##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2008
 or
 o
    
    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.
  
 
 US Airways, Inc.
  
 
 
 
 þ o
  US Airways Group, Inc.
    
    Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company oUS Airways, Inc.
    
    Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
  o þ  o þ
  þ o  þ o




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##### 



US Airways Group, Inc.
Form 10-Q
Quarterly Period Ended March 31, 2008
Table of Contents
 PagePart I. Financial InformationItem 1A. Condensed Consolidated Financial Statements of US Airways Group, Inc.Condensed Consolidated Statements of Operations
    
    
    5Condensed Consolidated Balance Sheets
    
    
    6Condensed Consolidated Statements of Cash Flows
    
    
    7Notes to the Condensed Consolidated Financial Statements
    
    
    8Item 1B. Condensed Consolidated Financial Statements of US Airways, Inc.Condensed Consolidated Statements of Operations
    
    
    14Condensed Consolidated Balance Sheets
    
    
    15Condensed Consolidated Statements of Cash Flows
    
    
    16Notes to the Condensed Consolidated Financial Statements
    
    
    17Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    40Item 4. Controls and Procedures
    
    
    41Part II. Other InformationItem 1. Legal Proceedings
    
    
    42Item 1A. Risk Factors
    
    
    42Item 6. Exhibits
    
    
    50Signatures
    
    
    51EX-10.1EX-10.2EX-10.3EX-31.1EX-31.2EX-31.3EX-31.4EX-32.1EX-32.2
  2




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##### Table of Contents



Note Concerning Forward-Looking Statements
  
    
    the impact of high fuel costs, significant disruptions in the supply of aircraft fuel and
further significant increases to fuel prices;
    
    the impact of future significant operating losses;
    
    labor costs and relations with unionized employees generally and the impact and outcome
of labor negotiations;
    
    reliance on automated systems and the impact of any failure or disruption of these
systems;
    
    our ability to obtain and maintain adequate facilities and infrastructure to operate and
grow our route network;
    
    delays in scheduled aircraft deliveries or other loss of anticipated fleet capacity;
    
    changes in government legislation and regulation, including environmental regulation;
    
    the impact of global instability, including the current instability in the Middle East,
the continuing impact of the military presence in Iraq and Afghanistan and the terrorist
attacks of September 11, 2001 and the potential impact of future hostilities, terrorist
attacks, infectious disease outbreaks or other global events that affect travel behavior;
    
    security-related and insurance costs;
    
    our ability to obtain and maintain commercially reasonable terms with vendors and service
providers and our reliance on those vendors and service providers;
    
    changes in prevailing interest rates;
    
    our high level of fixed obligations and our ability to obtain and maintain financing for
operations and other purposes and operate pursuant to the terms of our financing facilities
(particularly the financial covenants);
    
    costs of ongoing data security compliance requirements and the impact of any data
security breach;
    
    the impact of industry consolidation;
    
    competitive practices in the industry, including significant fare restructuring
activities, capacity reductions and in court or out of court restructuring by major
airlines;
    
    our ability to attract and retain qualified personnel;
    
    interruptions or disruptions in service at one or more of our hub airports;
 3




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##### Table of Contents




    
    the impact of any accident involving our aircraft;
    
    weather conditions;
    
    the impact of foreign currency exchange rate fluctuations;
    
    our ability to use pre-merger NOLs and certain other tax attributes;
    
    our ability to integrate the management, operations and labor groups of US Airways Group
and America West Holdings;
    
    our ability to maintain adequate liquidity;
    
    our ability to maintain contracts that are critical to our operations;
    
    our ability to attract and retain customers;
    
    the cyclical nature of the airline industry;
    
    economic conditions; and
    
    other risks and uncertainties listed from time to time in our reports to the Securities
and Exchange Commission.
  
 Part I. Financial Information
  4




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Three MonthsEnded March 31,2008
    
    
    2007Operating revenues:Mainline passenger
    
    $
    1,953
    
    
    $
    1,906Express passenger
    
    
    657
    
    
    
    609Cargo
    
    
    36
    
    
    
    37Other
    
    
    194
    
    
    
    180Total operating revenues
    
    
    2,840
    
    
    
    2,732Operating expenses:Aircraft fuel and related taxes
    
    
    823
    
    
    
    550Gain on fuel hedging instruments, net
    
    
    (117
    )
    
    
    (54
    )Salaries and related costs
    
    
    563
    
    
    
    527Express expenses
    
    
    734
    
    
    
    620Aircraft rent
    
    
    178
    
    
    
    180Aircraft maintenance
    
    
    213
    
    
    
    165Other rent and landing fees
    
    
    145
    
    
    
    128Selling expenses
    
    
    104
    
    
    
    106Special items, net
    
    
    26
    
    
    
    39Depreciation and amortization
    
    
    50
    
    
    
    44Other
    
    
    317
    
    
    
    311Total operating expenses
    
    
    3,036
    
    
    
    2,616Operating income (loss)
    
    
    (196
    )
    
    
    116Nonoperating income (expense):Interest income
    
    
    29
    
    
    
    40Interest expense, net
    
    
    (60
    )
    
    
    (71
    )Other, net
    
    
    (9
    )
    
    
    (16
    )Total nonoperating expense, net
    
    
    (40
    )
    
    
    (47
    )Income (loss) before income taxes
    
    
    (236
    )
    
    
    69Income tax provision
    
    
    
    
    
    
    3Net income (loss)
    
    $
    (236
    )
    
    $
    66Earnings (loss) per common share:Basic earnings (loss) per common share
    
    
    (2.56
    )
    
    
    0.73Diluted earnings (loss) per common share
    
    
    (2.56
    )
    
    
    0.70Shares used for computation (in thousands):Basic
    
    
    92,023
    
    
    
    91,363Diluted
    
    
    92,023
    
    
    
    96,223
  5




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March 31,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    1,905
    
    
    $
    1,948Investments in marketable securities
    
    
    165
    
    
    
    226Restricted cash
    
    
    2
    
    
    
    2Accounts receivable, net
    
    
    522
    
    
    
    374Materials and supplies, net
    
    
    297
    
    
    
    249Prepaid expenses and other
    
    
    630
    
    
    
    548Total current assets
    
    
    3,521
    
    
    
    3,347Property and equipmentFlight equipment
    
    
    2,517
    
    
    
    2,414Ground property and equipment
    
    
    741
    
    
    
    703Less accumulated depreciation and amortization
    
    
    (802
    )
    
    
    (757
    )2,456
    
    
    
    2,360Equipment purchase deposits
    
    
    164
    
    
    
    128Total property and equipment
    
    
    2,620
    
    
    
    2,488Other assetsGoodwill
    
    
    622
    
    
    
    622Other intangibles, net
    
    
    547
    
    
    
    553Restricted cash
    
    
    461
    
    
    
    466Investments in marketable securities
    
    
    295
    
    
    
    353Other assets, net
    
    
    209
    
    
    
