26)   (26)
     Other                                               19       26     22
     Changes in certain assets and liabilities
       Decrease (increase) in receivables               (31)     (80)   (13)
       Decrease (increase) in materials 
        and supplies, prepaid expenses
        and pension assets                             (108)      29    (32)
       Decrease (increase) in deferred income taxes     184     (422)     -
       Increase (decrease) in traffic 
        balances payable and unused tickets              55      (14)    78
       Increase (decrease) in accounts payable 
        and accrued expenses                            243     (219)	   319
       Increase (decrease) in postretirement
        benefits other than pensions, noncurrent         66       58     76
                                                      -----    -----   ----
          Net cash provided by (used for)
           operating activities                       1,234      594    910
Cash flows from investing activities
  Capital expenditures                                 (489)    (194)  (176)
  Transfer of aircraft purchase deposits
   to parent company                                      -        7      -
  Proceeds from the sale-leaseback of aircraft          189        -      -
  Proceeds from dispositions of property                112       82     22
  Proceeds from sales of interests in affiliates          -      224      -
  Decrease (increase) in short-term investments         275     (235)  (604)
  Decrease (increase) in restricted cash 
   and investments                                      (41)      18     11
  Funding of parent company's common stock purchases (1,081)       -      -
  Funding of parent company's purchase
   of Shuttle, Inc.                                       -     (210)     -
  Funding of parent company's aircraft
   purchase deposits                                   (135)     (84)     -
  Payment of debt for affiliated company                  -        -    (43)
  Collection on note receivable from
   affiliated company                                     -        -     43
  Other                                                   4       28     (6)
                                                      -----    -----   ----
          Net cash provided by (used for)
           investing activities                      (1,166)    (364)  (753)
Cash flows from financing activities
  Issuances of debt                                       -        -    103
  Principal payments on long-term debt                 (556)     (88)  (190)
                                                      -----    -----   ----
          Net cash provided by (used for)
           financing activities                        (556)     (88)   (87)
                                                      -----    -----   ----
Net increase (decrease) in Cash and Cash equivalents   (488)     142     70
                                                      -----    -----   ----
Cash and Cash equivalents at end of year             $  604   $1,092  $ 950
                                                      =====    =====   ====

Noncash investing and financing activities
  Net unrealized gain on available-for-sale
   securities,  net of income tax effect             $   73   $  104  $   -
  Reduction of aircraft-related purchase deposits    $   61   $    -  $   -
  Reduction of parent company receivable-
   assignment of aircraft purchase
   rights by parent company                          $   22   $    -  $   -
  Issuances of debt - refinancing of debt
   secured by aircraft                               $    -   $    -  $ 160
  Reductions of debt - refinancing of debt
   secured by aircraft                               $    -   $    -  $ 154
  Reduction of parent company debt - 
   aircraft acquisitions                             $    -   $    -  $  69
  Issuances of debt - aircraft acquisitions          $    -   $    -  $  29

Supplemental Information
  Cash paid during the year for interest,
   net of amount capitalized                         $  233   $  246  $ 258
  Net cash paid during the year for income taxes     $  228   $   95  $  11

See accompanying Notes to Consolidated Financial Statements.

                                        78
</TABLE>

<TABLE>
<CAPTION>
US Airways, Inc.
Consolidated Statements of Changes in Stockholder's Equity (Deficit)
Three Years Ended December 31, 1998	
-------------------------------------------------------------------------------------------------------------------------
(in millions)
                                                                        Accumulated other comprehensive
                                                                        income, net of income tax effect
                                                                       -----------------------------------
                                                                       Unrealized    Adjustment
                                                            Receivable  gain on         for
                                                  Retained     from    available-     minimum
                                 Common  Paid-in  earnings    parent    for-sale      pension               Comprehensive
                                  stock  capital  (deficit)   company  securities *  liability *   Total       income
                                  -----  -------  ---------   -------  ------------  ----------    ------   --------------
<S>                               <C>     <C>     <C>         <C>         <C>          <C>        <C>          <C>
Balance as of December 31, 1995   $  -    $2,416  $(2,649)    $     -     $  -         $(78)      $  (311)
Adjustment for minimum pension
  liability *                        -         -        -           -        -           43            43      $   43
Net income                           -         -      183           -        -            -           183         183
                                   ---     -----   ------      ------      ---          ---        ------       -----
    Total comprehensive income                                                                                 $  226
                                                                                                                =====
Balance as of December 31, 1996      -     2,416   (2,466)          -        -          (35)          (85)

Unrealized gain on available-
  for-sale securities *              -         -        -           -      104            -           104      $  104
Adjustment for minimum pension
  liability *                        -         -        -           -        -           22            22          22
Tax benefit from employee
  stock option exercises             -         9        -           -        -            -             9           -
Net income                           -         -    1,052           -        -            -         1,052       1,052
                                   ---     -----   ------      ------      ---          ---        ------       -----
    Total comprehensive income                                                                                 $1,178
                                                                                                                =====
Balance as of December 31, 1997      -     2,425   (1,414)          -      104          (13)        1,102

Unrealized gain on available-
  for-sale securities *              -         -        -           -       73            -            73      $   73
Adjustment for minimum pension
  liability *                        -         -        -           -        -          (39)          (39)        (39)
Tax benefit from employee
  stock option exercises             -         6        -           -        -            -             6           -
Funding of parent company's
  common stock purchases             -         -        -      (1,099)       -            -        (1,099)          -
Net income                           -         -      559           -        -            -           559         559
                                   ---     -----   ------      ------      ---          ---        ------       -----
    Total comprehensive income                                                                                 $  593
Balance as of December 31, 1998   $  -    $2,431  $  (855)    $(1,099)    $177         $(52)      $   602       =====
                                   ===     =====   ======      ======      ===          ===        ======

* Net of income tax effect


See accompanying Notes to Consolidated Financial Statements.

                                                                  79
</TABLE>



                               US AIRWAYS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)  BASIS OF PRESENTATION AND NATURE OF OPERATIONS

     The accompanying Consolidated Financial Statements include the 
accounts of US Airways, Inc. (US Airways) and its wholly-owned subsidiary 
USAM Corp. (USAM). US Airways is a wholly-owned subsidiary of US Airways 
Group, Inc. (US Airways Group). All significant intercompany accounts and 
transactions have been eliminated. However, as discussed further in Note 
10, US Airways' financial results are significantly influenced by related 
party transactions.

     US Airways is a major United States air carrier engaged primarily in 
the business of transporting passengers, property and mail. US Airways 
operates predominantly in the Eastern U.S. with major connecting hubs at 
airports in Charlotte, Philadelphia and Pittsburgh. US Airways also has 
substantial operations at Baltimore/Washington International Airport, 
Boston's Logan International Airport, New York's LaGuardia Airport and 
Washington's Ronald Reagan Washington National Airport. US Airways enplaned 
58 million passengers during 1998 and is currently the sixth largest 
domestic air carrier, as ranked by total revenue passenger miles (RPMs).

     As of December 31, 1998, USAM owned approximately 6.7% of Galileo 
International, Inc. (Galileo), which provides electronic global 
distribution services for the travel industry and 11% of the Galileo Japan 
Partnership (GJP). GJP markets the Galileo Computer Reservation System 
(Galileo CRS) in Japan. USAM accounts for its investment in Galileo using 
the cost method (see Note 1(g)). USAM accounts for its investment in GJP 
using the equity method because it is represented on the board of directors 
and therefore participates in policy making processes. Until July 1997, as 
discussed in Note 9, USAM held interests in the Galileo International 
Partnership and the Apollo Travel Services Partnership and accounted for 
these investments using the equity method. 

     The preparation of financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions that affect the reported amounts of assets and liabilities and 
disclosure of contingent assets and liabilities at the date of the 
financial statements and the reported amounts of revenues and expenses 
during the reporting period. Actual results could differ from those 
estimates. 

     Certain 1997 and 1996 amounts have been reclassified to conform with 
1998 classifications.

     (b)  OPERATING ENVIRONMENT

     Most of US Airways' operations are in competitive markets. Competitors 
include other air carriers along with other methods of transportation. 

     US Airways has the highest unit operating costs among the major 
domestic air carriers. The growth and expansion of competitors with lower 
cost and fare structures in its markets has put considerable pressure on US 
Airways to reduce its operating costs in order to maintain competitiveness. 
In addition, although a competitive strength in some regards, the 
concentration of significant operations in the Eastern U.S. results in US 
Airways being susceptible to changes in certain regional conditions that 
may have an adverse effect on its results of operations and financial 
condition. In addition, US Airways' parent company has agreements to 
acquire up to 430 new Airbus aircraft, accompanying jet engines and 
ancillary assets. These agreements are expected to increase US Airways' 
financing needs and result in a significant increase in its financial

                                     80

obligations (see Note 6(a) for additional information).

     Personnel costs represent US Airways' largest expense category. As of 
December 31, 1998, US Airways employed approximately 38,200 full-time 
equivalent employees. Approximately 35,175 (87%) of US Airways' employees 
are covered by collective bargaining agreements with various unions or will 
be covered by collective bargaining agreements for which initial 
negotiations are in progress. A new five-year contract between US Airways 
and its pilots became effective January 1, 1998. US Airways' contracts with 
its mechanics and related employees, flight attendants, flight crew 
training instructors, flight simulator engineers and dispatch employees are 
currently amendable; talks with respect to new contracts are ongoing. US 
Airways is also negotiating with representatives of its fleet service and 
passenger service employees with respect to initial labor contracts. 
US Airways cannot predict the ultimate outcome of any of these negotiations 
or the timing of any new agreements. US Airways believes that its new 
contract with its pilots is helping it to address its high cost structure.

     US Airways operations are largely dependent on the availability of 
aviation fuel. The availability and price of aviation fuel is largely 
determined by actions generally outside of US Airways' control. US Airways 
has a diversified aviation fuel supplier network and uses certain risk 
management techniques (see Note 2(a)) in order to help ensure aviation fuel 
availability and partially protect itself from temporary aviation fuel 
price fluctuations.

    (c)  CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 

     All highly liquid investments purchased within three months of 
maturity are classified as Cash equivalents. Short-term investments consist 
primarily of certificates of deposit and commercial paper purchased with 
maturities greater than three months but less than one year.

     US Airways classifies securities underlying its Cash equivalents and 
Short-term investments as "available-for-sale" in accordance with Statement 
of Financial Accounting Standards No. 115, "Accounting for Certain 
Investments in Debt and Equity Securities" (SFAS 115). Cash equivalents are 
stated at cost, which approximates fair value due to the highly liquid 
nature and short maturities of the underlying securities. Short-term 
investments are stated at fair value with the offsetting unrecognized gain 
or loss reflected as a separate component of Stockholder's Equity within 
Accumulated other comprehensive income, net of income tax effect.  See also 
Note 7(c). 

     (d)  MATERIALS AND SUPPLIES, NET

     Inventories of materials and supplies are valued at the lower of cost 
or fair value. Costs are determined using average costing methods and are 
charged to operations as consumed. An allowance for obsolescence is 
provided for flight equipment expendable and repairable parts. 

     (e)  PROPERTY AND EQUIPMENT

     Property and equipment is stated at cost or, if acquired under capital 
lease, at the lower of the present value of minimum lease payments or fair 
value of the asset at the inception of the lease. Interest expenses related 
to the acquisition of certain property and equipment are capitalized as an 
additional cost of the asset or as a leasehold improvement if the asset is 
leased. Costs of major improvements are capitalized for both owned and 
leased assets. Maintenance and repairs are recognized as operating expenses 
as incurred. 

     Depreciation and amortization expense for principal asset 
classifications is calculated on a straight-line basis to an estimated 
residual value. Depreciable lives are 17-20 years for operating flight 
equipment, 30 years for facilities and 5-10 years for other ground property 
and equipment. Improvements to leased assets are depreciated over the term 
of the lease of the related asset. The

                                     81

cost of property acquired under capital lease is amortized on a straight-
line basis to Depreciation and amortization expense over the term of the 
lease. When property and equipment is sold or retired any gain or loss is 
recognized in the Other, net category of Other Income (Expense). 

     US Airways monitors the recoverability of the carrying value of its 
long-lived assets. Under the provisions of Statement of Financial 
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived 
Assets and Long-Lived Assets to Be Disposed Of" (SFAS 121), US Airways 
recognizes an "impairment charge" when the net undiscounted future cash 
flows from an asset's use (including any proceeds from disposition) are 
less than the asset's carrying value and the asset's carrying value exceeds 
its fair value. The impairment charge reflects writing-down the asset to 
fair value. See Note 13(b) for impairment charges recognized by US Airways 
during 1997.

