##### 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 June 30, 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
  US Airways Group, Inc.
    
    Yes
    
    o
    
    No
    
    þUS Airways, Inc.
    
    Yes
    
    o
    
    No
    
    þ
  US Airways Group, Inc.
    
    Yes
    
    þ
    
    No
    
    oUS Airways, Inc.
    
    Yes
    
    þ
    
    No
    
    o




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##### 



US Airways Group, Inc.
Form 10-Q
Quarterly Period Ended June 30, 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
    
    
    17Condensed Consolidated Balance Sheets
    
    
    18Condensed Consolidated Statements of Cash Flows
    
    
    19Notes to the Condensed Consolidated Financial Statements
    
    
    20Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    58Item 4. Controls and Procedures
    
    
    59Part II. Other InformationItem 1. Legal Proceedings
    
    
    60Item 1A. Risk Factors
    
    
    60Item 4. Submission of Matters to a Vote of Security Holders
    
    
    69Item 6. Exhibits
    
    
    70Signatures
    
    
    71Exhibit 10.2Exhibit 10.3Exhibit 31.1Exhibit 31.2Exhibit 31.3Exhibit 31.4Exhibit 32.1Exhibit 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;
    
    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);
    
    the impact of changes in our business model;
    
    our ability to maintain adequate liquidity;
    
    changes in prevailing interest rates and increased costs of financing;
    
    economic conditions;
    
    our ability to obtain and maintain commercially reasonable terms with vendors and service
providers and our reliance on those vendors and service providers;
    
    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;
    
    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;
    
    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;
    
    changes in government legislation and regulation, including environmental regulation;
    
    our ability to obtain and maintain adequate facilities and infrastructure to operate and
grow our route network;
    
    costs of ongoing data security compliance requirements and the impact of any data
security breach;
  3




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##### Table of Contents




    
    interruptions or disruptions in service at one or more of our hub airports;
    
    the impact of any accident involving our aircraft;
    
    delays in scheduled aircraft deliveries or other loss of anticipated fleet capacity;
    
    security-related and insurance costs;
    
    weather conditions;
    
    the cyclical nature of the airline industry;
    
    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 contracts that are critical to our operations;
    
    our ability to attract and retain customers; 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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##### Table of Contents



Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Operating revenues:Mainline passenger
    
    $
    2,214
    
    
    $
    2,194
    
    
    $
    4,167
    
    
    $
    4,100Express passenger
    
    
    802
    
    
    
    737
    
    
    
    1,459
    
    
    
    1,346Cargo
    
    
    38
    
    
    
    34
    
    
    
    74
    
    
    
    70Other
    
    
    203
    
    
    
    190
    
    
    
    396
    
    
    
    371Total operating revenues
    
    
    3,257
    
    
    
    3,155
    
    
    
    6,096
    
    
    
    5,887Operating expenses:Aircraft fuel and related taxes
    
    
    1,086
    
    
    
    658
    
    
    
    1,908
    
    
    
    1,208Gain on fuel hedging instruments, net
    
    
    (382
    )
    
    
    (23
    )
    
    
    (500
    )
    
    
    (78
    )Salaries and related costs
    
    
    571
    
    
    
    576
    
    
    
    1,134
    
    
    
    1,104Express expenses
    
    
    822
    
    
    
    652
    
    
    
    1,556
    
    
    
    1,272Aircraft rent
    
    
    183
    
    
    
    180
    
    
    
    361
    
    
    
    360Aircraft maintenance
    
    
    200
    
    
    
    170
    
    
    
    413
    
    
    
    335Other rent and landing fees
    
    
    142
    
    
    
    139
    
    
    
    287
    
    
    
    267Selling expenses
    
    
    116
    
    
    
    125
    
    
    
    220
    
    
    
    231Special items, net
    
    
    34
    
    
    
    27
    
    
    
    59
    
    
    
    66Depreciation and amortization
    
    
    57
    
    
    
    46
    
    
    
    107
    
    
    
    90Goodwill impairment
    
    
    622
    
    
    
    
    
    
    
    622
    
    
    
    Other
    
    
    342
    
    
    
    316
    
    
    
    662
    
    
    
    627Total operating expenses
    
    
    3,793
    
    
    
    2,866
    
    
    
    6,829
    
    
    
    5,482Operating income (loss)
    
    
    (536
    )
    
    
    289
    
    
    
    (733
    )
    
    
    405Nonoperating income (expense):Interest income
    
    
    21
    
    
    
    48
    
    
    
    50
    
    
    
    88Interest expense, net
    
    
    (56
    )
    
    
    (69
    )
    
    
    (116
    )
    
    
    (140
    )Other, net
    
    
    4
    
    
    
    3
    
    
    
    (5
    )
    
    
    (13
    )Total nonoperating expense, net
    
    
    (31
    )
    
    
    (18
    )
    
    
    (71
    )
    
    
    (65
    )Income (loss) before income taxes
    
    
    (567
    )
    
    
    271
    
    
    
    (804
    )
    
    
    340Income tax provision
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    11Net income (loss)
    
    $
    (567
    )
    
    $
    263
    
    
    $
    (804
    )
    
    $
    329Earnings (loss) per common share:Basic earnings (loss) per common share
    
    
    (6.16
    )
    
    
    2.88
    
    
    
    (8.73
    )
    
    
    3.60Diluted earnings (loss) per common share
    
    
    (6.16
    )
    
    
    2.77
    
    
    
    (8.73
    )
    
    
    3.46Shares used for computation (in thousands):Basic
    
    
    92,137
    
    
    
    91,477
    
    
    
    92,080
    
    
    
    91,420Diluted
    
    
    92,137
    
    
    
    95,613
    
    
    
    92,080
    
    
    
    95,918
   5




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##### Table of Contents



June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    1,717
    
    
    $
    1,948Investments in marketable securities
    
    
    293
    
    
    
    226Restricted cash
    
    
    2
    
    
    
    2Accounts receivable, net
    
    
    564
    
    
    
    374Materials and supplies, net
    
    
    290
    
    
    
    249Prepaid expenses and other
    
    
    862
    
    
    
    548Total current assets
    
    
    3,728
    
    
    
    3,347Property and equipmentFlight equipment
    
    
    2,704
    
    
    
    2,414Ground property and equipment
    
    
    772
    
    
    
    703Less accumulated depreciation and amortization
    
    
    (856
    )
    
    
    (757
    )2,620
    
    
    
    2,360Equipment purchase deposits
    
    
    207
    
    
    
    128Total property and equipment
    
    
    2,827
    
    
    
    2,488Other assetsGoodwill
    
    
    
    
    
    
    622Other intangibles, net
    
    
    558
    
    
    
    553Restricted cash
    
    
    460
    
    
    
    466Investments in marketable securities
    
    
    285
    
    
    
    353Other assets, net
    
    
    213
    
    
    
    211Total other assets
    
    
    1,516
    
    
    
    2,205Total assets
    
    $
    8,071
    
    
    $
    8,040LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent maturities of debt and capital leases
    
    $
    159
    
    
    $
    117Accounts payable
    
    
    533
    
    
    
    366Air traffic liability
    
    
    1,286
    
    
    
    832Accrued compensation and vacation
    
    
    171
    
    
    
    225Accrued taxes
    
    
    184
    
    
    
    152Other accrued expenses
    
    
    924
    
    
    
    859Total current liabilities
    
    
    3,257
    
    
    
    2,551Noncurrent liabilities and deferred creditsLong-term debt and capital leases, net of current maturities
    
    
    3,205
    
    
    
    3,031Deferred gains and credits, net
    
    
    142
    
    
    
    168Postretirement benefits other than pensions
    
    
    138
    
    
    
    138Employee benefit liabilities and other
    
    
    736
    
    
    
    713Total noncurrent liabilities and deferred credits
    
    
    4,221
    
    
    
    4,050Stockholders equityCommon stock, $0.01 par value; 200,000,000 shares authorized, 92,587,927 and
92,173,934 shares issued and outstanding at June 30, 2008; 92,278,557 and
91,864,564 shares issued and outstanding at December 31, 2007
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    1,554
    
    
    
    1,536Accumulated other comprehensive income (loss)
    
    
    (48
    )
    
    
    10Accumulated deficit
    
    
    (901
    )
    
    
    (95
    )Treasury stock, common stock, 413,993 shares at June 30, 2008 and December 31, 2007
    
    
    (13
    )
    
    
    (13
    )Total stockholders equity
    
    
    593
    
    
    
    1,439Total liabilities and stockholders equity
    
    $
    8,071
    
    
    $
    8,040
   6




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##### Table of Contents



Six Months Ended June 30,2008
    
    
    2007Net cash provided by operating activities
    
    $
    96
    
    
    $
    646Cash flows from investing activities:Purchases of property and equipment
    
    
    (400
    )
    
    
    (201
    )Purchases of marketable securities
    
    
    (284
    )
    
    
    (2,017
    )Sales of marketable securities
    
    
    217
    
    
    
    906Proceeds from sale of other investments
    
    
    1
    
    
    
    31Decrease in long-term restricted cash
    
    
    6
    
    
    
    168Proceeds from dispositions of property and equipment
    
    
    
    
    
    
    4Increase in equipment purchase deposits
    
    
    (79
    )
    
    
    (17
    )Other
    
    
    2
    
    
    
    Net cash used in investing activities
    
    
    (537
    )
    
    
    (1,126
    )Cash flows from financing activities:Repayments of debt and capital lease obligations
    
    
    (169
    )
    
    
    (1,638
    )Proceeds from issuance of debt
    
    
    387
    
    
    
    1,666Deferred financing costs
    
    
    (8
    )
    
    
    (6
    )Proceeds from issuance of common stock, net
    
    
    
    
    
    
    3Net cash provided by financing activities
    
    
    210
    
    
    
    25Net decrease in cash and cash equivalents
    
    
    (231
    )
    
    
    (455
    )Cash and cash equivalents at beginning of period
    
    
    1,948
    
    
    
    1,116Cash and cash equivalents at end of period
    
    $
    1,717
    
    
    $
    661Non-cash investing and financing activities:Net unrealized loss on available for sale securities
    
    $
    55
    
    
    $
    Supplemental information:Interest paid, net of amounts capitalized
    
    $
    109
    
    
    $
    125Income taxes paid
    
    
    
    
    
    
    4
   7




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##### Table of Contents



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
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Merger related transition expenses (a)
    
    $
    10
    
    
    $
    27
    
    
    $
    35
    
    
    $
    66Asset impairment charges (b)
    
    
    18
    
    
    
    
    
    
    
    18
    
    
    
    Lease return and cancellation charges (c)
    
    
    6
    
    
    
    
    
    
    