    211Total other assets
    
    
    2,134
    
    
    
    2,205Total assets
    
    $
    8,275
    
    
    $
    8,040LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent maturities of debt and capital leases
    
    $
    138
    
    
    $
    117Accounts payable
    
    
    398
    
    
    
    366Air traffic liability
    
    
    1,208
    
    
    
    832Accrued compensation and vacation
    
    
    152
    
    
    
    225Accrued taxes
    
    
    186
    
    
    
    152Other accrued expenses
    
    
    891
    
    
    
    859Total current liabilities
    
    
    2,973
    
    
    
    2,551Noncurrent liabilities and deferred creditsLong-term debt and capital leases, net of current maturities
    
    
    3,108
    
    
    
    3,031Deferred gains and credits, net
    
    
    153
    
    
    
    168Postretirement benefits other than pensions
    
    
    139
    
    
    
    138Employee benefit liabilities and other
    
    
    739
    
    
    
    713Total noncurrent liabilities and deferred credits
    
    
    4,139
    
    
    
    4,050Stockholders equityCommon stock, $0.01 par value; 200,000,000 shares authorized, 92,439,648 and
92,025,655 shares issued and outstanding at March 31, 2008; 92,278,557 and
91,864,564 shares issued and outstanding at December 31, 2007
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    1,545
    
    
    
    1,536Accumulated other comprehensive income (loss)
    
    
    (37
    )
    
    
    10Accumulated deficit
    
    
    (333
    )
    
    
    (95
    )Treasury stock, common stock, 413,993 shares at March 31, 2008 and December 31, 2007
    
    
    (13
    )
    
    
    (13
    )Total stockholders equity
    
    
    1,163
    
    
    
    1,439Total liabilities and stockholders equity
    
    $
    8,275
    
    
    $
    8,040
  6




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##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007Net cash provided by (used in) operating activities
    
    $
    (25
    )
    
    $
    299Cash flows from investing activities:Purchases of property and equipment
    
    
    (150
    )
    
    
    (86
    )Purchases of marketable securities
    
    
    (90
    )
    
    
    (908
    )Sales of marketable securities
    
    
    151
    
    
    
    503Proceeds from sale of other investments
    
    
    1
    
    
    
    31Decrease (increase) in long-term restricted cash
    
    
    5
    
    
    
    (70
    )Proceeds from dispositions of property and equipment
    
    
    
    
    
    
    3Increase in equipment purchase deposits
    
    
    (36
    )
    
    
    (5
    )Other
    
    
    2
    
    
    
    Net cash used in investing activities
    
    
    (117
    )
    
    
    (532
    )Cash flows from financing activities:Repayments of debt and capital lease obligations
    
    
    (149
    )
    
    
    (1,629
    )Proceeds from issuance of debt
    
    
    251
    
    
    
    1,622Deferred financing costs
    
    
    (3
    )
    
    
    (8
    )Proceeds from issuance of common stock, net
    
    
    
    
    
    
    3Net cash provided by (used in) financing activities
    
    
    99
    
    
    
    (12
    )Net decrease in cash and cash equivalents
    
    
    (43
    )
    
    
    (245
    )Cash and cash equivalents at beginning of period
    
    
    1,948
    
    
    
    1,116Cash and cash equivalents at end of period
    
    $
    1,905
    
    
    $
    871Non-cash investing and financing activities:Net unrealized loss on available for sale securities
    
    $
    45
    
    
    $
    Supplemental information:Interest paid, net of amounts capitalized
    
    $
    70
    
    
    $
    79Income taxes paid
    
    
    
    
    
    
    1
  7




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US Airways Group, Inc.
 
 Notes to Condensed Consolidated Financial Statements
 (Unaudited)
 1. Basis of presentation
   Recent Accounting Pronouncements
    8




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##### Table of Contents



2. Special items, net
    3. Earnings (loss) per common share
  Three Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007Basic earnings (loss) per share:Net income (loss)
    
    $
    (236
    )
    
    $
    66Weighted average common shares outstanding (in thousands)
    
    
    92,023
    
    
    
    91,363Basic earnings (loss) per share
    
    $
    (2.56
    )
    
    $
    0.73Diluted earnings (loss) per share:Net income (loss)
    
    $
    (236
    )
    
    $
    66Interest expense on 7.0% senior convertible notes
    
    
    
    
    
    
    1Income (loss) for purposes of computing diluted net income (loss) per share
    
    $
    (236
    )
    
    $
    67Share computation (in thousands):Weighted average common shares outstanding
    
    
    92,023
    
    
    
    91,363Dilutive effect of stock awards and warrants
    
    
    
    
    
    
    1,810Assumed conversion of 7.0% senior convertible notes
    
    
    
    
    
    
    3,050Weighted average common shares outstanding as adjusted
    
    
    92,023
    
    
    
    96,223Diluted earnings (loss) per share
    
    $
    (2.56
    )
    
    $
    0.70
    9




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4. Debt
  March 31,
    
    
    December 31,2008
    
    
    2007SecuredCiticorp North America loan, variable interest rate of 5.63%, installments due through 2014
    
    $
    1,584
    
    
    $
    1,600Equipment notes payable and aircraft pre-delivery payment financings, fixed and variable
interest rates ranging from 4% to 9.01%, maturing from 2008 to 2022
    
    
    1,498
    
    
    
    1,378Slot financing, interest rate of 8%, interest only payments until due in 2015
    
    
    47
    
    
    
    47Capital lease obligations, interest rate of 8%, installments due through 2021
    
    
    41
    
    
    
    41Senior secured discount notes, variable interest rate of 7.87%, installments due through 2009
    
    
    32
    
    
    
    32Capital lease obligations, computer software, installments due through 2009
    
    
    1
    
    
    
    13,203
    
    
    
    3,099Unsecured7% senior convertible notes, interest only payments until due in 2020
    
    
    74
    
    
    
    74GE Engine Maintenance term note, variable interest rate of 8.79%, installments due through 2011
    
    
    47
    
    
    
    57Industrial development bonds, fixed interest rate of 6.3%, interest only payments until due in 2023
    
    
    29
    
    
    
    29Note payable to Pension Benefit Guaranty Corporation, interest rate of 6%, interest only
payments until due in 2012
    
    
    10
    
    
    
    10160
    
    
    
    170Total long-term debt and capital lease obligations
    
    
    3,363
    
    
    
    3,269Less: Unamortized discount on debt
    
    
    (117
    )
    
    
    (121
    )Current maturities
    
    
    (138
    )
    
    
    (117
    )Long-term debt and capital lease obligations, net of current maturities
    
    $
    3,108
    
    
    $
    3,031
   5. Income taxes
    10




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6. Express expenses
  Three Months EndedMarch 31,2008
    
    
    2007Aircraft fuel and related taxes
    
    $
    249
    
    
    $
    153Salaries and related costs
    
    
    37
    
    
    
    35Capacity purchases
    
    
    263
    
    
    
    251Aircraft rent
    
    
    2
    
    
    
    2Aircraft maintenance
    
    
    22
    
    
    
    21Other rent and landing fees
    
    
    27
    
    
    
    28Selling expenses
    
    
    38
    
    
    
    35Depreciation and amortization
    
    
    6
    
    
    
    6Other expenses
    
    
    90
    
    
    
    89Express expenses
    
    $
    734
    
    
    $
    620
 7. Investments in marketable securities (noncurrent)
    11




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##### Table of Contents



8. Fair value measurements
  Level 1.
    
    Observable inputs such as quoted prices in active markets;Level 2.
    
    Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; andLevel 3.
    
    Unobservable inputs in which there is little or no market data, which require the
reporting entity to develop its own assumptions.
  Quoted Prices in
    
    Significant Other
    
    SignificantFair Value
    
    Active Markets for
    
    Observable
    
    UnobservableMarch 31,
    
    Identical Assets
    
    Inputs
    
    Inputs
    
    Valuation2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    TechniqueInvestments in marketable securities (noncurrent)
    
    $
    295
    
    
    $
    
    
    
    $
    
    
    
    $
    295
    
    
    
    (1
    )Fuel hedging derivatives
    
    
    157
    
    
    
    
    
    
    
    157
    
    
    
    
    
    
    
    (2
    )
 
 (1)
    
    Given the complexity of the Companys investments in auction rate securities, the
Company engaged an investment advisor to assist in determining the fair values of its
investments. The Company, with the assistance of its advisor, estimated the fair value of
these auction rate securities based on the following: (i) the underlying structure of each
security; (ii) the present value of future principal and interest payments discounted at
rates considered to reflect current market conditions; (iii) consideration of the
probabilities of default, auction failure, or repurchase at par for each period; and (iv)
estimates of the recovery rates in the event of default for each security. These estimated
fair values could change significantly based on future market conditions. Refer to Note 7
for further discussion of the Companys investments in auction rate securities.(2)
    
    Since the Companys fuel hedging derivative instruments are not traded on a market
exchange, the fair values are determined using valuation models which include assumptions
about commodity prices based on those observed in the underlying markets. The fair value of
fuel hedging derivatives is recorded in prepaid expenses and other on the condensed
consolidated balance sheets.  Investments inMarketableSecurities(Noncurrent)Balance at December 31, 2007
    
    $
    353Unrealized losses recorded to other comprehensive income
    
    
    (49
    )Losses deemed to be other than temporary reclassified from
other comprehensive income to other nonoperating expense,
net
    
    
    4Impairment losses included in other nonoperating expense, net
    
    
    (13
    )Balance at March 31, 2008
    
    $
    295
 12




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9. Other comprehensive income (loss)
  Three Months EndedMarch 31,2008
    
    
    2007Net income (loss)
    
    $
    (236
    )
    
    $
    66Unrealized losses on available for sale securities
    
    
    (49
    )
    
    
    Reclassification of previously recognized unrealized losses now deemed other than temporary
    
    
    4
    
    
    
    Amortization of actuarial gains associated with pension and other postretirement benefits
    
    
    (2
    )
    
    
    Total comprehensive income (loss)
    
    $
    (283
    )
    
    $
    66
  March 31,
    
    
    December 31,2008
    
    
    2007Accumulated net unrealized losses on available for sale securities
    
    $
    (93
    )
    
    $
    (48
    )Adjustment to initially apply FASB Statement No. 158
    
    
    3
    
    
    
    3Actuarial gains associated with pension and other postretirement benefits
    
    
    53
    
    
    
    55Accumulated other comprehensive income (loss)
    
    $
    (37
    )
    
    $
    10
  10. Subsequent event
  13




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##### Table of Contents



Three MonthsEnded March 31,2008
    
    
    2007Operating revenues:Mainline passenger
    
    $
    1,953
    
    
    $
    1,906Express passenger
    
    
    657
    
    
    
    609Cargo
    
    
    36
    
    
    
    37Other
    
    
    221
    
    
    
    209Total operating revenues
    
    
    2,867
    
    
    
    2,761Operating expenses:Aircraft fuel and related taxes
    
    
    823
    
    
    
    550Gain on fuel hedging instruments, net
    
    
    (117
    )
    
    
    (54
    )Salaries and related costs
    
    
    563
    
    
    
    527Express expenses
    
    
    758
    
    
    
    637Aircraft rent
    
    
    178
    
    
    
    180Aircraft maintenance
    
    
    213
    
    
    
    165Other rent and landing fees
    
    
    145
    
    
    
    128Selling expenses
    
    
    104
    
    
    
    106Special items, net
    
    
    26
    
    
    
    39Depreciation and amortization
    
    
    52
    
    
    
    46Other
    
    
    315
    
    
    
    307Total operating expenses
    
    
    3,060
    
    
    
    2,631Operating income (loss)
    
    
    (193
    )
    
    
    130Nonoperating income (expense):Interest income
    
    
    29
    
    
    
    40Interest expense, net
    
    
    (52
    )
    
    
    (65
    )Other, net
    
    
    (8
    )
    
    
    2Total nonoperating expense, net
    
    
    (31
    )
    
    
    (23
    )Income (loss) before income taxes
    
    
    (224
    )
    
    
    107Income tax provision
    
    
    
    
    
    
    3Net income (loss)
    
    $
    (224
    )
    
    $
    104
  14




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March 31,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    1,899
    
    
    $
    1,940Investments in marketable securities
    
    
    165
    
    
    
    226Restricted cash
    
    
    2
    
    
    
    2Accounts receivable, net
    
    
    510
    
    
    
    366Materials and supplies, net
    
    
    242
    
    
    
    197Prepaid expenses and other
    
    
    609
    
    
    
    524Total current assets
    
    
    3,427
    
    
    
    3,255Property and equipmentFlight equipment
    
    
    2,387
    
    
    
    2,295Ground property and equipment
    
    
    719
    
    
    
    681Less accumulated depreciation and amortization
    
    
    (771
    )
    
    
    (729
    )2,335
    
    
    
    2,247Equipment purchase deposits
    
    
    164
    
    
    
    128Total property and equipment
    
    
    2,499
    
    
    
    2,375Other assetsGoodwill
    
    
    622
    
    
    
    622Other intangibles, net
    
    
    508
    
    
    
    514Restricted cash
    
    
    461
    
    
    
    466Investments in marketable securities
    
    
    295
    
    
    
    353Other assets, net
    
    
    201
    
    
    
    202Total other assets
    
    
    2,087
    
    
    
    2,157Total assets
    
    $
    8,013
    
    
    $
    7,787LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent maturities of debt and capital leases
    
    $
    122
    
    
    $
    101Accounts payable
    
    
    380
    
    
    
    333Payables to related parties, net
    
    
    1,028
    
    
    
    1,067Air traffic liability
    
    
    1,208
    
    
    