     (f)  GOODWILL AND OTHER INTANGIBLES, NET

     Goodwill, the cost in excess of fair value of identified net assets 
acquired, is amortized on a straight-line basis over 40 years. The $629 
million goodwill resulting from the acquisitions of Pacific Southwest 
Airlines (Pacific Southwest) and Piedmont Aviation, Inc. (Piedmont 
Aviation), both in 1987, is amortized as Depreciation and amortization 
expense. As of December 31, 1998 and 1997, accumulated amortization related 
to the Pacific Southwest and Piedmont Aviation acquisitions was $176 
million and $160 million, respectively. Goodwill of $4 million resulting 
from USAM's computer reservation system investment is being amortized as a 
component of Other Income (Expense), consistent with the classification of 
the related income from this investment. As of December 31, 1998 and 1997, 
USAM's related accumulated amortization was $1 million. US Airways 
periodically evaluates whether goodwill is impaired by comparing the 
goodwill balances with estimated future undiscounted cash flows which, in 
US Airways' judgment, are attributable to the goodwill. This analysis is 
performed separately for the goodwill that resulted from each acquisition.

     Other intangible assets consist mainly of purchased operating rights 
at various airports, capitalized software costs and the intangible asset 
associated with the underfunded amounts of certain pension plans. The cost 
of operating rights and capitalized software costs are amortized on a 
straight-line basis over the expected periods of benefit as Depreciation 
and amortization expense. Operating rights, which are valued at purchase 
cost or appraised value if acquired with Pacific Southwest or Piedmont 
Aviation, are amortized over periods ranging from ten to 25 years and 
capitalized software costs are amortized over five years. The intangible 
pension asset is recognized in accordance with Statement of Financial 
Accounting Standards No. 87, "Employers' Accounting for Pensions"  (SFAS 
87) (see Note 7(c)). As of December 31, 1998 and 1997, accumulated 
amortization related to other intangible assets was $165 million and $149 
million, respectively.

     Based on the most recent analyses, US Airways believes that goodwill 
and other intangible assets were not impaired as of December 31, 1998.

     (g)  INVESTMENT IN MARKETABLE EQUITY SECURITIES

     USAM's investment in Galileo, which is accounted for under the cost 
method, is classified as "available-for-sale" under SFAS 115 and recorded 
at fair value. See also Notes 2(b), 7(c) and 9.
 
     (h)  OTHER ASSETS, NET 

     Other assets, net consist primarily of noncurrent pension assets, the 
unamortized balance of deferred compensation, restricted cash and 
investments, unamortized debt issuance costs and a long-term receivable 
from British Airways Plc (British Airways). Deferred compensation resulted 
mainly from US Airways' establishment of an employee stock ownership plan 
(ESOP) in 1989 (see

                                     82

Note 5(d). Restricted cash and investments are deposits in trust accounts 
to collateralize letters of credit and workers' compensation policies. The 
long-term receivable from British Airways resulted from the relinquishment 
by US Airways of three U.S. to London routes.

     Other than the deferred compensation that arose from the establishment 
of the ESOP, US Airways accounts for deferred compensation and the related 
amortization by applying the provisions of Accounting Principles Board 
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). In 
accordance with APB 25, deferred compensation related to grants of US 
Airways Group common stock to employees (Stock Grants) is recognized based 
on the fair market value of the stock on the date of grant. Except on 
limited occasions, no deferred compensation is recognized when options to 
purchase US Airways Group common stock are granted to employees (Option 
Grants) because the exercise price of the stock options is set equal to the 
fair market value of the underlying stock on the date of grant. Any 
deferred compensation is amortized as Personnel costs over the applicable 
vesting period. 

     US Airways recognized expenses related to Stock Grants of $7 million, 
$6 million and $12 million in 1998, 1997 and 1996, respectively, and 
expenses related to Option Grants of $12 million, $1 million and $8 million 
in 1998, 1997 and 1996, respectively. Deferred compensation related to 
Stock Grants was $22 million and $7 million as of December 31, 1998 and 
1997, respectively, and deferred compensation related to Option Grants was 
$13 million and $1 million as of December 31, 1998 and 1997, respectively. 
Expenses and deferred compensation related to Option Grants increased in 
1998 due to the grant of 2.3 million stock options to US Airways' pilots. 
In addition, US Airways recognized expenses related to stock appreciation 
rights (SARs) tied to the fair market value of US Airways Group common 
stock of $1 million, $33 million and $42 million in 1998, 1997 and 1996, 
respectively, as the result of a SAR feature granted to stock option 
holders under US Airways Group's 1992 Stock Option Plan.

     The weighted average fair value per stock option for stock options 
which have an exercise price equal to the fair value of a share of US 
Airways Group common stock at date of grant was $34, $18, and $11 for 1998, 
1997 and 1996, respectively. The weighted average fair value per stock 
option for stock options which have an exercise price lower than the fair 
value of a share of US Airways Group common stock at date of grant was $41 
for 1998 and $13 for 1996 (no such grants during 1997).

     During 1995, the Financial Accounting Standards Board adopted 
Statement No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). 
This statement requires the use of fair value techniques to determine 
compensation expense associated with stock-based compensation. As mentioned 
above, US Airways applies the provisions of APB 25 to determine 
compensation expense, as permitted under SFAS 123. However, US Airways is 
obligated to disclose certain information including pro forma net income as 
if SFAS 123 had been adopted to measure compensation expense. Had 
compensation cost been measured in accordance with SFAS 123, US Airways 
estimates that its net income for 1998 would have been reduced from $559 
million to $528 million, its net income for 1997 would have been reduced 
from $1,052 million to $1,045 million, and its net income for 1996 would 
have been reduced from $183 million to $168 million. In order to calculate 
this pro forma net income information, US Airways used the Black-Scholes 
stock option-pricing model with the following weighted-average assumptions 
for 1998, 1997 and 1996, respectively: stock volatility of US Airways Group 
common stock of 51.4%, 52.6% and 50.1%; risk-free interest rates of 5.5%, 
6.6% and 6.2%; expected stock option life of eight years, eight years and 
nine years; and no dividend yield (0%). 

     The pro forma net income information reflects stock options granted 
after December 31, 1994 only. Therefore, the full impact of calculating 
compensation expense for stock options under SFAS 123 is not reflected in 
the pro forma net income amounts above because compensation expense is 
recognized over the stock option's vesting period and compensation expense 
for stock options

                                     83

granted prior to January 1, 1995 is not considered.

     (i)  FREQUENT TRAVELER PROGRAM 

     US Airways accrues the estimated incremental cost of travel awards 
earned by participants in its "Dividend Miles" frequent traveler program 
when requisite mileage award levels are achieved. US Airways also sells 
mileage credits to participating partners in Dividend Miles. The resulting 
revenues are recorded as Other operating revenues during the period in 
which the credits are sold. 

     In 1998, US Airways and American Airlines, Inc. (American) announced a 
marketing relationship that gives customers combined access to both 
companies' frequent traveler programs. Under the program, members who 
belong to US Airways' Dividend Miles and American's AAdvantage are able to 
claim awards for airline travel on both airlines and to combine miles when 
claiming travel awards on either airline. Each airline compensates the 
other when relieved of an obligation to provide a travel award.

     (j)  DEFERRED GAINS, NET

     Gains on aircraft sale and leaseback transactions are deferred and 
amortized over the terms of the leases as a reduction of the related 
aircraft rent expense.

     (k)  PASSENGER TRANSPORTATION REVENUES

     Passenger ticket sales are recognized as Passenger transportation 
revenues when the transportation service is rendered or the ticket 
otherwise expires. At the time of sale, a liability is established (Traffic 
balances payable and unused tickets) and subsequently relieved through 
carriage of the passenger, through billing from another air carrier which 
provided the service, upon expiration of the ticket or by refund to the 
passenger. 

     Effective October 1, 1996, US Airways began purchasing all of the 
capacity (available seat miles) generated by US Airways Group's three 
wholly-owned regional air carriers and, concurrently, recognizing revenues, 
"US Airways Express transportation revenues," when transportation service 
is rendered by these affiliates or the related tickets otherwise expire. 
Liabilities related to tickets sold for travel on these air carriers, as 
well as for travel on Shuttle are also included in US Airways' Traffic 
balances payable and unused tickets and are subsequently eliminated in the 
same manner as described above. See Note 10(b) for additional information 
related to US Airways' transactions with its affiliates.

     In January 1998, US Airways began purchasing the capacity of Mesa 
Airlines, Inc. (Mesa) in certain markets.  Mesa operates regional jet 
aircraft in these markets as part of US Airways Express.

     (l)  OTHER SELLING EXPENSES

     Other selling expenses include credit card fees, computerized 
reservations systems fees and advertising and promotional expenses. 
Advertising expenses for 1998, 1997 and 1996 were $36 million, $46 million 
and $51 million, respectively (such costs are expensed when incurred).

2.  FINANCIAL INSTRUMENTS

     (a)  TERMS OF CERTAIN FINANCIAL INSTRUMENTS

     On January 1, 1998, as part of a comprehensive information technology 
services agreement with The SABRE Group, Inc. (TSG), TSG granted US Airways 
two tranches of stock options (TSGH Stock Options) to acquire up to 
6,000,000 shares of Class A Common Stock, $.01 par value, of The

                                     84

SABRE Group Holding, Inc. (TSGH Common Stock), TSG's parent company. Each 
tranche includes 3,000,000 stock options. Stock options in the first 
tranche have an exercise price of $27 and are exercisable from June 30, 
1999 until December 31, 1999, but are subject to a $90 per share cap on the 
fair market value of the underlying common stock. Stock options in the 
second tranche have an exercise price of $27 and are exercisable during a 
ten-year period beginning January 2, 2003, but are subject to a $127 per 
share cap on the fair market value of the underlying common stock. Under 
certain circumstances, and under certain conditions, US Airways may select 
an alternative vehicle of substantially equivalent value in place of 
receiving TSGH Common Stock.

     US Airways uses risk management strategies to reduce its exposure to 
certain market uncertainties. US Airways is party to financial contracts 
which it believes help to reduce its exposure to significant increases in 
the price of aviation fuel. US Airways has also hedged certain foreign-
denominated debt to maturity. US Airways periodically reviews the financial 
condition of each counterparty to these financial contracts and believes 
that the potential for default by any of the current counterparties is 
negligible. 

     US Airways continually adjusts its aviation fuel procurement strategy 
in order to take advantage of the best available prices while at the same 
time ensuring that it has an adequate supply of aviation fuel to support 
its operations. In addition, US Airways may participate in arrangements 
designed to reduce its exposure to significant increases in the price of 
aviation fuel. These arrangements have the net effect of increasing or 
decreasing US Airways' aviation fuel expense in the period in which they 
are settled.  While US Airways was not a participant in fuel swap contracts 
as of December 31, 1998, US Airways previously entered into fuel swap 
contracts that resulted in US Airways receiving or making payments based on 
the difference between a fixed price and a variable price per notional 
gallon for specified petroleum products. The total notional gallons under 
these contracts were approximately 47 million as of December 31, 1997 (US 
Airways entered into contracts prior to December 31, 1997 which effectively 
closed certain hedging arrangements covering approximately 17 million 
gallons). For contracts open as of December 31, 1997, US Airways paid fixed 
prices ranging from $0.496 to $0.600 per notional gallon and received a 
variable price per gallon based on market prices. 

     An aggregate of $31 million of future principal payments of US 
Airways' long-term debt due in 1999 and 2000 is payable in Japanese Yen. 
This foreign currency exposure has been hedged to maturity by US Airways' 
participation in foreign currency contracts. Net settlements are recorded 
as adjustments to Interest expense.

     (b)  FAIR VALUE OF FINANCIAL INSTRUMENTS

     In accordance with the provisions of SFAS 115, the fair values for US 
Airways' short-term and marketable equity security investments are 
determined based upon quoted market prices. Restricted cash is carried at 
cost which approximates fair value. At December 31, 1998 and 1997, US 
Airways' long-term investments represent ownership interests in privately 
held companies which have no readily determinable market values. US Airways 
estimated the fair values of its note receivable and long-term debt by 
discounting expected future cash flows using current rates offered to US 
Airways for note receivables and debt with similar maturities. The 
estimated fair value of the TSGH Stock Options was calculated using the 
Black-Scholes stock option pricing model and is presented in the table 
presented on the following page in accordance with Statement of Financial 
Accounting Standards No. 119, "Disclosures about Derivative Financial 
Instruments and Fair Value of Financial Instruments" (SFAS 119). These 
financial instruments are classified as held for "purposes other than 
trading" under SFAS 119 due primarily to certain restrictions, including 
limitations on US Airways' ability to exercise or sell these stock options. 
The fair values of foreign currency and fuel swap contracts are obtained 
from dealer quotes. These values represent the estimated amount US Airways 
would receive or pay to terminate such agreements as of the valuation date.