    6
    
    
    
    Special items, net
    
    $
    34
    
    
    $
    27
    
    
    $
    59
    
    
    $
    66
 
 (a)
    
    In connection with the continuing effort to consolidate functions and integrate the Companys
organizations, procedures and operations, the Company incurred $10 million of merger related
transition expenses during the second quarter of 2008. These expenses included $3 million in
uniform costs to transition employees to the new US Airways uniforms; $2 million in
compensation expenses for equity awards granted in connection with the merger to retain key
employees through the integration period; $2 million of aircraft livery costs; $1 million in
professional and technical fees related to the integration of the Companys airline operations
systems and $2 million in other expenses. During the second quarter of 2007, the Company
incurred $27 million of merger related transition expenses. These expenses included $2 million
in training and related expenses; $5 million in compensation expenses for equity awards
granted in connection with the merger to retain key employees through the integration period;
$4 million of aircraft livery costs; $13 million in professional and technical fees related to
the integration of the Companys airline operations systems; $2 million related to reservation
system migration expenses and $1 million in other expenses.In connection with the merger transition efforts noted above, the Company incurred $35 million of
merger related transition expenses in the first six months of 2008. These expenses included $12
million in uniform costs to transition employees to the new US Airways uniforms; $5 million in
applicable employment tax expenses related to contractual benefits granted to certain current and
former employees as a result of the merger; $6 million in compensation expenses for equity awards
granted in connection with the merger to retain key employees through the integration period; $5
million of aircraft livery costs; $4 million in professional and technical fees related to the
integration of the Companys airline operations systems and $3 million in other expenses. In the
first six months of 2007, the Company incurred $66 million of merger related transition expenses.
These expenses included $10 million in training and related expenses; $13 million in compensation
expenses for equity awards granted in connection with the merger to retain key employees through
the integration period; $11 million of aircraft livery costs; $24 million in professional and
technical fees related to the integration of the Companys airline operations systems; $1 million
in employee moving expenses; $4 million related to reservation system migration expenses and $3
million in other expenses.  9




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##### Table of Contents



(b)
    
    In the second quarter of 2008, the Company recorded $18 million in non-cash impairment
charges related to the decline in fair value of certain spare parts associated with the
Companys Boeing 737 aircraft fleet. See Note 10 for further discussion of these charges.(c)
    
    In the second quarter of 2008, the Company recorded $6 million in charges for lease return
costs and lease cancellation penalties related to certain Airbus aircraft as a result of the
fleet reductions announced in June 2008. 3. Earnings (loss) per common share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Basic earnings (loss) per share:Net income (loss)
    
    $
    (567
    )
    
    $
    263
    
    
    $
    (804
    )
    
    $
    329Weighted average common shares outstanding (in thousands)
    
    
    92,137
    
    
    
    91,477
    
    
    
    92,080
    
    
    
    91,420Basic earnings (loss) per share
    
    $
    (6.16
    )
    
    $
    2.88
    
    
    $
    (8.73
    )
    
    $
    3.60Diluted earnings (loss) per share:Net income (loss)
    
    $
    (567
    )
    
    $
    263
    
    
    $
    (804
    )
    
    $
    329Interest expense on 7.0% senior convertible notes
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    3Income (loss) for purposes of computing diluted net
income (loss) per share
    
    $
    (567
    )
    
    $
    264
    
    
    $
    (804
    )
    
    $
    332Share computation (in thousands):Weighted average common shares outstanding
    
    
    92,137
    
    
    
    91,477
    
    
    
    92,080
    
    
    
    91,420Dilutive effect of stock awards and warrants
    
    
    
    
    
    
    1,086
    
    
    
    
    
    
    
    1,448Assumed conversion of 7.0% senior convertible notes
    
    
    
    
    
    
    3,050
    
    
    
    
    
    
    
    3,050Weighted average common shares outstanding as adjusted
    
    
    92,137
    
    
    
    95,613
    
    
    
    92,080
    
    
    
    95,918Diluted earnings (loss) per share
    
    $
    (6.16
    )
    
    $
    2.77
    
    
    $
    (8.73
    )
    
    $
    3.46
     10




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##### Table of Contents



4. Debt
  June 30,
    
    
    December 31,2008
    
    
    2007SecuredCiticorp North America loan, variable interest rate of 4.98%, installments due through 2014
    
    $
    1,584
    
    
    $
    1,600Equipment notes payable and aircraft pre-delivery payment financings, fixed and variable interest
rates ranging from 3.86% to 9.01%, maturing from 2008 to 2022
    
    
    1,617
    
    
    
    1,378Slot financing, interest rate of 8.08%, 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 5.84%, installments due through 2009
    
    
    32
    
    
    
    32Capital lease obligations, computer software, installments due through 2009
    
    
    1
    
    
    
    13,322
    
    
    
    3,099Unsecured7% senior convertible notes, interest only payments until due in 2020
    
    
    74
    
    
    
    74GE Engine Maintenance term note, variable interest rate of 6.94%, installments due through 2011
    
    
    43
    
    
    
    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
    
    
    
    10156
    
    
    
    170Total long-term debt and capital lease obligations
    
    
    3,478
    
    
    
    3,269Less: Unamortized discount on debt
    
    
    (114
    )
    
    
    (121
    )Current maturities
    
    
    (159
    )
    
    
    (117
    )Long-term debt and capital lease obligations, net of current maturities
    
    $
    3,205
    
    
    $
    3,031
    5. Income taxes
    11




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6. Express expenses
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Aircraft fuel and related taxes
    
    $
    340
    
    
    $
    187
    
    
    $
    589
    
    
    $
    340Salaries and related costs
    
    
    37
    
    
    
    35
    
    
    
    74
    
    
    
    71Capacity purchases
    
    
    266
    
    
    
    249
    
    
    
    529
    
    
    
    499Aircraft rent
    
    
    2
    
    
    
    2
    
    
    
    4
    
    
    
    4Aircraft maintenance
    
    
    17
    
    
    
    17
    
    
    
    39
    
    
    
    38Other rent and landing fees
    
    
    27
    
    
    
    28
    
    
    
    54
    
    
    
    56Selling expenses
    
    
    44
    
    
    
    46
    
    
    
    82
    
    
    
    81Depreciation and amortization
    
    
    6
    
    
    
    6
    
    
    
    12
    
    
    
    12Other expenses
    
    
    83
    
    
    
    82
    
    
    
    173
    
    
    
    171Express expenses
    
    $
    822
    
    
    $
    652
    
    
    $
    1,556
    
    
    $
    1,272
 7. Investments in marketable securities (noncurrent)
    12




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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
    
    
    UnobservableJune 30,
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Valuation2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TechniqueInvestments in marketable securities (noncurrent)
    
    $
    285
    
    
    $
    
    
    
    $
    
    
    
    $
    285
    
    
    
    (1
    )Fuel hedging derivatives
    
    
    347
    
    
    
    
    
    
    
    347
    
    
    
    
    
    
    
    (2
    )
 (1)
    
    The Company 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, passing a future auction, 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 marketable 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.  13




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##### Table of Contents



Investments inMarketableSecurities(Noncurrent)Balance at December 31, 2007
    
    $
    353Unrealized losses recorded to other comprehensive income
    
    
    (59
    )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 June 30, 2008
    
    $
    285
 9. Other comprehensive income (loss)
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    (567
    )
    
    $
    263
    
    
    $
    (804
    )
    
    $
    329Unrealized losses on available for sale securities
    
    
    (10
    )
    
    
    
    
    
    
    (59
    )
    
    
    Reclassification of previously recognized
unrealized losses now deemed other than temporary
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    Amortization of actuarial gains associated with
pension and other postretirement benefits
    
    
    (1
    )
    
    
    
    
    
    
    (3
    )
    
    
    Total comprehensive income (loss)
    
    $
    (578
    )
    
    $
    263
    
    
    $
    (862
    )
    
    $
    329
  June 30,
    
    
    December 31,2008
    
    
    2007Accumulated net unrealized losses on available for sale securities
    
    $
    (103
    )
    
    $
    (48
    )Adjustment to initially apply FASB Statement No. 158
    
    
    3
    
    
    
    3Actuarial gains associated with pension and other postretirement benefits
    
    
    52
    
    
    
    55Accumulated other comprehensive income (loss)
    
    $
    (48
    )
    
    $
    10
  10. Impairment Goodwill SFAS No. 142, Goodwill and Other Intangible Assets, requires that goodwill be tested for impairment at the
reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would
more likely than not reduce the fair value of the reporting unit below its carrying value. Goodwill represents the
purchase price in excess of the net amount assigned to assets acquired and liabilities assumed by America West Holdings
on September 27, 2005. The Company has two reporting units consisting of its mainline and Express operations. All of
the Companys goodwill was allocated to the mainline reporting unit. The Company tested goodwill for impairment during
the fourth quarter of 2007. At that time, the Company concluded that the fair value of the mainline reporting unit was
in excess of the carrying value. In accordance with SFAS No. 142, the Company concluded that events had occurred and circumstances had changed
during the second quarter of 2008 which required the Company to perform an interim period goodwill impairment test.
Subsequent to the first quarter of 2008, the Company experienced a significant decline in market capitalization due to
overall airline industry conditions driven by record high fuel prices. The price of fuel became less volatile in the
second quarter of 2008, and there was a sustained surge in fuel prices. On May 21, 2008, the price per barrel of oil
hit a then record high of $133 per barrel and from that date through June 30, 2008 stayed at an average daily price of
$133 per barrel. The Companys average mainline fuel price during the second quarter of 2008 was $3.63 as compared to
$2.88 per gallon in the first quarter of 2008 and $2.20 for the full year 2007. This increase in the price per gallon
of fuel represents an increase of 26% and 65% as compared to the first quarter of 2008 and full year 2007,
respectively. The Companys average stock price in the second quarter of 2008 was $6.13 as compared to an average of
$12.15 in the first quarter of 2008, a decline of 50%. In addition, the Company announced in June 2008 that in response
to the record high fuel prices, it plans to reduce fourth quarter 2008 and full year 2009 domestic mainline capacity by
six to eight percent and seven to nine percent, respectively, on a year over year basis.  14




