##### 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, 2009
 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
 Yes o No o
  US Airways Group, Inc.
    
    Large accelerated filer o
    
    Accelerated filer þ
    
    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.
US Airways, Inc.
Form 10-Q
Quarterly Period Ended June 30, 2009
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
    
    
    27Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    57Item 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 31.1Exhibit 31.2Exhibit 31.3Exhibit 31.4Exhibit 32.1Exhibit 32.2
   2




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Note Concerning Forward-Looking Statements
  
    
    the impact of future significant operating losses;
    
    economic conditions and their impact on passenger demand and related revenues;
 
    
    a reduction in the availability of financing and changes in prevailing interest rates
that result in increased costs of financing;
 
    
    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);
 
    
    our ability to maintain adequate liquidity;
 
    
    labor costs and relations with unionized employees generally and the impact and outcome
of labor negotiations, including our ability to complete the integration of the labor groups
of US Airways Group and America West Holdings;
 
    
    our reliance on vendors and service providers and our ability to obtain and maintain
commercially reasonable terms with those vendors and service providers;
 
    
    the impact of fuel price volatility, significant disruptions in the supply of aircraft
fuel and further significant increases to fuel prices;
 
    
    our reliance on automated systems and the impact of any failure or disruption of these
systems;
 
    
    the impact of the integration of our business units;
    
    the impact of changes in our business model;
 
    
    competitive practices in the industry, including significant fare restructuring
activities, capacity reductions and in court or out of court restructuring by major
airlines;
 
    
    the impact of industry consolidation;
    
    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;
 
    
    our ability to obtain and maintain adequate facilities and infrastructure to operate and
grow our route network;
 
    
    the impact of environmental laws and regulations;
  3




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
    
    costs of ongoing data security compliance requirements and the impact of any data
security breach;
 
    
    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;
    
    the impact of weather conditions and seasonality of airline travel;
    
    the cyclical nature of the airline industry;
 
    
    the impact of possible future increases in insurance costs and disruptions to insurance
markets;
 
    
    the impact of foreign currency exchange rate fluctuations;
    
    our ability to use NOLs and certain other tax attributes;
    
    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



Item 1A. Condensed Consolidated Financial Statements of US Airways Group, Inc.
 US Airways Group, Inc.
 
 Condensed Consolidated Statements of Operations
 (In millions, except share and per share amounts)
 (Unaudited)
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Operating revenues:Mainline passenger
    
    $
    1,724
    
    
    $
    2,214
    
    
    $
    3,335
    
    
    $
    4,167Express passenger
    
    
    642
    
    
    
    802
    
    
    
    1,194
    
    
    
    1,459Cargo
    
    
    20
    
    
    
    38
    
    
    
    44
    
    
    
    74Other
    
    
    272
    
    
    
    203
    
    
    
    540
    
    
    
    396Total operating revenues
    
    
    2,658
    
    
    
    3,257
    
    
    
    5,113
    
    
    
    6,096Operating expenses:Aircraft fuel and related taxes
    
    
    440
    
    
    
    1,086
    
    
    
    819
    
    
    
    1,908Loss (gain) on fuel hedging instruments, net
    
    
    (21
    )
    
    
    (382
    )
    
    
    5
    
    
    
    (500
    )Salaries and related costs
    
    
    549
    
    
    
    571
    
    
    
    1,100
    
    
    
    1,134Express expenses
    
    
    625
    
    
    
    822
    
    
    
    1,228
    
    
    
    1,556Aircraft rent
    
    
    174
    
    
    
    183
    
    
    
    352
    
    
    
    361Aircraft maintenance
    
    
    184
    
    
    
    200
    
    
    
    358
    
    
    
    413Other rent and landing fees
    
    
    142
    
    
    
    142
    
    
    
    273
    
    
    
    287Selling expenses
    
    
    99
    
    
    
    116
    
    
    
    192
    
    
    
    220Special items, net
    
    
    1
    
    
    
    34
    
    
    
    7
    
    
    
    59Depreciation and amortization
    
    
    62
    
    
    
    57
    
    
    
    121
    
    
    
    107Goodwill impairment
    
    
    
    
    
    
    622
    
    
    
    
    
    
    
    622Other
    
    
    281
    
    
    
    342
    
    
    
    561
    
    
    
    662Total operating expenses
    
    
    2,536
    
    
    
    3,793
    
    
    
    5,016
    
    
    
    6,829Operating income (loss)
    
    
    122
    
    
    
    (536
    )
    
    
    97
    
    
    
    (733
    )Nonoperating income (expense):Interest income
    
    
    6
    
    
    
    21
    
    
    
    13
    
    
    
    50Interest expense, net
    
    
    (77
    )
    
    
    (57
    )
    
    
    (148
    )
    
    
    (118
    )Other, net
    
    
    7
    
    
    
    4
    
    
    
    (7
    )
    
    
    (5
    )Total nonoperating expense, net
    
    
    (64
    )
    
    
    (32
    )
    
    
    (142
    )
    
    
    (73
    )Income (loss) before income taxes
    
    
    58
    
    
    
    (568
    )
    
    
    (45
    )
    
    
    (806
    )Income tax provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    58
    
    
    $
    (568
    )
    
    $
    (45
    )
    
    $
    (806
    )Earnings (loss) per common share:Basic earnings (loss) per common share
    
    $
    0.47
    
    
    $
    (6.17
    )
    
    $
    (0.38
    )
    
    $
    (8.75
    )Diluted earnings (loss) per common share
    
    $
    0.42
    
    
    $
    (6.17
    )
    
    $
    (0.38
    )
    
    $
    (8.75
    )Shares used for computation (in thousands):Basic
    
    
    123,790
    
    
    
    92,137
    
    
    
    118,956
    
    
    
    92,080Diluted
    
    
    144,125
    
    
    
    92,137
    
    
    
    118,956
    
    
    
    92,080
   5




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US Airways Group, Inc.
 
 Condensed Consolidated Balance Sheets
 (In millions, except share and per share amounts)
 (Unaudited)
 June 30,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assetsCash and cash equivalents
    
    $
    1,483
    
    
    $
    1,034Investments in marketable securities
    
    
    
    
    
    
    20Restricted cash
    
    
    46
    
    
    
    186Accounts receivable, net
    
    
    372
    
    
    
    293Materials and supplies, net
    
    
    230
    
    
    
    201Prepaid expenses and other
    
    
    443
    
    
    
    684Total current assets
    
    
    2,574
    
    
    
    2,418Property and equipmentFlight equipment
    
    
    3,648
    
    
    
    3,157Ground property and equipment
    
    
    874
    
    
    
    816Less accumulated depreciation and amortization
    
    
    (1,054
    )
    
    
    (954
    )3,468
    
    
    
    3,019Equipment purchase deposits
    
    
    310
    
    
    
    267Total property and equipment
    
    
    3,778
    
    
    
    3,286Other assetsOther intangibles, net of accumulated amortization of $100 million and $87 million, respectively
    
    
    532
    
    
    
    545Restricted cash
    
    
    534
    
    
    
    540Investments in marketable securities
    
    
    214
    
    
    
    187Other assets
    
    
    226
    
    
    
    238Total other assets
    
    
    1,506
    
    
    
    1,510Total assets
    
    $
    7,858
    
    
    $
    7,214LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilitiesCurrent maturities of debt and capital leases
    
    $
    465
    
    
    $
    362Accounts payable
    
    
    448
    
    
    
    797Air traffic liability
    
    
    963
    
    
    
    698Accrued compensation and vacation
    
    
    174
    
    
    
    158Accrued taxes
    
    
    190
    
    
    
    142Other accrued expenses
    
    
    882
    
    
    
    887Total current liabilities
    
    
    3,122
    
    
    
    3,044Noncurrent liabilities and deferred creditsLong-term debt and capital leases, net of current maturities
    
    
    4,073
    
    
    
    3,623Deferred gains and credits, net
    
    
    355
    
    
    
    383Postretirement benefits other than pensions
    
    
    106
    
    
    
    108Employee benefit liabilities and other
    
    
    538
    
    
    
    550Total noncurrent liabilities and deferred credits
    
    
    5,072
    
    
    
    4,664Commitments and contingenciesStockholders deficitCommon
stock, $0.01 par value; 200,000,000 shares authorized, 132,445,173 and 132,031,180
shares issued and outstanding at June 30, 2009; 114,527,377 and 114,113,384 shares issued and
outstanding at December 31, 2008
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    1,963
    
    
    
    1,789Accumulated other comprehensive income
    
    
    94
    
    
    
    65Accumulated deficit
    
    
    (2,381
    )
    
    
    (2,336
    )Treasury stock, common stock, 413,993 shares at June 30, 2009 and December 31, 2008
    
    
    (13
    )
    
    
    (13
    )Total stockholders deficit
    
    
    (336
    )
    
    
    (494
    )Total liabilities and stockholders deficit
    
    $
    7,858
    
    
    $
    7,214
   6




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##### Table of Contents



US Airways Group, Inc.
 
 Condensed Consolidated Statements of Cash Flows
 (In millions)
 (Unaudited)
 Six Months Ended June 30,2009
    
    
    2008Net cash provided by operating activities
    
    $
    360
    
    
    $
    96Cash flows from investing activities:Purchases of property and equipment
    
    
    (578
    )
    
    
    (400
    )Purchases of marketable securities
    
    
    
    
    
    
    (284
    )Sales of marketable securities
    
    
    20
    
    
    
    217Proceeds from sale of other investments
    
    
    
    
    
    
    3Decrease in long-term restricted cash
    
    
    6
    
    
    
    6Proceeds from dispositions of property and equipment
    
    
    52
    
    
    
    Increase in equipment purchase deposits
    
    
    (43
    )
    
    
    (79
    )Net cash used in investing activities
    
    
    (543
    )
    
    
    (537
    )Cash flows from financing activities:Repayments of debt and capital lease obligations
    
    
    (175
    )
    
    
    (169
    )Proceeds from issuance of debt
    
    
    749
    
    
    
    387Deferred financing costs
    
    
    (8
    )
    
    
    (8
    )Proceeds from issuance of common stock, net
    
    
    66
    
    
    
    Net cash provided by financing activities
    
    
    632
    
    
    
    210Net increase (decrease) in cash and cash equivalents
    
    
    449
    
    
    
    (231
    )Cash and cash equivalents at beginning of period
    
    
    1,034
    
    
    
    1,948Cash and cash equivalents at end of period
    
    $
    1,483
    
    
    $
    1,717Non-cash investing and financing activities:Note payable issued for aircraft purchase
    
    $
    32
    
    
    $
    Interest payable converted to debt
    
    
    19
    
    
    
    Maintenance payable converted to debt
    
    
    10
    
    
    
    Net unrealized loss (gain) on available for sale securities
    
    
    (34
    )
    
    
    55Supplemental information:Interest paid
    
    $
    100
    
    
    $
    109Income taxes paid
    
    
    
    
    
    
    
   7




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US Airways Group, Inc.
 