                                     85

<TABLE>
     The estimated fair values of US Airways' financial instruments, none of which are held for 
trading purposes, are summarized as follows (in millions; brackets denote a liability):
<CAPTION>
                                                 December 31,
                                ---------------------------------------------
                                        1998                    1997
                                ---------------------   ---------------------
                                Carrying   Estimated    Carrying   Estimated
                                 Amount    Fair Value    Amount    Fair Value
                                --------   ----------   --------   ----------
<S>                              <C>         <C>         <C>         <C>
Short-term investments (1)       $   598     $   598     $   870     $   870
Investment in marketable 
  equity securities (1)              301         301         190         190
Restricted cash and long-term
  Investments                        113         114          72          72
Note receivable (2)                   27          27          30          30
TSGH Stock Options                     -         119           -           -
Long-term debt (excludes
  capital lease obligations)      (1,998)     (2,243)     (2,577)     (2,861)
Foreign currency contracts:
     In a net receivable 
       (payable) position              -          (1)          -          (3)
Fuel swap contracts:
     In a net receivable
       (payable) position              -           -           -          (1)

(1)  Classified as  "available-for-sale" in accordance with SFAS 115. See 
     also Notes 1(c) and 1(g).
(2)  Current carrying amount included in Other assets, net on US Airways' 
     Consolidated Balance Sheets, except for the current portion of the note 
     receivable ($6 million) which is included in Receivables, net.
</TABLE>



3.  INCOME TAXES

     US Airways accounts for income taxes according to the provisions of 
Statement of Financial Accounting Standards No. 109, "Accounting for Income 
Taxes" (SFAS 109). US Airways files a consolidated federal income tax 
return with its parent company, US Airways Group. US Airways Group and its 
wholly-owned subsidiaries have executed a tax sharing agreement (Tax 
Sharing Agreement) which allocates tax and tax items, such as net operating 
losses and tax credits between members of the group based on their 
proportion of taxable income and other items. This tax sharing and 
allocation impacts the deferred tax assets and liabilities reported by each 
corporation on a separate company basis. Accordingly, US Airways' tax 
expense is based on its taxable income, taking into consideration its 
allocated tax loss carryforwards and tax credit carryforwards.

     During 1997, US Airways determined that it was no longer appropriate 
to apply a valuation allowance to its deferred tax assets. US Airways 
believed, based on prior earnings and projections of future earnings, that 
it was more likely than not that the Company would be able to utilize tax 
benefits accumulated through December 31, 1997 in future periods. 
Accordingly, at December 31, 1997, previous valuation allowances were 
removed, resulting in a net deferred income tax asset and an income tax 
credit for 1997. As of December 31, 1997, the Receivables from related 
parties, net line item on US Airways' Consolidated Balance Sheets included 
$78 million related to certain tax attributes of US Airways used by other 
US Airways Group subsidiaries during 1997 and in prior years. These amounts 
were settled through intercompany receivables/payables accounts in January 
1998 (see Note 10 for related information). 

     The components of the provision (credit) for income taxes are as 
follows (in millions):

                                                   1998      1997      1996
                                                   ----      ----      ----
Current provision: 
     Federal                                       $179     $ 118        $4
     State                                           14         7         3
                                                    ---       ---        --
          Total current provision                   193       125         7
                                                    ---       ---        --
Deferred provision:
     Federal                                        157      (447)       --
     State                                           27       (57)        1
                                                    ---       ---        --
          Total deferred provision                  184      (504)        1
                                                    ---       ---        --
Provision (credit) for income taxes                $377     $(379)       $8
                                                    ===       ===        ==

                                     86

     In 1998, US Airways was subject to federal regular income tax. 
Approximately $297 million in federal regular tax net operating loss 
carryforwards, $51 million in alternative minimum tax (AMT) credits and 
$658 million in state net operating loss carryforwards were utilized to 
reduce the federal and state current tax liabilities.

     The significant components of deferred income tax provision (credit) 
for the years ended December 31, 1998, 1997 and 1996 are as follows (in 
millions):

                                                   1998      1997     1996
                                                   ----      ----     ----

Deferred tax provision (exclusive of the
  other components listed below)                  $ 184     $ 191     $ 91
Decrease in the valuation allowance for 
  deferred tax assets                                 -      (695)     (90)
                                                    ---       ---       --
     Total                                        $ 184     $(504)    $  1
                                                    ===       ===       ==

     A reconciliation of taxes computed at the statutory federal tax rate 
on earnings before income taxes to the provision (credit) for income taxes 
is provided below (in millions):

                                                   1998      1997     1996
                                                   ----      ----     ----

Tax provision computed at federal statutory rate   $328     $ 236     $ 67
Book expenses not deductible for tax purposes        17        15       17
State income tax provision (credit), net of 
  federal tax benefit                                27       (32)       2
Reduction of federal valuation allowance              -      (595)     (75)
Other                                                 5        (3)      (3)
                                                    ---       ---       --
Provision (credit) for income taxes                $377     $(379)    $  8
                                                    ===       ===       ==

Effective tax rate                                   40%      (56)%      4%
                                                    ===       ===       ==

     The tax effects of temporary differences that give rise to significant 
portions of the deferred tax assets and liabilities as of December 31, 1998 
and 1997 (in millions):

                                                             1998      1997
                                                             ----      ----
Deferred tax assets:
     Leasing transactions                                  $  171    $  170
     Tax benefits purchased/sold                               26        41
     Gain on sale and leaseback transactions                  129       124
     Employee benefits                                        694       668
     Net operating loss carryforwards                           6       125
     Alternative minimum tax credit carryforwards              99       157
     Investment tax credit carryforwards                        -        11
     Other deferred tax assets                                 95        87
                                                            -----     -----
          Total gross deferred tax assets                   1,220     1,383
     Less valuation allowance                                   -         -
                                                            -----     -----
          Net deferred tax assets                           1,220     1,383
Deferred tax liabilities:
     Depreciation and amortization                            875       902
     Other deferred tax liabilities                           104        56
                                                            -----     -----
          Total deferred tax liabilities                      979       958
                                                            -----     -----
          Net deferred tax assets                          $  241    $  425
                                                            =====     =====

     The valuation allowance for deferred tax assets decreased 
approximately $695 million in 1997.

     Included in the deferred tax assets at December 31, 1998, among other 
items, are $471 million related to obligations of postretirement medical 
benefits, and $99 million of alternative minimum tax credits which do not 
expire. There were no federal regular or alternative minimum tax net 
operating loss carryforwards remaining at December 31, 1998. The Company 
had state net operating loss carryforwards of $222 million as of December 
31, 1998. In prior years, investment tax credit benefits were recorded 
using the "flow through" method as a reduction of the federal

                                     87

income tax provision. No new investment tax credits were generated during 
1998, 1997 or 1996 and all prior year investment tax credits were used by 
December 31, 1998. Certain changes in stock ownership can result in 
limitation on the amount of net operating loss and tax credit carryovers 
that can be utilized each year. US Airways determined it has undergone such 
an ownership change that did not impact the utilization of federal tax 
attributes during 1998. Furthermore, US Airways does not believe that 
alternative minimum tax credits available as of December 31, 1998 will be 
limited in future years as a result of the ownership change. The federal 
income tax returns of US Airways through 1986 have been examined and 
settled with the Internal Revenue Service.

     US Airways believes that a significant portion of the deferred tax 
assets will be realized through projected taxable income and reversals of 
existing taxable temporary differences. The deferred tax assets and 
liabilities disclosed above exclude tax assets and liabilities which arise 
as a result of including certain transactions in the equity section of the 
balance sheet, net of tax. These tax attributes include a noncurrent 
deferred tax liability of $95 million and $56 million as of December 31, 
1998 and 1997, respectively, for unrealized gains on available-for-sale 
investments pursuant to SFAS 115 and a noncurrent deferred tax asset of $33 
million and $3 million as of December 31, 1998 and 1997, respectively, 
relating to the equity adjustment for the minimum pension liability for US 
Airways' defined benefit plans. 

     The following table is a summary of pretax book income and taxable 
income prior to net operating loss carryforwards for the last three years 
(in millions):

                                                   1998      1997      1996
                                                   ----      ----      ----

     Pretax book income                            $936    $  673      $191
     Taxable income (loss)                         $989    $1,037      $186

     The reasons for significant differences between taxable income and 
pretax book income in 1997 primarily relate to employee pension and 
postretirement benefit costs, certain aircraft impairment charges and lease 
accruals, and other employee related accruals. See also Note 13.

4.  LONG-TERM DEBT, INCLUDING CAPITAL LEASE OBLIGATIONS

     Details of long-term debt are as follows (in millions):
                                                              December 31,
                                                             -------------
                                                             1998     1997
                                                             ----     ----
Senior Debt:
     10% Senior Notes due 2003                             $    -   $  300
     9 5/8% Senior Notes due 2001                             175      175
     5.7% to 11.7% Equipment Financing Agreements,
          Installments due 1999 to 2016                     1,795    2,045
     8.6% Airport Facility Revenue Bond due 2022               28       28
     7.4% Aircraft Purchase Deposit Financing*                  -       29
                                                            -----    -----
                                                            1,998    2,577
Capital Lease Obligations                                      27       34
                                                            -----    -----
     Total                                                  2,025    2,611
Less Current Maturities                                       (71)    (186)
                                                            -----    -----
                                                           $1,954   $2,425
                                                            =====    =====

*  See related information under Note 6(c) (regarding settlement of
   litigation between US Airways and The Boeing Company (Boeing)).




                    (this space intentionally left blank)


                                     88

     Maturities of long-term debt and debt under capital leases for the 
next five years (in millions):

               1999          $   71
               2000             115
               2001             240
               2002              69
               2003             190
               Thereafter     1,340
                              -----
                             $2,025
                              =====

     Interest rates on $92 million principal amount of long-term debt as of 
December 31, 1998 are subject to adjustment to reflect prime rate and other 
rate changes.

     Equipment financings totaling $1.8 billion were collateralized by 
aircraft and engines with a net book value of approximately $1.9 billion as 
of December 31, 1998.  

     In 1998, US Airways retired early certain long-term debt with a 
principal amount of $434 million, including US Airways' 10% Senior Notes. 
The retirement of the 10% Senior Notes resulted in a cash outflow of $315 
million, including prepayment penalties of $15 million.

5.  EMPLOYEE PENSION AND BENEFIT PLANS

     Substantially all of US Airways' employees meeting certain service and 
other requirements are eligible to participate in various pension, medical, 
life insurance, disability and survivorship and employee stock ownership 
plans.

     (a)  DEFINED BENEFIT AND OTHER POSTRETIREMENT BENEFIT PLANS

     US Airways sponsors several qualified and nonqualified defined benefit 
plans and other postretirement benefit plans for certain employees. 
Liabilities related to pension plans covering foreign employees are 
calculated in accordance with generally accepted accounting principles and 
funded in accordance with the laws of the individual country.