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##### Table of Contents



During the second quarter of 2008, the Company performed the first step of the two-step impairment test and
compared the fair value of the mainline reporting unit to its carrying value. Consistent with the Companys approach in
its annual impairment testing, in assessing the fair value of the reporting unit, the Company considered both the
market approach and income approach. Under the market approach, the fair value of the reporting unit is based on quoted
market prices and the number of shares outstanding for the Companys common stock. Under the income approach, the fair
value of the reporting unit is based on the present value of estimated future cash flows. The income approach is
dependent on a number of significant management assumptions including estimates of future capacity, passenger yield,
traffic, fuel, other operating costs and discount rates. Due to current market conditions, greater weighting was
attributed to the market approach, which was weighted 67% while the income approach was weighted 33% in arriving at the
fair value of the reporting unit. The Company determined that the fair value of the mainline reporting unit was less
than the carrying value of the net assets of the reporting unit, and thus the Company performed step two of the
impairment test. In step two of the impairment test, the Company determined the implied fair value of the goodwill and compared it
to the carrying value of the goodwill. With the assistance of a third party valuation firm, the Company allocated the
fair value of the reporting unit to all of its assets and liabilities as if the reporting unit had been acquired in a
business combination and the fair value of the mainline reporting unit was the price paid to acquire the reporting
unit. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the
implied fair value of goodwill. The Companys step two analysis resulted in no implied fair value of goodwill, and
therefore, the Company recognized an impairment charge of $622 million, representing a write off of the entire amount
of the Companys previously recorded goodwill. The following table reflects the change in the carrying amount of goodwill from December 31, 2007 (in millions): GoodwillBalance at December 31, 2007
    
    $
    622Impairment charge
    
    
    (622
    )Balance at June 30, 2008
    
    $
    
  Intangible Assets The Companys other intangible assets of $558 million at June 30, 2008 consist principally of airport take-off and
landing slots and airport gate leasehold rights of $473 million which are subject to amortization and $85 million of
international route authorities and trademarks which are classified as indefinite lived assets under SFAS No. 142. The
Company considered the potential impairment of these other intangibles assets in accordance with SFAS No. 142 and SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, as applicable.In connection with completing
step two of the Companys goodwill impairment analysis, the Company assessed the current fair values of its significant
intangible assets. The fair values of airport take-off and landing slots and international route authorities were
assessed using the market approach. The market approach took into consideration relevant supply and demand factors at
the related airport locations as well as available market sale and lease data. For trademarks, the Company utilized a
form of the income approach known as the relief-from-royalty method. As a result of these assessments, no impairment
was indicated.  Other Assets In connection with completing step two of the Companys goodwill impairment analysis, the Company also assessed
the current fair values of its other significant assets including owned aircraft, aircraft leases, and aircraft spare
parts. The Company concluded that the only additional impairment indicated was associated with the decline in fair
value of certain spare parts associated with its Boeing 737 fleet. Due to record high fuel prices and the current
industry environment, demand for the Boeing 737 aircraft type has declined given its lower fuel efficiency as compared
to other aircraft types. The fair value of these spare parts was determined using a market approach on the premise of
continued use of the aircraft through the Companys final scheduled lease return. In accordance with SFAS No. 144, the Company determined that the carrying amount of the Boeing 737 spare parts
classified as long-lived assets was not recoverable as the carrying amount of the Boeing 737 assets was greater than
the sum of the undiscounted cash flows expected from the use and disposition of these assets. As a result of this
impairment analysis, the Company recorded a $13 million impairment charge related to Boeing 737 rotable parts included
in flight equipment on its condensed consolidated balance sheet. The Company also recorded a $5 million write down
related to its Boeing 737 spare parts inventory included in materials and supplies, net on its condensed consolidated
balance sheet to reflect lower of cost of market.  15




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##### Table of Contents



11. Pass through trusts
     16




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##### Table of Contents



Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Operating revenues:Mainline passenger
    
    $
    2,214
    
    
    $
    2,194
    
    
    $
    4,167
    
    
    $
    4,100Express passenger
    
    
    802
    
    
    
    737
    
    
    
    1,459
    
    
    
    1,346Cargo
    
    
    38
    
    
    
    34
    
    
    
    74
    
    
    
    70Other
    
    
    233
    
    
    
    220
    
    
    
    454
    
    
    
    430Total operating revenues
    
    
    3,287
    
    
    
    3,185
    
    
    
    6,154
    
    
    
    5,946Operating expenses:Aircraft fuel and related taxes
    
    
    1,086
    
    
    
    658
    
    
    
    1,908
    
    
    
    1,208Gain on fuel hedging instruments, net
    
    
    (382
    )
    
    
    (23
    )
    
    
    (500
    )
    
    
    (78
    )Salaries and related costs
    
    
    571
    
    
    
    576
    
    
    
    1,134
    
    
    
    1,104Express expenses
    
    
    855
    
    
    
    681
    
    
    
    1,613
    
    
    
    1,319Aircraft rent
    
    
    183
    
    
    
    180
    
    
    
    361
    
    
    
    360Aircraft maintenance
    
    
    200
    
    
    
    170
    
    
    
    413
    
    
    
    335Other rent and landing fees
    
    
    142
    
    
    
    139
    
    
    
    287
    
    
    
    267Selling expenses
    
    
    116
    
    
    
    125
    
    
    
    220
    
    
    
    231Special items, net
    
    
    34
    
    
    
    27
    
    
    
    59
    
    
    
    66Depreciation and amortization
    
    
    59
    
    
    
    49
    
    
    
    111
    
    
    
    95Goodwill impairment
    
    
    622
    
    
    
    
    
    
    
    622
    
    
    
    Other
    
    
    339
    
    
    
    308
    
    
    
    656
    
    
    
    615Total operating expenses
    
    
    3,825
    
    
    
    2,890
    
    
    
    6,884
    
    
    
    5,522Operating income (loss)
    
    
    (538
    )
    
    
    295
    
    
    
    (730
    )
    
    
    424Nonoperating income (expense):Interest income
    
    
    21
    
    
    
    48
    
    
    
    50
    
    
    
    88Interest expense, net
    
    
    (46
    )
    
    
    (54
    )
    
    
    (99
    )
    
    
    (119
    )Other, net
    
    
    4
    
    
    
    2
    
    
    
    (4
    )
    
    
    5Total nonoperating expense, net
    
    
    (21
    )
    
    
    (4
    )
    
    
    (53
    )
    
    
    (26
    )Income (loss) before income taxes
    
    
    (559
    )
    
    
    291
    
    
    
    (783
    )
    
    
    398Income tax provision
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    11Net income (loss)
    
    $
    (559
    )
    
    $
    283
    
    
    $
    (783
    )
    
    $
    387
   17




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##### Table of Contents



June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    1,713
    
    
    $
    1,940Investments in marketable securities
    
    
    293
    
    
    
    226Restricted cash
    
    
    2
    
    
    
    2Accounts receivable, net
    
    
    559
    
    
    
    366Materials and supplies, net
    
    
    235
    
    
    
    197Prepaid expenses and other
    
    
    842
    
    
    
    524Total current assets
    
    
    3,644
    
    
    
    3,255Property and equipmentFlight equipment
    
    
    2,571
    
    
    
    2,295Ground property and equipment
    
    
    748
    
    
    
    681Less accumulated depreciation and amortization
    
    
    (822
    )
    
    
    (729
    )2,497
    
    
    
    2,247Equipment purchase deposits
    
    
    207
    
    
    
    128Total property and equipment
    
    
    2,704
    
    
    
    2,375Other assetsGoodwill
    
    
    
    
    
    
    622Other intangibles, net
    
    
    520
    
    
    
    514Restricted cash
    
    
    460
    
    
    
    466Investments in marketable securities
    
    
    285
    
    
    
    353Other assets, net
    
    
    205
    
    
    
    202Total other assets
    
    
    1,470
    
    
    
    2,157Total assets
    
    $
    7,818
    
    
    $
    7,787LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent maturities of debt and capital leases
    
    $
    143
    
    
    $
    101Accounts payable
    
    
    516
    
    
    
    333Payables to related parties, net
    
    
    1,036
    
    
    
    1,067Air traffic liability
    
    
    1,286
    
    
    
    832Accrued compensation and vacation
    
    
    161
    
    
    
    214Accrued taxes
    
    
    192
    
    
    
    158Other accrued expenses
    
    
    905
    
    
    
    841Total current liabilities
    
    
    4,239
    
    
    
    3,546Noncurrent liabilities and deferred creditsLong-term debt and capital leases, net of current maturities
    
    
    1,563
    
    
    
    1,373Deferred gains and credits, net
    
    
    142
    
    
    
    168Postretirement benefits other than pensions
    
    
    137
    
    
    
    137Employee benefit liabilities and other
    
    
    729
    
    
    
    713Total noncurrent liabilities and deferred credits
    
    
    2,571
    
    
    
    2,391Stockholders equityCommon stock, $1 par, 1,000 shares issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    1,845
    
    
    
    1,845Accumulated other comprehensive loss
    
    
    (58
    )
    
    
    (1
    )Retained earnings (deficit)
    
    
    (779
    )
    
    
    6Total stockholders equity
    
    
    1,008
    
    
    
    1,850Total liabilities and stockholders equity
    
    $
    7,818
    
    
    $
    7,787
   18




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##### Table of Contents



Six Months Ended June 30,2008
    
    
    2007Net cash provided by operating activities
    
    $
    67
    
    
    $
    661Cash flows from investing activities:Purchases of property and equipment
    
    
    (383
    )
    
    
    (191
    )Purchases of marketable securities
    
    
    (284
    )
    
    
    (2,017
    )Sales of marketable securities
    
    
    217
    
    
    
    906Proceeds from sale of other investments
    
    
    1
    
    
    
    31Decrease in long-term restricted cash
    
    
    6
    
    
    
    168Proceeds from dispositions of property and equipment
    
    
    
    
    
    
    4Increase in equipment purchase deposits
    
    
    (79
    )
    
    
    (17
    )Other
    
    
    2
    
    
    
    Net cash used in investing activities
    
    
    (520
    )
    
    
    (1,116
    )Cash flows from financing activities:Repayments of debt and capital lease obligations
    
    
    (153
    )
    
    
    (63
    )Proceeds from issuance of debt
    
    
    387
    
    
    
    66Deferred financing costs
    
    
    (8
    )
    
    
    Net cash provided by financing activities
    
    
    226
    
    
    
    3Net decrease in cash and cash equivalents
    
    
    (227
    )
    
    
    (452
    )Cash and cash equivalents at beginning of period
    
    
    1,940
    
    
    
    1,111Cash and cash equivalents at end of period
    
    $
    1,713
    
    
    $
    659Non-cash investing and financing activities:Net unrealized loss on available for sale securities
    
    $
    55
    
    
    $
    Repayment of Barclays prepaid miles by parent
    
    
    
    
    
    
    325Supplemental information:Interest paid, net of amounts capitalized
    
    $
    59
    
    
    $
    64Income taxes paid
    
    
    
    
    
    
    3
   19




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##### Table of Contents



US Airways, Inc.
 