 Notes to Condensed Consolidated Financial Statements
 (Unaudited)
 1. Basis of Presentation
   Recent Accounting Pronouncements
    December 31, 2008As Adjusted
    
    
    As ReportedLong-term debt and capital leases, net of current maturities
    
    $
    3,623
    
    
    $
    3,634Additional paid-in capital
    
    
    1,789
    
    
    
    1,749Accumulated deficit
    
    
    (2,336
    )
    
    
    (2,307
    )
  8




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9




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2. Special Items, Net
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Lease return costs and penalties (a)
    
    $
    1
    
    
    $
    6
    
    
    $
    6
    
    
    $
    6Severance charges (b)
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Merger related transition expenses (c)
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    35Asset impairment charges (d)
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    18Special items, net
    
    $
    1
    
    
    $
    34
    
    
    $
    7
    
    
    $
    59
 
 (a)
    
    In connection with previously announced capacity reductions, the Company recorded $1 million
and $6 million in the three and six months ended June 30, 2009, respectively, in charges for
aircraft lease return costs and penalties. The Company also recognized $6 million in aircraft
lease return costs in the second quarter of 2008.(b)
    
    As a result of previously announced capacity reductions, the Company recorded $1 million in
severance charges in the six months ended June 30, 2009.(c)
    
    In connection with the 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.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.(d)
    
    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.  10




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3. Earnings (loss) per common share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Basic earnings (loss) per share:Net income (loss)
    
    $
    58
    
    
    $
    (568
    )
    
    $
    (45
    )
    
    $
    (806
    )Weighted average common shares outstanding (in thousands)
    
    
    123,790
    
    
    
    92,137
    
    
    
    118,956
    
    
    
    92,080Basic earnings (loss) per share
    
    $
    0.47
    
    
    $
    (6.17
    )
    
    $
    (0.38
    )
    
    $
    (8.75
    )Diluted earnings (loss) per share:Net income (loss)
    
    $
    58
    
    
    $
    (568
    )
    
    $
    (45
    )
    
    $
    (806
    )Interest expense on 7.25% convertible senior notes
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) for purposes of computing diluted net income (loss) per share
    
    $
    61
    
    
    $
    (568
    )
    
    $
    (45
    )
    
    $
    (806
    )Share computation (in thousands):Weighted average common shares outstanding
    
    
    123,790
    
    
    
    92,137
    
    
    
    118,956
    
    
    
    92,080Dilutive effect of stock awards
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    Assumed conversion of 7.25% convertible senior notes
    
    
    20,325
    
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares outstanding as adjusted
    
    
    144,125
    
    
    
    92,137
    
    
    
    118,956
    
    
    
    92,080Diluted earnings (loss) per share
    
    $
    0.42
    
    
    $
    (6.17
    )
    
    $
    (0.38
    )
    
    $
    (8.75
    )
    11




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4. Debt
  June 30,
    
    
    December 31,2009
    
    
    2008SecuredCiticorp North America loan, variable interest rate of 2.81%, installments due through 2014
    
    $
    1,168
    
    
    $
    1,184Equipment loans, aircraft pre-delivery payment financings and other notes payable, fixed and
variable interest rates ranging from 1.71% to 11.11%, averaging 4.54%, maturing from 2010 to 2021
    
    
    2,134
    
    
    
    1,674Aircraft enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 7.08%
to 9.01%, averaging 7.79%, maturing from 2015 to 2022
    
    
    519
    
    
    
    540Slot financing, fixed interest rate of 8.08%, interest only payments until due in 2015
    
    
    47
    
    
    
    47Capital lease obligations, interest rate of 8%, installments due through 2021
    
    
    39
    
    
    
    39Senior secured discount notes, variable interest rate of 5.39%, due in 2009
    
    
    32
    
    
    
    323,939
    
    
    
    3,516UnsecuredBarclays prepaid miles, variable interest rate of 5.06%, interest only payments
    
    
    200
    
    
    
    200Airbus advance, repayments beginning in 2010 through 2018
    
    
    226
    
    
    
    2077% senior convertible notes, interest only payments until due in 2020
    
    
    74
    
    
    
    747.25% convertible senior notes, interest only payments until due in 2014
    
    
    172
    
    
    
    Engine maintenance notes
    
    
    65
    
    
    
    72Industrial development bonds, fixed interest rate of 6.3%, interest only payments until due in 2023
    
    
    29
    
    
    
    29Note payable to Pension Benefit Guaranty Corporation, fixed interest rate of 6%, interest only
payments until due in 2012
    
    
    10
    
    
    
    10Other notes payable, due in 2009 to 2011
    
    
    70
    
    
    
    45846
    
    
    
    637Total long-term debt and capital lease obligations
    
    
    4,785
    
    
    
    4,153Less: Total unamortized discount on debt
    
    
    (247
    )
    
    
    (168
    )Current maturities, less $3 million and $10 million of unamortized discount on debt at June 30,
2009 and December 31, 2008, respectively
    
    
    (465
    )
    
    
    (362
    )Long-term debt and capital lease obligations, net of current maturities
    
    $
    4,073
    
    
    $
    3,623
  7.25% Convertible Senior Notes
      12




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Other 2009 Financing Transactions
    Fair Value of Debt
  5. Income Taxes
     13




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##### Table of Contents



6. Express Expenses
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Aircraft fuel and related taxes
    
    $
    145
    
    
    $
    340
    
    
    $
    267
    
    
    $
    589Salaries and related costs
    
    
    61
    
    
    
    64
    
    
    
    124
    
    
    
    127Capacity purchases
    
    
    268
    
    
    
    266
    
    
    
    531
    
    
    
    529Aircraft rent
    
    
    13
    
    
    
    12
    
    
    
    26
    
    
    
    25Aircraft maintenance
    
    
    20
    
    
    
    17
    
    
    
    43
    
    
    
    39Other rent and landing fees
    
    
    30
    
    
    
    27
    
    
    
    61
    
    
    
    54Selling expenses
    
    
    40
    
    
    
    44
    
    
    
    74
    
    
    
    82Depreciation and amortization
    
    
    6
    
    
    
    6
    
    
    
    12
    
    
    
    12Other expenses
    
    
    42
    
    
    
    46
    
    
    
    90
    
    
    
    99Express expenses
    
    $
    625
    
    
    $
    822
    
    
    $
    1,228
    
    
    $
    1,556
 7. Derivative Instruments
   Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Realized loss (gain)
    
    $
    135
    
    
    $
    (192
    )
    
    $
    332
    
    
    $
    (274
    )Unrealized gain
    
    
    (156
    )
    
    
    (190
    )
    
    
    (327
    )
    
    
    (226
    )Loss (gain) on fuel hedging instruments, net
    
    $
    (21
    )
    
    $
    (382
    )
    
    $
    5
    
    
    $
    (500
    )
    14




---



##### Table of Contents



8. Investments in Marketable Securities (Noncurrent)
     9. Fair Value Measurements
  Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    ValuationFair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TechniqueAt June 30, 2009Investments in marketable securities (noncurrent)
    
    $
    214
    
    
    $
    
    
    
    $
    
    
    
    $
    214
    
    
    
    (1
    )Fuel hedging derivatives
    
    
    (48
    )
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    (2
    )At December 31, 2008Investments in marketable securities (noncurrent)
    
    $
    187
    
    
    $
    
    
    
    $
    
    
    
    $
    187
    
    
    
    (1
    )Fuel hedging derivatives
    
    
    (375
    )
    
    
    
    
    
    
    (375
    )
    
    
    
    
    
    
    (2
    )
 (1)
    
    The Company estimated the fair value of its 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 8 for further discussion of the Companys investments in marketable
securities.(2)
    
    As 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 accounts payable on the consolidated balance sheets. Refer to Note
7 for further discussion of the Companys fuel hedging derivatives.  15




---



##### Table of Contents



Investments inMarketableSecurities(Noncurrent)Balance at December 31, 2008
    
    $
    187Unrealized gains recorded to other comprehensive income
    
    
    34Impairment losses included in other nonoperating expense, net
    
    
    (7
    )Balance at June 30, 2009
    
    $
    214
 10. Other Comprehensive Income (Loss)
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    58
    
    
    $
    (568
    )
    
    $
    (45
    )
    
    $
    (806
    )Unrealized gains (losses) on available for sale securities
    
    
    34
    
    
    
    (10
    )
    
    
    34
    
    
    
    (59
    )Recognition of previous unrealized losses now deemed other-than-temporary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Pension and other postretirement benefits
    
    
    (1
    )
    
    
    (1
    )
    
    
    (5
    )
    
    
    (3
    )Total comprehensive income (loss)
    
    $
    91
    
    
    $
    (579
    )
    
    $
    (16
    )
    
    $
    (864
    )
  June 30,
    
    
    December 31,2009
    
    
    2008Pension and other postretirement benefits
    
    $
    60
    
    
    $
    65Accumulated net unrealized gains on available for sale securities
    
    
    34
    
    
    
    Accumulated other comprehensive income
    
    $
    94
    
    
    $
    65
 11. Flight 1549
   12. Stockholders Equity
   16




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##### Table of Contents



Item 1B. Condensed Consolidated Financial Statements of US Airways, Inc.
 US Airways, Inc.
 
 Condensed Consolidated Statements of Operations
 (In millions)
 (Unaudited)
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Operating revenues:Mainline passenger
    
    $
    1,724
    
    
    $
    2,214
    
    
    $
    3,335
    
    
    $
    4,167Express passenger
    
    
    642
    
    
    
    802
    
    
    
    1,194
    
    
    
    1,459Cargo
    
    
    20
    
    
    
    38
    
    
    
    44
    
    
    
    74Other
    
    
    310
    
    
    
    233
    
    
    
    614
    
    
    
    454Total operating revenues
    
    
    2,696
    
    
    
    3,287
    
    
    
    5,187
    
    
    
    6,154Operating expenses:Aircraft fuel and related taxes
    
    
    440
    
    
    
    1,086
    
    
    
    819
    
    
    
    1,908Loss (gain) on fuel hedging instruments, net
    
    
    (21
    )
    
    
    (382
    )
    
    
    5
    
    
    
    (500
    )Salaries and related costs
    
    
    549
    
    
    
    571
    
    
    
    1,100
    
    
    
    1,134Express expenses
    
    
    656
    
    
    
    855
    
    
    
    1,287
    
    
    
    1,613Aircraft rent
    
    
    174
    
    
    
    183
    
    
    
    352
    
    
    
    361Aircraft maintenance
    
    
    184
    
    
    
    200
    
    
    
    358
    
    
    
    413Other rent and landing fees
    
    
    142
    
    
    
    142
    
    
    
    273
    
    
    
    287Selling expenses
    
    
    99
    
    
    
    116
    
    
    
    192
    
    
    
    220Special items, net
    
    
    1
    
    
    
    34
    
    
    
    7
    
    
    
    59Depreciation and amortization
    
    
    64
    
    
    
    59
    
    
    
    126
    
    
    
    111Goodwill impairment
    
    
    
    
    
    
    622
    
    
    
    
    
    
    
    622Other
    
    
    287
    
    
    
    339
    
    
    
    573
    
    
    
    656Total operating expenses
    
    
    2,575
    
    
    
    3,825
    
    
    
    5,092
    
    
    
    6,884Operating income (loss)
    
    
    121
    
    
    
    (538
    )
    
    
    95
    
    
    
    (730
    )Nonoperating income (expense):Interest income
    
    
    6
    
    
    
    21
    
    
    
    13
    
    
    
    50Interest expense, net
    
    
    (64
    )
    
    
    (46
    )
    
    
    (125
    )
    
    
    (99
    )Other, net
    
    
    6
    
    
    
    4
    
    
    
    (9
    )
    
    
    (4
    )Total nonoperating expense, net
    
    
    (52
    )
    
    
    (21
    )
    
    
    (121
    )
    
    
    (53
    )Income (loss) before income taxes
    
    
    69
    
    
    
    (559
    )
    
    
    (26
    )
    
    
    (783
    )Income tax provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    69
    
    
    $
    (559
    )
    
    $
    (26
    )
    
    $
    (783
    )
   17




---



##### Table of Contents



US Airways, Inc.
 
