##### 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, 2007
 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.
    
 America West Airlines, Inc.
    
 US Airways, Inc.
    
 
 
 þ o
  US Airways Group, Inc.
    
    Large accelerated filer
    
    þ
    
    Accelerated filer
    
    o
    
    Non-accelerated filer
    
    oAmerica West Airlines, Inc.
    
    Large accelerated filer
    
    o
    
    Accelerated filer
    
    o
    
    Non-accelerated filer
    
    þUS Airways, Inc.
    
    Large accelerated filer
    
    o
    
    Accelerated filer
    
    o
    
    Non-accelerated filer
    
    þ
  US Airways Group, Inc.
    
    Yes
    
    o
    
    No
    
    þAmerica West Airlines, 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




---



##### 



US Airways Group, Inc.
Form 10-Q
Quarterly Period Ended June 30, 2007
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 America West Airlines, Inc.Condensed Consolidated Statements of Operations
    
    
    16Condensed Consolidated Balance Sheets
    
    
    17Condensed Consolidated Statements of Cash Flows
    
    
    18Notes to the Condensed Consolidated Financial Statements
    
    
    19Item 1C. Condensed Financial Statements of US Airways, Inc.Condensed Statements of Operations
    
    
    24Condensed Balance Sheets
    
    
    25Condensed Statements of Cash Flows
    
    
    26Notes to the Condensed Financial Statements
    
    
    27Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    34Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    59Item 4. Controls and Procedures
    
    
    60Part II. Other InformationItem 1. Legal Proceedings
    
    
    60Item 1A. Risk Factors
    
    
    62Item 4. Submission of Matters to a Vote of Security Holders
    
    
    69Item 6. Exhibits
    
    
    70Signatures
    
    
    71EX-10.1EX-10.2EX-31.1EX-31.2EX-31.3EX-31.4EX-31.5EX-31.6EX-32.1EX-32.2EX-32.3
  2




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##### Table of Contents



Note Concerning Forward-Looking Statements
  
    
    the impact of high fuel costs, significant disruptions in the supply of aircraft fuel and
further significant increases to fuel prices;
    
    our high level of fixed obligations and our ability to obtain and maintain financing for operations and other purposes;
    
    our ability to achieve the synergies anticipated as a result of the merger and to achieve those synergies in a timely manner;
    
    our ability to integrate the management, operations and labor groups of US Airways Group and America West Holdings;
    
    labor costs and relations with unionized employees generally and the impact and outcome of labor negotiations;
    
    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;
    
    reliance on automated systems and the impact of any failure or disruption of these systems;
    
    the impact of future significant operating losses;
    
    changes in prevailing interest rates;
    
    our ability to obtain and maintain commercially reasonable terms with vendors and service
providers and our reliance on those vendors and service providers;
    
    security-related and insurance costs;
    
    changes in government legislation and regulation;
    
    our ability to use pre-merger NOLs and certain other tax attributes;
    
    competitive practices in the industry, including significant fare restructuring
activities, capacity reductions and in court or out of court restructuring by major
airlines;
    
    continued existence of prepetition liabilities;
    
    interruptions or disruptions in service at one or more of our hub airports;
    
    weather conditions;
 3




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##### Table of Contents




    
    our ability to maintain adequate liquidity;
    
    our ability to maintain contracts that are critical to our operations;
    
    our ability to operate pursuant to the terms of our financing facilities (particularly the financial covenants);
    
    our ability to attract and retain customers;
    
    the cyclical nature of the airline industry;
    
    our ability to attract and retain qualified personnel;
    
    economic conditions; and
    
    other risks and uncertainties listed from time to time in our reports to the Securities and Exchange Commission.
  
 Part I. Financial Information
  4




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##### Table of Contents



Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Operating revenues:Mainline passenger
    
    $
    2,194
    
    
    $
    2,186
    
    
    $
    4,100
    
    
    $
    3,996Express passenger
    
    
    737
    
    
    
    780
    
    
    
    1,346
    
    
    
    1,392Cargo
    
    
    34
    
    
    
    37
    
    
    
    70
    
    
    
    74Other
    
    
    190
    
    
    
    168
    
    
    
    371
    
    
    
    341Total operating revenues
    
    
    3,155
    
    
    
    3,171
    
    
    
    5,887
    
    
    
    5,803Operating expenses:Aircraft fuel and related taxes
    
    
    658
    
    
    
    669
    
    
    
    1,208
    
    
    
    1,223Gain on fuel hedging instruments, net
    
    
    (23
    )
    
    
    (29
    )
    
    
    (78
    )
    
    
    (56
    )Salaries and related costs
    
    
    576
    
    
    
    542
    
    
    
    1,104
    
    
    
    1,045Express expenses
    
    
    652
    
    
    
    660
    
    
    
    1,272
    
    
    
    1,276Aircraft rent
    
    
    180
    
    
    
    180
    
    
    
    360
    
    
    
    365Aircraft maintenance
    
    
    170
    
    
    
    153
    
    
    
    335
    
    
    
    291Other rent and landing fees
    
    
    139
    
    
    
    145
    
    
    
    267
    
    
    
    285Selling expenses
    
    
    125
    
    
    
    121
    
    
    
    231
    
    
    
    228Special items, net
    
    
    27
    
    
    
    35
    
    
    
    66
    
    
    
    (9
    )Depreciation and amortization
    
    
    46
    
    
    
    45
    
    
    
    90
    
    
    
    90Other
    
    
    316
    
    
    
    308
    
    
    
    627
    
    
    
    598Total operating expenses
    
    
    2,866
    
    
    
    2,829
    
    
    
    5,482
    
    
    
    5,336Operating income
    
    
    289
    
    
    
    342
    
    
    
    405
    
    
    
    467Nonoperating income (expense):Interest income
    
    
    48
    
    
    
    41
    
    
    
    88
    
    
    
    66Interest expense, net
    
    
    (69
    )
    
    
    (72
    )
    
    
    (140
    )
    
    
    (147
    )Other, net
    
    
    3
    
    
    
    
    
    
    
    (13
    )
    
    
    (11
    )Total nonoperating expense, net
    
    
    (18
    )
    
    
    (31
    )
    
    
    (65
    )
    
    
    (92
    )Income before income taxes and cumulative effect of change in
accounting principle
    
    
    271
    
    
    
    311
    
    
    
    340
    
    
    
    375Income tax provision
    
    
    8
    
    
    
    6
    
    
    
    11
    
    
    
    6Income before cumulative effect of change in accounting principle
    
    
    263
    
    
    
    305
    
    
    
    329
    
    
    
    369Cumulative effect of change in accounting principle, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net income
    
    $
    263
    
    
    $
    305
    
    
    $
    329
    
    
    $
    370Earnings per common share:Basic:Before cumulative effect of change in accounting principle
    
    $
    2.88
    
    
    $
    3.55
    
    
    $
    3.60
    
    
    $
    4.40Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Earnings per share
    
    
    2.88
    
    
    
    3.55
    
    
    
    3.60
    
    
    
    4.41Diluted:Before cumulative effect of change in accounting principle
    
    $
    2.77
    
    
    $
    3.25
    
    
    $
    3.46
    
    
    $
    4.02Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Earnings per share
    
    
    2.77
    
    
    
    3.25
    
    
    
    3.46
    
    
    
    4.03Shares used for computation (in thousands):Basic
    
    
    91,477
    
    
    
    85,886
    
    
    
    91,420
    
    
    
    83,794Diluted
    
    
    95,613
    
    
    
    94,673
    
    
    
    95,918
    
    
    
    94,012
  5




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##### Table of Contents



June 30,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assetsCash and cash equivalents
    
    $
    661
    
    
    $
    1,116Short-term investments
    
    
    2,360
    
    
    
    1,249Restricted cash
    
    
    2
    
    
    
    1Accounts receivable, net
    
    
    541
    
    
    
    388Materials and supplies, net
    
    
    242
    
    
    
    223Prepaid expenses and other
    
    
    498
    
    
    
    377Total current assets
    
    
    4,304
    
    
    
    3,354Property and equipmentFlight equipment
    
    
    2,189
    
    
    
    2,051Ground property and equipment
    
    
    646
    
    
    
    598Less accumulated depreciation and amortization
    
    
    (668
    )
    
    
    (583
    )2,167
    
    
    
    2,066Equipment purchase deposits
    
    
    65
    
    
    
    48Total property and equipment
    
    
    2,232
    
    
    
    2,114Other assetsGoodwill
    
    
    623
    
    
    
    629Other intangibles, net
    
    
    542
    
    
    
    554Restricted cash
    
    
    497
    
    
    
    666Other assets, net
    
    
    222
    
    
    
    259Total other assets
    
    
    1,884
    
    
    
    2,108Total assets
    
    $
    8,420
    
    
    $
    7,576LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent maturities of debt and capital leases
    
    $
    107
    
    
    $
    95Accounts payable
    
    
    439
    
    
    
    454Air traffic liability
    
    
    1,267
    
    
    
    847Accrued compensation and vacation
    
    
    204
    
    
    
    262Accrued taxes
    
    
    218
    
    
    
    181Other accrued expenses
    
    
    971
    
    
    
    873Total current liabilities
    
    
    3,206
    
    
    
    2,712Noncurrent liabilities and deferred creditsLong-term debt and capital leases, net of current maturities
    
    
    2,942
    
    
    
    2,907Deferred gains and credits
    
    
    190
    
    
    
    205Postretirement benefits other than pensions
    
    
    183
    
    
    
    187Employee benefit liabilities and other
    
    
    579
    
    
    
    595Total noncurrent liabilities and deferred credits
    
    
    3,894
    
    
    
    3,894Stockholders equityCommon stock, $0.01 par value; 200,000,000 shares authorized, 91,942,094 and
91,528,101 shares issued and outstanding at June 30, 2007; 91,697,896 and
91,283,903 shares issued and outstanding at December 31, 2006
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    1,522
    
    
    
    1,501Accumulated other comprehensive income
    
    
    3
    
    
    
    3Accumulated deficit
    
    
    (193
    )
    
    
    (522
    )Treasury stock, common stock, 413,993 shares at June 30, 2007 and December 31, 2006
    
    
    (13
    )
    
    
    (13
    )Total stockholders equity
    
    
    1,320
    
    
    
    970Total liabilities and stockholders equity
    
    $
    8,420
    
    
    $
    7,576
  6




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##### Table of Contents



Six Months Ended June 30,2007
    
    
    2006Net cash provided by operating activities
    
    $
    671
    
    
    $
    675Cash flows from investing activitiesPurchases of property and equipment
    
    
    (201
    )
    
    
    (113
    )Purchases of short-term investments
    
    
    (2,017
    )
    
    
    (980
    )Sales of short-term investments
    
    
    906
    
    
    