 Notes to Condensed Consolidated Financial Statements
 (Unaudited)
 1. Basis of presentation
     Recent Accounting Pronouncements
    20




---



##### Table of Contents



2. Special items, net
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Merger related transition expenses (a)
    
    $
    10
    
    
    $
    27
    
    
    $
    35
    
    
    $
    66Asset impairment charges (b)
    
    
    18
    
    
    
    
    
    
    
    18
    
    
    
    Lease return and cancellation charges (c)
    
    
    6
    
    
    
    
    
    
    
    6
    
    
    
    Special items, net
    
    $
    34
    
    
    $
    27
    
    
    $
    59
    
    
    $
    66
 
 (a)
    
    In connection with the continuing effort to consolidate functions and integrate
organizations, procedures and operations with AWA, US Airways incurred $10 million of merger
related transition expenses during the second quarter of 2008. These expenses included $3
million in uniform costs to transition employees to the new US Airways uniforms; $2 million in
compensation expenses for equity awards granted in connection with the merger to retain key
employees through the integration period; $2 million of aircraft livery costs; $1 million in
professional and technical fees related to the integration of airline operations systems and
$2 million in other expenses. During the second quarter of 2007, US Airways incurred $27
million of merger related transition expenses. These expenses included $2 million in training
and related expenses; $5 million in compensation expenses for equity awards granted in
connection with the merger to retain key employees through the integration period; $4 million
of aircraft livery costs; $13 million in professional and technical fees related to the
integration of airline operations systems; $2 million related to reservation system migration
expenses and $1 million in other expenses.In connection with the merger transition efforts noted above, US Airways incurred $35 million of
merger related transition expenses in the first six months of 2008. These expenses included $12
million in uniform costs to transition employees to the new US Airways uniforms; $5 million in
applicable employment tax expenses related to contractual benefits granted to certain current and
former employees as a result of the merger; $6 million in compensation expenses for equity awards
granted in connection with the merger to retain key employees through the integration period; $5
million of aircraft livery costs; $4 million in professional and technical fees related to the
integration of airline operations systems and $3 million in other expenses. In the first six
months of 2007, US Airways incurred $66 million of merger related transition expenses. These
expenses included $10 million in training and related expenses; $13 million in compensation
expenses for equity awards granted in connection with the merger to retain key employees through
the integration period; $11 million of aircraft livery costs; $24 million in professional and
technical fees related to the integration of airline operations systems; $1 million in employee
moving expenses; $4 million related to reservation system
migration expenses and $3 million in other expenses.  21




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##### Table of Contents



(b)
    
    In the second quarter of 2008, US Airways recorded $18 million in non-cash impairment charges
related to the decline in fair value of certain spare parts associated with US Airways
Boeing 737 aircraft fleet. See Note 10 for further discussion of these charges.(c)
    
    In the second quarter of 2008, US Airways recorded $6 million in charges for lease return
costs and lease cancellation penalties related to certain Airbus aircraft as a result of the
fleet reductions announced in June 2008. 3. Debt
  June 30,
    
    
    December 31,2008
    
    
    2007SecuredEquipment notes payable and aircraft pre-delivery payment financings, fixed and variable interest
rates ranging from 3.86% to 9.01%, maturing from 2008 to 2022
    
    $
    1,617
    
    
    $
    1,378Slot financing, interest rate of 8.08%, 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 5.84%, installments due through 2009
    
    
    32
    
    
    
    32Capital lease obligations, computer software, installments due through 2009
    
    
    1
    
    
    
    11,738
    
    
    
    1,499UnsecuredGE Engine Maintenance term note, variable interest rate of 6.94%, installments due through 2011
    
    
    43
    
    
    
    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
    
    
    
    1082
    
    
    
    96Total long-term debt and capital lease obligations
    
    
    1,820
    
    
    
    1,595Less: Unamortized discount on debt
    
    
    (114
    )
    
    
    (121
    )Current maturities
    
    
    (143
    )
    
    
    (101
    )Long-term debt and capital lease obligations, net of current maturities
    
    $
    1,563
    
    
    $
    1,373
     22




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##### Table of Contents



4. Related party transactions
  June 30, 2008
    
    
    December 31, 2007US Airways Group
    
    $
    956
    
    
    $
    986US Airways Group wholly owned subsidiaries
    
    
    80
    
    
    
    81$
    1,036
    
    
    $
    1,067
   5. Income taxes
       23




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##### Table of Contents



6. Express expenses
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Aircraft fuel and related taxes
    
    $
    340
    
    
    $
    187
    
    
    $
    589
    
    
    $
    340Salaries and related costs
    
    
    5
    
    
    
    5
    
    
    
    11
    
    
    
    11Capacity purchases
    
    
    420
    
    
    
    395
    
    
    
    836
    
    
    
    789Other rent and landing fees
    
    
    22
    
    
    
    23
    
    
    
    44
    
    
    
    47Selling expenses
    
    
    44
    
    
    
    46
    
    
    
    82
    
    
    
    81Other expenses
    
    
    24
    
    
    
    25
    
    
    
    51
    
    
    
    51Express expenses
    
    $
    855
    
    
    $
    681
    
    
    $
    1,613
    
    
    $
    1,319
 7. Investments in marketable securities (noncurrent)
      24




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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
    
    
    UnobservableJune 30,
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Valuation2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TechniqueInvestments in marketable securities (noncurrent)
    
    $
    285
    
    
    $
    
    
    
    $
    
    
    
    $
    285
    
    
    
    (1
    )Fuel hedging derivatives
    
    
    347
    
    
    
    
    
    
    
    347
    
    
    
    
    
    
    
    (2
    )
 (1)
    
    US Airways 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, passing a future auction, 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 marketable 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
    
    
    (59
    )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 June 30, 2008
    
    $
    285
  25




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##### Table of Contents



9. Other comprehensive income (loss)
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    (559
    )
    
    $
    283
    
    
    $
    (783
    )
    
    $
    387Unrealized losses on available for sale securities
    
    
    (10
    )
    
    
    
    
    
    
    (59
    )
    
    
    Reclassification of previously recognized
unrealized losses now deemed other than temporary
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    Amortization of actuarial gains associated with
pension and other postretirement benefits
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )
    
    
    Total comprehensive income (loss)
    
    $
    (570
    )
    
    $
    283
    
    
    $
    (840
    )
    
    $
    387
  June 30,
    
    
    December 31,2008
    
    
    2007Accumulated net unrealized losses on available for sale securities
    
    $
    (103
    )
    
    $
    (48
    )Actuarial gains associated with pension and other postretirement benefits
    
    
    45
    
    
    
    47Accumulated other comprehensive loss
    
    $
    (58
    )
    
    $
    (1
    )
  10. Impairment Goodwill SFAS No. 142, Goodwill and Other Intangible Assets, requires that goodwill be tested for impairment at the
reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would
more likely than not reduce the fair value of the reporting unit below its carrying value. Goodwill represents the
purchase price in excess of the net amount assigned to assets acquired and liabilities assumed by America West Holdings
on September 27, 2005. US Airways has two reporting units consisting of its mainline and Express operations. All of US
Airways goodwill was allocated to the mainline reporting unit. US Airways tested goodwill for impairment during the
fourth quarter of 2007. At that time, US Airways concluded that the fair value of the mainline reporting unit was in
excess of the carrying value. In accordance with SFAS No. 142, US Airways concluded that events had occurred and circumstances had changed
during the second quarter of 2008 which required US Airways to perform an interim period goodwill impairment test.
Subsequent to the first quarter of 2008, US Airways experienced a significant decline in market capitalization due to
overall airline industry conditions driven by record high fuel prices. The price of fuel became less volatile in the
second quarter of 2008, and there was a sustained surge in fuel prices. On May 21, 2008, the price per barrel of oil
hit a then record high of $133 per barrel and from that date through June 30, 2008 stayed at an average daily price of
$133 per barrel. US Airways average mainline fuel price during the second quarter of 2008 was $3.63 as compared to
$2.88 per gallon in the first quarter of 2008 and $2.20 for the full year 2007. This increase in the price per gallon
of fuel represents an increase of 26% and 65% as compared to the first quarter of 2008 and full year 2007,
respectively. US Airways Groups average stock price in the second quarter of 2008 was $6.13 as compared to an average
of $12.15 in the first quarter of 2008, a decline of 50%. In addition, US Airways announced in June 2008 that in
response to the record high fuel prices, it plans to reduce fourth quarter 2008 and full year 2009 domestic mainline
capacity by six to eight percent and seven to nine percent, respectively, on a year over year basis. During the second quarter of 2008, US Airways performed the first step of the two-step impairment test and
compared the fair value of the mainline reporting unit to its carrying value. Consistent with US Airways approach in
its annual impairment testing, in assessing the fair value of the reporting unit, US Airways considered both the market
approach and income approach. Under the market approach, the fair value of the reporting unit is based on quoted market
prices and the number of shares outstanding for US Airways Groups common stock. Under the income approach, the fair
value of the reporting unit is based on the present value of estimated future cash flows. The income approach is
dependent on a number of significant management assumptions including estimates of future capacity, passenger yield,
traffic, fuel, other operating costs and discount rates. Due to current market conditions, greater weighting was
attributed to the market approach, which was weighted 67% while the income approach was weighted 33% in arriving at the
fair value of the reporting unit. US Airways determined that the fair value of the mainline reporting unit was less
than the carrying value of the net assets of the reporting unit, and thus US Airways performed step two of the
impairment test.  26




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##### Table of Contents



In step two of the impairment test, US Airways determined the implied fair value of the goodwill and compared it
to the carrying value of the goodwill. With the assistance of a third party valuation firm, US Airways allocated the
fair value of the reporting unit to all of its assets and liabilities as if the reporting unit had been acquired in a
business combination and the fair value of the mainline reporting unit was the price paid to acquire the reporting
unit. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the
implied fair value of goodwill. US Airways step two analysis resulted in no implied fair value of goodwill, and
therefore, US Airways recognized an impairment charge of $622 million, representing a write off of the entire amount of
US Airways previously recorded goodwill. The following table reflects the change in the carrying amount of goodwill from December 31, 2007 (in millions): GoodwillBalance at December 31, 2007
    