 Condensed Consolidated Balance Sheets
 (In millions, except share and per share amounts)
 (Unaudited)
 June 30,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assetsCash and cash equivalents
    
    $
    1,246
    
    
    $
    1,026Investments in marketable securities
    
    
    
    
    
    
    20Restricted cash
    
    
    46
    
    
    
    186Accounts receivable, net
    
    
    369
    
    
    
    291Materials and supplies, net
    
    
    192
    
    
    
    163Prepaid expenses and other
    
    
    434
    
    
    
    673Total current assets
    
    
    2,287
    
    
    
    2,359Property and equipmentFlight equipment
    
    
    3,508
    
    
    
    3,017Ground property and equipment
    
    
    847
    
    
    
    791Less accumulated depreciation and amortization
    
    
    (1,007
    )
    
    
    (914
    )3,348
    
    
    
    2,894Equipment purchase deposits
    
    
    310
    
    
    
    267Total property and equipment
    
    
    3,658
    
    
    
    3,161Other assetsOther intangibles, net of accumulated amortization of $94 million and $81 million, respectively
    
    
    495
    
    
    
    508Restricted cash
    
    
    534
    
    
    
    540Investments in marketable securities
    
    
    214
    
    
    
    187Other assets
    
    
    189
    
    
    
    199Total other assets
    
    
    1,432
    
    
    
    1,434Total assets
    
    $
    7,377
    
    
    $
    6,954LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilitiesCurrent maturities of debt and capital leases
    
    $
    449
    
    
    $
    346Accounts payable
    
    
    430
    
    
    
    781Payables to related parties, net
    
    
    984
    
    
    
    985Air traffic liability
    
    
    963
    
    
    
    698Accrued compensation and vacation
    
    
    164
    
    
    
    147Accrued taxes
    
    
    192
    
    
    
    142Other accrued expenses
    
    
    852
    
    
    
    867Total current liabilities
    
    
    4,034
    
    
    
    3,966Noncurrent liabilities and deferred creditsLong-term debt and capital leases, net of current maturities
    
    
    2,618
    
    
    
    2,236Deferred gains and credits, net
    
    
    326
    
    
    
    342Postretirement benefits other than pensions
    
    
    105
    
    
    
    107Employee benefit liabilities and other
    
    
    512
    
    
    
    524Total noncurrent liabilities and deferred credits
    
    
    3,561
    
    
    
    3,209Commitments and contingenciesStockholders deficitCommon stock, $1 par value, 1,000 shares issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    1,845
    
    
    
    1,845Accumulated other comprehensive income
    
    
    107
    
    
    
    78Accumulated deficit
    
    
    (2,170
    )
    
    
    (2,144
    )Total stockholders deficit
    
    
    (218
    )
    
    
    (221
    )Total liabilities and stockholders deficit
    
    $
    7,377
    
    
    $
    6,954
   18




---



##### Table of Contents



US Airways, Inc.
 
 Condensed Consolidated Statements of Cash Flows
 (In millions)
 (Unaudited)
 Six Months Ended June 30,2009
    
    
    2008Net cash provided by operating activities
    
    $
    346
    
    
    $
    67Cash flows from investing activities:Purchases of property and equipment
    
    
    (575
    )
    
    
    (383
    )Purchases of marketable securities
    
    
    
    
    
    
    (284
    )Sales of marketable securities
    
    
    20
    
    
    
    217Proceeds from sale of other investments
    
    
    
    
    
    
    3Decrease in long-term restricted cash
    
    
    6
    
    
    
    6Proceeds from dispositions of property and equipment
    
    
    52
    
    
    
    Increase in equipment purchase deposits
    
    
    (43
    )
    
    
    (79
    )Net cash used in investing activities
    
    
    (540
    )
    
    
    (520
    )Cash flows from financing activities:Repayments of debt and capital lease obligations
    
    
    (159
    )
    
    
    (153
    )Proceeds from issuance of debt
    
    
    576
    
    
    
    387Deferred financing costs
    
    
    (3
    )
    
    
    (8
    )Net cash provided by financing activities
    
    
    414
    
    
    
    226Net increase (decrease) in cash and cash equivalents
    
    
    220
    
    
    
    (227
    )Cash and cash equivalents at beginning of period
    
    
    1,026
    
    
    
    1,940Cash and cash equivalents at end of period
    
    $
    1,246
    
    
    $
    1,713Non-cash investing and financing activities:Note payable issued for aircraft purchase
    
    $
    32
    
    
    $
    Interest payable converted to debt
    
    
    19
    
    
    
    Maintenance payable converted to debt
    
    
    10
    
    
    
    Net unrealized loss (gain) on available for sale securities
    
    
    (34
    )
    
    
    55Supplemental information:Interest paid
    
    $
    75
    
    
    $
    59Income taxes paid
    
    
    
    
    
    
    
   19




---



##### 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 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Lease return costs and penalties (a)
    
    $
    1
    
    
    $
    6
    
    
    $
    6
    
    
    $
    6Severance charges (b)
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Merger related transition expenses (c)
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    35Asset impairment charges (d)
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    18Special items, net
    
    $
    1
    
    
    $
    34
    
    
    $
    7
    
    
    $
    59
 
 (a)
    
    In connection with previously announced capacity reductions, US Airways recorded $1 million
and $6 million in the three and six months ended June 30, 2009, respectively, in charges for
aircraft lease return costs and penalties. US Airways also recognized $6 million in aircraft
lease return costs in the second quarter of 2008.(b)
    
    As a result of previously announced capacity reductions, US Airways recorded $1 million in
severance charges in the six months ended June 30, 2009.(c)
    
    In connection with the effort to consolidate functions and integrate organizations,
procedures and operations, 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.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.(d)
    
    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 its Boeing 737
aircraft fleet.  21




---



##### Table of Contents



3. Debt
  June 30,
    
    
    December 31,2009
    
    
    2008SecuredEquipment loans, aircraft pre-delivery payment financings and other notes payable, fixed and
variable interest rates ranging from 1.71% to 11.11%, averaging 4.54%, maturing from 2010 to 2021
    
    $
    2,134
    
    
    $
    1,674Aircraft enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 7.08%
to 9.01%, averaging 7.79%, maturing from 2015 to 2022
    
    
    519
    
    
    
    540Slot 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
    
    
    39
    
    
    
    39Senior secured discount notes, variable interest rate of 5.39%, due in 2009
    
    
    32
    
    
    
    322,771
    
    
    
    2,332UnsecuredAirbus advance, repayments beginning in 2010 through 2018
    
    
    226
    
    
    
    207Engine maintenance notes
    
    
    65
    
    
    
    72Industrial development bonds, fixed interest rate of 6.3%, interest only payments until due in 2023
    
    
    29
    
    
    
    29Note payable to Pension Benefit Guaranty Corporation, fixed interest rate of 6%, interest only
payments until due in 2012
    
    
    10
    
    
    
    10Other notes payable, due in 2009 to 2011
    
    
    70
    
    
    
    45400
    
    
    
    363Total long-term debt and capital lease obligations
    
    
    3,171
    
    
    
    2,695Less: Total unamortized discount on debt
    
    
    (104
    )
    
    
    (113
    )Current maturities, less $3 million and $10 million of unamortized discount on debt at June 30,
2009 and December 31, 2008, respectively
    
    
    (449
    )
    
    
    (346
    )Long-term debt and capital lease obligations, net of current maturities
    
    $
    2,618
    
    
    $
    2,236
  2009 Financing Transactions
    Fair Value of Debt
   22




---



##### Table of Contents



4. Related Party Transactions
  June 30, 2009
    
    
    December 31, 2008US Airways Group
    
    $
    943
    
    
    $
    949US Airways Groups wholly owned subsidiaries
    
    
    41
    
    
    
    36$
    984
    
    
    $
    985
   5. Income Taxes
     6. Express Expenses
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Aircraft fuel and related taxes
    
    $
    145
    
    
    $
    340
    
    
    $
    267
    
    
    $
    589Salaries and related costs
    
    
    6
    
    
    
    5
    
    
    
    12
    
    
    
    11Capacity purchases
    
    
    418
    
    
    
    420
    
    
    
    836
    
    
    
    836Other rent and landing fees
    
    
    25
    
    
    
    22
    
    
    
    51
    
    
    
    44Selling expenses
    
    
    40
    
    
    
    44
    
    
    
    74
    
    
    
    82Other expenses
    
    
    22
    
    
    
    24
    
    
    
    47
    
    
    
    51Express expenses
    
    $
    656
    
    
    $
    855
    
    
    $
    1,287
    
    
    $
    1,613
 7. Derivative Instruments
   23




---



##### Table of Contents



Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Realized loss (gain)
    
    $
    135
    
    
    $
    (192
    )
    
    $
    332
    
    
    $
    (274
    )Unrealized gain
    
    
    (156
    )
    
    
    (190
    )
    
    
    (327
    )
    
    
    (226
    )Loss (gain) on fuel hedging instruments, net
    
    $
    (21
    )
    
    $
    (382
    )
    
    $
    5
    
    
    $
    (500
    )
     8. Investments in Marketable Securities (Noncurrent)
     24




---



##### Table of Contents



9. Fair Value Measurements
  Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    ValuationFair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TechniqueAt June 30, 2009Investments in marketable securities (noncurrent)
    
    $
    214
    
    
    $
    
    
    
    $
    
    
    
    $
    214
    
    
    
    (1
    )Fuel hedging derivatives
    
    
    (48
    )
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    (2
    )At December 31, 2008Investments in marketable securities (noncurrent)
    
    $
    187
    
    
    $
    
    
    
    $
    
    
    
    $
    187
    
    
    
    (1
    )Fuel hedging derivatives
    
    
    (375
    )
    
    
    
    
    
    
    (375
    )
    
    
    
    
    
    
    (2
    )
 (1)
    
    US Airways estimated the fair value of its 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 8 for further discussion of US Airways investments in marketable
securities.(2)
    
    As 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 accounts payable on the consolidated balance sheets. Refer to Note
7 for further discussion of US Airways fuel hedging derivatives.  Investments inMarketableSecurities(Noncurrent)Balance at December 31, 2008
    
    $
    187Unrealized gains recorded to other comprehensive income
    
    
    34Impairment losses included in other nonoperating expense, net
    
    
    (7
    )Balance at June 30, 2009
    
    $
    214
 10. Other Comprehensive Income (Loss)
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    69
    
    
    $
    (559
    )
    
    $
    (26
    )
    
    $
    (783
    )Unrealized gains (losses) on available for sale securities
    
    
    34
    
    
    
    (10
    )
    
    
    34
    
    
    
    (59
    )Recognition of previous unrealized losses now deemed other-than-temporary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Other postretirement benefits
    
    
    (1
    )
    
    
    (1
    )
    
    
    (5
    )
    
    
    (2
    )Total comprehensive income (loss)
    
    $
    102
    
    
    $
    (570
    )
    
    $
    3
    
    
    $
    (840
    )
  June 30,
    
    
    December 31,2009
    
    
    2008Other postretirement benefits
    
    $
    73
    
    
    $
    78Accumulated net unrealized gains on available for sale securities
    
    
    34
    
    
    
    Accumulated other comprehensive income
    
    $
    107
    
    
    $
    78
  25




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##### Table of Contents



11. Flight 1549
    26




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Background
   U.S. Airline Industry Environment
       27




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##### Table of Contents



US Airways
    Capacity and Fleet Reductions
  Cost Control
  Liquidity
  June 30,
    
    
    December 31,2009
    
    
    2008(In millions)Cash, cash equivalents and short-term investments in marketable securities
    
    $
    1,483
    
    
    $
    1,054Short and long-term restricted cash
    
    
    580
    
    
    
    726Long-term investments in marketable securities
    
    
    214
    
    
    
    187Total cash, cash equivalents, investments in marketable securities and restricted cash
    
    $
    2,277
    
    
    $
    1,967
   28




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##### Table of Contents



Current Financial Results and Outlook
      29




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##### Table of Contents



Customer Service
    2009
    
    
    2008
    
    
    Percent Change 2009-2008April
    
    
    May
    
    
    June (e)
    
    
    April
    
    
    May
    
    
    June
    
    
    April
    
    
    May
    
    
    JuneOn-time performance (a)
    
    
    79.9
    
    
    
    79.2
    
    
    
    78.0
    
    
    
    81.3
    
    
    
    83.6
    
    
    
    76.3
    
    
    
    (1.7
    )
    
    
    (5.3
    )
    
    
    2.2Completion factor (b)
    
    
    99.1
    
    
    
    99.1
    
    
    
    98.9
    
    
    
    98.9
    
    
    
    99.1
    
    
    
    98.1
    
    
    
    0.2
    
    
    
    
    
    
    
    0.8Mishandled baggage (c)
    
    
    2.88
    
    
    
    2.91
    
    
    
    2.86
    
    
    
    4.20
    
    
    
    3.86
    
    
    
    4.65
    
    
    
    (31.4
    )
    
    
    (24.6
    )
    
    
    (38.5
    )Customer complaints (d)
    
    
    1.35
    
    
    
    1.34
    
    
    
    1.42
    
    
    
    2.27
    
    
    
    1.94
    
    
    
    1.75
    
    
    
    (40.5
    )
    
    
    (30.9
    )
    
    
    (18.9
    )
 
 (a)
    
    Percentage of reported flight operations arriving on time as defined by the DOT.(b)
    
    Percentage of scheduled flight operations completed.(c)
    
    Rate of mishandled baggage reports per 1,000 passengers.(d)
    
    Rate of customer complaints filed with the DOT per 100,000 passengers.(e)
    
    June 2009 operating statistics are preliminary as the DOT has not issued its June 2009 Air
Travel Consumer Report as of the date of this filing.  30




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##### Table of Contents



US Airways Groups Results of Operations
  
    
    $156 million of net unrealized gains resulting from the application of mark-to-market
accounting for changes in the fair value of fuel hedging instruments, offset by $135 million
of net realized losses on settled fuel hedge transactions. In mark-to-market accounting, the
unrealized losses recognized in prior periods are reversed as hedge transactions are settled
in the current period. We are required to use mark-to-market accounting as our existing fuel
hedging instruments do not meet the requirements for hedge accounting established by
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. If these instruments had qualified for hedge accounting
treatment, any unrealized gains or losses would have been recorded in other comprehensive
income, a component of stockholders equity. Given the market volatility of jet fuel, the
fair value of these fuel hedging instruments is expected to change until settled;
 
    
    $1 million of net special charges for aircraft lease return costs as a result of our
previously announced capacity reductions; and
 
    
    a $2 million non-cash asset impairment charge included in nonoperating expense, net.
  