    309Decrease (increase) in long-term restricted cash
    
    
    168
    
    
    
    (193
    )Proceeds from disposition of assets
    
    
    4
    
    
    
    2Increase in equipment purchase deposits
    
    
    (17
    )
    
    
    Net cash used for investing activities
    
    
    (1,157
    )
    
    
    (975
    )Cash flows from financing activitiesRepayments of debt
    
    
    (1,638
    )
    
    
    (1,128
    )Proceeds from issuance of debt
    
    
    1,666
    
    
    
    1,375Proceeds from issuance of common stock, net
    
    
    3
    
    
    
    25Net cash provided by financing activities
    
    
    31
    
    
    
    272Net decrease in cash and cash equivalents
    
    
    (455
    )
    
    
    (28
    )Cash and cash equivalents at beginning of period
    
    
    1,116
    
    
    
    1,125Cash and cash equivalents at end of period
    
    $
    661
    
    
    $
    1,097Non-cash investing and financing activitiesNotes payable cancelled under aircraft purchase agreement
    
    $
    
    
    
    $
    4Conversion of 7.5% Convertible Senior Notes, net
discount of $17 million, to common stock
    
    
    
    
    
    
    95Equipment purchases financed by capital leases
    
    
    
    
    
    
    3Supplemental informationCash paid for interest, net of amounts capitalized
    
    $
    125
    
    
    $
    124Cash paid for income taxes
    
    
    4
    
    
    
    3
  7




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##### Table of Contents



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




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##### Table of Contents



2. Special items, net
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Airbus restructuring (a)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (90
    )Merger related transition expenses (b)
    
    
    27
    
    
    
    35
    
    
    
    66
    
    
    
    81Special items, net
    
    $
    27
    
    
    $
    35
    
    
    $
    66
    
    
    $
    (9
    )
 
 (a)
    
    In connection with the merger and the Airbus Memorandum of Understanding (Airbus MOU)
executed between Airbus, US Airways Group, US Airways and AWA, certain aircraft firm orders
were restructured. In connection with that restructuring, US Airways Group and America West
Holdings were required to pay restructuring fees totaling $89 million by means of set-off 9




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##### Table of Contents



against existing equipment deposits of US Airways and AWA held by Airbus of $39 million and $50
million, respectively. Also in connection with the Airbus MOU, US Airways and AWA entered into
two loan agreements with commitments of up to $161 million and $89 million. On March 31, 2006,
the outstanding principal and accrued interest on the $89 million loan was forgiven upon
repayment in full of the $161 million loan in accordance with the terms of the Airbus loans. As
a result, the Company recognized a gain associated with the return of these equipment deposits
upon forgiveness of the loan totaling $90 million, consisting of the $89 million in equipment
deposits and accrued interest of $1 million.(b)
    
    In connection with the continuing effort to consolidate functions and integrate the Companys
organizations, procedures, and operations, the Company incurred $27 million of transition and
merger integration costs in the second quarter of 2007. These items included $2 million in
training and related expenses; $5 million in compensation expenses for equity awards granted
in connection with the merger; $4 million of aircraft livery costs; $13 million in
professional and technical fees related to the integration of the Companys airline operations
systems; $2 million related to reservation system migration expenses and $1 million of other
expenses. During the second quarter of 2006, the Company incurred $35 million of transition
and merger integration costs. These items included $8 million in compensation expenses
primarily for severance, retention payments and equity awards granted in connection with the
merger; $11 million of costs associated with the integration of the AWA FlightFund and US
Airways Dividend Miles frequent traveler programs; $2 million in merger related aircraft lease
return expenses; $2 million of aircraft livery costs; $8 million in professional and technical
fees, including continuing professional fees associated with US Airways bankruptcy
proceedings and fees related to the integration of the Companys airline operations systems;
$2 million in employee moving expenses; $1 million of transition-related sales and marketing
program expenses and $1 million of other expenses.In connection with the merger transition efforts noted above, the Company incurred $66 million
of transition and merger integration costs in the first six months of 2007. These items included
$10 million in training and related expenses; $13 million in compensation expenses for equity
awards granted in connection with the merger; $11 million of aircraft livery costs; $24 million
in professional and technical fees related to the integration of the Companys airline
operations systems; $1 million in employee moving expenses; $4 million related to reservation
system migration expenses and $3 million of other expenses. During the first six months of
2006, the Company incurred $81 million of transition and merger integration costs. These items
included $29 million in compensation expenses primarily for severance, retention payments and
equity awards granted in connection with the merger; $11 million of costs associated with the
integration of the AWA FlightFund and US Airways Dividend Miles frequent traveler programs; $9
million in merger related aircraft lease return expenses; $9 million of aircraft livery costs;
$15 million in professional and technical fees, including continuing professional fees
associated with US Airways bankruptcy proceedings; $5 million in employee moving expenses; $1
million of transition-related sales and marketing program expenses; $1 million of programming
service expenses and $1 million of other expenses. 10




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3. Earnings per share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Basic earnings per share:Income before cumulative effect of change in accounting
principle
    
    $
    263
    
    
    $
    305
    
    
    $
    329
    
    
    $
    369Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net income
    
    $
    263
    
    
    $
    305
    
    
    $
    329
    
    
    $
    370Weighted average common shares outstanding (in thousands)
    
    
    91,477
    
    
    
    85,886
    
    
    
    91,420
    
    
    
    83,794Basic earnings per share:Before cumulative effect of change in accounting principle
    
    $
    2.88
    
    
    $
    3.55
    
    
    $
    3.60
    
    
    $
    4.40Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Net earnings per share
    
    $
    2.88
    
    
    $
    3.55
    
    
    $
    3.60
    
    
    $
    4.41Diluted earnings per share:Income before cumulative effect of change in accounting
principle
    
    $
    263
    
    
    $
    305
    
    
    $
    329
    
    
    $
    369Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net income
    
    
    263
    
    
    
    305
    
    
    
    329
    
    
    
    370Interest expense on 7.5% convertible senior notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Interest expense on 7.0% senior convertible notes
    
    
    1
    
    
    
    3
    
    
    
    3
    
    
    
    5Income for purposes of computing diluted net income per share
    
    $
    264
    
    
    $
    308
    
    
    $
    332
    
    
    $
    379Share computation (in thousands):Weighted average common shares outstanding
    
    
    91,477
    
    
    
    85,886
    
    
    
    91,420
    
    
    
    83,794Dilutive effect of stock awards and warrants
    
    
    1,086
    
    
    
    2,469
    
    
    
    1,448
    
    
    
    2,158Assumed conversion of 7.5% convertible senior notes
    
    
    
    
    
    
    358
    
    
    
    
    
    
    
    2,100Assumed conversion of 7.0% senior convertible notes
    
    
    3,050
    
    
    
    5,960
    
    
    
    3,050
    
    
    
    5,960Weighted average common shares outstanding as adjusted
    
    
    95,613
    
    
    
    94,673
    
    
    
    95,918
    
    
    
    94,012Diluted earnings per share:Before cumulative effect of change in accounting principle
    
    $
    2.77
    
    
    $
    3.25
    
    
    $
    3.46
    
    
    $
    4.02Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Earnings per share
    
    $
    2.77
    
    
    $
    3.25
    
    
    $
    3.46
    
    
    $
    4.03
   4. Stock options
 Agreements with ALPA 
 11




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##### Table of Contents



Annual Incentive Grant 
   5. Debt
  June 30,
    
    
    December 31,2007
    
    
    2006SecuredCiticorp North America loan, variable interest rate of 7.86%, installments due through maturity
    
    $
    1,600
    
    
    $
    General Electric Capital Corporation loan
    
    
    
    
    
    
    1,250Equipment notes payable, variable interest rates of 6.89% to 9.65%
    
    
    1,284
    
    
    
    1,258Slot financing, interest rate of 8%, installments due through 2015
    
    
    47
    
    
    
    47Capital lease obligations, interest rate of 8%, installments due through 2021
    
    
    43
    
    
    
    41Senior secured discount notes, variable interest rate of 8.73%, installments due 2005 through 2009
    
    
    33
    
    
    
    33GE Credit Facility
    
    
    
    
    
    
    21Capital lease obligations, computer software, installments due through 2008
    
    
    2
    
    
    
    23,009
    
    
    
    2,652Unsecured7% senior convertible notes, interest only payments until due in 2020
    
    
    74
    
    
    
    74GE Engine Maintenance Term Note, variable interest of 9.37%, installments due 2008 through 2011
    
    
    54
    
    
    
    45Industrial development bonds, fixed interest rate of 6.3% due 2023
    
    
    29
    
    
    
    29Barclays prepaid miles (formerly Juniper prepaid miles)
    
    
    
    
    
    
    325Note payable to Pension Benefit Guaranty Corporation, interest rate of 6%, interest only payments
until due in 2012
    
    
    10
    
    
    
    10167
    
    
    
    483Total long-term debt and capital lease obligations
    
    
    3,176
    
    
    
    3,135Less: Unamortized discount on debt
    
    
    (127
    )
    
    
    (133
    )Current maturities
    
    
    (107
    )
    
    
    (95
    )Long-term debt and capital lease obligations, net of current maturities
    
    $
    2,942
    
    
    $
    2,907
 Refinancing Transaction 
 12




---



##### Table of Contents




    
    The amended and restated loan agreement, dated April 7, 2006, entered into by US Airways
Group with General Electric Capital Corporation (GECC) and a syndicate of lenders. At the
time of the repayment, the total outstanding balance of the loan was $1.25 billion.
    
    The Barclays prepaid miles issued on October 3, 2005 in connection with the amended
co-branded credit card agreement dated August 8, 2005 between pre-merger US Airways Group,
AWA and Juniper Bank, a subsidiary of Barclays PLC that has since been renamed Barclays Bank
Delaware (Barclays). At the time of the repayment, the total outstanding balance was $325
million.
    