    832Accrued compensation and vacation
    
    
    143
    
    
    
    214Accrued taxes
    
    
    195
    
    
    
    158Other accrued expenses
    
    
    870
    
    
    
    841Total current liabilities
    
    
    3,946
    
    
    
    3,546Noncurrent liabilities and deferred creditsLong-term debt and capital leases, net of current maturities
    
    
    1,466
    
    
    
    1,373Deferred gains and credits, net
    
    
    153
    
    
    
    168Postretirement benefits other than pensions
    
    
    139
    
    
    
    137Employee benefit liabilities and other
    
    
    731
    
    
    
    713Total noncurrent liabilities and deferred credits
    
    
    2,489
    
    
    
    2,391Stockholders equityCommon stock, $1 par, 1,000 shares issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    1,845
    
    
    
    1,845Accumulated other comprehensive loss
    
    
    (47
    )
    
    
    (1
    )Retained earnings (deficit)
    
    
    (220
    )
    
    
    6Total stockholders equity
    
    
    1,578
    
    
    
    1,850Total liabilities and stockholders equity
    
    $
    8,013
    
    
    $
    7,787
  15




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##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007Net cash provided by (used in) operating activities
    
    $
    (51
    )
    
    $
    312Cash flows from investing activities:Purchases of property and equipment
    
    
    (137
    )
    
    
    (80
    )Purchases of marketable securities
    
    
    (90
    )
    
    
    (908
    )Sales of marketable securities
    
    
    151
    
    
    
    503Proceeds from sale of other investments
    
    
    1
    
    
    
    31Decrease (increase) in long-term restricted cash
    
    
    5
    
    
    
    (70
    )Proceeds from dispositions of property and equipment
    
    
    
    
    
    
    3Increase in equipment purchase deposits
    
    
    (36
    )
    
    
    (5
    )Other
    
    
    2
    
    
    
    Net cash used in investing activities
    
    
    (104
    )
    
    
    (526
    )Cash flows from financing activities:Repayments of debt and capital lease obligations
    
    
    (134
    )
    
    
    (54
    )Proceeds from issuance of debt
    
    
    251
    
    
    
    22Deferred financing costs
    
    
    (3
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    114
    
    
    
    (32
    )Net decrease in cash and cash equivalents
    
    
    (41
    )
    
    
    (246
    )Cash and cash equivalents at beginning of period
    
    
    1,940
    
    
    
    1,111Cash and cash equivalents at end of period
    
    $
    1,899
    
    
    $
    865Non-cash investing and financing activities:Net unrealized loss on available for sale securities
    
    $
    45
    
    
    $
    Repayment of Barclays prepaid miles by parent
    
    
    
    
    
    
    325Supplemental information:Interest paid, net of amounts capitalized
    
    $
    41
    
    
    $
    51Income taxes paid
    
    
    
    
    
    
    1
  16




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##### Table of Contents



US Airways, Inc.
 
 Notes to Condensed Consolidated Financial Statements
 (Unaudited)
 1. Basis of presentation
     Recent Accounting Pronouncements
   17




---



##### Table of Contents



2. Special items, net
    3. Debt
  March 31,
    
    
    December 31,2008
    
    
    2007SecuredEquipment notes payable and aircraft pre-delivery payment financings, fixed and variable
interest rates ranging from 4% to 9.01%, maturing from 2008 to 2022
    
    $
    1,498
    
    
    $
    1,378Slot financing, interest rate of 8%, interest only payments until due in 2015
    
    
    47
    
    
    
    47Capital lease obligations, interest rate of 8%, installments due through 2021
    
    
    41
    
    
    
    41Senior secured discount notes, variable interest rate of 7.87%, installments due through 2009
    
    
    32
    
    
    
    32Capital lease obligations, computer software, installments due through 2009
    
    
    1
    
    
    
    11,619
    
    
    
    1,499UnsecuredGE Engine Maintenance term note, variable interest rate of 8.79%, installments due through 2011
    
    
    47
    
    
    
    57Industrial development bonds, fixed interest rate of 6.3%, interest only payments until due in 2023
    
    
    29
    
    
    
    29Note payable to Pension Benefit Guaranty Corporation, interest rate of 6%, interest only
payments until due in 2012
    
    
    10
    
    
    
    1086
    
    
    
    96Total long-term debt and capital lease obligations
    
    
    1,705
    
    
    
    1,595Less: Unamortized discount on debt
    
    
    (117
    )
    
    
    (121
    )Current maturities
    
    
    (122
    )
    
    
    (101
    )Long-term debt and capital lease obligations, net of current maturities
    
    $
    1,466
    
    
    $
    1,373
  18




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##### Table of Contents



4. Related party transactions
  March 31, 2008
    
    
    December 31, 2007US Airways Group
    
    $
    952
    
    
    $
    986US Airways Group wholly owned subsidiaries
    
    
    76
    
    
    
    81$
    1,028
    
    
    $
    1,067
   5. Income taxes
      19




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##### Table of Contents



6. Express expenses
  Three Months EndedMarch 31,2008
    
    
    2007Aircraft fuel and related taxes
    
    $
    249
    
    
    $
    153Salaries and related costs
    
    
    6
    
    
    
    5Capacity purchases
    
    
    416
    
    
    
    394Other rent and landing fees
    
    
    22
    
    
    
    23Selling expenses
    
    
    38
    
    
    
    35Other expenses
    
    
    27
    
    
    
    27Express expenses
    
    $
    758
    
    
    $
    637
 7. Investments in marketable securities (noncurrent)
     20




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##### Table of Contents



8. Fair value measurements
  Level 1.
    
    Observable inputs such as quoted prices in active markets;Level 2.
    
    Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; andLevel 3.
    
    Unobservable inputs in which there is little or no market data, which require the
reporting entity to develop its own assumptions.
  Quoted Prices in
    
    Significant Other
    
    SignificantFair Value
    
    Active Markets for
    
    Observable
    
    UnobservableMarch 31,
    
    Identical Assets
    
    Inputs
    
    Inputs
    
    Valuation2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    TechniqueInvestments in marketable securities (noncurrent)
    
    $
    295
    
    
    $
    
    
    
    $
    
    
    
    $
    295
    
    
    
    (1
    )Fuel hedging derivatives
    
    
    157
    
    
    
    
    
    
    
    157
    
    
    
    
    
    
    
    (2
    )
 
 (1)
    
    Given the complexity of US Airways investments in auction rate securities, US Airways
engaged an investment advisor to assist in determining the fair values of its investments.
US Airways, with the assistance of its advisor, estimated the fair value of these auction
rate securities based on the following: (i) the underlying structure of each security; (ii)
the present value of future principal and interest payments discounted at rates considered
to reflect current market conditions; (iii) consideration of the probabilities of default,
auction failure, or repurchase at par for each period; and (iv) estimates of the recovery
rates in the event of default for each security. These estimated fair values could change
significantly based on future market conditions. Refer to Note 7 for further discussion of
US Airways investments in auction rate securities.(2)
    