    $
    622Impairment charge
    
    
    (622
    )Balance at June 30, 2008
    
    $
    
 Intangible Assets US Airways other intangible assets of $520 million at June 30, 2008 consist principally of airport take-off and
landing slots and airport gate leasehold rights of $435 million which are subject to amortization and $85 million of
international route authorities and trademarks which are classified as indefinite lived assets under SFAS No. 142. US
Airways considered the potential impairment of these other intangibles assets in accordance with SFAS No. 142 and SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, as applicable.In connection with completing
step two of US Airways goodwill impairment analysis, US Airways assessed the current fair values of its significant
intangible assets. The fair values of airport take-off and landing slots and international route authorities were
assessed using the market approach. The market approach took into consideration relevant supply and demand factors at
the related airport locations as well as available market sale and lease data. For trademarks, US Airways utilized a
form of the income approach known as the relief-from-royalty method. As a result of these assessments, no impairment
was indicated. Other Assets In connection with completing step two of US Airways goodwill impairment analysis, US Airways also assessed the
current fair values of its other significant assets including owned aircraft, aircraft leases, and aircraft spare
parts. US Airways concluded that the only additional impairment indicated was associated with the decline in fair value
of certain spare parts associated with its Boeing 737 fleet. Due to record high fuel prices and the current industry
environment, demand for the Boeing 737 aircraft type has declined given its lower fuel efficiency as compared to other
aircraft types. The fair value of these spare parts was determined using a market approach on the premise of continued
use of the aircraft through US Airways final scheduled lease return. In accordance with SFAS No. 144, US Airways determined that the carrying amount of the Boeing 737 spare parts
classified as long-lived assets was not recoverable as the carrying amount of the Boeing 737 assets was greater than
the sum of the undiscounted cash flows expected from the use and disposition of these assets. As a result of this
impairment analysis, US Airways recorded a $13 million impairment charge related to Boeing 737 rotable parts included
in flight equipment on its condensed consolidated balance sheet. US Airways also recorded a $5 million write down
related to its Boeing 737 spare parts inventory included in materials and supplies, net on its condensed consolidated
balance sheet to reflect lower of cost of market. 11. Pass through trusts
   27




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28




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   Industry Environment
   
    
    Announced substantial capacity reductions to take effect after the summer travel season.
These capacity cuts are expected to create an environment that supports ticket price
increases and in turn increases yields, reduces costs and minimizes cash burn.
    
    Developed and implemented new revenue initiatives to supplement existing sources of
revenue.
    
    Implemented cost containment strategies to minimize non-essential expenditures and
conserve cash.
    
    Raised cash to enhance near-term liquidity through a number of initiatives such as
traditional capital market issuances, asset sales and sale and leaseback transactions, and
prepaid sales of miles to affinity card issuers.
    29




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##### Table of Contents



US Airways Response to Record High Fuel Prices
  Capacity and Fleet Reductions
   
    
    Fleet Reduction: We are returning ten aircraft to lessors, which includes six Boeing
737-300 aircraft to be returned by the end of 2008 and four Airbus A320 aircraft to be
returned in the first half of 2009. We have also cancelled the leases of two A330-200
wide-body aircraft that had been scheduled for delivery in the second half of 2009. Further,
we plan to reduce additional aircraft in 2009 and 2010.
    
    Las Vegas Flight Reduction: We will close our Las Vegas night operation, except for
limited night service to the East Coast, in early September 2008. In the current fuel
environment, the revenue generated from the Las Vegas night operation no longer exceeds the
incremental cost of that flying. Overall, daily departures from Las Vegas, which were as
high as 141 during September 2007, will decrease to 81 in early September 2008, and will
decrease further to approximately 74 by the end of 2008 as aircraft are retired from our
fleet.
 New Revenue Initiatives
  Cost Control
  
    
    Employee Reduction: As a result of the reduced flying, we will require approximately
1,700 fewer positions across the system, including approximately 300 pilots, 400 flight
attendants, 800 airport employees and 200 staff and management. For front line employees,
the staffing reduction is expected to be handled by attrition throughout the summer. Any
necessary furloughs following the summer travel season will be offset as much as possible by
voluntary leaves of absence as permitted by the respective labor contracts. Also, in July
2008, we commenced additional headcount reductions of approximately 500 in non-union
administrative and management staff.
    
    Reduced Capital
Expenditures: We have reduced our planned 2008 non-aircraft capital
expenditures by $90 million to $225 million, while maintaining critical operational projects such as our
Reliability, Convenience and Appearance initiative, which includes cabin refurbishments,
improved and additional check-in kiosks, airport club refurbishments, facility upgrades, new
gate reading technology and the completion of our next generation website.
    
    Closing Certain Facilities:
The US Airways Club in the Baltimore/Washington International
Airport, arrivals lounges in Munich, Rome and
Zurich, and cargo stations in Burbank, Colorado Springs and Reno will be closed.
    
    Reducing Partner Costs: We are revising our wholesale programs for cruise lines, tour
operators and consolidators, including
reducing the number of agency partners, decreasing discounts, adding tighter restrictions on
travel rules, and reducing commissions.
  30




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##### Table of Contents



Liquidity
  
    
    Restructuring aircraft commitments and other obligations with our vendors.
    
    Outsourcing nonstrategic portions of our business that would not impact the quality
of our operations.
    
    Selling non-core assets.
    
    Asset-backed financings.
 Current Financial Results and Outlook
     31




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Customer Service
   2008
    
    
    2007
    
    
    Percent Change 2008-2007April
    
    
    May
    
    
    June
    
    
    April
    
    
    May
    
    
    June
    
    
    April
    
    
    May
    
    
    JuneOn-time performance (a)
    
    
    81.3
    
    
    
    83.6
    
    
    
    76.3
    
    
    
    63.1
    
    
    
    67.9
    
    
    
    61.6
    
    
    
    28.8
    
    
    
    23.1
    
    
    
    23.9Completion factor (b)
    
    
    98.9
    
    
    
    99.1
    
    
    
    98.1
    
    
    
    98.6
    
    
    
    98.5
    
    
    
    97.2
    
    
    
    0.3
    
    
    
    0.6
    
    
    
    0.9Mishandled baggage (c)
    
    
    4.20
    
    
    
    3.86
    
    
    
    4.70
    
    
    
    7.96
    
    
    
    7.17
    
    
    
    10.59
    
    
    
    (47.2
    )
    
    
    (46.2
    )
    
    
    (55.6
    )Customer complaints (d)
    
    
    2.51
    
    
    
    1.94
    
    
    
    2.36
    
    
    
    4.82
    
    
    
    2.66
    
    
    
    3.43
    
    
    
    (47.9
    )
    
    
    (27.1
    )
    
    
    (31.2
    )
 
 (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
     32




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US Airways Groups Results of Operations
        33




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##### Table of Contents



Three Months Ended
    
    
    Percent
    
    
    Six Months Ended
    
    
    PercentJune 30,
    
    
    Change
    
    
    June 30,
    
    
    Change2008
    
    
    2007
    
    
    2008-2007
    
    
    2008
    
    
    2007
    
    
    2008-2007Revenue passenger miles (millions) (a)
    
    
    16,193
    
    
    
    16,294
    
    
    
    (0.6
    )
    
    
    30,682
    
    
    
    30,712
    
    
    
    (0.1
    )Available seat miles (millions) (b)
    
    
    19,387
    
    
    
    19,523
    
    
    
    (0.7
    )
    
    
    37,721
    
    
    
    38,079
    
    
    
    (0.9
    )Passenger load factor (c)
    
    
    83.5
    
    
    
    83.5
    
    
    
    pts
    
    
    81.3
    
    
    
    80.7
    
    
    0.6
    ptsYield (d)
    
    
    13.67
    
    
    
    13.47
    
    
    
    1.5
    
    
    
    13.58
    
    
    
    13.35
    
    
    
    1.7Passenger revenue per available seat mile (e)
    
    
    11.42
    
    
    
    11.24
    
    
    
    1.6
    
    
    
    11.05
    
    
    
    10.77
    
    
    
    2.6Operating cost per available seat mile (f)
    
    
    15.33
    
    
    
    11.34
    
    
    
    35.2
    
    
    
    13.98
    
    
    
    11.06
    
    
    
    26.5Passenger enplanements (thousands) (g)
    
    
    14,410
    
    
    
    15,375
    
    
    
    (6.3
    )
    
    
    27,946
    
    
    
    29,355
    
    
    
    (4.8
    )Aircraft at end of period
    
    
    357
    
    
    
    358
    
    
    
    (0.3
    )
    
    
    357
    
    
    
    358
    
    
    
    (0.3
    )Block hours (h)
    
    
    337,257
    
    
    
    344,736
    
    
    
    (2.2
    )
    
    
    664,587
    
    
    
    679,693
    
    
    
    (2.2
    )Average stage length (miles) (i)
    
    
    971
    
    
    
    930
    
    
    
    4.5
    
    
    
    954
    
    
    
    921
    
    
    
    3.6Average passenger journey (miles) (j)
    
    
    1,584
    
    
    
    1,494
    
    
    
    6.0
    
    
    
    1,552
    
    
    
    1,478
    
    
    
    4.9Fuel consumption (gallons in millions)
    
    
    299.1
    
    
    
    306.6
    
    
    
    (2.4
    )
    
    
    584.6
    
    
    
    598.5
    
    
    
    (2.3
    )Average aircraft fuel price including
related taxes (dollars per gallon)
    
    
    3.63
    
    
    
    2.15
    
    
    
    69.2
    
    
    
    3.26
    
    
    
    2.02
    
    
    
    61.8Full time equivalent employees at end of
period
    
    
    34,359
    
    
    
    35,532
    
    
    
    (3.3
    )
    
    
    34,359
    
    
    
    35,532
    
    
    
    (3.3
    )
 
 (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.(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. 
  34




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##### Table of Contents



Three Months Ended June 30, 2008
Compared with the
Three Months Ended June 30, 2007
 Operating Revenues:
 Percent2008
    
    
    2007
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    2,214
    
    
    $
    2,194
    
    
    
    0.9Express passenger
    
    
    802
    
    
    
    737
    
    
    
    8.8Cargo
    
    
    38
    
    
    
    34
    
    
    
    12.1Other
    
    
    203
    
    
    
    190
    
    
    
    6.7Total operating revenues
    
    $
    3,257
    
    
    $
    3,155
    
    
    
    3.2
     35




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##### Table of Contents



Operating Expenses:
 Percent2008
    
    
    2007
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    1,086
    
    
    $
    658
    
    
    
    65.1Loss (gain) on fuel hedging instruments, net:Realized
    
    
    (192
    )
    
    
    2
    
    
    nmUnrealized
    
    
    (190
    )
    
    
    (25
    )
    
    nmSalaries and related costs
    
    
    571
    
    
    
    576
    
    
    
    (0.9
    )Aircraft rent
    
    
    183
    
    
    
    180
    
    
    
    1.5Aircraft maintenance
    
    
    200
    
    
    
    170
    
    
    
    17.9Other rent and landing fees
    
    
    142
    
    
    
    139
    
    
    
    2.2Selling expenses
    
    
    116
    
    
    
    125
    
    
    