    
    $192 million of net realized gains on settled fuel hedge transactions as well as $190
million of net unrealized gains resulting from the application of mark-to-market accounting
for changes in the fair value of fuel hedging instruments; and
 
    
    $34 million of net special charges consisting of $18 million in non-cash charges related
to the decline in fair value of certain spare parts associated with our Boeing 737 aircraft
fleet, $10 million of merger related transition expenses and $6 million in aircraft lease
return costs and penalties as a result of our previously announced capacity reductions.
  
    
    $332 million of net realized losses on settled fuel hedge transactions, offset by $327
million of net unrealized gains resulting from the application of mark-to-market accounting
for changes in the fair value of fuel hedging instruments;
 
    
    $7 million of net special charges as a result of our previously announced capacity
reductions, consisting of $6 million in aircraft lease return costs and penalties and $1
million in severance charges; and
 
    
    $7 million in other-than-temporary non-cash impairment charges for our investments in
auction rate securities due to continued declines in the values of certain securities as well
as a $2 million non-cash asset impairment charge, all included in nonoperating expense, net.
  31




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##### Table of Contents




    
    $274 million of net realized gains on settled fuel hedge transactions as well as $226
million of net unrealized gains resulting from the application of mark-to-market accounting
for changes in the fair value of fuel hedging instruments;
 
    
    $59 million of net special charges consisting of $35 million of merger related transition
expenses, $18 million in non-cash charges related to the decline in fair value of certain
spare parts associated with our Boeing 737 aircraft fleet and $6 million in aircraft lease
return costs and penalties as a result of our previously announced capacity reductions; and
 
    
    $13 million in other-than-temporary non-cash impairment charges for our investments in
auction rate securities as well as a $2 million write off of debt discount and debt issuance
costs in connection with the refinancing of certain aircraft equipment notes, offset by $8
million in gains on forgiveness of debt, all included in nonoperating expense, net.
    32




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##### Table of Contents



Three Months Ended
    
    
    Percent
    
    
    Six Months Ended
    
    
    PercentJune 30,
    
    
    Change
    
    
    June 30,
    
    
    Change2009
    
    
    2008
    
    
    2009-2008
    
    
    2009
    
    
    2008
    
    
    2009-2008MainlineRevenue passenger miles (millions) (a)
    
    
    15,526
    
    
    
    16,193
    
    
    
    (4.1
    )
    
    
    28,834
    
    
    
    30,682
    
    
    
    (6.0
    )Available seat miles (millions) (b)
    
    
    18,310
    
    
    
    19,387
    
    
    
    (5.6
    )
    
    
    35,289
    
    
    
    37,721
    
    
    
    (6.4
    )Passenger load factor (percent) (c)
    
    
    84.8
    
    
    
    83.5
    
    
    1.3
    pts
    
    
    81.7
    
    
    
    81.3
    
    
    0.4
    ptsYield (cents) (d)
    
    
    11.11
    
    
    
    13.67
    
    
    
    (18.8
    )
    
    
    11.57
    
    
    
    13.58
    
    
    
    (14.8
    )Passenger revenue per available seat mile (cents) (e)
    
    
    9.42
    
    
    
    11.42
    
    
    
    (17.6
    )
    
    
    9.45
    
    
    
    11.05
    
    
    
    (14.5
    )Operating cost per available seat mile (cents) (f)
    
    
    10.44
    
    
    
    15.33
    
    
    
    (31.9
    )
    
    
    10.73
    
    
    
    13.98
    
    
    
    (23.2
    )Passenger enplanements (thousands) (g)
    
    
    13,440
    
    
    
    14,410
    
    
    
    (6.7
    )
    
    
    25,850
    
    
    
    27,946
    
    
    
    (7.5
    )Departures (thousands)
    
    
    118
    
    
    
    127
    
    
    
    (7.2
    )
    
    
    235
    
    
    
    253
    
    
    
    (7.1
    )Aircraft at end of period
    
    
    350
    
    
    
    357
    
    
    
    (2.0
    )
    
    
    350
    
    
    
    357
    
    
    
    (2.0
    )Block hours (thousands) (h)
    
    
    317
    
    
    
    337
    
    
    
    (6.0
    )
    
    
    621
    
    
    
    665
    
    
    
    (6.6
    )Average stage length (miles) (i)
    
    
    984
    
    
    
    971
    
    
    
    1.3
    
    
    
    959
    
    
    
    954
    
    
    
    0.5Average passenger journey (miles) (j)
    
    
    1,655
    
    
    
    1,584
    
    
    
    4.5
    
    
    
    1,593
    
    
    
    1,552
    
    
    
    2.7Fuel consumption (gallons in millions)
    
    
    278
    
    
    
    299
    
    
    
    (7.1
    )
    
    
    536
    
    
    
    585
    
    
    
    (8.4
    )Average aircraft fuel price including related taxes
(dollars per gallon)
    
    
    1.58
    
    
    
    3.63
    
    
    
    (56.4
    )
    
    
    1.53
    
    
    
    3.26
    
    
    
    (53.2
    )Full time equivalent employees at end of period
    
    
    32,393
    
    
    
    34,359
    
    
    
    (5.7
    )
    
    
    32,393
    
    
    
    34,359
    
    
    
    (5.7
    )Express (k)Revenue passenger miles (millions) (a)
    
    
    2,809
    
    
    
    2,906
    
    
    
    (3.4
    )
    
    
    5,183
    
    
    
    5,391
    
    
    
    (3.9
    )Available seat miles (millions) (b)
    
    
    3,676
    
    
    
    3,893
    
    
    
    (5.6
    )
    
    
    7,132
    
    
    
    7,492
    
    
    
    (4.8
    )Passenger load factor (percent) (c)
    
    
    76.4
    
    
    
    74.7
    
    
    1.7
    pts
    
    
    72.7
    
    
    
    72.0
    
    
    0.7
    ptsYield (cents) (d)
    
    
    22.87
    
    
    
    27.59
    
    
    
    (17.1
    )
    
    
    23.03
    
    
    
    27.07
    
    
    
    (14.9
    )Passenger revenue per available seat mile (cents) (e)
    
    
    17.47
    
    
    
    20.60
    
    
    
    (15.2
    )
    
    
    16.74
    
    
    
    19.48
    
    
    
    (14.1
    )Operating cost per available seat mile (cents) (f)
    
    
    16.99
    
    
    
    21.12
    
    
    
    (19.6
    )
    
    
    17.23
    
    
    
    20.77
    
    
    
    (17.0
    )Passenger enplanements (thousands) (g)
    
    
    7,051
    
    
    
    7,071
    
    
    
    (0.3
    )
    
    
    13,029
    
    
    
    13,266
    
    
    
    (1.8
    )Aircraft at end of period
    
    
    290
    
    
    
    295
    
    
    
    (1.7
    )
    
    
    290
    
    
    
    295
    
    
    
    (1.7
    )Fuel consumption (gallons in millions)
    
    
    87
    
    
    
    91
    
    
    
    (5.2
    )
    
    
    168
    
    
    
    177
    
    
    
    (5.2
    )Average aircraft fuel price including related taxes
(dollars per gallon)
    
    
    1.67
    
    
    
    3.72
    
    
    
    (55.1
    )
    
    
    1.59
    
    
    
    3.33
    
    
    
    (52.1
    )Total Mainline and ExpressRevenue passenger miles (millions) (a)
    
    
    18,335
    
    
    
    19,099
    
    
    
    (4.0
    )
    
    
    34,017
    
    
    
    36,073
    
    
    
    (5.7
    )Available seat miles (millions) (b)
    
    
    21,986
    
    
    
    23,280
    
    
    
    (5.6
    )
    
    
    42,421
    
    
    
    45,213
    
    
    
    (6.2
    )Passenger load factor (percent) (c)
    
    
    83.4
    
    
    
    82.0
    
    
    1.4
    pts
    
    
    80.2
    
    
    
    79.8
    
    
    0.4
    ptsYield (cents) (d)
    
    
    12.91
    
    
    
    15.79
    
    
    
    (18.3
    )
    
    
    13.31
    
    
    
    15.60
    
    
    
    (14.6
    )Passenger revenue per available seat mile (cents) (e)
    
    
    10.76
    
    
    
    12.96
    
    
    
    (16.9
    )
    
    
    10.68
    
    
    
    12.44
    
    
    
    (14.2
    )Total revenue per available seat mile (cents) (l)
    
    
    12.09
    
    
    
    13.99
    
    
    
    (13.6
    )
    
    
    12.05
    
    
    
    13.48
    
    
    
    (10.6
    )Passenger enplanements (thousands) (g)
    
    
    20,491
    
    
    
    21,481
    
    
    
    (4.6
    )
    
    
    38,879
    
    
    
    41,212
    
    
    
    (5.7
    )Aircraft at end of period
    
    
    640
    
    
    
    652
    
    
    
    (1.8
    )
    
    
    640
    
    
    
    652
    
    
    
    (1.8
    )Fuel consumption (gallons in millions)
    
    
    365
    
    
    
    390
    
    
    
    (6.6
    )
    
    
    704
    
    
    
    762
    
    
    
    (7.6
    )Average aircraft fuel price including related taxes
(dollars per gallon)
    
    
    1.60
    
    
    
    3.65
    
    
    
    (56.0
    )
    
    
    1.54
    
    
    
    3.28
    
    
    
    (52.9
    )
 
 (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)  Passenger revenues divided by available
seat miles.(f)
    
    Operating cost per available seat mile (CASM)  Operating expenses divided by available
seat miles.(g)
    
    Passenger enplanements  The number of passengers on board an aircraft including local,
connecting and through passengers.  33




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##### Table of Contents



(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.(k)
    
    Express statistics include Piedmont and PSA, as well as operating and financial results from
capacity purchase agreements with Air Wisconsin Airlines Corporation, Republic Airways, Mesa
Airlines, Inc. and Chautauqua Airlines, Inc.(l)
    
    Total revenue per available seat mile (RASM)  Total revenues divided by total mainline and
Express available seat miles. Three Months Ended June 30, 2009
Compared with the
Three Months Ended June 30, 2008
 Operating Revenues:
 Percent2009
    
    
    2008
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    1,724
    
    
    $
    2,214
    
    
    
    (22.1
    )Express passenger
    
    
    642
    
    
    
    802
    
    
    
    (19.9
    )Cargo
    
    
    20
    
    
    
    38
    
    
    
    (46.9
    )Other
    
    
    272
    
    
    
    203
    
    
    
    33.6Total operating revenues
    
    $
    2,658
    
    
    $
    3,257
    
    
    
    (18.4
    )
  
    
    Mainline passenger revenues were $1.72 billion in the second quarter of 2009 as compared
to $2.21 billion for the 2008 period. Mainline RPMs decreased 4.1% as mainline capacity, as
measured by ASMs, decreased 5.6%, resulting in a 1.3 point increase in load factor to 84.8%.
Mainline passenger yield decreased 18.8% to 11.11 cents in the second quarter of 2009 from
13.67 cents in the 2008 period. Mainline PRASM decreased 17.6% to 9.42 cents in the second
quarter of 2009 from 11.42 cents in the 2008 period. Mainline yield and PRASM decreased in
the second quarter of 2009 due principally to the decline in passenger demand and weak
pricing environment driven by the global economic recession.
 