    Since US Airways fuel hedging derivative instruments are not traded on a market
exchange, the fair values are determined using valuation models which include assumptions
about commodity prices based on those observed in the underlying markets. The fair value of
fuel hedging derivatives is recorded in prepaid expenses and other on the condensed
consolidated balance sheets.  Investments inMarketableSecurities(Noncurrent)Balance at December 31, 2007
    
    $
    353Unrealized losses recorded to other comprehensive income
    
    
    (49
    )Losses deemed to be other than temporary reclassified from
other comprehensive income to other nonoperating expense,
net
    
    
    4Impairment losses included in other nonoperating expense, net
    
    
    (13
    )Balance at March 31, 2008
    
    $
    295
 21




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##### Table of Contents



9. Other comprehensive income (loss)
  Three Months EndedMarch 31,2008
    
    
    2007Net income (loss)
    
    $
    (224
    )
    
    $
    104Unrealized losses on available for sale securities
    
    
    (49
    )
    
    
    Reclassification
of previously recognized unrealized losses now deemed other than temporary
    
    
    4
    
    
    
    Amortization of actuarial gains associated with pension and other postretirement benefits
    
    
    (1
    )
    
    
    Total comprehensive income (loss)
    
    $
    (270
    )
    
    $
    104
  March 31,
    
    
    December 31,2008
    
    
    2007Accumulated net unrealized losses on available for sale securities
    
    $
    (93
    )
    
    $
    (48
    )Actuarial gains associated with pension and other postretirement benefits
    
    
    46
    
    
    
    47Accumulated other comprehensive loss
    
    $
    (47
    )
    
    $
    (1
    )
  10. Subsequent event
  22




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   Financial Results
  Revenue Pricing Environment
  Cost Control
  23




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Liquidity Position
    2008 Outlook
    24




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##### Table of Contents



Customer Service
   2008
    
    2007
    
    Percent Change 2008-2007January
    
    February
    
    March
    
    January
    
    February
    
    March
    
    January
    
    February
    
    MarchOn-time performance (a)
    
    
    79.5
    
    
    
    76.3
    
    
    
    79.1
    
    
    
    71.8
    
    
    
    60.0
    
    
    
    55.5
    
    
    
    10.7
    
    
    
    27.2
    
    
    
    42.5Completion factor (b)
    
    
    98.3
    
    
    
    98.0
    
    
    
    98.5
    
    
    
    98.5
    
    
    
    96.2
    
    
    
    97.1
    
    
    
    (0.2
    )
    
    
    1.9
    
    
    
    1.4Mishandled baggage (c)
    
    
    7.35
    
    
    
    6.96
    
    
    
    7.03
    
    
    
    7.52
    
    
    
    9.41
    
    
    
    10.93
    
    
    
    (2.3
    )
    
    
    (26.0
    )
    
    
    (35.7
    )Customer complaints (d)
    
    
    2.32
    
    
    
    2.28
    
    
    
    2.62
    
    
    
    1.04
    
    
    
    2.06
    
    
    
    4.43
    
    
    nm
    
    
    10.7
    
    
    
    (40.9
    )
 
 (a)
    
    Percentage of reported flight operations arriving on time as defined by the DOT.(b)
    
    Percentage of scheduled flight operations completed.(c)
    
    Rate of mishandled baggage reports per 1,000 passengers.(d)
    
    Rate of customer complaints filed with the DOT per 100,000 passengers.  Other Developments
    25




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US Airways Groups Results of Operations
      26




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##### Table of Contents



Three Months Ended
    
    PercentMarch 31,
    
    Change2008
    
    2007
    
    2008-2007Revenue passenger miles (millions) (a)
    
    
    14,489
    
    
    
    14,418
    
    
    
    0.5Available seat miles (millions) (b)
    
    
    18,335
    
    
    
    18,556
    
    
    
    (1.2
    )Passenger load factor (c)
    
    
    79.0
    
    
    
    77.7
    
    
    
    1.3
    ptsYield (d)
    
    
    13.48
    
    
    
    13.22
    
    
    
    2.0Passenger revenue per available seat mile (e)
    
    
    10.65
    
    
    
    10.27
    
    
    
    3.7Operating cost per available seat mile (f)
    
    
    12.56
    
    
    
    10.76
    
    
    
    16.7Passenger enplanements (thousands) (g)
    
    
    13,536
    
    
    
    13,980
    
    
    
    (3.2
    )Aircraft at end of period
    
    
    357
    
    
    
    356
    
    
    
    0.3Block hours (h)
    
    
    327,330
    
    
    
    334,947
    
    
    
    (2.3
    )Average stage length (miles) (i)
    
    
    937
    
    
    
    912
    
    
    
    2.8Average passenger journey (miles) (j)
    
    
    1,517
    
    
    
    1,461
    
    
    
    3.8Fuel consumption (gallons in millions)
    
    
    285.5
    
    
    
    291.9
    
    
    
    (2.2
    )Average aircraft fuel price including related taxes (dollars per gallon)
    
    
    2.88
    
    
    
    1.88
    
    
    
    52.9Full time equivalent employees at end of period
    
    
    34,684
    
    
    
    34,613
    
    
    
    0.2
 
 (a)
    
    Revenue passenger mile (RPM)  A basic measure of sales volume. A RPM represents one
passenger flown one mile.(b)
    
    Available seat mile (ASM)  A basic measure of production. An ASM represents one seat flown
one mile.(c)
    
    Passenger load factor  The percentage of available seats that are filled with revenue
passengers.(d)
    
    Yield  A measure of airline revenue derived by dividing passenger revenue by revenue
passenger miles and expressed in cents per mile.(e)
    
    Passenger revenue per available seat mile (PRASM)  Total passenger revenues divided by
total available seat miles.(f)
    
    Cost per available seat mile (CASM)  Total mainline operating expenses divided by total
available seat miles.(g)
    
    Passenger enplanements -The number of passengers on board an aircraft including local,
connecting and through passengers.(h)
    
    Block hours  The hours measured from the moment an aircraft first moves under its own power,
including taxi time, for the purposes of flight until the aircraft is docked at the next point
of landing and its power is shut down.(i)
    
    Average stage length  The average of the distances flown on each segment of every route.(j)
    
    Average passenger journey  The average one-way trip measured in miles for one passenger
origination. Three Months Ended March 31, 2008
Compared with the
Three Months Ended March 31, 2007
 Operating Revenues:
 Percent2008
    
    
    2007
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    1,953
    
    
    $
    1,906
    
    
    
    2.5Express passenger
    
    
    657
    
    
    
    609
    
    
    
    7.9Cargo
    
    
    36
    
    
    
    37
    
    
    
    (0.8
    )Other
    
    
    194
    
    
    
    180
    
    
    
    7.1Total operating revenues
    
    $
    2,840
    
    
    $
    2,732
    
    
    