    (7.1
    )Special items, net
    
    
    34
    
    
    
    27
    
    
    
    22.8Depreciation and amortization
    
    
    57
    
    
    
    46
    
    
    
    22.4Goodwill impairment
    
    
    622
    
    
    
    
    
    
    nmOther
    
    
    342
    
    
    
    316
    
    
    
    9.0Total mainline operating expenses
    
    
    2,971
    
    
    
    2,214
    
    
    
    34.2Express expenses:Fuel
    
    
    340
    
    
    
    187
    
    
    
    81.6Other
    
    
    482
    
    
    
    465
    
    
    
    3.6Total Express expenses
    
    
    822
    
    
    
    652
    
    
    
    26.0Total operating expenses
    
    $
    3,793
    
    
    $
    2,866
    
    
    
    32.4
    Percent2008
    
    
    2007
    
    
    Change(In cents)Mainline:Aircraft fuel and related taxes
    
    
    5.60
    
    
    
    3.37
    
    
    
    66.3Gain on fuel hedging instruments, net
    
    
    (1.97
    )
    
    
    (0.12
    )
    
    nmSalaries and related costs
    
    
    2.95
    
    
    
    2.95
    
    
    
    Aircraft rent
    
    
    0.95
    
    
    
    0.92
    
    
    
    2.2Aircraft maintenance
    
    
    1.03
    
    
    
    0.87
    
    
    
    18.7Other rent and landing fees
    
    
    0.73
    
    
    
    0.71
    
    
    
    2.9Selling expenses
    
    
    0.60
    
    
    
    0.64
    
    
    
    (6.4
    )Special items, net
    
    
    0.17
    
    
    
    0.14
    
    
    
    23.7Depreciation and amortization
    
    
    0.29
    
    
    
    0.24
    
    
    
    23.2Goodwill impairment
    
    
    3.21
    
    
    
    
    
    
    nmOther
    
    
    1.77
    
    
    
    1.62
    
    
    
    9.715.33
    
    
    
    11.34
    
    
    
    35.2
  36




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##### Table of Contents




    
    Aircraft fuel and related taxes per ASM increased 66.3% due primarily to a 69.2% increase
in the average price per gallon of fuel to $3.63 in the second quarter of 2008 from $2.15 in
2007 period.
    
    Gain on fuel hedging instruments, net per ASM increased from a gain of 0.12 cents in the
second quarter of 2007 to a gain of 1.97 cents in the second quarter of 2008 as a result of
a period over period increase in the fair value of costless collar transactions.
    
    Aircraft maintenance expense per ASM increased 18.7% due principally to increases in the
number of engine and landing gear overhauls performed, coupled with a higher rate per engine
and landing gear overhaul as a result of servicing larger capacity aircraft in the 2008
maintenance cycle as compared to the 2007 period.
    
    Depreciation and amortization expense per ASM increased 23.2% due primarily to an
increase in depreciation of owned aircraft as a result of the acquisition of six Embraer 190
aircraft subsequent to the second quarter of 2007 and eight Embraer 190 aircraft in the
first half of 2008.
    
    Other expenses per ASM increased 9.7% due primarily to the increase in the incremental
cost of travel redemptions associated with our frequent traveler program as a result of
increases in fuel costs. Other operating expenses in the 2007 period benefited from $9
million of insurance settlement proceeds related to business interruption and property
damages incurred as a result of Hurricane Katrina in 2005.
  Nonoperating Income (Expense):
 Percent2008
    
    
    2007
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    21
    
    
    $
    48
    
    
    
    (56.2
    )Interest expense, net
    
    
    (56
    )
    
    
    (69
    )
    
    
    (18.4
    )Other, net
    
    
    4
    
    
    
    3
    
    
    
    60.8Total nonoperating expense, net
    
    $
    (31
    )
    
    $
    (18
    )
    
    
    69.0
   37




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Six Months Ended June 30, 2008
Compared with the
Six Months Ended June 30, 2007
 Operating Revenues:
 Percent2008
    
    
    2007
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    4,167
    
    
    $
    4,100
    
    
    
    1.6Express passenger
    
    
    1,459
    
    
    
    1,346
    
    
    
    8.4Cargo
    
    
    74
    
    
    
    70
    
    
    
    5.4Other
    
    
    396
    
    
    
    371
    
    
    
    6.9Total operating revenues
    
    $
    6,096
    
    
    $
    5,887
    
    
    
    3.6
     38




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##### Table of Contents



Operating Expenses:
 Percent2008
    
    
    2007
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    1,908
    
    
    $
    1,208
    
    
    
    58.0Loss (gain) on fuel hedging instruments, net:Realized
    
    
    (274
    )
    
    
    37
    
    
    nmUnrealized
    
    
    (226
    )
    
    
    (115
    )
    
    
    96.2Salaries and related costs
    
    
    1,134
    
    
    
    1,104
    
    
    
    2.7Aircraft rent
    
    
    361
    
    
    
    360
    
    
    
    0.3Aircraft maintenance
    
    
    413
    
    
    
    335
    
    
    
    23.2Other rent and landing fees
    
    
    287
    
    
    
    267
    
    
    
    7.5Selling expenses
    
    
    220
    
    
    
    231
    
    
    
    (4.7
    )Special items, net
    
    
    59
    
    
    
    66
    
    
    
    (10.7
    )Depreciation and amortization
    
    
    107
    
    
    
    90
    
    
    
    18.1Goodwill impairment
    
    
    622
    
    
    
    
    
    
    nmOther
    
    
    662
    
    
    
    627
    
    
    
    5.7Total mainline operating expenses
    
    
    5,273
    
    
    
    4,210
    
    
    
    25.3Express expenses:Fuel
    
    
    589
    
    
    
    340
    
    
    
    73.2Other
    
    
    967
    
    
    
    932
    
    
    
    3.7Total Express expenses
    
    
    1,556
    
    
    
    1,272
    
    
    
    22.2Total operating expenses
    
    $
    6,829
    
    
    $
    5,482
    
    
    
    24.6
    Percent2008
    
    
    2007
    
    
    Change(In cents)Mainline:Aircraft fuel and related taxes
    
    
    5.06
    
    
    
    3.17
    
    
    
    59.5Gain on fuel hedging instruments, net
    
    
    (1.33
    )
    
    
    (0.21
    )
    
    nmSalaries and related costs
    
    
    3.01
    
    
    
    2.90
    
    
    
    3.7Aircraft rent
    
    
    0.96
    
    
    
    0.95
    
    
    
    1.3Aircraft maintenance
    
    
    1.09
    
    
    
    0.88
    
    
    
    24.4Other rent and landing fees
    
    
    0.76
    
    
    
    0.70
    
    
    
    8.5Selling expenses
    
    
    0.58
    
    
    
    0.61
    
    
    
    (3.8
    )Special items, net
    
    
    0.16
    
    
    
    0.17
    
    
    
    (9.8
    )Depreciation and amortization
    
    
    0.28
    
    
    
    0.24
    
    
    
    19.3Goodwill impairment
    
    
    1.65
    
    
    
    
    
    
    nmOther
    
    
    1.76
    
    
    
    1.65
    
    
    
    6.713.98
    
    
    
    11.06
    
    
    
    26.5
  39




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##### Table of Contents




    
    Aircraft fuel and related taxes per ASM increased 59.5% due primarily to a 61.8% increase
in the average price per gallon of fuel to $3.26 in the first six months of 2008 from $2.02
in 2007 period.
    
    Gain on fuel hedging instruments, net per ASM increased from a gain of 0.21 cents in the
first six months of 2007 to a gain of 1.33 cents in the first six months of 2008 as a result
of a period over period increase in the fair value of costless collar transactions.
    
    Aircraft maintenance expense per ASM increased 24.4% due principally to increases in the
number of engine and landing gear overhauls performed, coupled with a higher rate per engine
and landing gear overhaul as a result of servicing larger capacity aircraft in the 2008
maintenance cycle as compared to the 2007 period.
    
    Other rent and landing fees expense per ASM increased 8.5% 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 19.3% due primarily to an
increase in depreciation of owned aircraft as a result of the acquisition of six Embraer 190
aircraft subsequent to the second quarter of 2007 and eight Embraer 190 aircraft in the
first half of 2008.
    
    Other expenses per ASM increased 6.7% due primarily to the increase in the incremental
cost of travel redemptions associated with our frequent traveler program as a result of
increases in fuel costs. Other operating expenses in the 2007 period benefited from $9
million of insurance settlement proceeds related to business interruption and property
damages incurred as a result of Hurricane Katrina in 2005.
  Nonoperating Income (Expense):
 Percent2008
    
    
    2007
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    50
    
    
    $
    88
    
    
    
    (43.6
    )Interest expense, net
    
    
    (116
    )
    
    
    (140
    )
    
    
    (16.9
    )Other, net
    
    
    (5
    )
    
    
    (13
    )
    
    
    (66.9
    )Total nonoperating expense, net
    
    $
    (71
    )
    
    $
    (65
    )
    
    
    9.4
    40




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##### Table of Contents



US Airways Results of Operations
        41




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##### Table of Contents



Three Months Ended
    
    
    Percent
    
    
    Six Months Ended
    
    
    PercentJune 30,
    
    
    Change
    
    
    June 30,
    
    
    Change2008
    
    
    2007
    
    
    2008-2007
    
    
    2008
    
    
    2007
    
    
    2008-2007Revenue passenger miles (millions) (a)
    
    
    16,193
    
    
    
    16,294
    
    
    
    (0.6
    )
    
    
    30,682
    
    
    
    30,712
    
    
    
    (0.1
    )Available seat miles (millions) (b)
    
    
    19,387
    
    
    
    19,523
    
    
    
    (0.7
    )
    
    
    37,721
    
    
    
    38,079
    
    
    
    (0.9
    )Passenger load factor (c)
    
    
    83.5
    
    
    
    83.5
    
    
    
    pts
    
    
    81.3
    
    
    
    80.7
    
    
    0.6
    ptsYield (d)
    
    
    13.67
    
    
    
    13.47
    
    
    
    1.5
    
    
    
    13.58
    
    
    
    13.35
    
    
    
    1.7Passenger revenue per available seat mile (e)
    
    
    11.42
    
    
    
    11.24
    
    
    
    1.6
    
    
    
    11.05
    
    
    
    10.77
    
    
    
    2.6Aircraft at end of period
    
    
    357
    
    
    
    358
    
    
    
    (0.3
    )
    
    
    357
    
    
    
    358
    
    
    
    (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.  42




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##### Table of Contents



Three Months Ended June 30, 2008
Compared with the
Three Months Ended June 30, 2007
 Operating Revenues:
 Percent2008
    