                   (this space intentionally left blank)



                                     89

     The following table sets forth changes in the fair value of plan 
assets, benefit obligations and the funded status of the plans as of 
September 30, 1998 and 1997, in addition to the amounts recognized in US 
Airways' Consolidated Balance Sheets as of December 31, 1998 and 1997, 
respectively (in millions):

<TABLE>
<CAPTION>
                                                                    Other
                                         Defined Benefit       Postretirement
                                         Pension Plans (1)         Benefits
                                         -----------------     --------------
                                           1998     1997        1998     1997
                                           ----     ----        ----     ----
<S>                                      <C>      <C>         <C>     <C>
Fair value of plan assets at the 
  beginning of the period                $ 3,101  $ 2,474     $    -  $     -
     Actual return on plan assets            246      587          -        -
     Employer contributions                   33      169         30       28
     Plan participants' contributions          -        -          2        1
     Gross benefits paid                    (201)    (129)       (32)     (29)
                                          ------   ------     ------   ------
Fair value of plan assets at the end
  of the period                            3,179    3,101          -        -
                                          ------   ------     ------   ------

Benefit obligation at the beginning
  of the period                            3,850    3,143        996      950
     Service cost                            139      128         36       35
     Interest cost                           292      258         76       71
     Plan participants' contributions          -        -          2        1
     Plan amendments                           -       39          -        -
     Actuarial (gain) loss                   526      296        127      (32)
     Special termination benefits (2)          -      115          -        -
     Gross benefits paid (3)                (201)    (129)       (32)     (29)
                                          ------   ------     ------   ------
Benefit obligation at the end 
  of the period                            4,606    3,850      1,205      996
                                          ------   ------     ------   ------

Funded status of the plan                 (1,427)    (749)    (1,205)    (996)
     Unrecognized actuarial (gain) loss    1,019      477         66      (62)
     Unrecognized prior service cost          90       97       (118)    (130)
     Unrecognized transition obligation      (20)     (26)         -        -
     Contributions for October to December    21        2         27        7
                                          ------   ------     ------   ------
Net amount recognized in US Airways'
  Consolidated Balance Sheets            $  (317) $  (199)   $(1,230) $(1,181)
                                          ======   ======     ======   ======

     Components of the amounts recognized in 	US Airways' Consolidated Balance Sheets:

                                                                   Other
                                         Defined Benefit       Postretirement
                                         Pension Plans (1)        Benefits
                                         -----------------     --------------
                                           1998     1997       1998     1997
                                           ----     ----       ----     ----

Prepaid benefit cost                     $  310   $  282    $     -  $     -
Accrued benefit cost                       (627)    (481)    (1,230)  (1,181)
Adjustment for minimum pension liability   (180)    (111)         -        -
Intangible asset                             95       95          -        -
Accumulated other comprehensive income       85       16          -        -
                                         ------   ------     ------   ------
Net amount recognized in US Airways'
     Consolidated Balance Sheets         $ (317)  $ (199)   $(1,230) $(1,181)
                                         ======   ======     ======   ======

(1)  For plans with accumulated benefit obligations in excess of plan assets,
     the aggregate accumulated benefit obligations and plan assets were 
     $3,640 million and $3,179 million, respectively, as of September 30, 
     1998, and $585 million and $435 million, respectively, as of September 
     30, 1997.
(2)  Related to an early retirement plan offered to US Airways' pilots, 
     recorded in accordance with Statement of Financial Accounting Standards 
     No. 88 "Employers' Accounting for Settlements and Curtailments of 
     Defined Benefit Pension Plans and for Termination Benefits" (SFAS 88).
(3)  Gross benefits paid in 1998 include lump sum payments for pilots made 
     pursuant to the special termination benefits charge of $115 million in 
     1997. See (2) above.




                  (this space intentionally left blank)


                                     90
</TABLE>



     The following table presents the weighted average assumptions used to 
determine the actuarial present value of Pension Benefits and Other 
Postretirement Benefits:

                                                                 Other
                                       Defined Benefit       Postretirement
                                       Pension Plans            Benefits
                                       -----------------     --------------
                                         1998     1997       1998     1997
                                         ----     ----       ----     ----
Discount rate                             6.8%     7.5%       6.8%     7.5%
Expected return on plan assets            9.5%     9.5%        NA       NA
Rate of compensation increase             3.3%     3.3%       4.6%     4.7%

     The assumed health care cost trend rate is 4.5% in 1999 and 
thereafter. The assumed health care cost trend rate has a significant 
effect on amounts reported for retiree health care plans. A 1% change in 
the health care cost trend would have the following effects on Other 
Postretirement Benefits as of September 30, 1998 (in millions):

                                                 1% Increase    1% Decrease
                                                 -----------    -----------
Effect on total service and interest costs           $ 17           $ (13)
Effect on postretirement benefit obligation          $162           $(124)

     Total periodic cost for Pension Benefits and Other Postretirement 
Benefits (in millions):

                                                             Other
                                 Defined Benefit         Postretirement
                                 Pension Plans              Benefits      
                               --------------------   --------------------
                               1998    1997    1996   1998    1997    1996
                               ----    ----    ----   ----    ----    ----

Service cost                  $ 139   $ 128   $ 145   $ 36    $ 34    $ 44
Interest cost                   292     258     252     76      71      74
Expected return on plan assets (274)   (236)   (217)     -       -       -
Amortization of:
     Transition asset            (5)     (5)     (5)     -       -       -
     Prior service cost           4       6       4    (12)    (12)    (12)
     Actuarial (gain) / loss     16      17      37     (1)     (3)      1
                               ----    ----    ----    ---     ---     ---
Net periodic cost               172     168     216     99      90     107
Special termination benefits      -     115       -      -       -       -
                               ----    ----    ----    ---     ---     ---
Total periodic cost           $ 172   $ 283   $ 216   $ 99    $ 90    $107
                               ====    ====    ====    ===     ===     ===

     US Airways recorded a $115 million charge to Personnel costs in 1997 
related to an early retirement program offered to 325 US Airways pilots. 
These charges were recorded in accordance with SFAS 88.

     See Note 7(c) for the amount included within other comprehensive 
income arising from a change in the additional minimum pension liability.

     (b)  DEFINED CONTRIBUTION PENSION PLANS

    Expenses related to these plans, excluding expenses related to US 
Airways' ESOP and any profit sharing contributions, were approximately $36 
million, $57 million and $54 million for the years 1998, 1997 and 1996, 
respectively. Expenses for 1998 include a $17 million credit related to a 
favorable legal settlement regarding employer matching contributions. See 
Notes 5(d) and 5(e) for information related to US Airways' ESOP and profit 
sharing contributions.

     (c)  POSTEMPLOYMENT BENEFITS

     US Airways provides certain postemployment benefits to its employees. 
Such benefits include disability-related and workers' compensation benefits 
and severance payments for certain employees. US Airways accrues for the 
cost of such benefit expenses once an appropriate triggering event has 
occurred.

                                     91

     (d)  EMPLOYEE STOCK OWNERSHIP PLAN

     In August 1989, US Airways established an ESOP. US Airways Group sold 
2,200,000 shares of its common stock to an Employee Stock Ownership Trust 
(the Trust) to hold on behalf of US Airways' employees, exclusive of 
officers, in accordance with the terms of the Trust and the ESOP. The 
trustee placed those shares in a suspense account pending their release and 
allocation to employees. US Airways provided financing to the Trust in the 
form of a 9 3/4% loan for $111 million for its purchase of shares and US 
Airways contributed an additional $2 million to the Trust. US Airways makes 
a yearly contribution to the Trust sufficient to cover the Trust's debt 
service requirement. The contributions are made in amounts equal to the 
periodic loan payments as they come due, less dividends available for loan 
payment. Since US Airways Group did not pay dividends on any shares held by 
the Trust for the years ended December 31, 1998, 1997 and 1996, the Trust 
did not utilize dividends to service its debt during those periods. The 
initial maturity of the loan is 30 years. As the loan is repaid over time, 
the trustee systematically releases shares of the common stock from the 
suspense account and allocates them to participating employees. Each 
participant's allocation is based on the participant's compensation, the 
total compensation of all ESOP participants and the total number of shares 
being released. For each year after 1989, a minimum of 71,933 shares are 
released from the suspense account and allocated to participant accounts. If 
US Airways Group's return on sales equals or exceeds four percent in a given 
year, more shares are released and repayment of the loan is accelerated. See 
also Note 5(e) regarding the profit sharing component of US Airways' ESOP. 
Annual contributions made by US Airways, and therefore loan repayments made 
by the Trust, were $27 million in 1998, and $11 million in each of 1997 and 
1996. The interest portion of these contributions was $10 million in 1998, 
1997 and 1996, respectively. Approximately 946,000 shares of US Airways 
Group common stock have been released or committed to be released as of 
December 31, 1998. US Airways recognized compensation expense related to the 
ESOP of $8 million in 1998, $11 million in 1997 and $4 million in 1996 based 
on shares allocated to employees (the "shares allocated" method). Deferred 
compensation related to the ESOP amounted to approximately $65 million, $72 
million and $84 million as of December 31, 1998, 1997 and 1996, 
respectively.

     See Note 1(h) with respect to US Airways' accounting policies for 
stock-based compensation.

     (e)  PROFIT SHARING PLANS

     In exchange for temporary wage and salary reductions and other 
concessions during a twelve month period in 1992 and 1993, including certain 
ongoing work rule and medical benefits concessions and the freeze of the 
defined benefit plan for certain non-contract employees, certain US Airways 
employees participated in a profit sharing program and were granted stock 
options to purchase US Airways Group common stock (see related discussion 
under Note 1(h)). This profit sharing program was designed to recompense 
those US Airways employees whose pay was reduced in an amount equal to (i) 
two times salary foregone plus (ii) one time salary foregone (subject to a 
minimum of $1,000) for the freeze of the defined benefit pension plan for 
certain non-contract employees. US Airways recognized charges of $214 
million related to this program, including $122 million in 1996. Cash 
distributions to participants of $214 million were made under this program. 
After a first quarter 1997 payment of $129 million, US Airways' obligations 
under this profit sharing program were satisfied and this program ceased.

     US Airways' ESOP and Defined Contribution Retirement Program (DCRP) 
each have profit sharing components. Under the ESOP, each eligible US 
Airways employee receives shares of US Airways Group common stock based on 
his or her compensation relative to the total compensation of all 
participants and the number of shares of US Airways Group common stock in 
the allocation pool. When US Airways Group's return on sales equals or 
exceeds certain prescribed levels, US Airways increases its contribution, 
which effectively increases the number of shares of US Airways Group common 
stock in the allocation pool (see Note 5(d)). US Airways' ESOP-


                                       92


related expenses included $4 million and $7 million in 1998 and 1997, 
respectively, related to this profit sharing program. US Airways did not 
make any provision for profit sharing contributions in connection with the 
profit sharing component of the ESOP during 1996. Under the DCRP, US Airways 
makes additional contributions to participant accounts when US Airways Group 
achieves certain prescribed pre-tax margin levels (see Note 5(b)). US 
Airways' 1998, 1997 and 1996 results of operations reflect expenses of $27 
million, $24 million and $5 million, respectively, for the profit sharing 
component of the DCRP.

6.  COMMITMENTS AND CONTINGENCIES

     (a)  COMMITMENTS TO PURCHASE FLIGHT EQUIPMENT

     On October 31, 1997, US Airways Group entered into agreements with 
AVSA, S.A.R.L. (AVSA), an affiliate of aircraft manufacturer Airbus 
Industrie G.I.E. (Airbus), and CFM International, Inc. (CFMI) for the 
acquisition of up to 400 Airbus A320-Family aircraft and accompanying jet 
engines. The A320-Family aircraft are single-aisle aircraft that include the 
Airbus A319, A320 and A321. 

     As of December 31, 1998, US Airways Group had 122 A320-Family aircraft 
on firm order, 112 aircraft subject to reconfirmation prior to scheduled 
delivery and options for 160 additional aircraft. With respect to the firm-
order aircraft, 33 are expected to be delivered in 1999 and 89 are expected 
to be delivered in the years 2000 through 2002 (43 of the aircraft 
scheduled for delivery in the years 2000 to 2002 time period are subject to 
cancellation with 18 month notice and payment of a cancellation fee). 
During the fourth quarter of 1998, US Airways accepted delivery of and 
placed into operational service six A319 aircraft acquired under US Airways 
Group's purchase agreements with AVSA and CFMI. Although the agreements 
with AVSA and CFMI represent a commitment of US Airways' parent company, 
US Airways anticipates that the new Airbus single-aisle aircraft will 
replace, at a minimum, its B737-200, DC-9-30 and MD-80 aircraft. US Airways 
has an agreement with GE Engine Services, Inc. for the maintenance of the 
engines that power these aircraft. 

     In July 1998, US Airways Group reached an agreement with Airbus for 
the purchase of up to 30 widebody A330-300 aircraft. The agreement includes 
seven firm aircraft orders, seven aircraft subject to reconfirmation prior 
to scheduled delivery and options for 16 additional aircraft. Of the seven 
firm-order A330-300 aircraft, six are scheduled for delivery in the year 
2000 and one in early 2001. Orders subject to reconfirmation are for 
aircraft that are tentatively scheduled for delivery beginning in the 
fourth quarter of 2000. US Airways Group can substitute other Airbus 
widebody aircraft for the A330-300s, including the A330-200 or members of 
the A340-Series, for orders other than the first seven aircraft. In October 
1998, US Airways Group reached an agreement with Pratt & Whitney for jet 
engines to power these aircraft and to provide long-term maintenance for 
the engines. These new widebody aircraft are expected to eventually 
supplant US Airways' B767-200ER fleet in transatlantic markets.

     As of December 31, 1998, the minimum determinable payments associated 
with US Airways Group's aircraft acquisition agreements for Airbus aircraft 
(including progress payments, payments at delivery, buyer-furnished 
equipment, spares, capitalized interest, penalty payments, cancellation 
fees and/or nonrefundable deposits) were estimated at $1.3 billion in 1999, 
$2.1 billion in 2000 and $9 million in 2001. 