    3.9
  27




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Operating Expenses:
 Percent2008
    
    
    2007
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    823
    
    
    $
    550
    
    
    
    49.5Loss (gain) on fuel hedging instruments, net:Realized
    
    
    (81
    )
    
    
    36
    
    
    
    nmUnrealized
    
    
    (36
    )
    
    
    (90
    )
    
    
    (60.1
    )Salaries and related costs
    
    
    563
    
    
    
    527
    
    
    
    6.7Aircraft rent
    
    
    178
    
    
    
    180
    
    
    
    (0.8
    )Aircraft maintenance
    
    
    213
    
    
    
    165
    
    
    
    28.7Other rent and landing fees
    
    
    145
    
    
    
    128
    
    
    
    13.4Selling expenses
    
    
    104
    
    
    
    106
    
    
    
    (1.8
    )Special items, net
    
    
    26
    
    
    
    39
    
    
    
    (34.2
    )Depreciation and amortization
    
    
    50
    
    
    
    44
    
    
    
    13.7Other
    
    
    317
    
    
    
    311
    
    
    
    2.4Total mainline operating expenses
    
    
    2,302
    
    
    
    1,996
    
    
    
    15.3Express expenses:Fuel
    
    
    249
    
    
    
    153
    
    
    
    62.3Other
    
    
    485
    
    
    
    467
    
    
    
    3.9Total operating expenses
    
    $
    3,036
    
    
    $
    2,616
    
    
    
    16.0
  28




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##### Table of Contents



Percent2008
    
    2007
    
    Change(In cents)Mainline:Aircraft fuel and related taxes
    
    
    4.49
    
    
    
    2.96
    
    
    
    51.3Gain on fuel hedging instruments, net
    
    
    (0.64
    )
    
    
    (0.29
    )
    
    nmSalaries and related costs
    
    
    3.07
    
    
    
    2.84
    
    
    
    8.0Aircraft rent
    
    
    0.97
    
    
    
    0.97
    
    
    
    Aircraft maintenance
    
    
    1.16
    
    
    
    0.89
    
    
    
    30.2Other rent and landing fees
    
    
    0.79
    
    
    
    0.69
    
    
    
    14.7Selling expenses
    
    
    0.57
    
    
    
    0.57
    
    
    
    Special items, net
    
    
    0.14
    
    
    
    0.21
    
    
    
    (33.4
    )Depreciation and amortization
    
    
    0.27
    
    
    
    0.24
    
    
    
    15.1Other
    
    
    1.74
    
    
    
    1.68
    
    
    
    3.612.56
    
    
    
    10.76
    
    
    
    16.7
  
    
    Aircraft fuel and related taxes per ASM increased 51.3% due primarily to a 52.9% increase
in the average price per gallon of fuel to $2.88 in 2008 from $1.88 in 2007.
    
    Gain on fuel hedging instruments, net per ASM increased from a gain of 0.29 cents in the
first quarter of 2007 to a gain of 0.64 cents in the first quarter of 2008 as a result of a
period over period increase in the fair market value of costless collar transactions.
    
    Salaries and related costs per ASM increased 8% due principally to an increase in
employee benefit expenses as a result of higher medical claim costs due to general
inflationary increases, and contractual rate increases among certain unionized employee
groups as well as expenses associated with our operational improvement plan that commenced
in the second quarter of 2007.
    
    Aircraft maintenance expense per ASM increased 30.2% due principally to increases in the
number of engine and landing gear overhauls performed in the 2008 period as compared to the
2007 period.
    
    Other rent and landing fees expense per ASM increased 14.7% due primarily to reductions
in annually determined rent credits received at certain airport stations as well as
increases in rental rates at certain airport stations in the 2008 period as compared to the
2007 period.
    
    Depreciation and amortization expense per ASM increased 15.1% due primarily to an
increase in depreciation of owned aircraft as a result of the acquisition of eight Embraer
190 aircraft subsequent to the first quarter of 2007 and three Embraer 190 aircraft in the
first quarter of 2008.
  Nonoperating Income (Expense):
 Percent2008
    
    
    2007
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    29
    
    
    $
    40
    
    
    
    (28.8
    )Interest expense, net
    
    
    (60
    )
    
    
    (71
    )
    
    
    (15.6
    )Other, net
    
    
    (9
    )
    
    
    (16
    )
    
    
    (46.8
    )Total nonoperating expense, net
    
    $
    (40
    )
    
    $
    (47
    )
    
    
    (14.3
    )
 29




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US Airways Results of Operations
       30




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Three Months Ended
    
    PercentMarch 31,
    
    Change2008
    
    2007
    
    2008-2007Revenue passenger miles (millions) (a)
    
    
    14,489
    
    
    
    14,418
    
    
    
    0.5Available seat miles (millions) (b)
    
    
    18,335
    
    
    
    18,556
    
    
    
    (1.2
    )Passenger load factor (c)
    
    
    79.0
    
    
    
    77.7
    
    
    
    1.3
    ptsYield (d)
    
    
    13.48
    
    
    
    13.22
    
    
    
    2.0Passenger revenue per available seat mile (e)
    
    
    10.65
    
    
    
    10.27
    
    
    
    3.7Aircraft at end of period
    
    
    357
    
    
    
    356
    
    
    
    0.3
 
 (a)
    
    Revenue passenger mile (RPM)  A basic measure of sales volume. A RPM represents one
passenger flown one mile.(b)
    
    Available seat mile (ASM)  A basic measure of production. An ASM represents one seat flown
one mile.(c)
    
    Passenger load factor  The percentage of available seats that are filled with revenue
passengers.(d)
    
    Yield  A measure of airline revenue derived by dividing passenger revenue by revenue
passenger miles and expressed in cents per mile.(e)
    
    Passenger revenue per available seat mile (PRASM)  Total passenger revenues divided by
total available seat miles. Three Months Ended March 31, 2008
Compared with the
Three Months Ended March 31, 2007
 Operating Revenues:
 Percent2008
    
    
    2007
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    1,953
    
    
    $
    1,906
    
    
    
    2.5Express passenger
    
    
    657
    
    
    
    609
    
    
    
    7.9Cargo
    
    
    36
    
    
    
    37
    
    
    
    (0.8
    )Other
    
    
    221
    
    
    
    209
    
    
    
    5.7Total operating revenues
    
    $
    2,867
    
    
    $
    2,761
    
    
    
    3.8
  31




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Operating Expenses:
 Percent2008
    
    
    2007
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    823
    
    
    $
    550
    
    
    
    49.5Loss (gain) on fuel hedging instruments, net:Realized
    
    
    (81
    )
    
    
    36
    
    
    
    nmUnrealized
    
    
    (36
    )
    
    
    (90
    )
    
    
    (60.1
    )Salaries and related costs
    
    
    563
    
    
    
    527
    
    
    
    6.7Aircraft rent
    
    
    178
    
    
    
    180
    
    
    