    
    Express passenger revenues were $642 million in the second quarter of 2009, a decrease of
$160 million from the 2008 period. Express RPMs decreased by 3.4% as Express capacity, as
measured by ASMs, decreased 5.6%, resulting in a 1.7 point increase in load factor to 76.4%.
Express passenger yield decreased by 17.1% to 22.87 cents in the second quarter of 2009 from
27.59 cents in the 2008 period. Express PRASM decreased 15.2% to 17.47 cents in the second
quarter of 2009 from 20.6 cents in the 2008 period. The decreases in Express yield and PRASM
are the result of the same passenger demand declines and weak pricing environment discussed
in mainline passenger revenues above.
 
    
    Cargo revenues were $20 million in the second quarter of 2009, a decrease of $18 million
or 46.9% from the 2008 period. The decrease in cargo revenues was driven by declines in
freight volumes as a result of the contraction of business spending in the current economic
environment as well as a decrease in fuel surcharges in 2009 as compared to the 2008 period.
 
    
    Other revenues were $272 million in the second quarter of 2009, an increase of $69 million
or 33.6% from the 2008 period due primarily to approximately $88 million generated by our
first and second checked bag fees, which were implemented in the third quarter of 2008. The
benefits of the new revenue initiatives were offset in part by declines in fuel sales to our
pro-rate carriers through our MSC subsidiary as well as a decline in the volume of passenger
ticketing change fees.
  34




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##### Table of Contents



Operating Expenses:
 Percent2009
    
    
    2008
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    440
    
    
    $
    1,086
    
    
    
    (59.4
    )Loss (gain) on fuel hedging instruments, net:Realized
    
    
    135
    
    
    
    (192
    )
    
    nmUnrealized
    
    
    (156
    )
    
    
    (190
    )
    
    
    (17.9
    )Salaries and related costs
    
    
    549
    
    
    
    571
    
    
    
    (3.8
    )Aircraft rent
    
    
    174
    
    
    
    183
    
    
    
    (4.8
    )Aircraft maintenance
    
    
    184
    
    
    
    200
    
    
    
    (8.0
    )Other rent and landing fees
    
    
    142
    
    
    
    142
    
    
    
    Selling expenses
    
    
    99
    
    
    
    116
    
    
    
    (14.8
    )Special items, net
    
    
    1
    
    
    
    34
    
    
    
    (97.8
    )Depreciation and amortization
    
    
    62
    
    
    
    57
    
    
    
    9.0Goodwill impairment
    
    
    
    
    
    
    622
    
    
    nmOther
    
    
    281
    
    
    
    342
    
    
    
    (18.3
    )Total mainline operating expenses
    
    
    1,911
    
    
    
    2,971
    
    
    
    (35.7
    )Express expenses:Fuel
    
    
    145
    
    
    
    340
    
    
    
    (57.4
    )Other
    
    
    480
    
    
    
    482
    
    
    
    (0.5
    )Total Express expenses
    
    
    625
    
    
    
    822
    
    
    
    (24.0
    )Total operating expenses
    
    $
    2,536
    
    
    $
    3,793
    
    
    
    (33.2
    )
     Percent2009
    
    
    2008
    
    
    Change(In cents)Mainline CASM:Aircraft fuel and related taxes
    
    
    2.41
    
    
    
    5.60
    
    
    
    (57.0
    )Gain on fuel hedging instruments, net
    
    
    (0.12
    )
    
    
    (1.97
    )
    
    
    (94.1
    )Salaries and related costs
    
    
    3.00
    
    
    
    2.95
    
    
    
    1.8Aircraft rent
    
    
    0.95
    
    
    
    0.95
    
    
    
    Aircraft maintenance
    
    
    1.01
    
    
    
    1.03
    
    
    
    (2.6
    )Other rent and landing fees
    
    
    0.78
    
    
    
    0.73
    
    
    
    6.1Selling expenses
    
    
    0.54
    
    
    
    0.60
    
    
    
    (9.8
    )Special items, net
    
    
    
    
    
    
    0.17
    
    
    nmDepreciation and amortization
    
    
    0.34
    
    
    
    0.29
    
    
    
    15.4Goodwill impairment
    
    
    
    
    
    
    3.21
    
    
    nmOther
    
    
    1.53
    
    
    
    1.77
    
    
    
    (13.5
    )Total mainline CASM
    
    
    10.44
    
    
    
    15.33
    
    
    
    (31.9
    )
  35




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##### Table of Contents




    
    Aircraft fuel and related taxes per ASM decreased 57% due primarily to a 56.4% decrease
in the average price per gallon of fuel to $1.58 in the second quarter of 2009 from $3.63 in
the 2008 period. A decrease of 7.1% in gallons of fuel consumed in the 2009 period on 5.6%
lower capacity also contributed to the decrease.
 
    
    Gain on fuel hedging instruments, net per ASM was a gain of 1.97 cents in the second
quarter of 2008 as compared to a gain of 0.12 cents in the second quarter of 2009. The net
gain in the 2009 period included $156 million of net unrealized gains on open fuel hedge
transactions, offset by realized losses of $135 million on settled fuel hedge transactions.
The unrealized gains are the result of the application of mark-to-market accounting in which
unrealized losses recognized in prior periods are reversed as hedge transactions are settled
in the current period. Our fuel hedging program uses collars with no premiums, which
establish an upper and lower limit on heating oil futures prices, to provide protection from
fuel price risks. We use heating oil as it is a commodity with prices that are generally
highly correlated with jet fuel prices. We recognized net gains from our fuel hedging
program in the second quarter of 2008 as the price of heating oil exceeded the upper limit
on certain of our collar transactions.
 
    
    Other rent and landing fees per ASM increased 6.1% despite a decrease in ASMs of 5.6%
over the 2008 period due to the fixed nature of space rent as well as rate increases in
landing fees and space rent at certain airport locations.
 
    
    Selling expenses per ASM decreased 9.8% due to lower credit card fees, booking fees and
commissions as a result of a decline in the number and value of tickets sold resulting from
the weakened demand and pricing caused by the economic recession.
 
    
    Depreciation and amortization expense per ASM increased 15.4% due to the acquisition of
six Embraer aircraft and 14 Airbus aircraft subsequent to the second quarter of 2008, which
increased depreciation expense on owned aircraft.
 
    
    Other expense per ASM decreased 13.5% due to a decrease in the incremental cost of travel
redemptions associated with our frequent traveler program, principally as a result of lower
fuel costs and the decline in the cost of fuel associated with sales to pro-rate carriers
through MSC. Our continued focus on overall cost control also contributed to the decrease.
  Nonoperating Income (Expense):
 Percent2009
    
    
    2008
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    6
    
    
    $
    21
    
    
    
    (69.5
    )Interest expense, net
    
    
    (77
    )
    
    
    (57
    )
    
    
    34.6Other, net
    
    
    7
    
    
    
    4
    
    
    
    60.1Total nonoperating expense, net
    
    $
    (64
    )
    
    $
    (32
    )
    
    
    98.6
    36




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##### Table of Contents



Six Months Ended June 30, 2009
Compared with the
Six Months Ended June 30, 2008
 Operating Revenues:
 Percent2009
    
    
    2008
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    3,335
    
    
    $
    4,167
    
    
    
    (20.0
    )Express passenger
    
    
    1,194
    
    
    
    1,459
    
    
    
    (18.2
    )Cargo
    
    
    44
    
    
    
    74
    
    
    
    (40.7
    )Other
    
    
    540
    
    
    
    396
    
    
    
    36.4Total operating revenues
    
    $
    5,113
    
    
    $
    6,096
    
    
    
    (16.1
    )
  
    
    Mainline passenger revenues were $3.34 billion for the six months ended June 30, 2009 as
compared to $4.17 billion for the 2008 period. Mainline RPMs decreased 6% as mainline
capacity, as measured by ASMs, decreased 6.4%, resulting in a 0.4 point increase in load
factor to 81.7%. Mainline passenger yield decreased 14.8% to 11.57 cents in the first six
months of 2009 from 13.58 cents in the 2008 period. Mainline PRASM decreased 14.5% to 9.45
cents in the first six months of 2009 from 11.05 cents in the 2008 period. Mainline yield and
PRASM decreased in the first six months of 2009 due principally to the decline in passenger
demand and weak pricing environment driven by the global economic recession.
 
    
    Express passenger revenues were $1.19 billion for the six months ended June 30, 2009, a
decrease of $265 million from the 2008 period. Express RPMs decreased by 3.9% as Express
capacity, as measured by ASMs, decreased 4.8%, resulting in a 0.7 point increase in load
factor to 72.7%. Express passenger yield decreased by 14.9% to 23.03 cents in the first six
months of 2009 from 27.07 cents in the 2008 period. Express PRASM decreased 14.1% to 16.74
cents in the first six months of 2009 from 19.48 cents in the 2008 period. The decreases in
Express yield and PRASM are the result of the same passenger demand declines and weak pricing
environment discussed in mainline passenger revenues above.
 
    
    Cargo revenues were $44 million for the six months ended June 30, 2009, a decrease of $30
million or 40.7% from the 2008 period. The decrease in cargo revenues was driven by declines
in freight volumes as a result of the contraction of business spending in the current
economic environment as well as a decrease in fuel surcharges in 2009 as compared to the 2008
period.
 