     US Airways has a commitment to purchase hush-kits for certain of its 
B737-200 aircraft. The installation of hush-kits will allow these aircraft 
to meet certain statutory noise level requirements. The expected payments 
associated with this commitment are approximately $21 million, all of which 
are expected to occur in 1999.



                                      93


     See Note 10(a) for information related to transactions between US 
Airways and its parent company.

     (b)  LEASES

     US Airways leases certain aircraft, engines and ground equipment, in 
addition to the majority of its ground facilities. Ground facilities include 
executive offices, maintenance facilities and ticket and administrative 
offices. Public airports are utilized for flight operations under lease 
arrangements with the municipalities or agencies owning or controlling such 
airports. Substantially all leases provide that the lessee shall pay taxes, 
maintenance, insurance and certain other operating expenses applicable to 
the leased property. Some leases also include renewal and purchase options. 
US Airways subleases certain leased aircraft and ground facilities under 
noncancelable operating leases expiring in various years through the year 
2023.

     The following amounts related to capital leases are included in 
property and equipment (in millions):

                                                            December 31, 
                                                     -----------------------
                                                        1998         1997
                                                       -----        -----
Flight equipment                                      $   82      $   81
Less accumulated amortization                            (60)        (55)
                                                        ----         ---
                                                      $   22      $   26
                                                       =====       =====

     As of December 31, 1998, obligations under capital and noncancelable 
operating leases for future minimum lease payments were as follows (in 
millions):

                                                          Capital Operating
                                                          Leases    Leases
                                                          ------- --------
1999                                                       $  10    $  721
2000                                                           7       708
2001                                                           5       709
2002                                                           5       654
2003                                                           5       665
Thereafter                                                     4     5,376
                                                            ----     -----
     Total minimum lease payments                             36     8,833
     Less sublease rental receipts                             -      (110)
                                                                     -----
     Total minimum operating lease payments                         $8,723
                                                                     =====
     Less amount representing interest                        (9)
                                                            ----
     Present value of future minimum capital lease payments   27
     Less current obligations under capital leases            (7)
                                                            ----
     Long-term obligations under  capital leases           $  20
                                                            ====

     For 1998, 1997 and 1996, rental expense under operating leases was 
approximately $695 million, $741 million and $731 million, respectively. 
Rental expense for 1998, 1997 and 1996 excludes credits of $3 million, $1 
million and $23 million, respectively, related to US Airways' subleasing of 
British Aerospace BAe-146-200 (BAe-146) aircraft (see Notes 13). Rental 
expense for 1997 also excludes $5 million related to expenses recognized by 
US Airways in conjunction with certain efficiency measures (see Note 13(b)).

     US Airways also leases certain owned flight equipment to both third and 
related parties (see Notes 10(b) and 10(c)) under noncancelable operating 
leases which expire in the years 1999 through 2002. The future minimum 
rental receipts associated with these leases are: $11 million-1999; $5 
million-2000; $4 million-2001; and $2 million-2002. 



                                       94



     The following amounts relate to aircraft leased under such agreements 
as reflected in flight equipment (in millions):
                                                             December 31, 
                                                         -------------------
                                                           1998      1997
                                                           ----      ----
     Flight equipment                                    $   85   $   86
     Less accumulated amortization                          (53)     (46)
                                                           ----     ----
                                                         $   32   $   40
                                                           ====     ====

     (c)  LEGAL PROCEEDINGS

     US Airways is involved in legal proceedings arising out of an aircraft 
accident in September of 1994 near Pittsburgh in which 127 passengers and 
five crew members lost their lives. With respect to this accident, the 
National Transportation Safety Board (NTSB) held hearings in January and 
November of 1995, and is scheduled to hold a final hearing on March 23, 1999 
before issuing its final accident investigation report. Wrongful death cases 
are pending in a consolidated multi-district litigation in U.S. District 
Court for the Western District of Pennsylvania and in state court in Cook 
County, Illinois. Although US Airways has settled over 80% of the cases and 
claims arising from the Pittsburgh accident, it expects that it will be at 
least a year before all of the settlements and/or related litigation are 
concluded. A trial has been set for November 1999 in the Illinois 
litigation. US Airways is fully insured with respect to this litigation and, 
therefore, believes that the litigation will not have a material adverse 
effect on US Airways' financial condition or results of operations.

     In September 1997, Boeing filed suit against US Airways in state court 
in King County, Washington seeking unspecified damages, estimated at 
approximately $220 million, for alleged breach of two aircraft purchase 
agreements concerning, respectively, eight B757-200 aircraft and 40 B737-
Series aircraft. On October 31, 1997, US Airways filed an answer and 
counterclaims to Boeing's complaint denying liability and seeking recovery 
from Boeing of approximately $35 million in equipment purchase deposits. On 
April 23, 1998 the parties reached a settlement terminating all obligations 
with respect to both purchase agreements. Pursuant to the settlement, the 
litigation has been dismissed with prejudice as to both Boeing's claims and 
US Airways' counterclaims.

     In October 1995, US Airways terminated for cause an agreement with In-
Flight Phone Corporation (IFPC). IFPC was US Airways' provider of on-board 
telephone and interactive data systems. The IFPC system had been installed 
in approximately 80 aircraft prior to the date of termination of the 
agreement. On December 6, 1995, IFPC filed suit against US Airways in 
Illinois state court seeking equitable relief and damages in excess of $186 
million. US Airways believes that its termination of its agreement with IFPC 
was appropriate and that it is owed significant damages from IFPC. US 
Airways has filed a counterclaim against IFPC seeking compensatory damages 
in excess of $25 million and punitive damages in excess of $25 million. In 
January 1997, IFPC filed for protection from its creditors under Chapter 11 
of the Bankruptcy Code. The parties stipulated to lift the automatic stay 
provided for in the Bankruptcy Code which could allow IFPC's and US Airways' 
claims to be fully litigated. US Airways is unable to predict at this time 
the ultimate resolution or potential financial impact of these proceedings 
on its financial condition or results of operations.

     On July 30, 1996, US Airways Group and US Airways initiated a lawsuit 
in U.S. District Court for the Southern District of New York against British 
Airways, BritAir Acquisition Corp., Inc., American and American's parent 
company, AMR Corp. US Airways Group and US Airways claimed that British 
Airways, in pursuit of an alliance with American, is responsible for 
breaches of fiduciary duty to US Airways Group and US Airways and violated 
certain provisions of the January 21, 1993 Investment Agreement between US 
Airways Group and British Airways (the Investment Agreement). The lawsuit 
also claims that the defendants have committed violations of U.S. antitrust 
laws. In response to the defendants' Motion to Dismiss, the Court sustained 


                                       95



US Airways' claims for breach of contract against British Airways. The Court 
dismissed the remaining claims against British Airways and all claims 
against American. On February 6, 1998, British Airways filed its answer to 
the complaint along with counterclaims against the Company and US Airways. 
British Airways' counterclaims alleged that US Airways breached various 
provisions of the Investment Agreement and that US Airways breached the Code 
Share Agreement between British Airways and US Airways by providing certain 
allegedly confidential information to specific third parties. In addition, 
British Airways seeks a declaratory judgment regarding certain payment 
obligations under its wet lease arrangement with US Airways. British Airways 
claimed damages of $16.7 million for the termination of the code share 
relationship and an unspecified amount of damages for its remaining claims. 
On January 29, 1999, the US Airways Group, US Airways and British Airways 
jointly filed a pretrial order with the Court, and on February 5, 1999, the 
Court placed the lawsuit on its trial-ready calendar. On February 5, 1999, 
British Airways filed a motion for summary judgment seeking dismissal of US 
Airways' Group's and US Airways' claims and a finding that US Airways Group 
and US Airways are liable for breach of the Code Share Agreement. 
Subsequently, US Airways Group and US Airways filed a memorandum of law 
opposing British Airways' motion. US Airways is unable to predict at this 
time the ultimate resolution or potential financial impact of these 
proceedings on its financial condition or results of operations.

     In May 1995, US Airways Group, US Airways and the Retirement Income 
Plan for US Airways, Inc. (the Pilots Pension Plan) were sued in federal 
district court for the District of Columbia by 481 active and retired pilots 
alleging that defendants had incorrectly interpreted the Pilots Pension Plan 
provisions and erroneously calculated benefits under the Pilots Pension 
Plan. The plaintiffs sought damages in excess of  $70 million. In May 1996, 
the court issued a decision granting US Airways' Motion to Dismiss the 
majority of the complaint for lack of jurisdiction, deciding that the 
dispute must be resolved through the arbitration process under the Railway 
Labor Act because the Pilots Pension Plan was collectively bargained. The 
court retained jurisdiction over one count of the complaint alleging a 
violation of a disclosure requirement under the Employee Retirement Income 
Security Act. The plaintiffs have attempted to appeal the district court's 
dismissal before the U.S. Court of Appeals for the District of Columbia. In 
January of 1998, the Court of Appeals dismissed plaintiff's appeal for lack 
of jurisdiction because the lower court order was not final. The plaintiffs 
moved for an order certifying the lower court order as final. The district 
court granted the motion to certify and the plaintiffs appealed to the 
United States Court of Appeals for the District of Columbia. In February 
1999, the United States Court of Appeals upheld the District Court's 
decision originally granted in May 1996 in US Airways' favor.

     In February of 1998 a purported class action complaint was filed by a 
travel agency in Puerto Rico against seven major U.S. airlines, including US 
Airways. The complaint alleges that the defendant airlines are 
undercompensating Puerto Rican travel agents in connection with the agents' 
sale of travel. The plaintiffs allege that the airlines are contractually 
obligated to pay a 10% commission and that the defendant airlines breached 
that contract as a result of the introduction of commission caps limiting 
commission payable with respect to a single trip to a stated dollar amount 
and reducing certain commissions to 8%. The plaintiffs have stated their 
damages for the class in the amount of $150 million. On December 22, 1998, 
after the filing of various motions by the defendants and some preliminary 
discussions, the plaintiffs dismissed this action without the payment of any 
amount by US Airways.

     The City and County of San Francisco have sued a number of San 
Francisco International Airport tenants for the recovery of approximately 
$18 million of costs incurred with respect to the characterization and 
cleanup of soil and groundwater contamination at the airport. The City and 
County of San Francisco has identified US Airways as a potentially 
responsible party. The City and County of San Francisco and US Airways 
recently entered into an agreement in principle to resolve this matter and 
expect to finalize the agreement by April 1, 1999.


                                        96



     (d)  GUARANTEES

     As of December 31, 1998, US Airways guaranteed payments of debt and 
lease obligations of Piedmont Airlines, Inc. (Piedmont) and PSA Airlines, 
Inc. (PSA), both wholly-owned subsidiaries of US Airways Group, totaling $47 
million.

     US Airways also guarantees the payment of principal and interest on 
special facility revenue bonds issued by certain municipalities to build or 
improve airport and maintenance facilities. Under related lease 
arrangements, US Airways is required to make rental payments sufficient to 
pay maturing principal and interest payments on the bonds. As of 
December 31, 1998 the principal amount of these bonds outstanding was $77 
million.

     (e)  CONCENTRATION OF CREDIT RISK

     US Airways invests available cash in money market securities of various 
banks, commercial paper of financial institutions and other companies with 
high credit ratings and securities backed by the United States government.

     As of December 31, 1998, most of US Airways' receivables related to 
tickets sold to individual passengers through the use of major credit cards 
or to tickets sold by other airlines and used by passengers on US Airways or 
its regional airline affiliates. These receivables are short-term, generally 
being settled within 17 days after sale. Bad debt losses, which have been 
minimal in the past, have been considered in establishing allowances for 
doubtful accounts. 

     US Airways does not believe it is subject to any significant 
concentration of credit risk.

7.  STOCKHOLDER'S EQUITY AND DIVIDEND RESTRICTIONS

     (a)  COMMON STOCK AND DIVIDEND RESTRICTIONS

     US Airways Group owns all of US Airways' outstanding common stock, par 
value $1 (US Airways Common Stock). US Airways' board of directors has not 
authorized the payment of dividends on US Airways' Common Stock since 1988.

     Currently, the amount of dividends that US Airways can pay on its 
common stock is limited by covenants contained in its 9 5/8% Senior Notes. 
However, these covenants do not restrict US Airways from loaning or 
advancing funds to US Airways Group. 

     US Airways, organized under the laws of the State of Delaware, may 
also be subject to certain legal restrictions on its ability to pay 
dividends on or repurchase or redeem its own shares of capital stock.

     (b)  RECEIVABLE FROM PARENT COMPANY

See Note 10(a).