    The credit facility with GECC, amended in July 2005, with an original balance of $28
million. At the time of the repayment, the total outstanding balance of the loan was $19
million.
    6. Bankruptcy claims resolution
  13




---



##### Table of Contents



7. Income taxes
        14




---



##### Table of Contents



8. Express expenses
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Aircraft fuel and related taxes
    
    $
    187
    
    
    $
    203
    
    
    $
    340
    
    
    $
    376Salaries and related costs
    
    
    63
    
    
    
    64
    
    
    
    126
    
    
    
    130Capacity purchases
    
    
    260
    
    
    
    253
    
    
    
    519
    
    
    
    475Aircraft rent
    
    
    13
    
    
    
    13
    
    
    
    25
    
    
    
    35Aircraft maintenance
    
    
    17
    
    
    
    18
    
    
    
    38
    
    
    
    37Other rent and landing fees
    
    
    28
    
    
    
    33
    
    
    
    56
    
    
    
    64Selling expenses
    
    
    46
    
    
    
    41
    
    
    
    81
    
    
    
    75Depreciation and amortization
    
    
    5
    
    
    
    6
    
    
    
    12
    
    
    
    12Other expenses
    
    
    33
    
    
    
    29
    
    
    
    75
    
    
    
    72Express expenses
    
    $
    652
    
    
    $
    660
    
    
    $
    1,272
    
    
    $
    1,276
 9. ARINC subsequent event
  15




---



##### Table of Contents



Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Operating revenues:Mainline passenger
    
    $
    689
    
    
    $
    747
    
    
    $
    1,351
    
    
    $
    1,399Express passenger
    
    
    173
    
    
    
    184
    
    
    
    322
    
    
    
    337Cargo
    
    
    5
    
    
    
    7
    
    
    
    11
    
    
    
    16Other
    
    
    35
    
    
    
    43
    
    
    
    84
    
    
    
    90Total operating revenues
    
    
    902
    
    
    
    981
    
    
    
    1,768
    
    
    
    1,842Operating expenses:Aircraft fuel and related taxes
    
    
    238
    
    
    
    242
    
    
    
    439
    
    
    
    447Gain on fuel hedging instruments, net
    
    
    (23
    )
    
    
    (29
    )
    
    
    (78
    )
    
    
    (56
    )Salaries and related costs
    
    
    189
    
    
    
    191
    
    
    
    363
    
    
    
    366Express expenses
    
    
    161
    
    
    
    159
    
    
    
    306
    
    
    
    305Aircraft rent
    
    
    82
    
    
    
    85
    
    
    
    165
    
    
    
    171Aircraft maintenance
    
    
    76
    
    
    
    73
    
    
    
    142
    
    
    
    125Other rent and landing fees
    
    
    45
    
    
    
    45
    
    
    
    91
    
    
    
    90Selling expenses
    
    
    37
    
    
    
    42
    
    
    
    74
    
    
    
    81Special items, net
    
    
    10
    
    
    
    23
    
    
    
    23
    
    
    
    (7
    )Depreciation and amortization
    
    
    11
    
    
    
    10
    
    
    
    22
    
    
    
    21Other
    
    
    101
    
    
    
    79
    
    
    
    199
    
    
    
    155Total operating expenses
    
    
    927
    
    
    
    920
    
    
    
    1,746
    
    
    
    1,698Operating income (loss)
    
    
    (25
    )
    
    
    61
    
    
    
    22
    
    
    
    144Nonoperating income (expense):Interest income
    
    
    17
    
    
    
    20
    
    
    
    36
    
    
    
    33Interest expense, net
    
    
    (1
    )
    
    
    (10
    )
    
    
    (11
    )
    
    
    (37
    )Other, net
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    (10
    )Total nonoperating income (expense), net
    
    
    17
    
    
    
    11
    
    
    
    26
    
    
    
    (14
    )Income (loss) before income taxes and cumulative effect of
change in accounting principle
    
    
    (8
    )
    
    
    72
    
    
    
    48
    
    
    
    130Income tax provision
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Income (loss) before cumulative effect of change in
accounting principle
    
    
    (8
    )
    
    
    68
    
    
    
    48
    
    
    
    126Cumulative effect of change in accounting principle, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net income (loss)
    
    $
    (8
    )
    
    $
    68
    
    
    $
    48
    
    
    $
    127
  16




---



##### Table of Contents



June 30,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assetsCash and cash equivalents
    
    $
    76
    
    
    $
    620Short-term investments
    
    
    1,001
    
    
    
    506Accounts receivable, net
    
    
    55
    
    
    
    181Materials and supplies, net
    
    
    80
    
    
    
    76Prepaid expenses and other
    
    
    261
    
    
    
    234Total current assets
    
    
    1,473
    
    
    
    1,617Property and equipmentFlight equipment
    
    
    341
    
    
    
    343Ground property and equipment
    
    
    390
    
    
    
    372Less accumulated depreciation and amortization
    
    
    (444
    )
    
    
    (426
    )287
    
    
    
    289Equipment purchase deposits
    
    
    31
    
    
    
    16Total property and equipment
    
    
    318
    
    
    
    305Other assetsRestricted cash
    
    
    142
    
    
    
    211Other assets, net
    
    
    72
    
    
    
    70Total other assets
    
    
    214
    
    
    
    281Total assets
    
    $
    2,005
    
    
    $
    2,203LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilitiesCurrent maturities of debt and capital leases
    
    $
    2
    
    
    $
    2Accounts payable
    
    
    130
    
    
    
    224Payables to related parties, net
    
    
    1,312
    
    
    
    720Air traffic liability
    
    
    95
    
    
    
    359Accrued compensation and vacation
    
    
    91
    
    
    
    144Accrued taxes
    
    
    37
    
    
    
    80Other accrued expenses
    
    
    145
    
    
    
    195Total current liabilities
    
    
    1,812
    
    
    
    1,724Noncurrent liabilities and deferred creditsLong-term debt and capital leases, net of current maturities
    
    
    59
    
    
    
    384Deferred credits
    
    
    28
    
    
    
    32Employee benefit liabilities and other
    
    
    205
    
    
    
    210Total noncurrent liabilities and deferred credits
    
    
    292
    
    
    
    626Stockholders deficitCommon stock, $0.01 par value; 1,000 shares authorized and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    555
    
    
    
    555Accumulated deficit
    
    
    (654
    )
    
    
    (702
    )Total stockholders deficit
    
    
    (99
    )
    
    
    (147
    )Total liabilities and stockholders deficit
    
    $
    2,005
    
    
    $
    2,203
  17




---



##### Table of Contents



Six Months Ended June 30,2007
    
    
    2006Net cash provided by (used for) operating activities
    
    $
    (82
    )
    
    $
    216Cash flows from investing activitiesPurchases of property and equipment
    
    
    (24
    )
    
    
    (34
    )Purchases of short-term investments
    
    
    (677
    )
    
    
    (379
    )Sales of short-term investments
    
    
    182
    
    
    
    242Decrease (increase) in long-term restricted cash
    
    
    69
    
    
    
    (62
    )Proceeds from disposition of assets
    
    
    3
    
    
    
    Decrease (increase) in equipment purchase deposits
    
    
    (15
    )
    
    
    1Net cash used for investing activities
    
    
    (462
    )
    
    
    (232
    )Cash flows from financing activitiesRepayments of debt
    
    
    
    
    
    
    (2
    )Net decrease in payables to related parties
    
    
    
    
    
    
    (201
    )Net cash used for financing activities
    
    
    
    
    
    
    (203
    )Net decrease in cash and cash equivalents
    
    
    (544
    )
    
    
    (219
    )Cash and cash equivalents at beginning of period
    
    
    620
    
    
    
    632Cash and cash equivalents at end of period
    
    $
    76
    
    
    $
    413Non-cash investing and financing activitiesRepayment of Barclays prepaid miles by parent
    
    $
    325
    
    
    $
    Repayment of ATSB, Airbus, and GECC loans by parent
    
    
    
    
    
    
    520Notes payable cancelled under aircraft purchase agreement
    
    
    
    
    
    
    4Loan proceeds received by parent
    
    
    
    
    
    
    64Conversion of 7.5% Convertible Senior Notes, net of
discount of $17 million, to common stock of US
Airways Group
    
    
    
    
    
    
    95Equipment purchases financed by capital leases
    
    
    
    
    
    
    3Supplemental informationCash paid for interest, net of amounts capitalized
    
    $
    10
    
    
    $
    22Cash paid for income taxes
    
    
    
    
    
    
    3
  18




---



##### Table of Contents



America West Airlines, Inc.
 
 Notes to Condensed Consolidated Financial Statements
 (Unaudited)
 1. Basis of presentation
    Recent Accounting Pronouncements
     19




---



##### Table of Contents



2. Special items, net
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Airbus restructuring (a)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (51
    )Merger related transition expenses (b)
    
    
    10
    
    
    
    23
    
    
    
    23
    
    
    
    44Special items, net
    
    $
    10
    
    
    $
    23
    
    
    $
    23
    
    
    $
    (7
    )
 
 (a)
    
    In connection with the merger and the Airbus Memorandum of Understanding (Airbus MOU)
executed between Airbus, US Airways Group, US Airways, Inc. (US Airways) and AWA, certain
aircraft firm orders were restructured. In connection with that restructuring, US Airways
Group and America West Holdings were required to pay restructuring fees totaling $89 million
by means of set-off against existing equipment deposits of US Airways and AWA held by Airbus
of $39 million and $50 million, respectively. Also in connection with the Airbus MOU, US
Airways and AWA entered into two loan agreements with commitments of up to $161 million and
$89 million. On March 31, 2006, the outstanding principal and accrued interest on the $89
million loan was forgiven upon repayment in full of the $161 million loan in accordance with
the terms of the Airbus loans. As a result, AWA recognized a gain associated with the return
of these equipment deposits upon forgiveness of the loan totaling $51 million, consisting of
the $50 million in equipment deposits and accrued interest of $1 million.(b)
    
    In connection with the continuing effort to consolidate functions and integrate
organizations, procedures, and operations with US Airways, AWA incurred $10 million of
transition and merger integration costs in the second quarter of 2007. These items included $1
million in training and related expenses; $1 million in compensation expenses for equity
awards granted in connection with the merger; $5 million in professional and technical fees
related to the integration of the airline operations systems; and $3 million of aircraft
livery costs. During the second quarter of 2006, AWA incurred $23 million of transition and
merger integration costs. These items included $3 million in compensation expenses primarily
for severance, retention payments and equity awards granted in connection with the merger; $12
million of costs associated with the integration of the AWA FlightFund and US Airways Dividend
Miles frequent traveler programs; $2 million in merger related aircraft lease return expenses;
$1 million of aircraft livery costs; $4 million in professional and technical fees related to
the integration of the airline operations systems and $1 million of transition-related sales
and marketing program expenses.In connection with the merger transition efforts noted above, AWA incurred $23 million of
transition and merger integration costs in the first six months of 2007. These items included $3
million in training and related expenses; $3 million in compensation expenses for equity awards
granted in connection with the merger; $9 million in professional and technical fees related to
the integration of the airline operations systems; $7 million of aircraft livery costs and $1
million of other expenses. In the first six months of 2006, AWA incurred $44 million of
transition and merger integration costs. These items included $7 million in compensation expenses
primarily for severance, retention payments and equity awards granted in connection with the
merger; $12 million of costs associated with the integration of the AWA FlightFund and US Airways
Dividend Miles frequent traveler programs; $9 million in merger related aircraft lease return
expenses; $6 million of aircraft livery costs; $7 million in professional and technical fees
related to the integration of the airline operations systems; $2 million of transition-related
sales and marketing program expenses and $1 million of other expenses. 20




---



##### Table of Contents



3. Stock options
 Annual Incentive Grant 
   4. Debt
  June 30,
    
    
    December 31,2007
    
    
    2006SecuredSenior secured discount notes, variable interest rate of 8.73%, installments due 2005 through 2009
    
    $
    33
    
    
    $
    33Capital lease obligation, computer software, installments due through 2008
    
    
    2
    
    
    
    235
    
    
    
    35UnsecuredIndustrial development bonds, fixed interest rate of 6.3% due 2023
    
    
    29
    
    
    
    29Barclays prepaid miles (formerly Juniper prepaid miles)
    
    
    
    
    
    
    32529
    
    
    
    354Total long-term debt and capital lease obligations
    
    
    64
    
    
    
    389Less: Unamortized discount on debt
    
    
    (3
    )
    
    
    (3
    )Current maturities
    
    
    (2
    )
    
    
    (2
    )Long-term debt and capital lease obligations, net of current maturities
    
    $
    59
    
    
    $
    384
 Refinancing Transaction 
  
    
    The amended and restated loan agreement, dated April 7, 2006, entered into by US Airways
Group with General Electric Capital Corporation (GECC) and a syndicate of lenders. At the
time of the repayment, the total outstanding balance of the loan was $1.25 billion.
    