    
    Other revenues were $540 million for the six months ended June 30, 2009, an increase of
$144 million or 36.4% from the 2008 period due primarily to approximately $178 million
generated by our first and second checked bag fees, which were implemented in the third
quarter of 2008. The benefits of the new revenue initiatives were offset in part by declines
in fuel sales to our pro-rate carriers through our MSC subsidiary as well as a decline in the
volume of passenger ticketing change fees.
  37




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##### Table of Contents



Operating Expenses:
 Percent2009
    
    
    2008
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    819
    
    
    $
    1,908
    
    
    
    (57.1
    )Loss (gain) on fuel hedging instruments, net:Realized
    
    
    332
    
    
    
    (274
    )
    
    nmUnrealized
    
    
    (327
    )
    
    
    (226
    )
    
    
    44.3Salaries and related costs
    
    
    1,100
    
    
    
    1,134
    
    
    
    (3.0
    )Aircraft rent
    
    
    352
    
    
    
    361
    
    
    
    (2.7
    )Aircraft maintenance
    
    
    358
    
    
    
    413
    
    
    
    (13.2
    )Other rent and landing fees
    
    
    273
    
    
    
    287
    
    
    
    (4.8
    )Selling expenses
    
    
    192
    
    
    
    220
    
    
    
    (13.0
    )Special items, net
    
    
    7
    
    
    
    59
    
    
    
    (88.4
    )Depreciation and amortization
    
    
    121
    
    
    
    107
    
    
    
    14.0Goodwill impairment
    
    
    
    
    
    
    622
    
    
    nmOther
    
    
    561
    
    
    
    662
    
    
    
    (15.5
    )Total mainline operating expenses
    
    
    3,788
    
    
    
    5,273
    
    
    
    (28.2
    )Express expenses:Fuel
    
    
    267
    
    
    
    589
    
    
    
    (54.6
    )Other
    
    
    961
    
    
    
    967
    
    
    
    (0.6
    )Total Express expenses
    
    
    1,228
    
    
    
    1,556
    
    
    
    (21.0
    )Total operating expenses
    
    $
    5,016
    
    
    $
    6,829
    
    
    
    (26.6
    )
     Percent2009
    
    
    2008
    
    
    Change(In cents)Mainline CASM:Aircraft fuel and related taxes
    
    
    2.32
    
    
    
    5.06
    
    
    
    (54.1
    )Loss (gain) on fuel hedging instruments, net
    
    
    0.02
    
    
    
    (1.33
    )
    
    nmSalaries and related costs
    
    
    3.12
    
    
    
    3.01
    
    
    
    3.7Aircraft rent
    
    
    1.00
    
    
    
    0.96
    
    
    
    4.1Aircraft maintenance
    
    
    1.01
    
    
    
    1.09
    
    
    
    (7.2
    )Other rent and landing fees
    
    
    0.77
    
    
    
    0.76
    
    
    
    1.8Selling expenses
    
    
    0.54
    
    
    
    0.58
    
    
    
    (7.0
    )Special items, net
    
    
    0.02
    
    
    
    0.16
    
    
    
    (87.6
    )Depreciation and amortization
    
    
    0.34
    
    
    
    0.28
    
    
    
    21.9Goodwill impairment
    
    
    
    
    
    
    1.65
    
    
    nmOther
    
    
    1.59
    
    
    
    1.76
    
    
    
    (9.7
    )Total mainline CASM
    
    
    10.73
    
    
    
    13.98
    
    
    
    (23.2
    )
  38




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##### Table of Contents




    
    Aircraft fuel and related taxes per ASM decreased 54.1% due primarily to a 53.2% decrease
in the average price per gallon of fuel to $1.53 in the first six months of 2009 from $3.26
in the 2008 period. A decrease of 8.4% in gallons of fuel consumed in the 2009 period on
6.4% lower capacity also contributed to the decrease.
 
    
    Loss (gain) on fuel hedging instruments, net per ASM fluctuated from a gain of 1.33 cents
in the first six months of 2008 to a loss of 0.02 cents in the first six months of 2009. The
net loss in the 2009 period included realized losses of $332 million on settled fuel hedge
transactions, offset by $327 million of net unrealized gains on open fuel hedge
transactions. The unrealized gains are the result of the application of mark-to-market
accounting in which unrealized losses recognized in prior periods are reversed as hedge
transactions are settled in the current period. We recognized net gains from our fuel
hedging program in the first six months of 2008 as the price of heating oil exceeded the
upper limit on certain of our collar transactions.
 
    
    Aircraft maintenance expense per ASM decreased 7.2% due principally to decreases in the
number of engine and landing gear overhauls performed in the 2009 period as compared to the
2008 period as a result of the timing of maintenance cycles.
 
    
    Selling expenses per ASM decreased 7% due to lower credit card fees, booking fees and
commissions as a result of a decline in the number and value of tickets sold resulting from
the weakened demand and pricing caused by the economic recession.
 
    
    Depreciation and amortization expense per ASM increased 21.9% due principally to the
acquisition of six Embraer aircraft and 14 Airbus aircraft subsequent to the second quarter
of 2008, which increased depreciation expense on owned aircraft.
 
    
    Other expense per ASM decreased 9.7% due to a decrease in the incremental cost of travel
redemptions associated with our frequent traveler program, principally as a result of lower
fuel costs and the decline in the cost of fuel associated with sales to pro-rate carriers
through MSC. Our continued focus on overall cost control also contributed to the decrease.
  Nonoperating Income (Expense):
 Percent2009
    
    
    2008
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    13
    
    
    $
    50
    
    
    
    (74.4
    )Interest expense, net
    
    
    (148
    )
    
    
    (118
    )
    
    
    24.6Other, net
    
    
    (7
    )
    
    
    (5
    )
    
    
    61.8Total nonoperating expense, net
    
    $
    (142
    )
    
    $
    (73
    )
    
    
    93.9
    39




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##### Table of Contents



US Airways Results of Operations
  
    
    $156 million of net unrealized gains resulting from the application of mark-to-market
accounting for changes in the fair value of fuel hedging instruments, offset by $135 million
of net realized losses on settled fuel hedge transactions. In mark-to-market accounting, the
unrealized losses recognized in prior periods are reversed as hedge transactions are settled
in the current period. US Airways is required to use mark-to-market accounting as its
existing fuel hedging instruments do not meet the requirements for hedge accounting
established by SFAS No. 133. If these instruments had qualified for hedge accounting
treatment, any unrealized gains or losses would have been recorded in other comprehensive
income, a component of stockholders equity. Given the market volatility of jet fuel, the
fair value of these fuel hedging instruments is expected to change until settled;
 
    
    $1 million of net special charges for aircraft lease return costs as a result of US
Airways previously announced capacity reductions; and
 
    
    a $2 million non-cash asset impairment charge included in nonoperating expense, net.
  
    
    $192 million of net realized gains on settled fuel hedge transactions as well as $190
million of net unrealized gains resulting from the application of mark-to-market accounting
for changes in the fair value of fuel hedging instruments; and
 
    
    $34 million of net special charges consisting of $18 million in non-cash charges related
to the decline in fair value of certain spare parts associated with US Airways Boeing 737
aircraft fleet, $10 million of merger related transition expenses and $6 million in aircraft
lease return costs and penalties as a result of US Airways previously announced capacity
reductions.
  
    
    $332 million of net realized losses on settled fuel hedge transactions, offset by $327
million of net unrealized gains resulting from the application of mark-to-market accounting
for changes in the fair value of fuel hedging instruments;
 
    
    $7 million of net special charges as a result of US Airways previously announced capacity
reductions, consisting of $6 million in aircraft lease return costs and penalties and $1
million in severance charges; and
 
    
    $7 million in other-than-temporary non-cash impairment charges for US Airways investments
in auction rate securities due to continued declines in the values of certain securities as
well as a $2 million non-cash asset impairment charge, all included in nonoperating expense,
net.
  40




---



##### Table of Contents




    
    $274 million of net realized gains on settled fuel hedge transactions as well as $226
million of net unrealized gains resulting from the application of mark-to-market accounting
for changes in the fair value of fuel hedging instruments;
 
    
    $59 million of net special charges consisting of $35 million of merger related transition
expenses, $18 million in non-cash charges related to the decline in fair value of certain
spare parts associated with US Airways Boeing 737 aircraft fleet and $6 million in aircraft
lease return costs and penalties as a result of US Airways previously announced capacity
reductions; and
 
    
    $13 million in other-than-temporary non-cash impairment charges for US Airways
investments in auction rate securities as well as a $2 million write off of debt discount and
debt issuance costs in connection with the refinancing of certain aircraft equipment notes,
offset by $8 million in gains on forgiveness of debt, all included in nonoperating expense,
net.
    41




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##### Table of Contents



Three Months Ended
    
    
    Percent
    
    
    Six Months Ended
    
    
    PercentJune 30,
    
    
    Change
    
    
    June 30,
    
    
    Change2009
    
    
    2008
    
    
    2009-2008
    
    
    2009
    
    
    2008
    
    
    2009-2008MainlineRevenue passenger miles (millions) (a)
    
    
    15,526
    
    
    
    16,193
    
    
    
    (4.1
    )
    
    
    28,834
    
    
    
    30,682
    
    
    
    (6.0
    )Available seat miles (millions) (b)
    
    
    18,310
    
    
    
    19,387
    
    
    
    (5.6
    )
    
    
    35,289
    
    
    
    37,721
    
    
    
    (6.4
    )Passenger load factor (percent) (c)
    
    
    84.8
    
    
    
    83.5
    
    
    1.3
    pts
    
    
    81.7
    
    
    
    81.3
    
    
    0.4
    ptsYield (cents) (d)
    
    
    11.11
    
    
    
    13.67
    
    
    
    (18.8
    )
    
    
    11.57
    
    
    
    13.58
    
    
    
    (14.8
    )Passenger revenue per available seat mile (cents) (e)
    
    
    9.42
    
    
    
    11.42
    
    
    
    (17.6
    )
    
    
    9.45
    
    
    
    11.05
    
    
    
    (14.5
    )Aircraft at end of period
    
    
    350
    
    
    
    357
    
    
    
    (2.0
    )
    
    
    350
    
    
    
    357
    
    
    
    (2.0
    )Fuel consumption (gallons in millions)
    
    
    278
    
    
    
    299
    
    
    
    (7.1
    )
    
    
    536
    
    
    
    585
    
    
    
    (8.4
    )Average aircraft fuel price including related taxes
(dollars per gallon)
    
    
    1.58
    
    
    
    3.63
    
    
    
    (56.4
    )
    
    
    1.53
    
    
    
    3.26
    
    
    
    (53.2
    )Express (f)Revenue passenger miles (millions) (a)
    
    
    2,809
    
    
    
    2,906
    
    
    
    (3.4
    )
    
    
    5,183
    
    
    
    5,391
    
    
    
    (3.9
    )Available seat miles (millions) (b)
    
    
    3,676
    
    
    
    3,893
    
    
    
    (5.6
    )
    
    
    7,132
    
    
    
    7,492
    
    
    
    (4.8
    )Passenger load factor (percent) (c)
    
    
    76.4
    
    
    
    74.7
    
    
    1.7
    pts
    
    
    72.7
    
    
    
    72.0
    
    
    0.7
    ptsYield (cents) (d)
    
    
    22.87
    
    
    
    27.59
    
    
    
    (17.1
    )
    
    
    23.03
    
    
    
    27.07
    
    
    
    (14.9
    )Passenger revenue per available seat mile (cents) (e)
    
    
    17.47
    
    
    
    20.60
    
    
    
    (15.2
    )
    
    
    16.74
    
    
    
    19.48
    
    
    
    (14.1
    )Aircraft at end of period
    
    
    290
    
    
    
    295
    
    
    
    (1.7
    )
    
    
    290
    
    
    
    295
    
    
    
    (1.7
    )Fuel consumption (gallons in millions)
    
    
    87
    
    
    
    91
    
    
    
    (5.2
    )
    
    
    168
    
    
    
    177
    
    
    
    (5.2
    )Average aircraft fuel price including related taxes
(dollars per gallon)
    
    
    1.67
    
    
    
    3.72
    
    
    
    (55.1
    )
    
    
    1.59
    
    
    
    3.33
    
    
    
    (52.1
    )Total Mainline and ExpressRevenue passenger miles (millions) (a)
    
    
    18,335
    
    
    
    19,099
    
    
    
    (4.0
    )
    
    
    34,017
    
    
    
    36,073
    
    
    
    (5.7
    )Available seat miles (millions) (b)
    
    
    21,986
    
    
    
    23,280
    
    
    
    (5.6
    )
    
    
    42,421
    
    
    
    45,213
    
    
    
    (6.2
    )Passenger load factor (percent) (c)
    
    
    83.4
    
    
    
    82.0
    
    
    1.4
    pts
    
    
    80.2
    
    
    
    79.8
    
    
    0.4
    ptsYield (cents) (d)
    
    
    12.91
    
    
    
    15.79
    
    
    
    (18.3
    )
    
    
    13.31
    
    
    
    15.60
    
    
    
    (14.6
    )Passenger revenue per available seat mile (cents) (e)
    
    
    10.76
    
    
    
    12.96
    
    
    
    (16.9
    )
    
    
    10.68
    
    
    
    12.44
    
    
    
    (14.2
    )Total revenue per available seat mile (cents) (g)
    
    
    12.26
    
    
    
    14.12
    
    
    
    (13.1
    )
    
    
    12.23
    
    
    
    13.61
    
    
    
    (10.2
    )Aircraft at end of period
    
    
    640
    
    
    
    652
    
    
    
    (1.8
    )
    
    
    640
    
    
    
    652
    
    
    
    (1.8
    )Fuel consumption (gallons in millions)
    