     (c)  ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX EFFECT

     US Airways adopted Statement of Financial Accounting Standards No. 
130, "Reporting Comprehensive Income" (SFAS 130), effective January 1, 
1998. SFAS 130 establishes standards for the reporting and presentation of 
comprehensive income and its components in financial statements. 
Comprehensive income encompasses net income and "other comprehensive 
income," which includes all other non-owner transactions and events that 
change stockholder's equity. US Airways' other comprehensive income 
includes unrealized gains on available-for-sale 

                                      97


securities and an adjustment for minimum pension liability, both shown net 
of income tax effects.

     Unrealized gains on available-for-sale securities are accounted for in 
accordance with SFAS 115. US Airways records an adjustment to Stockholder's 
Equity (Deficit) to reflect differences between the fair value of 
investments in marketable equity securities and short-term investments 
(both types of investments are considered "available-for-sale" under SFAS 
115) and their respective carrying values at each balance sheet date. In 
accordance with SFAS 87, US Airways recorded an Adjustment for minimum 
pension liability as of December 31, 1998, 1997 and 1996. SFAS 87 requires 
the recognition of an additional minimum pension liability for each defined 
benefit plan for which the accumulated benefit obligation exceeds the fair 
value of the plan's assets and accrued pension costs. An offsetting 
intangible asset is recognized for each additional minimum pension 
liability recorded. Because each intangible asset recognized is limited to 
the amount of unrecognized prior service cost, any balance is reflected as 
a reduction of Stockholder's Equity (Deficit).

     As presented in the accompanying Consolidated Statements of Changes in 
Stockholder's Equity (Deficit), US Airways recognized comprehensive income 
of $593 million for the year ended December 31, 1998, including net income 
of $559 million and other comprehensive income of $34 million. For the year 
ended December 31, 1997, US Airways recognized comprehensive income of 
$1,178 million, including net income of $1,052 million and other 
comprehensive income of $126 million. For the year ended December 31, 1996, 
US Airways recognized comprehensive income of $226 million, including net 
income of $183 million and other comprehensive income of $43 million. 

     The components of other comprehensive income and the related income tax
 effects are as follows (in millions):

<TABLE>
<CAPTION>

                                           1998                  1997                      1996              
                                  ---------------------   --------------------    ---------------------
                                  Before   Tax     Net    Before   Tax     Net    Before   Tax     Net
                                   tax     effect  of tax   tax     effect  of tax  tax     effect  of tax
                                  effect (expense)effect  effect 	(expense)effect effect (expense) effect
                                  ------ -------- ------  ------- -------- ------ ------ -------- -------
                                  <C>     <C>      <C>      <C>     <C>     <C>    <C>      <C>      <C>
<S>
Unrealized gain on available-
     for-sale securities:
    Unrealized gains during the 
     Period                       $ 112   $ (39)   $ 73     $160    $(56)   $104   $  -     $  -     $  -
    Reclassification adjustment 
     for gains included in net 
     income during the period         -       -       -        -       -       -      -        -        -
                                   ----    ----    ----     ----    ----    ----   ----     ----     ----
    Net unrealized gains            112     (39)     73      160     (56)    104      -        -        -
Change in adjustment for 
    minimum pension liability       (69)     30     (39)      19       3      22     43        -       43
                                   ----    ----    ----     ----    ----    ----   ----     ----     ----
Other comprehensive income
                                  $  43   $  (9)   $ 34     $179    $(53)   $126   $ 43     $  -     $ 43
                                   ====    ====    ====     ====    ====    ====   ====     ====     ====

</TABLE>



8.    OPERATING SEGMENTS AND RELATED DISCLOSURES

     In 1998, US Airways adopted Statement of Financial Accounting Standards 
No. 131 "Disclosure about Segments of an Enterprise and Related Information" 
(SFAS 131). SFAS 131 establishes standards for reporting information about 
operating segments in annual financial statements and requires selected 
information about operating segments in interim financial statements. SFAS 
131 also establishes standards for related disclosures about products and 
services, and geographic areas. Operating segments are defined as components 
of an enterprise about which separate financial information is available 
that is evaluated regularly by the chief operating decision maker in 
deciding how to allocate resources and in assessing performance.



                                       98




     US Airways has two reportable operating segments: US Airways and US 
Airways Express. The US Airways segment includes the operations of US 
Airways (excluding USAM). The US Airways Express segment only includes 
certain revenues and expenses related to US Airways Group's three wholly-
owned regional airlines and from a marketing agreement with a non-owned US 
Airways Express air carrier. As explained in Note 1(k), effective October 1, 
1996, US Airways began purchasing all the capacity generated by US Airways 
Group's three wholly-owned regional carriers. Both reportable operating 
segments are engaged in the business of transporting passengers, property 
and mail, but have different operating and economic characteristics. US 
Airways offers air transportation using exclusively jets. Its cost structure 
is higher than US Airways Express due to, among other things, higher labor 
and operating equipment costs. US Airways Express provides air 
transportation using primarily turboprop aircraft. Its route network is 
designed to feed traffic into US Airways' route system at several points, 
primarily at US Airways' hubs. All Other (as presented in the table below) 
reflects the activity of USAM. See also Notes 1 (a) and 1 (b).

     The accounting policies of the segments are the same as those described 
in the summary of significant accounting policies (see Note 1). The Company 
evaluates segment performance based on several factors, of which the primary 
financial measure is income before taxes.

     Financial information for each reportable operating segment is set 
forth below (millions):

                                         Year ended December 31,
                                         ------------------------
                                     1998          1997           1996
                                     ----          ----           ----

Operating Revenues:
     US Airways                   $ 7,845       $ 7,896        $ 7,559
     US Airways Express               711           605            145
                                     ----         -----          -----
                                  $ 8,556       $ 8,501        $ 7,704
                                    =====         =====          =====
Depreciation and amortization expense:
     US Airways                   $   290       $   385        $   301
     US Airways Express                 -             -              -
                                    -----         -----          -----
                                  $   290       $   385        $   301
                                    =====         =====          =====
Interest income:
     US Airways                   $   182       $   114        $    80
     US Airways Express                 -             -              -
     All Other                         11             7              -
     Intercompany eliminations        (11)           (9)            (4)
                                    -----         -----          -----
                                  $   182       $   112        $    76
                                    =====         =====          =====
Interest expense:
     US Airways                   $   235       $   267        $   284
     US Airways Express                 -             -              -
     All Other                          -             2              4
     Intercompany eliminations        (11)           (9)            (4)
                                    -----         -----          -----
                                  $   224       $   260        $   284
                                    =====         =====          =====
Equity in earnings of affiliates:
     US Airways                   $     -       $     -        $     -
     US Airways Express                 -             -              -
     All Other (1)                      1            30             37
                                    -----         -----          -----
                                  $     1       $    30        $    37
                                    =====         =====          =====
Income (Loss) Before Taxes:
     US Airways                   $   764       $   338        $   107
     US Airways Express               161           119             52
     All Other (1)                     11           216             32
                                    -----         -----          -----
                                  $   936       $   673        $   191
                                    =====         =====          =====
Assets (2):
     US Airways                   $ 7,392       $ 8,072        $ 7,347
     US Airways Express                 -             -              -
     All Other                        306           194             63
                                    -----         -----          -----
                                  $ 7,698       $ 8,266        $ 7,410
                                    =====         =====          =====

                 (table is continued on following page)


                                      99



                (table is continued from preceding page)

Capital Expenditures:
     US Airways                   $  624        $  271         $  176
     US Airways Express                -             -              -
     All Other                         -             -              -
                                     ---           ---            ---
                                  $  624        $  271         $  176
                                    ====          ====           ====

(1)See related information in Note 9.
(2)Substantially all located in the United States.

     Information concerning operating revenues (based on RPMs and yield) in 
principal geographic areas is as follows (millions):

                                     1998         1997           1996
                                    ------        -----          -----
United States                     $ 8,015       $ 7,966        $ 7,382
Foreign                               541           535            322
                                    -----         -----          -----
                                  $ 8,556       $ 8,501        $ 7,704
                                    =====         =====          =====

9.  USAM'S SALE OF CERTAIN INVESTMENTS

      As of December 31, 1996 and prior to the events described below, USAM 
owned 11% of the Galileo International Partnership (GIP) and approximately 
21% of the Apollo Travel Services Partnership (ATS).  GIP owned and 
operated the Galileo CRS and ATS marketed the Galileo CRS in the U.S. and 
Mexico.

     On July 30, 1997, Galileo completed an initial public offering (IPO) 
and used the proceeds, together with the proceeds of bank financing, to 
purchase ATS. Immediately preceding the IPO, GIP was merged with and into a 
wholly-owned limited liability company subsidiary of Galileo and USAM 
received common stock shares in Galileo in the same proportion as its 
partnership interest in GIP. As part of the IPO, USAM sold some of its 
Galileo shares and its interest in Galileo was reduced from 11% to 
approximately 6.7%. USAM received proceeds of $62 million and recognized a 
pre-tax gain of $50 million from the sell-down of its interest in Galileo 
and received proceeds of $162 million and recognized a pre-tax gain of $130 
million in connection with the ATS sale.

     As of December 31, 1998, USAM owned approximately 6.7% of Galileo and 
11% of GJP.  USAM applies the provisions of SFAS 115 to account for its 
remaining investment in Galileo, which is classified as "available-for-
sale."

     USAM received distributions from GIP and GJP of $2 million and $1 
million, respectively, during 1998, and $13 million and $1 million, 
respectively, during 1997.  USAM also received  a distribution from ATS of 
$5 million during 1997.

10.  RELATED PARTY TRANSACTIONS

    (a)  PARENT COMPANY

    US Airways provides loans to US Airways Group which arise in the normal 
course of business and bear interest at market rates, which are reset 
quarterly. US Airways' net receivable from US Airways Group for these loans 
were $82 million and $123 million as of December 31, 1998 and 1997, 
respectively.

    US Airways is currently financing US Airways Group's purchase deposits 
for Airbus aircraft at a blended interest rate, which is reset quarterly, 
based upon US Airways' outstanding debt and capital lease obligations. The 
related short-term receivable from US Airways Group was $132 



                                     100



million and $86 million as of December 31, 1998 and 1997, respectively.

     On December 30, 1997, US Airways Group purchased Shuttle, Inc. 
(Shuttle). US Airways provided the financing for this transaction at an 
interest rate of 7.5%, the balance of which was reflected in US Airways' 
balance sheet line item Receivable from parent company in Other Assets as of 
December 31, 1997. As of December 31, 1998, Receivable from parent company 
includes $226 million related to Shuttle's financing and $80 million related 
to financing for long-term purchase deposits for Airbus aircraft.

     US Airways reflects the receivable from US Airways Group associated 
with US Airways Group's common stock purchases as a reduction of 
Stockholder's Equity. The receivable is adjusted periodically for accrued 
interest.

     US Airways recorded net interest income of $72 million and $1 million 
in 1998 and 1997, respectively, and net interest expense of $20 million in 
1996, related to the above transactions.

(b)  REGIONAL AIRLINE SUBSIDIARIES OF US AIRWAYS GROUP

     Effective October 1, 1996, US Airways began purchasing all of the 
capacity (available seat miles or ASMs) generated by US Airways Group's 
three wholly-owned regional airline subsidiaries, Allegheny Airlines, Inc. 
(Allegheny), Piedmont and PSA, at a rate per ASM that is determined by US 
Airways on a monthly basis and, concurrently, recognizing revenues that 
result from passengers being carried by these affiliated companies. The 
rate per ASM that US Airways pays is based on estimates of the costs 
incurred to produce the capacity. US Airways recognized US Airways Express 
transportation revenues of $638 million, $605 million and $145 million and 
US Airways Express capacity purchases (expenses) of $497 million, $486 
million and $93 million in 1998, 1997 and the fourth quarter of 1996, 
respectively, related to this program.

     US Airways provides various services including passenger handling, 
contract training and catering. US Airways recognized other operating 
revenues of $60 million, $55 million and $64 million related to these 
services for the years 1998, 1997 and 1996, respectively. These regional 
airlines also perform passenger and ground handling for US Airways at 
certain airports for which US Airways recognized other operating expenses 
of $26 million $22 million and $19 million for the years 1998, 1997 and 
1996, respectively.

     US Airways also leases or subleases certain turboprop aircraft to 
these regional airline subsidiaries. US Airways recognized other operating 
revenues related to these arrangements of $6 million, $8 million and $14 
million for the years 1998, 1997 and 1996, respectively. US Airways entered 
into a sale-leaseback arrangement with Allegheny during 1994 involving 
certain turboprop aircraft (in return, US Airways subleased these same 
aircraft back to Allegheny). This arrangement was terminated in September 
1996. US Airways recognized other operating expenses related to the lease 
of these aircraft from Allegheny of $6 million for 1996.