    The Barclays prepaid miles issued on October 3, 2005 in connection with the amended
co-branded credit card agreement dated August 8, 2005 between pre-merger US Airways Group,
AWA and Juniper Bank, a subsidiary of Barclays PLC that has since been renamed Barclays Bank
Delaware (Barclays). At the time of the repayment, the total outstanding balance was $325
million.
    
    The credit facility with GECC, amended in July 2005 with an original balance of $28
million. At the time of the repayment, the total outstanding balance of the loan was $19
million.
  21




---



##### Table of Contents



5. Related party transactions
 (a) Payables to related parties, net
  June 30, 2007
    
    
    December 31, 2006US Airways Group
    
    $
    1,511
    
    
    $
    1,153America West Holdings
    
    
    (275
    )
    
    
    (276
    )US Airways
    
    
    100
    
    
    
    (140
    )Other US Airways Group wholly owned subsidiaries
    
    
    (24
    )
    
    
    (17
    )$
    1,312
    
    
    $
    720
   (b) Shared operating expenses
  22




---



##### Table of Contents



Three Months Ended June 30, 2007
    
    
    Six Months Ended June 30, 2007AWA
    
    
    US Airways
    
    
    Total
    
    
    AWA
    
    
    US Airways
    
    
    TotalSalaries and related costs
    
    $
    81
    
    
    $
    136
    
    
    $
    217
    
    
    $
    148
    
    
    $
    246
    
    
    $
    394Other rent and landing fees
    
    
    25
    
    
    
    44
    
    
    
    69
    
    
    
    52
    
    
    
    89
    
    
    
    141Selling expenses
    
    
    33
    
    
    
    71
    
    
    
    104
    
    
    
    65
    
    
    
    131
    
    
    
    196Express expenses
    
    
    25
    
    
    
    64
    
    
    
    89
    
    
    
    48
    
    
    
    121
    
    
    
    169Other expenses
    
    
    52
    
    
    
    88
    
    
    
    140
    
    
    
    101
    
    
    
    170
    
    
    
    271Total allocated expenses
    
    $
    216
    
    
    $
    403
    
    
    $
    619
    
    
    $
    414
    
    
    $
    757
    
    
    $
    1,171
 Three Months Ended June 30, 2006
    
    
    Six Months Ended June 30, 2006AWA
    
    
    US Airways
    
    
    Total
    
    
    AWA
    
    
    US Airways
    
    
    TotalSalaries and related costs
    
    $
    67
    
    
    $
    110
    
    
    $
    177
    
    
    $
    130
    
    
    $
    212
    
    
    $
    342Other rent and landing fees
    
    
    38
    
    
    
    69
    
    
    
    107
    
    
    
    76
    
    
    
    135
    
    
    
    211Other expenses
    
    
    23
    
    
    
    39
    
    
    
    62
    
    
    
    43
    
    
    
    78
    
    
    
    121Total allocated expenses
    
    $
    128
    
    
    $
    218
    
    
    $
    346
    
    
    $
    249
    
    
    $
    425
    
    
    $
    674
 6. Income taxes
   7. Express expenses
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Aircraft fuel and related taxes
    
    $
    50
    
    
    $
    57
    
    
    $
    88
    
    
    $
    103Salaries and related costs
    
    
    2
    
    
    
    
    
    
    
    3
    
    
    
    Capacity purchases
    
    
    94
    
    
    
    88
    
    
    
    188
    
    
    
    173Other rent and landing fees
    
    
    2
    
    
    
    3
    
    
    
    3
    
    
    
    6Selling expenses
    
    
    11
    
    
    
    10
    
    
    
    19
    
    
    
    20Other expenses
    
    
    2
    
    
    
    1
    
    
    
    5
    
    
    
    3Express expenses
    
    $
    161
    
    
    $
    159
    
    
    $
    306
    
    
    $
    305
 23




---



##### Table of Contents



Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Operating revenues:Mainline passenger
    
    $
    1,505
    
    
    $
    1,439
    
    
    $
    2,749
    
    
    $
    2,597Express passenger
    
    
    564
    
    
    
    596
    
    
    
    1,025
    
    
    
    1,054Cargo
    
    
    29
    
    
    
    29
    
    
    
    59
    
    
    
    58Other
    
    
    185
    
    
    
    162
    
    
    
    345
    
    
    
    319Total operating revenues
    
    
    2,283
    
    
    
    2,226
    
    
    
    4,178
    
    
    
    4,028Operating expenses:Aircraft fuel and related taxes
    
    
    420
    
    
    
    426
    
    
    
    768
    
    
    
    776Salaries and related costs
    
    
    387
    
    
    
    351
    
    
    
    741
    
    
    
    680Express expenses
    
    
    520
    
    
    
    534
    
    
    
    1,013
    
    
    
    1,033Aircraft rent
    
    
    98
    
    
    
    95
    
    
    
    195
    
    
    
    194Aircraft maintenance
    
    
    94
    
    
    
    80
    
    
    
    193
    
    
    
    166Other rent and landing fees
    
    
    94
    
    
    
    100
    
    
    
    176
    
    
    
    195Selling expenses
    
    
    88
    
    
    
    79
    
    
    
    157
    
    
    
    146Special items, net
    
    
    18
    
    
    
    12
    
    
    
    44
    
    
    
    (3
    )Depreciation and amortization
    
    
    38
    
    
    
    37
    
    
    
    73
    
    
    
    73Other
    
    
    206
    
    
    
    232
    
    
    
    415
    
    
    
    446Total operating expenses
    
    
    1,963
    
    
    
    1,946
    
    
    
    3,775
    
    
    
    3,706Operating income
    
    
    320
    
    
    
    280
    
    
    
    403
    
    
    
    322Nonoperating income (expense):Interest income
    
    
    29
    
    
    
    21
    
    
    
    51
    
    
    
    34Interest expense, net
    
    
    (53
    )
    
    
    (53
    )
    
    
    (109
    )
    
    
    (107
    )Other, net
    
    
    1
    
    
    
    (1
    )
    
    
    4
    
    
    
    (1
    )Total nonoperating expense, net
    
    
    (23
    )
    
    
    (33
    )
    
    
    (54
    )
    
    
    (74
    )Income before income taxes
    
    
    297
    
    
    
    247
    
    
    
    349
    
    
    
    248Income tax provision
    
    
    118
    
    
    
    1
    
    
    
    138
    
    
    
    1Net income
    
    $
    179
    
    
    $
    246
    
    
    $
    211
    
    
    $
    247
  24




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##### Table of Contents



June 30,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assetsCash and cash equivalents
    
    $
    559
    
    
    $
    467Short-term investments
    
    
    1,359
    
    
    
    744Restricted cash
    
    
    2
    
    
    
    1Accounts receivable, net
    
    
    473
    
    
    
    201Materials and supplies, net
    
    
    123
    
    
    
    112Prepaid expenses and other
    
    
    226
    
    
    
    117Total current assets
    
    
    2,742
    
    
    
    1,642Property and equipmentFlight equipment
    
    
    1,755
    
    
    
    1,623Ground property and equipment
    
    
    233
    
    
    
    205Less accumulated depreciation and amortization
    
    
    (201
    )
    
    
    (141
    )1,787
    
    
    
    1,687Equipment purchase deposits
    
    
    34
    
    
    
    32Total property and equipment
    
    
    1,821
    
    
    
    1,719Other assetsGoodwill
    
    
    623
    
    
    
    629Other intangibles, net
    
    
    502
    
    
    
    513Restricted cash
    
    
    355
    
    
    
    456Other assets, net
    
    
    141
    
    
    
    164Total other assets
    
    
    1,621
    
    
    
    1,762Total assets
    
    $
    6,184
    
    
    $
    5,123LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent maturities of debt and capital leases
    
    $
    88
    
    
    $
    93Accounts payable
    
    
    285
    
    
    
    212Payables to related parties, net
    
    
    1,041
    
    
    
    1,298Air traffic liability
    
    
    1,172
    
    
    
    487Accrued compensation and vacation
    
    
    103
    
    
    
    105Accrued taxes
    
    
    184
    
    
    
    100Other accrued expenses
    
    
    802
    
    
    
    656Total current liabilities
    
    
    3,675
    
    
    
    2,951Noncurrent liabilities and deferred creditsLong-term debt and capital leases, net of current maturities
    
    
    1,226
    
    
    
    1,200Deferred gains and credits
    
    
    162
    
    
    
    173Postretirement benefits other than pensions
    
    
    179
    
    
    
    183Employee benefit liabilities and other
    
    
    519
    
    
    
    404Total noncurrent liabilities and deferred credits
    
    
    2,086
    
    
    
    1,960Stockholders equityCommon stock, $1 par, 1,000 shares issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    1
    
    
    
    1Retained earnings
    
    
    422
    
    
    
    211Total stockholders equity
    
    
    423
    
    
    
    212Total liabilities and stockholders equity
    
    $
    6,184
    
    
    $
    5,123
  25




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##### Table of Contents



Six Months Ended June 30,2007
    
    
    2006Net cash provided by operating activities
    
    $
    774
    
    
    $
    494Cash flows from investing activitiesPurchases of property and equipment
    
    
    (169
    )
    
    
    (72
    )Purchases of short-term investments
    
    
    (1,339
    )
    
    
    (600
    )Sales of short-term investments
    
    
    724
    
    
    
    65Proceeds from disposition of assets
    
    
    
    
    
    
    1Decrease (increase) in long-term restricted cash
    
    
    101
    
    
    
    (130
    )Increase in equipment purchase deposits
    
    
    (2
    )
    
    
    Net cash used for investing activities
    
    
    (685
    )
    
    
    (736
    )Cash flows from financing activitiesProceeds from issuance of debt
    
    
    66
    
    
    
    48Repayments of debt and capital lease obligations
    
    
    (63
    )
    
    
    (57
    )Net increase in payables to related parties
    
    
    
    
    
    
    438Net cash provided by financing activities
    
    
    3
    
    
    
    429Net increase in cash and cash equivalents
    
    
    92
    
    
    
    187Cash and cash equivalents at beginning of period
    
    
    467
    
    
    
    462Cash and cash equivalents at end of period
    
    $
    559
    
    
    $
    649Non-cash investing and financing activitiesRepayment of ATSB and Airbus loans by parent
    
    $
    
    
    
    $
    712Loan proceeds received by parent
    
    
    
    
    
    
    64Supplemental informationCash paid for interest, net of amounts capitalized
    
    $
    54
    
    
    $
    75Cash paid for income taxes
    
    
    3
    
    
    
    
  26




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##### Table of Contents



US Airways, Inc.
 