    
    2007
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    2,214
    
    
    $
    2,194
    
    
    
    0.9Express passenger
    
    
    802
    
    
    
    737
    
    
    
    8.8Cargo
    
    
    38
    
    
    
    34
    
    
    
    12.1Other
    
    
    233
    
    
    
    220
    
    
    
    6.1Total operating revenues
    
    $
    3,287
    
    
    $
    3,185
    
    
    
    3.2
     43




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##### Table of Contents



Operating Expenses:
 Percent2008
    
    
    2007
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    1,086
    
    
    $
    658
    
    
    
    65.1Loss (gain) on fuel hedging instruments, net:Realized
    
    
    (192
    )
    
    
    2
    
    
    
    nmUnrealized
    
    
    (190
    )
    
    
    (25
    )
    
    
    nmSalaries and related costs
    
    
    571
    
    
    
    576
    
    
    
    (0.9
    )Aircraft rent
    
    
    183
    
    
    
    180
    
    
    
    1.5Aircraft maintenance
    
    
    200
    
    
    
    170
    
    
    
    17.9Other rent and landing fees
    
    
    142
    
    
    
    139
    
    
    
    2.2Selling expenses
    
    
    116
    
    
    
    125
    
    
    
    (7.1
    )Special items, net
    
    
    34
    
    
    
    27
    
    
    
    23.0Depreciation and amortization
    
    
    59
    
    
    
    49
    
    
    
    21.3Goodwill impairment
    
    
    622
    
    
    
    
    
    
    
    nmOther
    
    
    339
    
    
    
    308
    
    
    
    10.2Total mainline operating expenses
    
    
    2,970
    
    
    
    2,209
    
    
    
    34.4Express expenses:Fuel
    
    
    340
    
    
    
    187
    
    
    
    81.6Other
    
    
    515
    
    
    
    494
    
    
    
    4.2Total Express expenses
    
    
    855
    
    
    
    681
    
    
    
    25.4Total operating expenses
    
    $
    3,825
    
    
    $
    2,890
    
    
    
    32.3
    
    
    Aircraft fuel and related taxes increased 65.1% due primarily to a 69.2% increase in the
average price per gallon of fuel to $3.63 in the second quarter of 2008 from $2.15 in the
2007 period.
 
    
    Loss (gain) on fuel hedging instruments, net increased from a gain of $23 million in the
second quarter of 2007 to a gain of $382 million in the second quarter of 2008 as a result
of a period over period increase in the fair value of the costless collar
transactions.
 
    
    Aircraft maintenance expense increased 17.9% due principally to increases in the number
of engine and landing gear overhauls performed, coupled with a higher rate per engine and
landing gear overhaul as a result of servicing larger capacity aircraft in the 2008
maintenance cycle as compared to the 2007 period.
 
    
    Depreciation and amortization expense increased 21.3% due primarily to an increase in
depreciation of owned aircraft as a result of the acquisition of six Embraer 190 aircraft
subsequent to the second quarter of 2007 and eight Embraer 190 aircraft in the first half of
2008.
 
    
    Other expenses increased 10.2% due primarily to the increase in the incremental cost of
travel redemptions associated with US Airways frequent traveler program as a result of
increases in fuel costs. Other operating expenses in the 2007 period benefited from $9
million of insurance settlement proceeds related to business interruption and property
damages incurred as a result of Hurricane Katrina in 2005.
  44




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##### Table of Contents



Nonoperating Income (Expense):
 Percent2008
    
    
    2007
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    21
    
    
    $
    48
    
    
    
    (56.2
    )Interest expense, net
    
    
    (46
    )
    
    
    (54
    )
    
    
    (14.0
    )Other, net
    
    
    4
    
    
    
    2
    
    
    
    73.9Total nonoperating expense, net
    
    $
    (21
    )
    
    $
    (4
    )
    
    
    nm
  Six Months Ended June 30, 2008
Compared with the
Six Months Ended June 30, 2007
 Operating Revenues:
 Percent2008
    
    
    2007
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    4,167
    
    
    $
    4,100
    
    
    
    1.6Express passenger
    
    
    1,459
    
    
    
    1,346
    
    
    
    8.4Cargo
    
    
    74
    
    
    
    70
    
    
    
    5.4Other
    
    
    454
    
    
    
    430
    
    
    
    5.7Total operating revenues
    
    $
    6,154
    
    
    $
    5,946
    
    
    
    3.5
    45




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##### Table of Contents



Operating Expenses:
 Percent2008
    
    
    2007
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    1,908
    
    
    $
    1,208
    
    
    
    58.0Loss (gain) on fuel hedging instruments, net:Realized
    
    
    (274
    )
    
    
    37
    
    
    
    nmUnrealized
    
    
    (226
    )
    
    
    (115
    )
    
    
    96.2Salaries and related costs
    
    
    1,134
    
    
    
    1,104
    
    
    
    2.7Aircraft rent
    
    
    361
    
    
    
    360
    
    
    
    0.3Aircraft maintenance
    
    
    413
    
    
    
    335
    
    
    
    23.2Other rent and landing fees
    
    
    287
    
    
    
    267
    
    
    
    7.5Selling expenses
    
    
    220
    
    
    
    231
    
    
    
    (4.7
    )Special items, net
    
    
    59
    
    
    
    66
    
    
    
    (10.6
    )Depreciation and amortization
    
    
    111
    
    
    
    95
    
    
    
    17.2Goodwill impairment
    
    
    622
    
    
    
    
    
    
    
    nmOther
    
    
    656
    
    
    
    615
    
    
    
    6.6Total mainline operating expenses
    
    
    5,271
    
    
    
    4,203
    
    
    
    25.4Express expenses:Fuel
    
    
    589
    
    
    
    340
    
    
    
    73.2Other
    
    
    1,024
    
    
    
    979
    
    
    
    4.7Total Express expenses
    
    
    1,613
    
    
    
    1,319
    
    
    
    22.3Total operating expenses
    
    $
    6,884
    
    
    $
    5,522
    
    
    
    24.7
    
    
    Aircraft fuel and related taxes increased 58% due primarily to a 61.8% increase in the
average price per gallon of fuel to $3.26 in the first six months of 2008 from $2.02 in the
2007 period.
 
    
    Loss (gain) on fuel hedging instruments, net increased from a gain of $78 million in the
first six months of 2007 to a gain of $500 million in the first six months of 2008 as a
result of a period over period increase in the fair value of the costless collar
transactions.
 
    
    Aircraft maintenance expense increased 23.2% due principally to increases in the number
of engine and landing gear overhauls performed, coupled with a higher rate per engine and
landing gear overhaul as a result of servicing larger capacity aircraft in the 2008
maintenance cycle as compared to the 2007 period.
  46




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##### Table of Contents




    
    Other rent and landing fees expense increased 7.5% 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 increased 17.2% due primarily to an increase in
depreciation of owned aircraft as a result of the acquisition of six Embraer 190 aircraft
subsequent to the second quarter of 2007 and eight Embraer 190 aircraft in the first half of
2008.
 
    
    Other expenses increased 6.6% due primarily to the increase in the incremental cost of
travel redemptions associated with US Airways frequent traveler program as a result of
increases in fuel costs. Other operating expenses in the 2007 period benefited from $9
million of insurance settlement proceeds related to business interruption and property
damages incurred as a result of Hurricane Katrina in 2005.
  Nonoperating Income (Expense):
 Percent2008
    
    
    2007
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    50
    
    
    $
    88
    
    
    
    (43.6
    )Interest expense, net
    
    
    (99
    )
    
    
    (119
    )
    
    
    (17.3
    )Other, net
    
    
    (4
    )
    
    
    5
    
    
    
    nmTotal nonoperating expense, net
    
    $
    (53
    )
    
    $
    (26
    )
    
    
    nm
    47




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##### Table of Contents



Liquidity and Capital Resources
  Investments in Marketable Securities
      Investments inMarketableSecurities(Noncurrent)Balance at December 31, 2007
    
    $
    353Unrealized losses recorded to other comprehensive income
    
    
    (59
    )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 June 30, 2008
    
    $
    285
  48




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##### Table of Contents



Sources and Uses of Cash
 US Airways Group
    US Airways
    49




---



##### Table of Contents



Commitments
  Citicorp Credit Facility
     Credit
Card Processing Agreements
   50




---



##### Table of Contents



2008 Financing Transactions
    Aircraft and Engine Purchase Commitments
      51




---



##### Table of Contents



Covenants and Credit Rating
   S&P
    
    
    Fitch
    
    

MoodysCorporate
    
    
    Senior unsecured
    
    
    Long-term issuer
    
    
    Senior unsecured
    
    
    Corporate
    
    
    Senior unsecuredcredit rating
    
    
    credit rating
    
    
    credit rating
    
    
    credit rating
    
    
    family rating
    
    
    credit ratingUS Airways Group
    
    
    B-
    
    
    CCC
    
    CCC
    
    CC
    
    
    B3
    
    
    Caa1US Airways
    
    
    B-
    
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    Ca
 (*)
    
    The credit agencies do not rate these categories for US Airways.   Off-Balance Sheet Arrangements
   Pass Through Trusts
    52




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##### Table of Contents



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)
    
    
    42
    
    
    
    84
    
    
    
    83
    
    
    
    82
    
    
    
    81
    
    
    
    152
    
    
    
    524Aircraft related and other commitments
    
    
    201
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    237US Airways (4)Debt and capital lease obligations (5) (6)
    
    
    64
    
    
    
    171
    
    
    
    112
    
    
    
    126
    
    
    
    133
    
    
    
    1,214
    
    
    
    1,820Interest obligations (3) (6)
    
    
    23
    
    
    
    108
    
    
    
    100
    
    
    
    92
    
    
    
    83
    
    
    
    324
    
    
    
    730Aircraft purchase and operating lease commitments (7)
    
    
    832
    
    
    
    2,302
    
    
    
    2,273
    
    
    
    2,122
    
    
    
    1,576
    
    
    
    6,167
    
    
    
    15,272Regional capacity purchase agreements (8)
    
    
    528
    
    
    
    1,028
    
    
    
    1,044
    
    
    
    1,063
    
    
    
    925
    
    
    
    3,295
    
    
    
    7,883Other US Airways Group subsidiaries (9)
    
    
    5
    
    
    
    7
    
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    17Total
    
    $
    1,695
    
    
    $
    3,752
    
    
    $
    3,630
    
    
    $
    3,502
    
    
    $
    2,815
    
    
    $
    12,747
    
    
    $
    28,141
 
 (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 June 30, 2008.(4)
    
    Commitments listed separately under US Airways and its wholly owned subsidiaries represent
commitments under agreements entered into separately by those companies.(5)
    