     US Airways' receivables from and payables to these regional airlines 
were $12 million and $39 million, respectively, as of December 31, 1998 and 
$19 million and $37 million, respectively, as of December  31, 1997. 
Liabilities related to tickets sold for travel on the regional airline 
subsidiaries are included in the US Airways' Traffic balances payable and 
unused tickets balance sheet line item.

     US Airways and Shuttle provide each other with loans which arise in 
the normal course of business and bear interest at market rates, which are 
reset quarterly. US Airways' net payable to Shuttle for intercompany loan 
balances was $11 million as of December 31, 1998.




                                     101



     US Airways provides various services to Shuttle including the sale of 
frequent traveler mileage credits, the subleasing of certain facilities and 
management services. US Airways recognized other operating revenues related 
to these services of $10 million during 1998. US Airways receivables from 
Shuttle were $9 million and $8 million, as of December 31, 1998 and 1997, 
respectively. US Airways' Traffic balances payable and unused tickets 
balance sheet line item includes $9 million and $7 million as of December 
31, 1998 and 1997, respectively, related to tickets sold for travel on 
Shuttle.

     (c)  OTHER US AIRWAYS GROUP SUBSIDIARIES

     US Airways leased certain aircraft to US Airways Group's wholly-owned 
subsidiary US Airways Leasing and Sales, Inc. (US Airways Leasing and 
Sales). US Airways Leasing and Sales subleased these aircraft to third 
parties. This arrangement was terminated in January 1998. US Airways 
recognized other operating revenues related to these arrangements of $2 
million and $4 million for the years 1997 and 1996, respectively. US 
Airways' receivable from US Airways Leasing and Sales was $21 million as of 
December 31, 1997 (primarily resulting from the transfer of income tax 
benefits as discussed in Note 3).

     US Airways purchases a portion of its aviation fuel from US Airways 
Group's wholly-owned subsidiary US Airways Fuel Corporation (Fuel Corp.), 
which acts as a fuel wholesaler to US Airways in certain circumstances. US 
Airways' aviation fuel purchases were $125 million, $183 million and $206 
million for the years 1998, 1997 and 1996, respectively. US Airways' 
accounts payable to Fuel Corp. was $10 million and $17 million as of 
December 31, 1998 and 1997, respectively.

     AAL was incorporated in June 1998 and is a wholly-owned subsidiary of 
US Airways Group. AAL is a captive insurance company that was formed to 
manage a portion of US Airways' airline hull and liability insurance needs. 
A portion of the premium paid by US Airways to AAL is commission revenues 
to AAL and the remaining premium is used to obtain policies from insurance 
underwriters.

     (d)  BRITISH AIRWAYS

     During 1993, US Airways Group and British Airways entered into an 
Investment Agreement under which a wholly-owned subsidiary of British 
Airways purchased certain series of redeemable convertible preferred stock 
from US Airways Group and British Airways entered into code sharing and wet 
lease arrangements with US Airways. 

     US Airways wet leased B767-200ER aircraft, including cockpit and cabin 
crews, to British Airways in order to serve three routes between the U.S. 
and London beginning in June 1993 and ending in May 1996. During 1996, US 
Airways recognized other operating revenues of $13 million related to these 
arrangements which were offset by an equal amount of other operating 
expenses. US Airways also had various agreements with British Airways for 
ground handling at certain airports, contract training and other services. 
US Airways recognized other operating revenues of $2 million for the first 
five months of 1997 and $6 million for the year 1996 related to services US 
Airways performed for British  Airways.

    US Airways terminated the code share and other business arrangements 
between the two companies effective March 29, 1997. In addition, US Airways 
believes that British Airways held no ownership interest in US Airways 
Group after May 22, 1997.





                                   102



11.  VALUATION AND QUALIFYING ACCOUNTS

                                               Allowance For
                                      ----------------------------
                                       Uncollectible   Inventory
                                         Accounts     Obsolescence
                                      --------------  ------------

                                              (in millions)

Balance as of December 31, 1995           $ 12           $162
     Additions charged to expense           11              9
     Amounts charged to allowance          (11)           (28)
                                           ---            ---
Balance as of December 31, 1996             12            143
     Additions charged to expense           14              9
     Amounts charged to allowance           (9)            (9)
                                           ---            ---
Balance as of December 31, 1997             17            143
     Additions charged to expense            9             10
     Amounts charged to allowance           (5)           (44)
                                           ---            ---
Balance as of December 31, 1998           $ 21           $109
                                           ===            === 
12.   SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

                              First    Second    Third     Fourth
                             Quarter   Quarter   Quarter   Quarter
                             -------   -------   -------   -------

                                      (in millions)
1998
Operating Revenues            $2,031    $2,261    $2,177   $2,087
Operating Income              $  189    $  366    $  263   $  171
Net Income                    $  101    $  196    $  149   $  114

1997
Operating Revenues            $2,090    $2,208    $2,115   $2,087
Operating Income              $  174    $  259    $   85   $   68
Net Income                    $  144    $  202    $  187   $  520

See also Note 13.

Note:  The sum of the four quarters may not equal the totals for the year 
due to
       rounding of quarterly results.

13.  NONRECURRING ITEMS AND SIGNIFICANT QUARTERLY ADJUSTMENTS

     (a)  1998

      US Airways' results for 1998 include one nonrecurring item recorded 
during the third quarter related to the early termination of leases for two 
BAe-146 aircraft. US Airways reversed $3 million of previously accrued rent 
obligations related to these aircraft (recorded as a credit to Aircraft 
rent expense).

     (b)  1997

     US Airways' results for 1997 include certain nonrecurring items:  (i) 
$122 million recorded in Personnel costs (including a fourth quarter charge 
of $115 million related to an early retirement program for pilots (see also 
Note 5(a)) and a second quarter charge of $7 million related to estimated 
employee severance payments due to efficiency measures US Airways announced 
during May 1997); (ii) a $1 million credit recorded in Aircraft rent due to 
the reversal of previously accrued lease obligations upon the subleasing of 
an additional BAe-146 aircraft, recognized in the second quarter (see also 
Note 13(c) below); (iii) $5 million recorded in Other rent and landing fees 
(including a third quarter charge of $2 million to write-down certain 
equipment to be disposed of and a second quarter charge of $3 million to 
write-off lease



                                    103


obligations at certain facilities to be abandoned (net of any anticipated 
sublease revenues), both related to the May 1997 efficiency measures); (iv) 
$89 million recorded in Depreciation and amortization (including third 
quarter charges of $11 million related to the May 1997 efficiency measures 
to write-down certain equipment to be disposed of and a $59 million SFAS 
121 impairment charge resulting from US Airways' September 1997 decision to 
retire its remaining DC-9-30 aircraft over the next several years, and 
second quarter charges of $1 million to write-off certain leasehold 
improvements and an $18 million SFAS 121 impairment charge to write-down 
certain DC-9-30 aircraft, both related to the May 1997 efficiency 
measures); and (v) $180 million recorded in Gains on sales of interests in 
affiliates which resulted from USAM's sale of certain investments as 
discussed in Note 9. US Airways also recognized certain tax benefits in 
1997, as discussed in Note 3.

     (c)  1996

     US Airways' results for 1996 include two nonrecurring items recorded 
during the second quarter of 1996 related to its subleasing of 11 non-
operating BAe-146 aircraft. US Airways reversed $23 million of previously 
accrued rent obligations related to these aircraft against Aircraft rent 
expense and reversed $7 million against Aircraft maintenance expense 
related to previously accrued lease return provisions.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF US AIRWAYS GROUP

     Information regarding this item appears in the Company's definitive 
Proxy Statement to be filed pursuant to Regulation 14A relating to the 
Company's Annual Meeting of Stockholders on May 19, 1999 and is incorporated 
herein by reference. Information concerning executive officers of the 
Company is set forth in Part I, Item 1 of this report under the caption 
"Executive Officers" in reliance on General Instruction G to Form 10-K.

ITEM 11.  EXECUTIVE COMPENSATION.

     Information regarding this item appears in the Company's definitive 
Proxy Statement to be filed pursuant to Regulation 14A relating to the 
Company's Annual Meeting of Stockholders on May 19, 1999 and is incorporated 
herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Information regarding this item appears in the Company's definitive 
Proxy Statement to be filed pursuant to Regulation 14A relating to the 
Company's Annual Meeting of Stockholders on May 19, 1999 and is incorporated 
herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Information regarding this item appears in the Company's definitive 
Proxy Statement to be filed pursuant to Regulation 14A relating to the 
Company's Annual Meeting of Stockholders on May 19, 1999 and is incorporated 
herein by reference.



                                    104



Part IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

The following documents are filed as part of this report:

CONSOLIDATED FINANCIAL STATEMENTS

(i)  The following consolidated financial statements of US Airways Group, 
Inc.
     are included in Part II, Item 8A of this report:
        -Consolidated Statements of Operations for each of the three years 
         ended December 31, 1998
        -Consolidated Balance Sheets as of December 31, 1998 and 1997
        -Consolidated Statements of Cash Flows for each of the three years 
         ended December 31, 1998
        -Consolidated Statements of Changes in Stockholders' Equity
         (Deficit) 
         for each of the three years ended December 31, 1998
        -Notes to Consolidated Financial Statements

(ii) The following consolidated financial statements of US Airways, Inc. are 
     included in Part II, Item 8B of this report:

        -Consolidated Statements of Operations for each of the three years 
         ended December 31, 1998
        -Consolidated Balance Sheets as of December 31, 1998 and 1997
        -Consolidated Statements of Cash Flows for each of the three years 
         ended December 31, 1998
        -Consolidated Statements of Changes in Stockholder's Equity
         (Deficit) 
         for each of the three years ended December 31, 1998
        -Notes to Consolidated Financial Statements

CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

     All financial statement schedules have been omitted because they are 
not applicable or not required, or because the required information is 
either incorporated herein by reference or included in the financial 
statements or notes thereto included in this report.

EXHIBITS

Designation                        Description
-----------                        -----------

 3.1  Restated Certificate of Incorporation of US Airways Group, Inc. (US 
      Airways Group) (incorporated by reference to Exhibit 3.1 to US
      Airways 
      Group's Registration Statement on Form 8-B dated January 27, 1983), 
      including the Certificate of Amendment dated May 13, 1987 
      (incorporated by reference to Exhibit 3.1 to US Airways Group's and
      US Airways, Inc.'s (US Airways) Quarterly Report on Form 10-Q for the 
      quarter ended March 31, 1987), the Certificate of Increase dated 
      June 30, 1987 (incorporated by reference to Exhibit 3 to US Airways 
      Group's and US Airways' Quarterly Report on Form 10-Q for the quarter 
      ended June 30, 1987), the Certificate of Increase dated October 16, 
      1987 (incorporated by reference to Exhibit 3.1 to US Airways Group's 
      and US Airways' Quarterly Report on Form 10-Q for the quarter ended 
      September 30, 1987), the Certificate of Increase dated August 7, 1989 
      (incorporated by reference to Exhibit 3.1 to US Airways Group's
      Annual Report on Form 10-K for the year ended December 31, 1989),
      the Certificate of Increase dated April 9, 1992 (incorporated by
      reference to Exhibit 3.1 to US Airways Group's and US Airways' Annual
      Report on Form 10-K for the year ended December 31, 1992), the
      Certificate of Increase dated January 21, 1993 (incorporated by
      reference to US Airways Group's and US Airways' Annual 



                                     105



      Report on Form 10-K for the year ended December 31, 1992), and the
      Certificate of Amendment dated May 26, 1993 (incorporated by 
      reference to Appendix II to US Airways Group's Proxy Statement dated
      April 26, 1993); and the Certificate of Ownership and Merger merging
      Nameco, Inc. into USAir Group, Inc. dated February 17, 1997
      (incorporated by reference to Exhibit 3.1 to US Airways Group's
      Annual Report on Form 10-K for 1996).

 3.2  By-Laws of US Airways Group.

 3.3  Restated Certificate of Incorporation of US Airways (incorporated by 
      reference to Exhibit 3.1 to US Airways' Registration Statement on
      Form 8-B dated January 27, 1983); and the Certificate of Amendment to
      Restated Certificate of Incorporation of USAir, Inc. dated
      February 17, 1997 (incorporated by reference to Exhibit 3.3 to
      US Airways' Annual Report on Form 10-K for 1996).