 Notes to Condensed Financial Statements
 (Unaudited)
 1. Basis of presentation
    Recent Accounting Pronouncements
     27




---



##### Table of Contents



2. Special items, net
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Airbus restructuring (a)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (40
    )Merger related transition expenses (b)
    
    
    18
    
    
    
    12
    
    
    
    44
    
    
    
    37Special items, net
    
    $
    18
    
    
    $
    12
    
    
    $
    44
    
    
    $
    (3
    )
 
 (a)
    
    In connection with the merger and the Airbus Memorandum of Understanding (Airbus MOU)
executed between Airbus, US Airways Group, US Airways and America West Airlines, Inc. (AWA),
certain aircraft firm orders were restructured. In connection with that restructuring, US
Airways Group and America West Holdings were required to pay restructuring fees totaling $89
million by means of set-off against existing equipment deposits of US Airways and AWA held by
Airbus of $39 million and $50 million, respectively. Also in connection with the Airbus MOU,
US Airways and AWA entered into two loan agreements with commitments of up to $161 million and
$89 million. On March 31, 2006, the outstanding principal and accrued interest on the $89
million loan was forgiven upon repayment in full of the $161 million loan in accordance with
the terms of the Airbus loans. As a result, US Airways recognized a gain associated with the
return of these equipment deposits upon forgiveness of the loan totaling $40 million,
consisting of the $39 million in equipment deposits and accrued interest of $1 million.(b)
    
    In connection with the continuing effort to consolidate functions and integrate
organizations, procedures, and operations with AWA, US Airways incurred $18 million of
transition and merger integration costs in the second quarter of 2007. These items included $1
million in training and related expenses; $3 million in compensation expenses for equity
awards granted in connection with the merger; $8 million in professional and technical fees
related to the integration of the airline operations systems; $1 million of aircraft livery
costs; $2 million related to reservation system migration expenses and $3 million of other
expenses. During the second quarter of 2006, US Airways incurred $12 million of transition and
merger integration costs. These items included $5 million in compensation expenses primarily
for severance, retention payments and equity awards granted in connection with the merger; $4
million in professional and technical fees, including continuing professional fees associated
with US Airways bankruptcy proceedings and fees related to the integration of the airline
operations systems; $2 million in employee 28




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##### Table of Contents



moving expenses; $2 million of aircraft livery costs and $1 million credit associated with
reduced costs in connection with the integration of the AWA FlightFund and US Airways Dividend
Miles frequent traveler programs.In connection with the merger transition efforts noted above, US Airways incurred $44 million of
transition and merger integration costs in the first six months of 2007. These items included $8
million in training and related expenses; $10 million in compensation expenses for equity awards
granted in connection with the merger; $15 million in continuing professional and technical fees
related to the integration of the airline operations systems; $1 million in employee moving
expenses; $3 million of aircraft livery costs; $4 million related to reservation system migration
expenses and $3 million of other expenses. During the first six months of 2006, US Airways
incurred $37 million of transition and merger integration costs. These items included $22 million
in compensation expenses primarily for severance, retention payments and equity awards granted in
connection with the merger; $7 million in professional and technical fees, including continuing
professional fees associated with US Airways bankruptcy proceedings and fees related to the
integration of the airline operations systems; $5 million in employee moving expenses; $3 million
of aircraft livery costs; $1 million of programming service expenses and $1 million credit
associated with reduced costs in connection with the integration of the AWA FlightFund and US
Airways Dividend Miles frequent traveler programs. 3. Stock options
 Agreements with ALPA 
   Annual Incentive Grant 
   29




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##### Table of Contents



4. Debt
  June 30,
    
    
    December 31,2007
    
    
    2006SecuredEquipment notes payable, variable interest rates of 6.89% to 9.65%
    
    $
    1,284
    
    
    $
    1,258Slot financing, interest rate of 8%, installments due through 2015
    
    
    47
    
    
    
    47Capital lease obligations, interest rate of 8%, installments due through 2021
    
    
    43
    
    
    
    41GE Credit Facility
    
    
    
    
    
    
    211,374
    
    
    
    1,367UnsecuredGE Engine Maintenance Term Note, variable interest of 9.37%, installments due 2008 through 2011
    
    
    54
    
    
    
    45Note payable to Pension Benefit Guaranty Corporation, interest rate of 6%, interest only
payments until due in 2012
    
    
    10
    
    
    
    1064
    
    
    
    55Total long-term debt and capital lease obligations
    
    
    1,438
    
    
    
    1,422Less: Unamortized discount on debt
    
    
    (124
    )
    
    
    (129
    )Current maturities
    
    
    (88
    )
    
    
    (93
    )Long-term debt and capital lease obligations, net of current maturities
    
    $
    1,226
    
    
    $
    1,200
 Refinancing Transaction 
  
    
    The amended and restated loan agreement, dated April 7, 2006, entered into by US Airways
Group with General Electric Capital Corporation (GECC) and a syndicate of lenders. At the
time of the repayment, the total outstanding balance of the loans was $1.25 billion.
    
    The Barclays prepaid miles issued on October 3, 2005 in connection with the amended
co-branded credit card agreement dated August 8, 2005 between pre-merger US Airways Group,
AWA and Juniper Bank, a subsidiary of Barclays PLC that has since been renamed Barclays Bank
Delaware (Barclays). At the time of the repayment, the total outstanding balance was $325
million.
    
    The credit facility with GECC, amended in July 2005 with an original balance of $28
million. At the time of the repayment, the total outstanding balance of the loan was $19
million.
  30




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##### Table of Contents



5. Bankruptcy claims resolution
  6. Related party transactions
 (a) Payables to related parties, net
  June 30, 2007
    
    
    December 31, 2006US Airways Group
    
    $
    1,077
    
    
    $
    1,081AWA
    
    
    (100
    )
    
    
    140Other US Airways Group wholly owned subsidiaries
    
    
    64
    
    
    
    77$
    1,041
    
    
    $
    1,298
    (b) Shared operating expenses
  31




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##### Table of Contents



Three Months Ended June 30, 2007
    
    
    Six Months Ended June 30, 2007AWA
    
    
    US Airways
    
    
    Total
    
    
    AWA
    
    
    US Airways
    
    
    TotalSalaries and related costs
    
    $
    81
    
    
    $
    136
    
    
    $
    217
    
    
    $
    148
    
    
    $
    246
    
    
    $
    394Other rent and landing fees
    
    
    25
    
    
    
    44
    
    
    
    69
    
    
    
    52
    
    
    
    89
    
    
    
    141Selling expenses
    
    
    33
    
    
    
    71
    
    
    
    104
    
    
    
    65
    
    
    
    131
    
    
    
    196Express expenses
    
    
    25
    
    
    
    64
    
    
    
    89
    
    
    
    48
    
    
    
    121
    
    
    
    169Other expenses
    
    
    52
    
    
    
    88
    
    
    
    140
    
    
    
    101
    
    
    
    170
    
    
    
    271Total allocated expenses
    
    $
    216
    
    
    $
    403
    
    
    $
    619
    
    
    $
    414
    
    
    $
    757
    
    
    $
    1,171
 Three Months Ended June 30, 2006
    
    
    Six Months Ended June 30, 2006AWA
    
    
    US Airways
    
    
    Total
    
    
    AWA
    
    
    US Airways
    
    
    TotalSalaries and related costs
    
    $
    67
    
    
    $
    110
    
    
    $
    177
    
    
    $
    130
    
    
    $
    212
    
    
    $
    342Other rent and landing fees
    
    
    38
    
    
    
    69
    
    
    
    107
    
    
    
    76
    
    
    
    135
    
    
    
    211Other expenses
    
    
    23
    
    
    
    39
    
    
    
    62
    
    
    
    43
    
    
    
    78
    
    
    
    121Total allocated expenses
    
    $
    128
    
    
    $
    218
    
    
    $
    346
    
    
    $
    249
    
    
    $
    425
    
    
    $
    674
 7. Income taxes
     32




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##### Table of Contents



8. Express expenses
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Aircraft fuel and related taxes
    
    $
    137
    
    
    $
    147
    
    
    $
    253
    
    
    $
    273Salaries and related costs
    
    
    4
    
    
    
    11
    
    
    
    8
    
    
    
    23Capacity purchases
    
    
    316
    
    
    
    311
    
    
    
    630
    
    
    
    591Aircraft rent
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    9Aircraft maintenance
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    3Other rent and landing fees
    
    
    21
    
    
    
    25
    
    
    
    43
    
    
    
    48Selling expenses
    
    
    35
    
    
    
    31
    
    
    
    61
    
    
    
    55Other expenses
    
    
    7
    
    
    
    7
    
    
    
    18
    
    
    
    31Express expenses
    
    $
    520
    
    
    $
    534
    
    
    $
    1,013
    
    
    $
    1,033
 9. ARINC subsequent event
  33




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   Recent Developments
  34




---



##### Table of Contents



Airline Operations Update
  2007
    
    2006
    
    Percent Change 2007  2006April
    
    May
    
    June
    
    April
    
    May
    
    June
    
    April
    
    May
    
    JuneOn-time performance (a)
    
    
    63.1
    
    
    
    67.9
    
    
    
    61.6
    
    
    
    80.1
    
    
    
    80.6
    
    
    
    73.0
    
    
    
    (21.2
    )
    
    
    (15.8
    )
    
    
    (15.6
    )Completion factor (b)
    
    
    98.6
    
    
    
    98.5
    
    
    
    97.2
    
    
    
    99.5
    
    
    
    99.5
    
    
    
    99.0
    
    
    
    (0.9
    )
    
    
    (1.0
    )
    
    
    (1.8
    )Mishandled baggage (c)
    
    
    7.96
    
    
    
    7.17
    
    
    
    10.59
    
    
    
    5.84
    
    
    
    5.69
    
    
    
    7.84
    
    
    
    36.3
    
    
    
    26.0
    
    
    
    35.1Customer complaints (d)
    
    
    4.82
    
    
    
    2.66
    
    
    
    2.74
    
    
    
    1.32
    
    
    
    1.22
    
    
    
    1.64
    
    
    nm
    
    nm
    
    
    67.1
 
 (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.   
    