    
    365
    
    
    
    390
    
    
    
    (6.6
    )
    
    
    704
    
    
    
    762
    
    
    
    (7.6
    )Average aircraft fuel price including related taxes
(dollars per gallon)
    
    
    1.60
    
    
    
    3.65
    
    
    
    (56.0
    )
    
    
    1.54
    
    
    
    3.28
    
    
    
    (52.9
    )
 
 (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)  Passenger revenues divided by available
seat miles.(f)
    
    Express statistics include Piedmont and PSA, as well as operating and financial results from
capacity purchase agreements with Air Wisconsin Airlines Corporation, Republic Airways,
Mesa Airlines, Inc. and Chautauqua Airlines, Inc.(g)
    
    Total revenue per available seat mile (RASM)  Total revenues divided by total mainline and
Express available seat miles. 
  42




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##### Table of Contents



Three Months Ended June 30, 2009
Compared with the
Three Months Ended June 30, 2008
 Operating Revenues:
 Percent2009
    
    
    2008
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    1,724
    
    
    $
    2,214
    
    
    
    (22.1
    )Express passenger
    
    
    642
    
    
    
    802
    
    
    
    (19.9
    )Cargo
    
    
    20
    
    
    
    38
    
    
    
    (46.9
    )Other
    
    
    310
    
    
    
    233
    
    
    
    33.1Total operating revenues
    
    $
    2,696
    
    
    $
    3,287
    
    
    
    (18.0
    )
  
    
    Mainline passenger revenues were $1.72 billion in the second quarter of 2009 as compared
to $2.21 billion for the 2008 period. Mainline RPMs decreased 4.1% as mainline capacity, as
measured by ASMs, decreased 5.6%, resulting in a 1.3 point increase in load factor to 84.8%.
Mainline passenger yield decreased 18.8% to 11.11 cents in the second quarter of 2009 from
13.67 cents in the 2008 period. Mainline PRASM decreased 17.6% to 9.42 cents in the second
quarter of 2009 from 11.42 cents in the 2008 period. Mainline yield and PRASM decreased in
the second quarter of 2009 due principally to the decline in passenger demand and weak
pricing environment driven by the global economic recession.
 
    
    Express passenger revenues were $642 million in the second quarter of 2009, a decrease of
$160 million from the 2008 period. Express RPMs decreased by 3.4% as Express capacity, as
measured by ASMs, decreased 5.6%, resulting in a 1.7 point increase in load factor to 76.4%.
Express passenger yield decreased by 17.1% to 22.87 cents in the second quarter of 2009 from
27.59 cents in the 2008 period. Express PRASM decreased 15.2% to 17.47 cents in the second
quarter of 2009 from 20.6 cents in the 2008 period. The decreases in Express yield and PRASM
are the result of the same passenger demand declines and weak pricing environment discussed
in mainline passenger revenues above.
 
    
    Cargo revenues were $20 million in the second quarter of 2009, a decrease of $18 million
or 46.9% from the 2008 period. The decrease in cargo revenues was driven by declines in
freight volumes as a result of the contraction of business spending in the current economic
environment as well as a decrease in fuel surcharges in 2009 as compared to the 2008 period.
 
    
    Other revenues were $310 million in the second quarter of 2009, an increase of $77 million
or 33.1% from the 2008 period due primarily to approximately $88 million generated by US
Airways first and second checked bag fees, which were implemented in the third quarter of
2008. The benefits of the new revenue initiatives were offset in part by a decline in the
volume of passenger ticketing change fees.
  43




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##### Table of Contents



Operating Expenses:
 Percent2009
    
    
    2008
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    440
    
    
    $
    1,086
    
    
    
    (59.4
    )Loss (gain) on fuel hedging instruments, net:Realized
    
    
    135
    
    
    
    (192
    )
    
    nmUnrealized
    
    
    (156
    )
    
    
    (190
    )
    
    
    (17.9
    )Salaries and related costs
    
    
    549
    
    
    
    571
    
    
    
    (3.8
    )Aircraft rent
    
    
    174
    
    
    
    183
    
    
    
    (4.8
    )Aircraft maintenance
    
    
    184
    
    
    
    200
    
    
    
    (8.0
    )Other rent and landing fees
    
    
    142
    
    
    
    142
    
    
    
    Selling expenses
    
    
    99
    
    
    
    116
    
    
    
    (14.8
    )Special items, net
    
    
    1
    
    
    
    34
    
    
    
    (97.8
    )Depreciation and amortization
    
    
    64
    
    
    
    59
    
    
    
    8.6Goodwill impairment
    
    
    
    
    
    
    622
    
    
    nmOther
    
    
    287
    
    
    
    339
    
    
    
    (15.5
    )Total mainline operating expenses
    
    
    1,919
    
    
    
    2,970
    
    
    
    (35.4
    )Express expenses:Fuel
    
    
    145
    
    
    
    340
    
    
    
    (57.4
    )Other
    
    
    511
    
    
    
    515
    
    
    
    (0.7
    )Total Express expenses
    
    
    656
    
    
    
    855
    
    
    
    (23.3
    )Total operating expenses
    
    $
    2,575
    
    
    $
    3,825
    
    
    
    (32.7
    )
    
    
    Aircraft fuel and related taxes decreased 59.4% due primarily to a 56.4% decrease in the
average price per gallon of fuel to $1.58 in the second quarter of 2009 from $3.63 in the
2008 period. A decrease of 7.1% in gallons of fuel consumed in the 2009 period on 5.6% lower
capacity also contributed to the decrease.
 
    
    Gain on fuel hedging instruments, net was a gain of $382 million in the second quarter of
2008 as compared to a gain of $21 million in the second quarter of 2009. The net gain in the
2009 period included $156 million of net unrealized gains on open fuel hedge transactions,
offset by realized losses of $135 million on settled fuel hedge transactions. The unrealized
gains are the result of the application of mark-to-market accounting in which unrealized
losses recognized in prior periods are reversed as hedge transactions are settled in the
current period. US Airways fuel hedging program uses collars with no premiums, which
establish an upper and lower limit on heating oil futures prices, to provide protection from
fuel price risks. US Airways uses heating oil as it is a commodity with prices that are
generally highly correlated with jet fuel prices. US Airways recognized net gains from its
fuel hedging program in the second quarter of 2008 as the price of heating oil exceeded the
upper limit on certain of its collar transactions.
 
    
    Other rent and landing fees remained flat despite a 5.6% decrease in capacity over the
2008 period due to the fixed nature of space rent as well as rate increases in landing fees
and space rent at certain airport locations.
 
    
    Selling expenses decreased 14.8% due to lower credit card fees, booking fees and
commissions as a result of a decline in the number and value of tickets sold resulting from
the weakened demand and pricing caused by the economic recession.
  44




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
    
    Depreciation and amortization expense increased 8.6% due to the acquisition of six
Embraer aircraft and 14 Airbus aircraft subsequent to the second quarter of 2008, which
increased depreciation expense on owned aircraft.
 
    
    Other expense decreased 15.5% due to a decrease in the incremental cost of travel
redemptions associated with US Airways frequent traveler program, principally as a result
of lower fuel costs. US Airways continued focus on overall cost control also contributed to
the decrease.
  Nonoperating Income (Expense):
 Percent2009
    
    
    2008
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    6
    
    
    $
    21
    
    
    
    (69.5
    )Interest expense, net
    
    
    (64
    )
    
    
    (46
    )
    
    
    37.2Other, net
    
    
    6
    
    
    
    4
    
    
    
    43.6Total nonoperating expense, net
    
    $
    (52
    )
    
    $
    (21
    )
    
    nm
    45




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##### Table of Contents



Six Months Ended June 30, 2009
Compared with the
Six Months Ended June 30, 2008
 Operating Revenues:
 Percent2009
    
    
    2008
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    3,335
    
    
    $
    4,167
    
    
    
    (20.0
    )Express passenger
    
    
    1,194
    
    
    
    1,459
    
    
    
    (18.2
    )Cargo
    
    
    44
    
    
    
    74
    
    
    
    (40.7
    )Other
    
    
    614
    
    
    
    454
    
    
    
    35.6Total operating revenues
    
    $
    5,187
    
    
    $
    6,154
    
    
    
    (15.7
    )
  
    
    Mainline passenger revenues were $3.34 billion for the six months ended June 30, 2009 as
compared to $4.17 billion for the 2008 period. Mainline RPMs decreased 6% as mainline
capacity, as measured by ASMs, decreased 6.4%, resulting in a 0.4 point increase in load
factor to 81.7%. Mainline passenger yield decreased 14.8% to 11.57 cents in the first six
months of 2009 from 13.58 cents in the 2008 period. Mainline PRASM decreased 14.5% to 9.45
cents in the first six months of 2009 from 11.05 cents in the 2008 period. Mainline yield and
PRASM decreased in the first six months of 2009 due principally to the decline in passenger
demand and weak pricing environment driven by the global economic recession.
 
    
    Express passenger revenues were $1.19 billion for the six months ended June 30, 2009, a
decrease of $265 million from the 2008 period. Express RPMs decreased by 3.9% as Express
capacity, as measured by ASMs, decreased 4.8%, resulting in a 0.7 point increase in load
factor to 72.7%. Express passenger yield decreased by 14.9% to 23.03 cents in the first six
months of 2009 from 27.07 cents in the 2008 period. Express PRASM decreased 14.1% to 16.74
cents in the first six months of 2009 from 19.48 cents in the 2008 period. The decreases in
Express yield and PRASM are the result of the same passenger demand declines and weak pricing
environment discussed in mainline passenger revenues above.
 
    
    Cargo revenues were $44 million for the six months ended June 30, 2009, a decrease of $30
million or 40.7% from the 2008 period. The decrease in cargo revenues was driven by declines
in freight volumes as a result of the contraction of business spending in the current
economic environment as well as a decrease in fuel surcharges in 2009 as compared to the 2008
period.
 
    
    Other revenues were $614 million for the six months ended June 30, 2009, an increase of
$160 million or 35.6% from the 2008 period due primarily to approximately $178 million
generated by US Airways first and second checked bag fees, which were implemented in the
third quarter of 2008. The benefits of the new revenue initiatives were offset in part by a
decline in the volume of passenger ticketing change fees.
  46




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##### Table of Contents



Operating Expenses:
 Percent2009
    
    
    2008
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    819
    
    
    $
    1,908
    
    
    
    (57.1
    )Loss (gain) on fuel hedging instruments, net:Realized
    
    
    332
    
    
    
    (274
    )
    
    nmUnrealized
    
    
    (327
    )
    
    
    (226
    )
    
    
    44.3Salaries and related costs
    
    
    1,100
    
    
    
    1,134
    
    
    
    (3.0
    )Aircraft rent
    
    
    352
    
    
    
    361
    
    
    
    (2.7
    )Aircraft maintenance
    
    
    358
    
    
    
    413
    
    
    
    (13.2
    )Other rent and landing fees
    
    
    273
    
    
    
    287
    
    
    
    (4.8
    )Selling expenses
    
    
    192
    
    
    
    220
    
    
    
    (13.0
    )Special items, net
    
    
    7
    
    
    
    59
    
    
    
    (88.4
    )Depreciation and amortization
    
    
    126
    
    
    
    111
    
    
    
    13.4Goodwill impairment
    
    
    
    
    
    
    622
    
    
    nmOther
    
    
    573
    
    
    
    656
    
    
    
    (12.5
    )Total mainline operating expenses
    
    
    3,805
    
    
    
    5,271
    
    
    
    (27.8
    )Express expenses:Fuel
    
    
    267
    
    
    
    589
    
    
    
    (54.6
    )Other
    
    
    1,020
    
    
    
    1,024
    
    
    
    (0.4
    )Total Express expenses
    
    
    1,287
    
    
    
    1,613
    
    
    
    (20.2
    )Total operating expenses
    
    $
    5,092
    
    
    $
    6,884
    
    
    
    (26.0
    )
    
    
    Aircraft fuel and related taxes decreased 57.1% due primarily to a 53.2% decrease in the
average price per gallon of fuel to $1.53 in the first six months of 2009 from $3.26 in the
2008 period. A decrease of 8.4% in gallons of fuel consumed in the 2009 period on 6.4% lower
capacity also contributed to the decrease.
 