    (0.8
    )Aircraft maintenance
    
    
    213
    
    
    
    165
    
    
    
    28.7Other rent and landing fees
    
    
    145
    
    
    
    128
    
    
    
    13.4Selling expenses
    
    
    104
    
    
    
    106
    
    
    
    (1.8
    )Special items, net
    
    
    26
    
    
    
    39
    
    
    
    (34.2
    )Depreciation and amortization
    
    
    52
    
    
    
    46
    
    
    
    13.0Other
    
    
    315
    
    
    
    307
    
    
    
    2.9Total mainline operating expenses
    
    
    2,302
    
    
    
    1,994
    
    
    
    15.4Express expenses:Fuel
    
    
    249
    
    
    
    153
    
    
    
    62.3Other
    
    
    509
    
    
    
    484
    
    
    
    5.2Total operating expenses
    
    $
    3,060
    
    
    $
    2,631
    
    
    
    16.3
   
    
    Aircraft fuel and related taxes increased 49.5% due primarily to a 52.9% increase in the
average price per gallon of fuel to $2.88 in 2008 from $1.88 in 2007.
    
    Loss (gain) on fuel hedging instruments, net increased from a gain of $54 million in the
first quarter of 2007 to a gain of $117 million in the first quarter of 2008 as a result of
a period over period increase in the fair market value of the costless collar transactions.
    
    Salaries and related costs increased 6.7% due principally to an increase in employee
benefit expenses as a result of higher medical claim costs due to general inflationary
increases, and contractual rate increases among certain unionized employee groups as well as
expenses associated with US Airways operational improvement plan that commenced in the
second quarter of 2007.
    
    Aircraft maintenance expense increased 28.7% due principally to increases in the number
of engine and landing gear overhauls performed in the 2008 period as compared to the 2007
period.
    
    Other rent and landing fees expense increased 13.4% due primarily to reductions in
annually determined rent credits received at
 32




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certain airport stations as well as increases
in rental rates at certain airport stations in the 2008 period as compared to the 2007
period.
 
    
    Depreciation and amortization expense increased 13% due primarily to an increase in
depreciation of owned aircraft as a result of the acquisition of eight Embraer 190 aircraft
subsequent to the first quarter of 2007 and three Embraer 190 aircraft in the first quarter
of 2008.
  Nonoperating Income (Expense):
 Percent2008
    
    
    2007
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    29
    
    
    $
    40
    
    
    
    (28.8
    )Interest expense, net
    
    
    (52
    )
    
    
    (65
    )
    
    
    (19.9
    )Other, net
    
    
    (8
    )
    
    
    2
    
    
    
    nmTotal nonoperating expense, net
    
    $
    (31
    )
    
    $
    (23
    )
    
    
    43.5
  33




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Liquidity and Capital Resources
  Investments in Marketable Securities
     Investments inMarketableSecurities(Noncurrent)Balance at December 31, 2007
    
    $
    353Unrealized losses recorded to other comprehensive income
    
    
    (49
    )Losses deemed to be other than temporary reclassified from
other comprehensive income to other nonoperating expense,
net
    
    
    4Impairment losses included in other nonoperating expense, net
    
    
    (13
    )Balance at March 31, 2008
    
    $
    295
   34




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##### Table of Contents



Credit Card Processing Agreement
  Sources and Uses of Cash
 US Airways Group
    US Airways
   35




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##### Table of Contents



Commitments
 Form 10-K.
 Financing Transactions
   Aircraft and Engine Purchase Commitments
     36




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##### Table of Contents



Covenants and Credit Rating
   Off-Balance Sheet Arrangements
   Contractual Obligations
  Payments Due by Period2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    TotalUS Airways Group (1)Debt (2)
    
    $
    
    
    
    $
    16
    
    
    $
    16
    
    
    $
    16
    
    
    $
    16
    
    
    $
    1,594
    
    
    $
    1,658Interest obligations (3)
    
    
    71
    
    
    
    94
    
    
    
    93
    
    
    
    92
    
    
    
    91
    
    
    
    165
    
    
    
    606Aircraft related and other commitments
    
    
    352
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    388US Airways (4)Debt and capital lease obligations
    
    
    76
    
    
    
    148
    
    
    
    105
    
    
    
    120
    
    
    
    126
    
    
    
    1,130
    
    
    
    1,705Interest obligations (3)
    
    
    86
    
    
    
    107
    
    
    
    98
    
    
    
    90
    
    
    
    82
    
    
    
    315
    
    
    
    778Aircraft purchase and operating lease commitments
    
    
    1,084
    
    
    
    2,286
    
    
    
    2,264
    
    
    
    2,118
    
    
    
    1,574
    
    
    
    6,166
    
    
    
    15,492Regional capacity purchase agreements (5)
    
    
    815
    
    
    
    1,124
    
    
    
    1,158
    
    
    
    1,193
    
    
    
    1,043
    
    
    
    4,799
    
    
    
    10,132Other US Airways Group subsidiaries (6)
    
    
    8
    
    
    
    7
    
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    20Total
    
    $
    2,492
    
    
    $
    3,818
    
    
    $
    3,736
    
    
    $
    3,630
    
    
    $
    2,933
    
    
    $
    14,170
    
    
    $
    30,779
 
 (1)
    
    These commitments represent those specifically entered into by US Airways Group or joint
commitments entered into by US Airways Group and US Airways under which each entity is jointly
and severally liable.(2)
    
    Includes $74 million aggregate principal amount of 7% senior convertible notes due 2020
issued by US Airways Group and the $1.6 billion Citicorp credit facility due March 23, 2014.(3)
    
    For variable-rate debt, future interest obligations are shown above using interest rates in
effect as of March 31, 2008.(4)
    
    Commitments listed separately under US Airways and its wholly owned subsidiaries represent
commitments under agreements entered into separately by those companies. 37




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##### Table of Contents



(5)
    
    Represents minimum payments under capacity purchase agreements with third-party Express
carriers.(6)
    
    Represents operating lease commitments entered into by US Airways Groups other airline
subsidiaries Piedmont and PSA.  Critical Accounting Policies and Estimates
  Impairment of Goodwill
    38




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Recent Accounting Pronouncements
    39




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Market Risk Sensitive Instruments
  Commodity price risk
   Interest rate risk
     40




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Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures.
  Changes in internal control over financial reporting.
  Limitation on the effectiveness of controls.
  41




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##### Table of Contents



Part II. Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Risk Factors Relating to the Company and Industry Related Risks
 Our business is dependent on the price and availability of aircraft fuel. Continued periods of
historically high fuel costs, significant disruptions in the supply of aircraft fuel or further
increases in fuel costs could have a significant negative impact on our operating results.
  US Airways Group could experience significant operating losses in the future.
   Union disputes, employee strikes and other labor-related disruptions may adversely affect our
operations.
  42




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##### Table of Contents



If we incur problems with any of our third party service providers, our operations could be
adversely affected by a resulting decline in revenue or negative public perception about our
services.
  We rely heavily on automated systems to operate our business and any failure or disruption of
these systems could harm our business.
  The inability to maintain labor costs at competitive levels could harm our financial performance.
   Our ability to operate and grow our route network in the future is dependent on the availability
of adequate facilities and infrastructure throughout our system.
  43




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##### Table of Contents



Delays in scheduled aircraft deliveries or other loss of anticipated fleet capacity may adversely
impact our operations and financial results.
  We are subject to many forms of environmental regulation and may incur substantial costs as a
result.
       The travel industry continues to face ongoing security concerns.
  44




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##### Table of Contents



Fluctuations in interest rates and increased costs of financing could adversely affect our
liquidity, operating expenses and results.
  Our high level of fixed obligations limits our ability to fund general corporate requirements and
obtain additional financing, limits our flexibility in responding to competitive developments and
increases our vulnerability to adverse economic and industry conditions.
  