    We hired approximately 1,000 new employees system-wide to boost airport customer
service.
    
    We established Passenger Operations Control (POC) centers at our Charlotte hub and at
Washington National airport and expect to have a POC center operating at our Philadelphia
hub in the fourth quarter of 2007. These POC centers monitor all inbound flight activity
and identify customers who are on flights that for whatever reason (weather, air traffic
congestion, etc.) might miss their connecting flights. The POC center professionals
interact closely with the airlines System Support Center to rebook passengers who may
misconnect even before the inbound flight lands.
    
    We commenced installation of 600 new self-service kiosk machines to augment and replace
existing kiosks that were operating unreliably since the move to one reservation system.
   
    
    Inaugurated new service from Philadelphia to Brussels, Zurich and Athens rounding
out the airlines European presence to 19 cities in 12 countries.
    
    Announced plans to recall approximately 224 furloughed flight attendants and 130
furloughed pilots through the end of 2007.
 35




---



##### Table of Contents



Merger Integration Update
  
    
    Reached final single labor transition agreements covering the
flight crew training instructors and the flight simulator engineers,
each represented by the Transport Workers Union (TWU).
    
    Completed all integration training items identified by the FAA for the airlines
flight attendant workgroup to certify as one carrier in anticipation for a single operating
certificate later this year.
    
    Completed painting of 92 percent of the former America West in the new US Airways
livery. Only 10 aircraft remain to be painted with an estimated completion date of October
2007.
 US Airways Groups Results of Operations
     36




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##### Table of Contents



Three Months Ended
    
    Percent
    
    Six Months Ended
    
    PercentJune 30,
    
    Change
    
    June 30,
    
    Change2007
    
    2006
    
    2007-2006
    
    2007
    
    2006
    
    2007-2006Revenue passenger miles (millions) (a)
    
    
    16,294
    
    
    
    16,152
    
    
    
    0.9
    
    
    
    30,712
    
    
    
    30,109
    
    
    
    2.0Available seat miles (millions) (b)
    
    
    19,523
    
    
    
    19,634
    
    
    
    (0.6
    )
    
    
    38,079
    
    
    
    37,864
    
    
    
    0.6Load factor (c)
    
    
    83.5
    
    
    
    82.3
    
    

    1.2
    pts
    
    
    80.7
    
    
    
    79.5
    
    
    1.2
    ptsYield (d)
    
    
    13.47
    
    
    
    13.53
    
    
    
    (0.5
    )
    
    
    13.35
    
    
    
    13.27
    
    
    
    0.6Passenger revenue per available seat mile (e)
    
    
    11.24
    
    
    
    11.13
    
    
    
    1.0
    
    
    
    10.77
    
    
    
    10.55
    
    
    
    2.0Cost per available seat mile (f)
    
    
    11.34
    
    
    
    11.05
    
    
    
    2.6
    
    
    
    11.06
    
    
    
    10.72
    
    
    
    3.1Passenger enplanements (thousands) (g)
    
    
    15,375
    
    
    
    15,173
    
    
    
    1.3
    
    
    
    29,355
    
    
    
    28,765
    
    
    
    2.1Aircraft at end of period
    
    
    358
    
    
    
    359
    
    
    
    (0.3
    )
    
    
    358
    
    
    
    359
    
    
    
    (0.3
    )Block hours (h)
    
    
    344,736
    
    
    
    345,703
    
    
    
    (0.3
    )
    
    
    679,693
    
    
    
    673,280
    
    
    
    1.0Average stage length (miles) (i)
    
    
    930
    
    
    
    941
    
    
    
    (1.3
    )
    
    
    921
    
    
    
    922
    
    
    
    (0.1
    )Average passenger journey (miles) (j)
    
    
    1,494
    
    
    
    1,491
    
    
    
    0.2
    
    
    
    1,478
    
    
    
    1,459
    
    
    
    1.4Gallons of aircraft fuel consumed (millions)
    
    
    306.6
    
    
    
    308.4
    
    
    
    (0.7
    )
    
    
    598.5
    
    
    
    596.0
    
    
    
    0.4Average aircraft fuel price including tax
(per gallon)
    
    
    2.15
    
    
    
    2.17
    
    
    
    (1.1
    )
    
    
    2.02
    
    
    
    2.05
    
    
    
    (1.7
    )Full time equivalent employees at end of
period
    
    
    35,485
    
    
    
    33,535
    
    
    
    5.8
    
    
    
    35,485
    
    
    
    33,535
    
    
    
    5.8
 
 (a)
    
    Revenue passenger mile (RPM)  A basic measure of sales volume. A RPM represents one
passenger flown one mile. 37




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##### Table of Contents



(b)
    
    Available seat mile (ASM)  A basic measure of production. An ASM represents one seat flown
one mile.(c)
    
    Load factor  The percentage of available seats that are filled with revenue passengers.(d)
    
    Yield  A measure of airline revenue derived by dividing passenger revenue by revenue
passenger miles and expressed in cents per mile.(e)
    
    Passenger revenue per available seat mile (PRASM)  Total passenger revenues divided by
total available seat miles.(f)
    
    Cost per available seat mile (CASM)  Total mainline operating expenses divided by total
available seat miles.(g)
    
    Passenger enplanements The number of passengers on board an aircraft including local,
connecting and through passengers.(h)
    
    Block hours  The hours measured from the moment an aircraft first moves under its own power,
including taxi time, for the purposes of flight until the aircraft is docked at the next point
of landing and its power is shut down.(i)
    
    Average stage length  The average of the distances flown on each segment of every route.(j)
    
    Average passenger journey  The average one-way trip measured in miles for one passenger
origination. Three Months Ended June 30, 2007
Compared with the
Three Months Ended June 30, 2006
 Revenues:
 Percent2007
    
    
    2006
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    2,194
    
    
    $
    2,186
    
    
    
    0.4Express passenger
    
    
    737
    
    
    
    780
    
    
    
    (5.6
    )Cargo
    
    
    34
    
    
    
    37
    
    
    
    (7.7
    )Other
    
    
    190
    
    
    
    168
    
    
    
    12.7Total operating revenues
    
    $
    3,155
    
    
    $
    3,171
    
    
    
    (0.5
    )
    38




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##### Table of Contents



Operating Expenses:
 Percent2007
    
    
    2006
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    658
    
    
    $
    669
    
    
    
    (1.7
    )Loss (gain) on fuel hedging instruments, net:Realized
    
    
    2
    
    
    
    (11
    )
    
    nmUnrealized
    
    
    (25
    )
    
    
    (18
    )
    
    
    36.4Salaries and related costs
    
    
    576
    
    
    
    542
    
    
    
    6.3Aircraft rent
    
    
    180
    
    
    
    180
    
    
    
    Aircraft maintenance
    
    
    170
    
    
    
    153
    
    
    
    10.8Other rent and landing fees
    
    
    139
    
    
    
    145
    
    
    
    (3.9
    )Selling expenses
    
    
    125
    
    
    
    121
    
    
    
    4.4Special items, net
    
    
    27
    
    
    
    35
    
    
    
    (22.3
    )Depreciation and amortization
    
    
    46
    
    
    
    45
    
    
    
    3.0Other
    
    
    316
    
    
    
    308
    
    
    
    1.8Total mainline operating expenses
    
    
    2,214
    
    
    
    2,169
    
    
    
    2.1Express expenses:Fuel
    
    
    187
    
    
    
    203
    
    
    
    (8.0
    )Other
    
    
    465
    
    
    
    457
    
    
    
    1.8Total operating expenses
    
    $
    2,866
    
    
    $
    2,829
    
    
    
    1.3
   Percent2007
    
    
    2006
    
    
    Change(In cents)Mainline:Aircraft fuel and related taxes
    
    
    3.37
    
    
    
    3.41
    
    
    
    (1.1
    )Gain on fuel hedging instruments, net
    
    
    (0.12
    )
    
    
    (0.15
    )
    
    
    (18.5
    )Salaries and related costs
    
    
    2.95
    
    
    
    2.76
    
    
    
    6.9Aircraft rent
    
    
    0.92
    
    
    
    0.92
    
    
    
    Aircraft maintenance
    
    
    0.87
    
    
    
    0.78
    
    
    
    11.5Other rent and landing fees
    
    
    0.71
    
    
    
    0.74
    
    
    
    (3.4
    )Selling expenses
    
    
    0.64
    
    
    
    0.61
    
    
    
    4.9Special items, net
    
    
    0.14
    
    
    
    0.18
    
    
    
    (21.8
    )Depreciation and amortization
    
    
    0.24
    
    
    
    0.23
    
    
    
    3.6Other
    
    
    1.62
    
    
    
    1.57
    
    
    
    3.211.34
    
    
    
    11.05
    
    
    
    2.6
  
    
    Salaries and related costs per ASM increased 6.9% due to an increase in headcount
principally in fleet and passenger service employees offset by decreases in amounts provided
for employee profit sharing and incentive plans.
    