 3.4  By-Laws of US Airways.

10.1  Purchase agreement dated October 31, 1997 between US Airways Group
      and AVSA, S.A.R.L. (AVSA), an affiliate of aircraft manufacturer
      Airbus Industrie G.I.E. (incorporated by reference to Exhibit 10.1 to 
      US Airways Group's Quarterly Report on Form 10-Q for the three months 
      ended September 30, 1997) (portions of this exhibit were omitted
      pursuant to a request for confidential treatment and filed separately
      with the United States Securities and Exchange Commission (SEC)).

10.2  Amendment No. 1 dated June 10, 1998 to purchase agreement dated
      October 31, 1997 between US Airways Group and AVSA
      (portions of this exhibit have been omitted pursuant to a request for
      confidential treatment and filed separately with the SEC).

10.3  Amendment No. 2 dated January 19, 1999 to purchase agreement dated 
      October 31, 1997 between US Airways Group and AVSA
      (portions of this exhibit have been omitted pursuant to a request for
      confidential treatment and filed separately with the SEC).


10.4  Purchase agreement dated November 24, 1998 between US Airways Group
      and AVSA (portions of this exhibit have been omitted
      pursuant to a request for confidential treatment and filed separately
      with the SEC).

10.5  Incentive Compensation Plan of US Airways Group, Inc. as amended and 
      restated January 1, 1997 (incorporated by reference to Exhibit 10.6
      to US Airways Group's Annual Report on Form 10-K for the year ended 
      December 31, 1997).

10.6  US Airways, Inc. Supplementary Retirement Benefit Plan (incorporated
      by reference to Exhibit 10.5 to US Airways Group's Annual Report on
      Form 10-K for the year ended December 31, 1989).

10.7  US Airways, Inc. Supplemental Executive Defined Contribution Plan 
      (incorporated by reference to Exhibit 10.6 to US Airways Group's
      Annual Report on Form 10-K for the year ended December 31, 1994).

10.8  1998 Pilot Stock Option Plan of US Airways Group, Inc. (incorporated
      by reference to Exhibit 10 to US Airways Group's Quarterly Report on 
      Form 10-Q for the three months ended September 30, 1998).



                                     106


10.9  1997 Stock Incentive Plan of US Airways Group, Inc. as amended and 
      restated as of November 18, 1997 (incorporated by reference to
      Exhibit 10.9 to US Airways Group's Annual Report on Form 10-K for the
      year ended December 31, 1997).

10.10 1996 Stock Incentive Plan of US Airways Group, Inc. as amended and 
      restated as of May 20, 1998 (incorporated by reference to Exhibit 10
      to US Airways Group's Quarterly Report on Form 10-Q for the three 
      months ended June 30, 1998).

10.11 US Airways Group Nonemployee Director Stock Incentive Plan 
      (incorporated by reference to Exhibit B to US Airways Group's Proxy 
      Statement dated April 15, 1996).

10.12 US Airways Group Nonemployee Director Deferred Stock Unit Plan 
      (incorporated by reference to Exhibit 10.12 to US Airways Group's 
      Annual Report on Form 10-K for the year ended December 31, 1997).

10.13 Amendment No. 1 dated July 22, 1998 to the US Airways Group
      Nonemployee Director Deferred Stock Unit Plan.

10.14 Amendment No. 2 dated March 17, 1999 to the US Airways Group
      Nonemployee Director Deferred Stock Unit Plan.

10.15 1992 Stock Option Plan of USAir Group (incorporated by reference to 
      Exhibit A to US Airways Group's Proxy Statement dated March 31,
      1992).

10.16 1984 Stock Option and Stock Appreciation Rights Plan of USAir Group 
      Inc. (incorporated by reference to Exhibit A to US Airways Group's
      Proxy Statement dated March 30, 1984).

10.17 Amendment to Employment Agreement between US Airways and its former 
      Senior Vice President-Finance and Chief Financial Officer
      (incorporated by reference to Exhibit 10.2 to US Airways Group's
      Quarterly Report on Form 10-Q for the three months ended
      September 30, 1997).

10.18 Employment Agreement among US Airways Group and US Airways and the
      Chairman of both companies.

10.19 Employment Agreement among US Airways Group and US Airways and the
      President and Chief Executive Officer of both companies.

10.20 Employment Agreement between US Airways and its Executive Vice 
      President-Corporate Affairs and General Counsel (incorporated by 
      reference to Exhibit 10.13 to US Airways Group's Annual Report on
      Form 10-K for the year ended December 31, 1995).

10.21 Agreement between US Airways and its Chairman with respect to
      certain employment arrangements.

10.22 Agreement between US Airways and its President and Chief Executive
      Officer with respect to certain employment arrangements



                                     107



10.23 Agreement between US Airways and its Executive Vice President-
      Corporate Affairs and General Counsel with respect to certain
      employment arrangements (incorporated by reference to Exhibit 10.16
      to US Airways Group's Annual Report on Form 10-K for the year ended
      December 31, 1995).

10.24 Agreement between US Airways and its Senior Vice President-Planning  
      with respect to certain employment arrangements.

10.25 Employment Agreement between US Airways and its former Executive
      Vice President-Human Resources (incorporated by reference to Exhibit
      10.22 to US Airways Group's Annual Report on Form 10-K for the year
      ended December 31, 1995). 

10.26 Agreement between US Airways and its Chairman providing
      supplemental retirement benefits (incorporated by reference to
      Exhibit 10.23 to US Airways Group's Annual Report on Form 10-K for
      the year ended December 31, 1995).

10.27 Amendment to the agreement between US Airways and its Chairman
      providing supplemental retirement benefits.

10.28 Agreement between US Airways and its President and Chief Executive
      Officer providing supplemental retirement benefits (incorporated 
      by reference to Exhibit 10.24 to US Airways Group's Annual Report
      on Form 10-K for the year ended December 31, 1995).

10.29 Amendment to the agreement between US Airways and its President and
      its Chief Executive Officer providing supplemental retirement
      benefits

10.30 Agreement between US Airways and its Executive Vice President-
      Corporate Affairs and General Counsel providing supplemental 
      retirement benefits (incorporated by reference to Exhibit 10.25 to
      US Airways Group's Annual Report on Form 10-K for the year ended 
      December 31, 1995).

10.31 Agreement between US Airways and its Senior Vice President-Planning 
      providing supplemental retirement benefits.

10.32 Employment Agreement between US Airways and its former Executive Vice 
      President-Human Resources providing retirement benefits (incorporated 
      by reference to Exhibit 10.30 to US Airways Group's Annual Report on 
      Form 10-K for the year ended December 31, 1995).

21.1  Subsidiaries of US Airways Group.

21.2  Subsidiaries of US Airways.

23.1  Consent of the Auditors of US Airways Group to the incorporation of 
      their report concerning certain financial statements contained in
      this report in certain registration statements.

23.2  Consent of the Auditors of US Airways to the incorporation of their 
      report concerning certain financial statements contained in this
      report in certain registration statements.


                                     108



24.1  Powers of Attorney signed by the directors of US Airways Group, 
      authorizing their signatures on this report.

24.2  Powers of Attorney signed by the directors of US Airways, authorizing 
      their signatures on this report.


27.1  Financial Data Schedule-US Airways Group.

27.2  Financial Data Schedule-US Airways.

REPORTS ON FORM 8-K

Date of Report                   Subject of Report
--------------                   -----------------

March 5, 1999  News release announcing that pursuant to a secondary offering 
               made by SOCIETE Internationale de Telcommunications 
               Aeronatiquies ("SITA"), SITA sold  part of its interest in 
               the international data network service provider Equant n.v.
               As member of SITA, US Airways, Inc. is treated as having 
               indirectly sold approximately 30 percent of its holdings in 
               Equant n.v. and as a result will recognize a before-tax gain 
               of $9,944,096.00.

January 20, 1999
               Consolidated statements of operations for both US Airways
               Group and US Airways for the three months and year ended
               December 31, 1998, and select operating and financial
               statistics for US Airways for the same periods.

December 4, 1998
               Document filed as an Exhibit in connection with, and 
               incorporated by reference into, US Airways' Registration 
               Statement on Form S-3 (Registration No. 33-64425). The 
               registration statement and the Prospectus Supplement, dated 
               December 4, 1998 to the Prospectus, dated September 28, 1998, 
               relate to the offering by US Airways of Pass Through 
               Certificates, Series 1998-1.

December 14, 1998
               Documents filed as Exhibits in connection with, and 
               incorporated by reference into, US Airways' Registration 
               Statement on Form S-3 (Registration No. 333-64425). The 
               registration statement, and the Prospectus Supplement, dated 
               December 4, 1998, to the Prospectus, dated November 17, 1998, 
               relate to the offering of US Airways Pass Through 
               Certificates, Series 1998-1.

November 23, 1998 
               News release announcing US Airways Group's board of directors 
               authorization for the purchase from time to time in the open 
               market or in privately negotiated transactions of up to $500 
               million of the Company's outstanding common stock.


                  (this space intentionally left blank)


                                     109



                                     SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the registrant has duly caused this report to be 
signed on its behalf by the undersigned, thereunto duly authorized, on March 
19, 1999.

US AIRWAYS GROUP, INC. (REGISTRANT)


By: /s/ RAKESH GANGWAL
        ----------------
    Rakesh Gangwal, Director, President and Chief Executive Officer 
   (Principal Executive Officer)


     Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on behalf of US 
Airways Group in the capacities indicated, on March 19, 1999.


By: /s/ RAKESH GANGWAL
        ---------------
     Rakesh Gangwal, Director, President and Chief Executive Officer 
    (Principal Executive Officer)


By: /s/ THOMAS A. MUTRYN
        -----------------
     Thomas A. Mutryn, Chief Financial Officer 
    (Principal Financial Officer and Principal Accounting Officer)


By:                     *            
   -----------------------------------
     Stephen M. Wolf, Director and Chairman


By:                     *         
    -----------------------------------------
    Mathias J. DeVito, Director


By:                     *         
    ----------------------------------------
    Peter M. George, Director


By:                     *         
    ----------------------------------------
    George J. W. Goodman, Director


By:                     *         
   -----------------------------------------
    John W. Harris, Director


By:                     *         
    ----------------------------------------
    Edward A. Horrigan, Jr., Director



                   (signatures continued on following page)


                                    110



                  (signatures continued from preceding page)


By:                     *         
    ----------------------------------------
    Robert L. Johnson, Director


By:                     *         
   -----------------------------------------
    Robert LeBuhn, Director


By:                     *         
   -----------------------------------------
   John G. Medlin, Jr., Director


By:                     *         
    ----------------------------------------
    Hanne M. Merriman, Director


By:                     *         
    -----------------------------------------
    Raymond W. Smith, Director


By: /s/ THOMAS A. MUTRYN
    ----------------------
    Thomas A. Mutryn, Attorney-In-Fact

* Signed pursuant to power of attorney filed herewith.


                              SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the registrant has duly caused this report to be 
signed on its behalf by the undersigned, thereunto duly authorized, on March 
19, 1999.

US AIRWAYS, INC. (REGISTRANT)


By: /s/ RAKESH GANGWAL
        -----------------
     Rakesh Gangwal, Director, President and Chief Executive Officer 
    (Principal Executive Officer)

     Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on behalf of US 
Airways and in the capacities indicated, on March 19, 1999.


By: /s/ RAKESH GANGWAL
        ----------------
     Rakesh Gangwal, Director, President and Chief Executive Officer 
    (Principal Executive Officer)

By: /s/ THOMAS A. MUTRYN
       -------------------
    Thomas A. Mutryn, Chief Financial Officer 
   (Principal Financial Officer and Principal Accounting Officer)


                     (signatures continued on following page)


                                     111


                    (signatures continued from preceding page)



By:                     *         
   ---------------------------------------
    Stephen M. Wolf, Director and Chairman


By:                     *         
   ---------------------------------------
    Mathias J. DeVito, Director


By:                     *         
    ----------------------------------
    Peter M. George, Director


By:                     *         
    ---------------------------------
    George J. W. Goodman, Director


By:                     *         
    ---------------------------------
    John W. Harris, Director


By:                     *        
    --------------------------------- 
    Edward A. Horrigan, Jr., Director


By:                     *         
    ---------------------------------
    Robert L. Johnson, Director


By:                     *         
    --------------------------------
    Robert LeBuhn, Director


By:                     *         
    ---------------------------------
    John G. Medlin, Jr., Director


By:                     *         
    ---------------------------------
    Hanne M. Merriman, Director


By:                     *         
    -----------------------------------
    Raymond W. Smith, Director


By: /s/ THOMAS A. MUTRYN
    -----------------------------------

    Thomas A. Mutryn, Attorney-In-Fact

* Signed pursuant to power of attorney filed herewith.




                                     112