    Excludes $114 million of unamortized debt discount as of June 30, 2008.(6)
    
    Includes $554 million of future principal payments and $281 million of future interest
payments, respectively, related to pass through trust certificates or EETCs associated with
mortgage financings for the purchase of certain aircraft as described above under Off-Balance
Sheet Arrangements and in Note 11 to the US Airways Group and US Airways condensed
consolidated financial statements in Item 1A and 1B of this Form 10-Q, respectively.(7)
    
    Includes $3.71 billion of future minimum lease payments related to EETC leveraged leased
financings of certain aircraft as described above under Off-Balance Sheet Arrangements and
in Note 11 to the US Airways Group and US Airways condensed consolidated financial statements
in Item 1A and 1B of this Form 10-Q, respectively.(8)
    
    Represents minimum payments under capacity purchase agreements with third-party Express
carriers.(9)
    
    Represents operating lease commitments entered into by US Airways Groups other airline
subsidiaries Piedmont and PSA.  53




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Critical Accounting Policies and Estimates
  Impairment of Goodwill SFAS No. 142 requires that goodwill be tested for impairment at the reporting unit level on an annual basis and
between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value
of the reporting unit below its carrying value. Goodwill represents the purchase price in excess of the net amount
assigned to assets acquired and liabilities assumed by America West Holdings on September 27, 2005. We have two
reporting units consisting of our mainline and Express operations. All of our goodwill was allocated to the mainline
reporting unit. We tested goodwill for impairment during the fourth quarter of 2007. At that time, we concluded that
the fair value of the mainline reporting unit was in excess of the carrying value. In accordance with SFAS No. 142, we concluded that events had occurred and circumstances had changed during the
second quarter of 2008 which required us to perform an interim period goodwill impairment test. Subsequent to the first
quarter of 2008, we experienced a significant decline in market capitalization due to overall airline industry
conditions driven by record high fuel prices. The price of fuel became less volatile in the second quarter of 2008, and
there was a sustained surge in fuel prices. On May 21, 2008, the price per barrel of oil hit a then record high of $133
per barrel and from that date through June 30, 2008 stayed at an average daily price of $133 per barrel. Our average
mainline fuel price during the second quarter of 2008 was $3.63 as compared to $2.88 per gallon in the first quarter of
2008 and $2.20 for the full year 2007. This increase in the price per gallon of fuel represents an increase of 26% and
65% as compared to the first quarter of 2008 and full year 2007, respectively. Our average stock price in the second
quarter of 2008 was $6.13 as compared to an average of $12.15 in the first quarter of 2008, a decline of 50%. In
addition, we announced in June 2008 that in response to the record high fuel prices, we plan to reduce fourth quarter
2008 and full year 2009 domestic mainline capacity by six to eight percent and seven to nine percent, respectively, on
a year over year basis. During the second quarter of 2008, we performed the first step of the two-step impairment test and compared the
fair value of the mainline reporting unit to its carrying value. Consistent with our approach in our annual impairment
testing, in assessing the fair value of the reporting unit, we considered both the market approach and income approach.
Under the market approach, the fair value of the reporting unit is based on quoted market prices and the number of
shares outstanding for our common stock. Under the income approach, the fair value of the reporting unit is based on
the present value of estimated future cash flows. The income approach is dependent on a number of significant
management assumptions including estimates of future capacity, passenger yield, traffic, fuel, other operating costs
and discount rates. Due to current market conditions, greater weighting was attributed to the market approach, which
was weighted 67% while the income approach was weighted 33% in arriving at the fair value of the reporting unit. We
determined that the fair value of the mainline reporting unit was less than the carrying value of the net assets of the
reporting unit, and thus we performed step two of the impairment test. In step two of the impairment test, we determined the implied fair value of the goodwill and compared it to the
carrying value of the goodwill. With the assistance of a third party valuation firm, we allocated the fair value of the
reporting unit to all of our assets and liabilities as if the reporting unit had been acquired in a business
combination and the fair value of the mainline reporting unit was the price paid to acquire the reporting unit. The
excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied
fair value of goodwill. Our step two analysis resulted in no implied fair value of goodwill, and therefore, we
recognized an impairment charge of $622 million, representing a write off of the entire amount of our previously
recorded goodwill.  54




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The following table reflects the change in the carrying amount of goodwill from December 31, 2007 (in millions): GoodwillBalance at December 31, 2007
    
    $
    622Impairment charge
    
    
    (622
    )Balance at June 30, 2008
    
    $
    
 Impairment of Intangible Assets Our other intangible assets of $558 million at June 30, 2008 consist principally of airport take-off and landing
slots and airport gate leasehold rights of $473 million which are subject to amortization and $85 million of
international route authorities and trademarks which are classified as indefinite lived assets under SFAS No. 142. We
considered the potential impairment of these other intangibles assets in accordance with SFAS No. 142 and SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, as applicable.In connection with completing step two
of our goodwill impairment analysis, we assessed the current fair values of our significant intangible assets. The fair
values of airport take-off and landing slots and international route authorities were assessed using the market
approach. The market approach took into consideration relevant supply and demand factors at the related airport
locations as well as available market sale and lease data. For trademarks, we utilized a form of the income approach
known as the relief-from-royalty method. As a result of these assessments, no impairment was indicated. Impairment of Other Assets In connection with completing step two of our goodwill impairment analysis, we also assessed the current fair
values of our other significant assets including owned aircraft, aircraft leases, and aircraft spare parts.
We concluded that the only additional impairment indicated was associated with the decline in fair value of certain
spare parts associated with our Boeing 737 fleet. Due to record high fuel prices and the current industry environment,
demand for the Boeing 737 aircraft type has declined given its lower fuel efficiency as compared to other aircraft
types. The fair value of these spare parts was determined using a market approach on the premise of continued use of
the aircraft through our final scheduled lease return. In accordance with SFAS No. 144, we determined that the carrying amount of the Boeing 737 spare parts classified
as long-lived assets was not recoverable as the carrying amount of the Boeing 737 assets was greater than the sum of
the undiscounted cash flows expected from the use and disposition of these assets. As a result of this impairment
analysis, we recorded a $13 million impairment charge related to Boeing 737 rotable parts included in flight equipment
on our condensed consolidated balance sheet. We also recorded a $5 million write down related to our Boeing 737 spare
parts inventory included in materials and supplies, net on our condensed consolidated balance sheet to reflect lower of
cost of market. Investments in Marketable Securities
   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.
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Recent Accounting Pronouncements
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Market Risk Sensitive Instruments
  Commodity price risk
   Interest rate risk
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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.
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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.
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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 to our business model that are designed to increase revenues may not be successful and may
cause operational difficulties or decreased demand.
  Increased costs of financing and fluctuations in interest rates could adversely affect our
liquidity, operating expenses and results.
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Our business may be adversely affected by a downturn in economic conditions that can result in
decreased demand for air travel.
  If our financial condition worsens, provisions in our credit card processing and other commercial
agreements may adversely affect our liquidity.
  Union disputes, employee strikes and other labor-related disruptions may adversely affect our
operations.
  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.
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Industry consolidation could weaken our competitive position.
  The airline industry is intensely competitive and dynamic.
   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.
  The travel industry continues to face ongoing security concerns.
  Changes in government regulation could increase our operating costs and limit our ability to
conduct our business.
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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.
  We are subject to many forms of environmental regulation and may incur substantial costs as a
result.
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Ongoing data security compliance requirements could increase our costs, and any significant data
breach could harm our business, financial condition or results of operations.
    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.
  Delays in scheduled aircraft deliveries or other loss of anticipated fleet capacity may adversely
impact our operations and financial results.
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Increases in insurance costs or reductions in insurance coverage may adversely impact our
operations and financial results.
  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.
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Risks Related to Our Common Stock
 Our common stock has limited trading history and its market price may be volatile.
  
    
    movements in fuel prices;
    
    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;
    
    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;
 
    
    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.
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Our charter documents include provisions limiting voting and ownership by foreign owners.
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Item 4. Submission of Matters to a Vote of Security Holders
  Number of SharesFor
    
    
    WithheldW. Douglas Parker
    
    
    74,084,928
    
    
    
    8,154,348Bruce R. Lakefield
    
    
    73,989,431
    
    
    
    8,249,845
   For
    
    Against
    
    Abstain81,663,199
    
    395,734
    
    180,342
  For
    
    Against
    
    Abstain
    
    Broker Non-Votes61,840,239
    
    10,539,334
    
    192,295
    
    9,667,408
  For
    
    Against
    
    Abstain
    
    Broker Non-Votes1,756,597
    
    54,670,420
    
    16,144,850
    
    9,667,409
  For
    
    Against
    
    Abstain
    
    Broker Non-Votes11,645,861
    
    41,513,910
    
    19,412,096
    
    9,667,409
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Item 6. Exhibits
 Exhibit No.
    
    Description10.1
    
    
    US Airways Group, Inc. 2008 Equity Incentive Plan
(incorporated by reference to Exhibit 4.1 to US Airways
Groups Registration Statement on Form S-8 filed on June 30,
2008 (Registration No. 333-152033)).10.2
    
    
    Second Amendment to Merchant Services Bankcard Agreement,
dated as of April 11, 2008, between US Airways Group, US
Airways, Chase Alliance Partners, LLC, as successor to Chase
Merchant Services, LLC, and JPMorgan Chase Bank, N.A.*10.3
    
    
    Amendment No. 5 dated as of June 30, 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.*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.
 
 
    
    Management contract or compensatory plan or arrangement.*
    
    Portions of this exhibit have been omitted under a request for confidential treatment and
filed separately with the Securities and Exchange Commission.  70




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

Chief Financial OfficerUS Airways, Inc. (Registrant)Date: July 24, 2008
    By:
    /s/ Derek J. KerrDerek J. KerrSenior Vice President and
Chief Financial Officer  71




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Exhibit Index
 Exhibit No.
    
    Description10.1
    
    
    US Airways Group, Inc. 2008 Equity Incentive Plan (incorporated by reference to
Exhibit 4.1 to US Airways Groups Registration Statement on Form S-8 filed on June
30, 2008 (Registration No. 333-152033)).10.2
    
    
    Second Amendment to Merchant Services Bankcard Agreement, dated as of April 11,
2008, between US Airways Group, US Airways, Chase Alliance Partners, LLC, as
successor to Chase Merchant Services, LLC, and JPMorgan Chase Bank, N.A.*10.3
    
    
    Amendment No. 5 dated as of June 30, 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.*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.
 
 
    
    Management contract or compensatory plan or arrangement.*
    
    Portions of this exhibit have been omitted under a request for confidential treatment and
filed separately with the Securities and Exchange Commission.  72