    Aircraft maintenance expense per ASM increased 11.5% due principally to an increase in
the number of overhauls performed on engines not subject to power by the hour maintenance
agreements in the second quarter of 2007 compared to the second quarter of 2006. We also
recognized $5 million of net expense associated with lease return conditions and power by the
hour penalties for six aircraft scheduled to be returned in the second half of 2007 and
six aircraft to be returned in the first half of 2008.
 39




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##### Table of Contents



Nonoperating Income (Expense):
 Percent2007
    
    
    2006
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    48
    
    
    $
    41
    
    
    
    16.6Interest expense, net
    
    
    (69
    )
    
    
    (72
    )
    
    
    (4.9
    )Other, net
    
    
    3
    
    
    
    
    
    
    nmTotal nonoperating expense, net
    
    $
    (18
    )
    
    $
    (31
    )
    
    
    (39.2
    )
  Six Months Ended June 30, 2007
Compared with the
Six Months Ended June 30, 2006
 Revenues:
 Percent2007
    
    
    2006
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    4,100
    
    
    $
    3,996
    
    
    
    2.6Express passenger
    
    
    1,346
    
    
    
    1,392
    
    
    
    (3.3
    )Cargo
    
    
    70
    
    
    
    74
    
    
    
    (4.9
    )Other
    
    
    371
    
    
    
    341
    
    
    
    8.8Total operating revenues
    
    $
    5,887
    
    
    $
    5,803
    
    
    
    1.5
    40




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##### Table of Contents



Operating Expenses:
 Percent2007
    
    
    2006
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    1,208
    
    
    $
    1,223
    
    
    
    (1.3
    )Loss (gain) on fuel hedging instruments, net:Realized
    
    
    37
    
    
    
    (12
    )
    
    nmUnrealized
    
    
    (115
    )
    
    
    (44
    )
    
    nmSalaries and related costs
    
    
    1,104
    
    
    
    1,045
    
    
    
    5.6Aircraft rent
    
    
    360
    
    
    
    365
    
    
    
    (1.3
    )Aircraft maintenance
    
    
    335
    
    
    
    291
    
    
    
    15.2Other rent and landing fees
    
    
    267
    
    
    
    285
    
    
    
    (6.5
    )Selling expenses
    
    
    231
    
    
    
    228
    
    
    
    1.8Special items, net
    
    
    66
    
    
    
    (9
    )
    
    nmDepreciation and amortization
    
    
    90
    
    
    
    90
    
    
    
    Other
    
    
    627
    
    
    
    598
    
    
    
    4.6Total mainline operating expenses
    
    
    4,210
    
    
    
    4,060
    
    
    
    3.7Express expenses:Fuel
    
    
    340
    
    
    
    375
    
    
    
    (9.3
    )Other
    
    
    932
    
    
    
    901
    
    
    
    3.5Total operating expenses
    
    $
    5,482
    
    
    $
    5,336
    
    
    
    2.7
   Percent2007
    
    2006
    
    Change(In cents)Mainline:Aircraft fuel and related taxes
    
    
    3.17
    
    
    
    3.23
    
    
    
    (1.8
    )Gain on fuel hedging instruments, net
    
    
    (0.21
    )
    
    
    (0.15
    )
    
    
    37.4Salaries and related costs
    
    
    2.90
    
    
    
    2.76
    
    
    
    5.0Aircraft rent
    
    
    0.95
    
    
    
    0.96
    
    
    
    (1.9
    )Aircraft maintenance
    
    
    0.88
    
    
    
    0.77
    
    
    
    14.5Other rent and landing fees
    
    
    0.70
    
    
    
    0.75
    
    
    
    (7.0
    )Selling expenses
    
    
    0.61
    
    
    
    0.60
    
    
    
    1.2Special items, net
    
    
    0.17
    
    
    
    (0.02
    )
    
    nmDepreciation and amortization
    
    
    0.24
    
    
    
    0.24
    
    
    
    Other
    
    
    1.65
    
    
    
    1.58
    
    
    
    4.111.06
    
    
    
    10.72
    
    
    
    3.1
  
    
    Gain on fuel hedging instruments, net per ASM increased 37.4% due principally to an
increase in the unrealized gain in 2007 compared to 2006, which was a result of a
period-over-period increase in the volume of barrels hedged during a period in which the
fair market value of the costless collar transactions increased. The unrealized gain was
partially offset by a realized loss in the first six months of 2007 as a result of an
increase in the price range at which heating oil collars were entered into as compared to
the 2006 period along with the timing of the settlements of those collars.
 41




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##### Table of Contents




    
    Salaries and related costs per ASM increased 5.0% due to an increase in headcount
principally in fleet and passenger service employees offset by decreases in amounts provided
for employee profit sharing and incentive plans.
    
    Aircraft maintenance expense per ASM increased 14.5% due principally to an increase in
the number of overhauls performed on engines not subject to power by the hour maintenance
agreements in the first six months of 2007 compared to the first six months of 2006. We also
recognized $12 million of net expense associated with lease return conditions and power by the
hour penalties for one aircraft returned in the first quarter of
2007, seven aircraft
scheduled to be returned in the second half of 2007 and six aircraft to be returned in the
first half of 2008.
    
    Other rent and landing fees expense per ASM decreased 7.0% as a result of the merger due
principally to the closure of former US Airways facilities on the east coast and a reduction
of equipment rent due to IT synergies as well as the recognition of annual airport
operating expense rent credits in the 2007 period.
  Nonoperating Income (Expense):
 Percent2007
    
    
    2006
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    88
    
    
    $
    66
    
    
    
    32.5Interest expense, net
    
    
    (140
    )
    
    
    (147
    )
    
    
    (5.0
    )Other, net
    
    
    (13
    )
    
    
    (11
    )
    
    
    22.4Total nonoperating expense, net
    
    $
    (65
    )
    
    $
    (92
    )
    
    
    (29.1
    )
   AWAs Results of Operations
  42




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##### Table of Contents



Three Months Ended
    
    Percent
    
    Six Months Ended
    
    PercentJune 30,
    
    Change
    
    June 30,
    
    Change2007
    
    2006
    
    2007-2006
    
    2007
    
    2006
    
    2007-2006Revenue passenger miles (millions) (a)
    
    
    6,273
    
    
    
    6,238
    
    
    
    0.6
    
    
    
    11,910
    
    
    
    11,898
    
    
    
    0.1Available seat miles (millions) (b)
    
    
    7,418
    
    
    
    7,580
    
    
    
    (2.1
    )
    
    
    14,498
    
    
    
    14,779
    
    
    
    (1.9
    )Load factor (c)
    
    
    84.6
    
    
    
    82.3
    
    
    2.3
    pts

    
    
    82.1
    
    
    
    80.5
    
    
    1.6
    ptsYield (d)
    
    
    10.99
    
    
    
    11.98
    
    
    
    (8.2
    )
    
    
    11.34
    
    
    
    11.76
    
    
    
    (3.5
    )Passenger revenue per available seat mile (e)
    
    
    9.29
    
    
    
    9.86
    
    
    
    (5.7
    )
    
    
    9.32
    
    
    
    9.47
    
    
    
    (1.6
    )Aircraft at end of period
    
    
    132
    
    
    
    135
    
    
    
    (2.2
    )
    
    
    132
    
    
    
    135
    
    
    
    (2.2
    )
 
 (a)
    
    Revenue passenger mile (RPM)  A basic measure of sales volume. A RPM represents one
passenger flown one mile.(b)
    
    Available seat mile (ASM)  A basic measure of production. An ASM represents one seat flown
one mile.(c)
    
    Load factor  The percentage of available seats that are filled with revenue passengers.(d)
    
    Yield  A measure of airline revenue derived by dividing passenger revenue by revenue
passenger miles and expressed in cents per mile.(e)
    
    Passenger revenue per available seat mile (PRASM)  Total passenger revenues divided by
total available seat miles. 43




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##### Table of Contents



Three Months Ended June 30, 2007
Compared with the
Three Months Ended June 30, 2006
 Revenues:
 Percent2007
    
    
    2006
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    689
    
    
    $
    747
    
    
    
    (7.7
    )Express passenger
    
    
    173
    
    
    
    184
    
    
    
    (5.9
    )Cargo
    
    
    5
    
    
    
    7
    
    
    
    (33.4
    )Other
    
    
    35
    
    
    
    43
    
    
    
    (20.2
    )Total operating revenues
    
    $
    902
    
    
    $
    981
    
    
    
    (8.1
    )
    44




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##### Table of Contents



Operating Expenses:
 Percent2007
    
    
    2006
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    238
    
    
    $
    242
    
    
    
    (2.0
    )Loss (gain) on fuel hedging instruments, net:Realized
    
    
    2
    
    
    
    (11
    )
    
    nmUnrealized
    
    
    (25
    )
    
    
    (18
    )
    
    
    36.4Salaries and related costs
    
    
    189
    
    
    
    191
    
    
    
    (1.2
    )Aircraft rent
    
    
    82
    
    
    
    85
    
    
    
    (4.0
    )Aircraft maintenance
    
    
    76
    
    
    
    73
    
    
    
    4.2Other rent and landing fees
    
    
    45
    
    
    
    45
    
    
    
    Selling expenses
    
    
    37
    
    
    
    42
    
    
    
    (9.7
    )Special items, net
    
    
    10
    
    
    
    23
    
    
    
    (59.2
    )Depreciation and amortization
    
    
    11
    
    
    
    10
    
    
    
    0.9Other
    
    
    101
    
    
    
    79
    
    
    
    30.4Total mainline operating expenses
    
    
    766
    
    
    
    761
    
    
    
    0.7Express expenses:Fuel
    
    
    50
    
    
    
    57
    
    
    
    (12.2
    )Other
    
    
    111
    
    
    
    102
    
    
    
    8.6Total operating expenses
    
    $
    927
    
    
    $
    920
    
    
    
    0.6
   
    
    Gain on fuel hedging instruments, net decreased 21% due principally to a realized loss
incurred in the second quarter of 2007 compared to a realized gain in the second quarter of
2006. The realized loss in the second quarter of 2007 is a result of an increase in the
price range at which heating oil collars were entered into as compared to the 2006 period
along with the timing of the settlements of those collars. The realized loss in the second
quarter of 2007 was offset by an increase in the unrealized gain in 2007 compared to 2006,
which was a result of a period-over-period increase in the volume of barrels hedged during a
period in which the fair market value of the costless collar transactions increased.
    
    Other operating expenses increased by 30.4% due principally to higher allocated costs for
shared services with US Airways, including reservations, technology and data processing
services in the 2007 period.
    