    
    A decrease in revenues results in a disproportionately greater percentage decrease in
earnings.
    
    We may not have sufficient liquidity to fund all of these fixed costs if our revenues
decline or costs increase.
    
    We may have to use our working capital to fund these fixed costs instead of funding
general corporate requirements, including capital expenditures.
    
    We may not have sufficient liquidity to respond to competitive developments and adverse
economic conditions.
   Changes in government regulation could increase our operating costs and limit our ability to
conduct our business.
  45




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##### Table of Contents



Ongoing data security compliance requirements could increase our costs, and any significant data
breach could harm our business, financial condition or results of operations.
    Increases in insurance costs or reductions in insurance coverage may adversely impact our
operations and financial results.
  The airline industry is intensely competitive and dynamic.
   Industry consolidation could weaken our competitive position.
  46




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##### Table of Contents



The loss of key personnel upon whom we depend to operate our business or the inability to attract
additional qualified personnel could adversely affect the results of our operations or our
financial performance.
  Interruptions or disruptions in service at one of our hub airports could have a material adverse
impact on our operations.
  We are at risk of losses and adverse publicity stemming from any accident involving any of our
aircraft.
  Our business is subject to weather factors and seasonal variations in airline travel, which cause
our results to fluctuate.
  We may be adversely affected by global events that affect travel behavior.
  We are exposed to foreign currency exchange rate fluctuations.
  The use of US Airways Groups pre-merger NOLs and certain other tax attributes could be limited in
the future.
  47




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Risks Related to Our Common Stock
 Our common stock has limited trading history and its market price may be volatile.
  
    
    our operating results failing to meet the expectations of securities analysts or
investors;
    
    changes in financial estimates or recommendations by securities analysts;
    
    material announcements by us or our competitors;
    
    movements in fuel prices;
    
    new regulatory pronouncements and changes in regulatory guidelines;
    
    general and industry-specific economic conditions;
    
    public sales of a substantial number of shares of our common stock; and
    
    general market conditions.
 Conversion of our convertible notes will dilute the ownership interest of existing stockholders
and could adversely affect the market price of our common stock.
  Certain provisions of the amended and restated certificate of incorporation and amended and
restated bylaws of US Airways Group make it difficult for stockholders to change the composition
of our board of directors and may discourage takeover attempts that some of our stockholders might
consider beneficial.
  
    
    a classified board of directors with three-year staggered terms;
    
    advance notice procedures for stockholder proposals to be considered at stockholders
meetings;
    
    the ability of US Airways Groups board of directors to fill vacancies on the board;
    
    a prohibition against stockholders taking action by written consent;
    
    a prohibition against stockholders calling special meetings of stockholders;
 48




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##### Table of Contents




    
    a requirement that holders of at least 80% of the voting power of the shares entitled to
vote in the election of directors approve amendment of the amended and restated bylaws; and
    
    super-majority voting requirements to modify or amend specified provisions of US Airways
Groups amended and restated certificate of incorporation.
  Our charter documents include provisions limiting voting and ownership by foreign owners.
  49




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Item 6. Exhibits
 Exhibit No.
    
    Description10.1
    
    Amendment No. 1 dated as of January 11, 2008 to the Amended and Restated Airbus A320
Family Aircraft Purchase Agreement dated as of October 2, 2007 between US Airways, Inc.
and Airbus S.A.S.*10.2
    
    Amendment No. 4 dated as of March 14, 2008 to Amended and Restated Embraer Aircraft
Purchase Agreement dated as of June 13, 2006 between US Airways Group and Embraer 
Empresa Brasileira de Aeronautica S.A.*10.3
    
    Amendment No. 2 dated as of March 14, 2008 to Amended and Restated Letter Agreement
DCT-022/33 dated as of June 13, 2006 between US Airways Group and Embraer  Empresa
Brasileira de Aeronautica S.A.*31.1
    
    Certification of US Airways Groups Chief Executive Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of US Airways Groups Chief Financial Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.31.3
    
    Certification of US Airways Chief Executive Officer pursuant to Rule 13a-14(a) under
the Securities Exchange Act of 1934, as amended.31.4
    
    Certification of US Airways Chief Financial Officer pursuant to Rule 13a-14(a) under
the Securities Exchange Act of 1934, as amended.32.1
    
    Certification of US Airways Groups Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of US Airways Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Portions of this exhibit have been omitted under a request for confidential treatment and
filed separately with the Securities and Exchange Commission. 50




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Signatures
  US Airways Group, Inc. (Registrant)Date: April 24, 2008
    By:
    /s/ Derek J. KerrDerek J. KerrSenior Vice President and
Chief Financial Officer US Airways, Inc. (Registrant)Date: April 24, 2008
    By:
    /s/ Derek J. KerrDerek J. KerrSenior Vice President and
Chief Financial Officer 51




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Exhibit Index
 Exhibit No.
    
    Description10.1
    
    Amendment No. 1 dated as of January 11, 2008 to the Amended and Restated Airbus
A320 Family Aircraft Purchase Agreement dated as of October 2, 2007 between US
Airways, Inc. and Airbus S.A.S.*10.2
    
    Amendment No. 4 dated as of March 14, 2008 to Amended and Restated Embraer Aircraft
Purchase Agreement dated as of June 13, 2006 between US Airways Group and Embraer
 Empresa Brasileira de Aeronautica S.A.*10.3
    
    Amendment No. 2 dated as of March 14, 2008 to Amended and Restated Letter Agreement
DCT-022/33 dated as of June 13, 2006 between US Airways Group and Embraer 
Empresa Brasileira de Aeronautica S.A.*31.1
    
    Certification of US Airways Groups Chief Executive Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of US Airways Groups Chief Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as amended.31.3
    
    Certification of US Airways Chief Executive Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.31.4
    
    Certification of US Airways Chief Financial Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.32.1
    
    Certification of US Airways Groups Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of US Airways Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Portions of this exhibit have been omitted under a request for confidential treatment and
filed separately with the Securities and Exchange Commission. 52