    
    Loss (gain) on fuel hedging instruments, net fluctuated from a gain of $500 million in
the first six months of 2008 to a loss of $5 million in the first six months of 2009. The
net loss in the 2009 period included realized losses of $332 million on settled fuel hedge
transactions, offset by $327 million of net unrealized gains on open fuel hedge
transactions. The unrealized gains are the result of the application of mark-to-market
accounting in which unrealized losses recognized in prior periods are reversed as hedge
transactions are settled in the current period. US Airways recognized net gains from its
fuel hedging program in the first six months of 2008 as the price of heating oil exceeded
the upper limit on certain of its collar transactions.
 
    
    Aircraft maintenance expense decreased 13.2% due principally to decreases in the number
of engine and landing gear overhauls performed in the 2009 period as compared to the 2008
period as a result of the timing of maintenance cycles.
 
    
    Selling expenses decreased 13% due to lower credit card fees, booking fees and
commissions as a result of a decline in the number and value of tickets sold resulting from
the weakened demand and pricing caused by the economic recession.
  47




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
    
    Depreciation and amortization expense increased 13.4% due principally to the acquisition
of six Embraer aircraft and 14 Airbus aircraft subsequent to the second quarter of 2008,
which increased depreciation expense on owned aircraft.
 
    
    Other expense decreased 12.5% due to a decrease in the incremental cost of travel
redemptions associated with US Airways frequent traveler program, principally as a result
of lower fuel costs. US Airways continued focus on overall cost control also contributed to
the decrease.
  Nonoperating Income (Expense):
 Percent2009
    
    
    2008
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    13
    
    
    $
    50
    
    
    
    (74.4
    )Interest expense, net
    
    
    (125
    )
    
    
    (99
    )
    
    
    26.5Other, net
    
    
    (9
    )
    
    
    (4
    )
    
    
    76.6Total nonoperating expense, net
    
    $
    (121
    )
    
    $
    (53
    )
    
    nm
    48




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Liquidity and Capital Resources
  Investments in Marketable Securities
      Aviation Fuel and Derivative Instruments
     49




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Sources and Uses of Cash
 US Airways Group
    US Airways
    50




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Commitments
  Citicorp Credit Facility
       51




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7.25% Convertible Senior Notes
      Other 2009 Financing Transactions
    Credit Card Processing Agreements
   52




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Aircraft and Engine Purchase Commitments
    Covenants and Credit Rating
   S&P
    
    Fitch
    
    MoodysLocal Issuer
    
    Issuer Default
    
    Corporatecredit rating
    
    credit rating
    
    Family ratingUS Airways Group
    
    B-
    
    CCC
    
    Caa1US Airways
    
    B-
    
    *
    
    *
 (*)
    
    The credit agencies do not rate these categories for US Airways.   53




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Off-Balance Sheet Arrangements
   Contractual Obligations
  Payments Due by Period2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    TotalUS Airways Group (1)Debt (2)
    
    $
    
    
    
    $
    33
    
    
    $
    116
    
    
    $
    99
    
    
    $
    16
    
    
    $
    1,350
    
    
    $
    1,614Interest obligations (3)
    
    
    30
    
    
    
    60
    
    
    
    57
    
    
    
    51
    
    
    
    49
    
    
    
    55
    
    
    
    302US Airways (4)Debt and capital lease obligations (5) (6)
    
    
    241
    
    
    
    376
    
    
    
    316
    
    
    
    289
    
    
    
    238
    
    
    
    1,711
    
    
    
    3,171Interest obligations (3) (6)
    
    
    75
    
    
    
    136
    
    
    
    160
    
    
    
    133
    
    
    
    90
    
    
    
    418
    
    
    
    1,012Aircraft purchase and operating lease commitments (7)
    
    
    1,272
    
    
    
    2,355
    
    
    
    2,172
    
    
    
    1,570
    
    
    
    696
    
    
    
    5,576
    
    
    
    13,641Regional capacity purchase agreements (8)
    
    
    503
    
    
    
    1,032
    
    
    
    1,050
    
    
    
    916
    
    
    
    786
    
    
    
    2,819
    
    
    
    7,106Other US Airways Group subsidiaries (9)
    
    
    5
    
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    10Total
    
    $
    2,126
    
    
    $
    3,994
    
    
    $
    3,872
    
    
    $
    3,059
    
    
    $
    1,876
    
    
    $
    11,929
    
    
    $
    26,856
 
 (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)
    
    Excludes $143 million of unamortized debt discount as of June 30, 2009.(3)
    
    For variable-rate debt, future interest obligations are shown above using interest rates in
effect as of June 30, 2009.(4)
    
    Commitments listed separately under US Airways and its wholly owned subsidiaries represent
commitments under agreements entered into separately by those companies.(5)
    
    Excludes $104 million of unamortized debt discount as of June 30, 2009.(6)
    
    Includes $519 million of future principal payments and $239 million of future interest
payments as of June 30, 2009, respectively, related to pass through trust certificates or
EETCs associated with mortgage financings for the purchase of certain aircraft.(7)
    
    Includes $3.39 billion of future minimum lease payments related to EETC leveraged leased
financings of certain aircraft as of June 30, 2009.(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.   54




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Critical Accounting Policies and Estimates
  Impairment of Intangible and Other Assets
   Recent Accounting Pronouncements
     55




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December 31, 2008As Adjusted
    
    
    As ReportedLong-term debt and capital leases, net of current maturities
    
    $
    3,623
    
    
    $
    3,634Additional paid-in capital
    
    
    1,789
    
    
    
    1,749Accumulated deficit
    
    
    (2,336
    )
    
    
    (2,307
    )
      56




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Market Risk Sensitive Instruments
  Commodity price risk
        57




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Interest rate risk
     58




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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.
   59




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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
 US Airways Group could experience significant operating losses in the future.
  Downturns in economic conditions adversely affect our business.
 The
airline industry is intensely competitive and dynamic
 Increased costs of financing, a reduction in the availability of financing and fluctuations in
interest rates could adversely affect our liquidity, operating expenses and results.
    60




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##### Table of Contents



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.
   Our business is dependent on the price and availability of aircraft fuel. Continued periods of
high volatility in fuel costs, increased fuel prices and significant disruptions in the supply of
aircraft fuel could have a significant negative impact on our operating results and liquidity.
     61




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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.
  The integration of our business units following the merger continues to present significant
challenges.
   62




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##### Table of Contents



Changes to our business model that are designed to increase revenues may not be successful and may
cause operational difficulties or decreased demand.
  The airline industry is intensely competitive and dynamic.
   Industry consolidation could weaken our competitive position.
  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.
   63




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##### Table of Contents



Changes in government regulation could increase our operating costs and limit our ability to
conduct our business.
     The inability to maintain labor costs at competitive levels could harm our financial performance.
  Our ability to operate and grow our route network in the future is dependent on the availability
of adequate facilities and infrastructure throughout our system.
  We are subject to many forms of environmental regulation and may incur substantial costs as a
result.
   64




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##### Table of Contents



Ongoing data security compliance requirements could increase our costs, and any significant data
breach could harm our business, financial condition or results of operations.
    Interruptions or disruptions in service at one of our hub airports could have a material adverse
impact on our operations.
   65




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##### Table of Contents



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.
  Our business is subject to weather factors and seasonal variations in airline travel, which cause
our results to fluctuate.
  Increases in insurance costs or reductions in insurance coverage may adversely impact our
operations and financial results.
  We may be adversely affected by global events that affect travel behavior.
  We are exposed to foreign currency exchange rate fluctuations.
   66




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##### Table of Contents



The use of US Airways Groups NOLs and certain other tax attributes could be limited in the
future.
  Risks Related to Our Common Stock
 Our common stock has limited trading history and its market price may be volatile.
  
    
    our operating results failing to meet the expectations of securities analysts or
investors;
 
    
    changes in financial estimates or recommendations by securities analysts;
 
    
    material announcements by us or our competitors;
 
    
    movements in fuel prices;
 
    
    new regulatory pronouncements and changes in regulatory guidelines;
 
    
    general and industry-specific economic conditions;
 
    
    public sales of a substantial number of shares of our common stock; and
 
    
    general market conditions.
 Conversion of our convertible notes will dilute the ownership interest of existing stockholders
and could adversely affect the market price of our common stock.
  Certain provisions of the amended and restated certificate of incorporation and amended and
restated bylaws of US Airways Group make it difficult for stockholders to change the composition
of our board of directors and may discourage takeover attempts that some of our stockholders might
consider beneficial.
  
    
    a classified board of directors with three-year staggered terms;
 
    
    advance notice procedures for stockholder proposals to be considered at stockholders
meetings;
 
    
    the ability of US Airways Groups board of directors to fill vacancies on the board;
  67




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##### Table of Contents




    
    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.
  Our charter documents include provisions limiting voting and ownership of our equity interests,
which includes our common stock and our convertible notes, by foreign owners.
   68




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  Number of SharesFor
    
    
    WithheldHerbert M. Baum
    
    
    91,497,283
    
    
    
    8,042,066Matthew J. Hart
    
    
    92,666,130
    
    
    
    6,873,219Richard C. Kraemer
    
    
    91,438,445
    
    
    
    8,100,904Cheryl G. Krongard
    
    
    91,493,553
    
    
    
    8,045,796
   For
    
    Against
    
    Abstain
    
    Broker Non-Votes97,802,594
    
    937,721
    
    799,017
    
    
  For
    
    Against
    
    Abstain
    
    Broker Non-Votes25,570,647
    
    47,244,781
    
    310,834
    
    26,413,087
  For
    
    Against
    
    Abstain
    
    Broker Non-Votes88,640,701
    
    9,637,169
    
    977,026
    
    
  69




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Item 6. Exhibits
 Exhibit No.
    
    Description4.1
    
    
    Indenture, dated May 13, 2009, between US Airways Group, Inc. and The Bank of New York
Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to US
Airways Groups Current Report on Form 8-K filed on May 14, 2009).4.2
    
    
    First Supplemental Indenture, dated May 13, 2009, between US Airways Group, Inc. and
The Bank of New York Mellon Trust Company, N.A., as trustee., including a form of 7.25%
Convertible Senior Note due 2014 (incorporated by reference to Exhibit 4.2 to US
Airways Groups Current Report on Form 8-K filed on May 14, 2009).31.1
    
    

Certification
of US Airways Groups Chief Executive Officer pursuant to
Rule 13a-14(a)/15d-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)/15d-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)/15d-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)/15d-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.
  70




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Signatures
  US Airways Group, Inc. (Registrant)Date: July 22, 2009
    
    By:
    
    /s/ Derek J. Kerr

Derek J. KerrExecutive Vice President andChief Financial Officer(Duly Authorized Officer and Principal Financial Officer)US Airways, Inc. (Registrant)Date: July 22, 2009
    
    By:
    
    /s/ Derek J. Kerr

Derek J. KerrExecutive Vice President andChief Financial Officer(Duly Authorized Officer and Principal Financial Officer)
  71




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Exhibit Index
 Exhibit No.
    
    Description4.1
    
    
    Indenture, dated May 13, 2009, between US Airways Group, Inc. and The Bank of New
York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit
4.1 to US Airways Groups Current Report on Form 8-K filed on May 14, 2009).4.2
    
    
    First Supplemental Indenture, dated May 13, 2009, between US Airways Group, Inc. and
The Bank of New York Mellon Trust Company, N.A., as trustee., including a form of
7.25% Convertible Senior Note due 2014 (incorporated by reference to Exhibit 4.2 to
US Airways Groups Current Report on Form 8-K filed on May 14, 2009).31.1
    
    
    Certification of US Airways Groups Chief Executive Officer pursuant to Rule
13a-14(a)/15d-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)/15d-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)/15d-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)/15d-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.
  72