    Selling expenses decreased by 9.7% primarily due to a decrease in mainline passenger
revenues in the 2007 period.
  Nonoperating Income (Expense):
 Percent2007
    
    
    2006
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    17
    
    
    $
    20
    
    
    
    (10.0
    )Interest expense, net
    
    
    (1
    )
    
    
    (10
    )
    
    
    (84.9
    )Other, net
    
    
    1
    
    
    
    1
    
    
    
    Total nonoperating income, net
    
    $
    17
    
    
    $
    11
    
    
    
    61.4
 45




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##### Table of Contents



Six Months Ended June 30, 2007
Compared with the
Six Months Ended June 30, 2006
 Revenues:
 Percent2007
    
    
    2006
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    1,351
    
    
    $
    1,399
    
    
    
    (3.4
    )Express passenger
    
    
    322
    
    
    
    337
    
    
    
    (4.7
    )Cargo
    
    
    11
    
    
    
    16
    
    
    
    (31.1
    )Other
    
    
    84
    
    
    
    90
    
    
    
    (6.3
    )Total operating revenues
    
    $
    1,768
    
    
    $
    1,842
    
    
    
    (4.1
    )
   46




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##### Table of Contents



Operating Expenses:
 Percent2007
    
    
    2006
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    439
    
    
    $
    447
    
    
    
    (1.8
    )Loss (gain) on fuel hedging instruments, net:Realized
    
    
    37
    
    
    
    (12
    )
    
    nmUnrealized
    
    
    (115
    )
    
    
    (44
    )
    
    nmSalaries and related costs
    
    
    363
    
    
    
    366
    
    
    
    (0.7
    )Aircraft rent
    
    
    165
    
    
    
    171
    
    
    
    (3.6
    )Aircraft maintenance
    
    
    142
    
    
    
    125
    
    
    
    14.2Other rent and landing fees
    
    
    91
    
    
    
    90
    
    
    
    1.0Selling expenses
    
    
    74
    
    
    
    81
    
    
    
    (7.8
    )Special items, net
    
    
    23
    
    
    
    (7
    )
    
    nmDepreciation and amortization
    
    
    22
    
    
    
    21
    
    
    
    5.2Other
    
    
    199
    
    
    
    155
    
    
    
    26.7Total mainline operating expenses
    
    
    1,440
    
    
    
    1,393
    
    
    
    3.4Express expenses:Fuel
    
    
    88
    
    
    
    103
    
    
    
    (14.4
    )Other
    
    
    218
    
    
    
    202
    
    
    
    8.2Total operating expenses
    
    $
    1,746
    
    
    $
    1,698
    
    
    
    2.8
   
    
    Gain on fuel hedging instruments, net increased 39.3% due principally to an increase in
the unrealized gain in 2007 compared to 2006, which was a result of a period-over-period
increase in the volume of barrels hedged during a period in which the fair market value of
the costless collar transactions increased. The unrealized gain was partially offset by a
realized loss in the first six months of 2007 as a result of an increase in the price range
at which heating oil collars were entered into as compared to the 2006 period along with the
timing of the settlements of those collars.
    
    Aircraft maintenance expense increased 14.2% due principally to an increase in the number
of overhauls performed on engines not subject to power by the hour maintenance agreements in
the first six months of 2007 compared to the first six months of 2006. AWA also recognized
$3 million of expense associated with lease return conditions and power by the hour
penalties for one aircraft returned in the first quarter of 2007 and one aircraft scheduled
to be returned in the second half of 2007.
    
    Selling expenses decreased by 7.8% primarily due to a decrease in mainline passenger
revenues in the 2007 period.
    
    Other operating expenses increased by 26.7% due principally to higher allocated costs for
shared services with US Airways, including reservations, technology and data processing
services in the 2007 period.
  47




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##### Table of Contents



Nonoperating Income (Expense):
 Percent2007
    
    
    2006
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    36
    
    
    $
    33
    
    
    
    11.8Interest expense, net
    
    
    (11
    )
    
    
    (37
    )
    
    
    (71.4
    )Other, net
    
    
    1
    
    
    
    (10
    )
    
    nmTotal nonoperating income (expense), net
    
    $
    26
    
    
    $
    (14
    )
    
    nm
   US Airways Results of Operations
       48




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##### Table of Contents



Three Months Ended
    
    Percent
    
    Six Months Ended
    
    PercentJune 30,
    
    Change
    
    June 30,
    
    Change2007
    
    2006
    
    2007-2006
    
    2007
    
    2006
    
    2007-2006Revenue passenger miles (millions) (a)
    
    
    10,021
    
    
    
    9,914
    
    
    
    1.1
    
    
    
    18,802
    
    
    
    18,210
    
    
    
    3.2Available seat miles (millions) (b)
    
    
    12,106
    
    
    
    12,054
    
    
    
    0.4
    
    
    
    23,581
    
    
    
    23,085
    
    
    
    2.1Load factor (c)
    
    
    82.8
    
    
    
    82.2
    
    
    0.5
    pts

    
    
    79.7
    
    
    
    78.9
    
    
    0.9
    ptsYield (d)
    
    
    15.02
    
    
    
    14.51
    
    
    
    3.5
    
    
    
    14.62
    
    
    
    14.26
    
    
    
    2.5Passenger revenue per available seat mile (e)
    
    
    12.43
    
    
    
    11.93
    
    
    
    4.2
    
    
    
    11.66
    
    
    
    11.25
    
    
    
    3.6Aircraft at end of period
    
    
    226
    
    
    
    224
    
    
    
    0.9
    
    
    
    226
    
    
    
    224
    
    
    
    0.9
 
 (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)
    
    Load factor  The percentage of available seats that are filled with revenue passengers.(d)
    
    Yield  A measure of airline revenue derived by dividing passenger revenue by revenue
passenger miles and expressed in cents per mile.(e)
    
    Passenger revenue per available seat mile (PRASM)  Total passenger revenues divided by
total available seat miles. Three Months Ended June 30, 2007
Compared with the
Three Months Ended June 30, 2006
 Revenues:
 Percent2007
    
    
    2006
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    1,505
    
    
    $
    1,439
    
    
    
    4.6Express passenger
    
    
    564
    
    
    
    596
    
    
    
    (5.5
    )Cargo
    
    
    29
    
    
    
    29
    
    
    
    Other
    
    
    185
    
    
    
    162
    
    
    
    14.3Total operating revenues
    
    $
    2,283
    
    
    $
    2,226
    
    
    
    2.5
  49




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##### Table of Contents



Operating Expenses:
 Percent2007
    
    
    2006
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    420
    
    
    $
    426
    
    
    
    (1.5
    )Salaries and related costs
    
    
    387
    
    
    
    351
    
    
    
    10.5Aircraft rent
    
    
    98
    
    
    
    95
    
    
    
    3.6Aircraft maintenance
    
    
    94
    
    
    
    80
    
    
    
    16.9Other rent and landing fees
    
    
    94
    
    
    
    100
    
    
    
    (5.7
    )Selling expenses
    
    
    88
    
    
    
    79
    
    
    
    11.7Special items, net
    
    
    18
    
    
    
    12
    
    
    
    50.6Depreciation and amortization
    
    
    38
    
    
    
    37
    
    
    
    3.3Other
    
    
    206
    
    
    
    232
    
    
    
    (11.7
    )Total mainline operating expenses
    
    
    1,443
    
    
    
    1,412
    
    
    
    2.1Express expenses:Fuel
    
    
    137
    
    
    
    147
    
    
    
    (6.3
    )Other
    
    
    383
    
    
    
    387
    
    
    
    (1.1
    )Total operating expenses
    
    $
    1,963
    
    
    $
    1,946
    
    
    
    0.9
   
    
    Salaries and related costs increased 10.5% primarily due to an increase in headcount
principally in fleet and passenger service employees offset by decreases in amounts provided
for employee profit sharing and incentive plans.
    
    Aircraft maintenance expense increased 16.9% due principally to an increase in the number
of overhauls performed on engines not subject to power by the hour maintenance agreements in
the second quarter of 2007 compared to the second quarter of 2006. US Airways also
recognized $4 million of net expense associated with lease return conditions and power by the
hour penalties for five aircraft scheduled to be returned in the second half of 2007 and
six aircraft to be returned in the first half of 2008.
    
    Selling expenses increased 11.7% primarily as a result of an increase in mainline
passenger revenues in the 2007 period.
    
    Other rent and landing fees decreased 5.7% as a result of the
recognition of
annual airport operating expense rent credits in the 2007 period.
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
    
    Other operating expenses decreased by 11.7% due to a $9 million credit to operating expenses
associated with a Hurricane Katrina insurance settlement recorded in the second quarter of
2007 as well as lower allocated costs for shared services with AWA including reservations,
technology and data processing services in the 2007 period.
  Nonoperating Income (Expense):
 Percent2007
    
    
    2006
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    29
    
    
    $
    21
    
    
    
    41.6Interest expense, net
    
    
    (53
    )
    
    
    (53
    )
    
    
    Other, net
    
    
    1
    
    
    
    (1
    )
    
    nmTotal nonoperating expense, net
    
    $
    (23
    )
    
    $
    (33
    )
    
    
    (32.0
    )
  Six Months Ended June 30, 2007
Compared with the
Six Months Ended June 30, 2006
 Revenues:
 Percent2007
    
    
    2006
    
    
    Change(In millions)Operating revenues:Mainline passenger
    
    $
    2,749
    
    
    $
    2,597
    
    
    
    5.9Express passenger
    
    
    1,025
    
    
    
    1,054
    
    
    
    (2.8
    )Cargo
    
    
    59
    
    
    
    58
    
    
    
    2.3Other
    
    
    345
    
    
    
    319
    
    
    
    8.3Total operating revenues
    
    $
    4,178
    
    
    $
    4,028
    
    
    
    3.7
   51




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Operating Expenses:
 Percent2007
    
    
    2006
    
    
    Change(In millions)Operating expenses:Aircraft fuel and related taxes
    
    $
    768
    
    
    $
    776
    
    
    
    (0.9
    )Salaries and related costs
    
    
    741
    
    
    
    680
    
    
    
    9.0Aircraft rent
    
    
    195
    
    
    
    194
    
    
    
    0.7Aircraft maintenance
    
    
    193
    
    
    
    166
    
    
    
    16.0Other rent and landing fees
    
    
    176
    
    
    
    195
    
    
    
    (10.0
    )Selling expenses
    
    
    157
    
    
    
    146
    
    
    
    7.1Special items, net
    
    
    44
    
    
    
    (3
    )
    
    nmDepreciation and amortization
    
    
    73
    
    
    
    73
    
    
    
    Other
    
    
    415
    
    
    
    446
    
    
    
    (6.6
    )Total mainline operating expenses
    
    
    2,762
    
    
    
    2,673
    
    
    
    3.3Express expenses:Fuel
    
    
    253
    
    
    
    273
    
    
    
    (7.3
    )Other
    
    
    760
    
    
    
    760
    
    
    
    Total operating expenses
    
    $
    3,775
    
    
    $
    3,706
    
    
    
    1.9
   
    
    Salaries and related costs increased 9.0% primarily due to an increase in headcount
principally in fleet and passenger service employees offset by decreases in amounts provided
for employee profit sharing and incentive plans.
    
    Aircraft maintenance expense increased 16.0% due principally to an increase in the number
of overhauls performed on engines not subject to power by the hour maintenance agreements in
the 2007 period compared to the 2006 period. US Airways also
recognized $8 million of net expense associated with lease return conditions and power by the
hour penalties for six aircraft scheduled to be
returned in the second half of 2007 and six aircraft scheduled to be returned in the first
half of 2008.
    
    Other rent and landing fees expense decreased 10.0% as a result of the merger due
principally to the closure of former US Airways facilities on the East Coast and a reduction
of equipment rent due to IT synergies as well as the recognition of annual airport
operating expense rent credits in the 2007 period.
    
    Selling expenses increased 7.1% primarily as a result of an increase in mainline
passenger revenues in the 2007 period.
    
    Other operating expenses decreased by 6.6% due to a $9 million credit to operating
expenses associated with a Hurricane Katrina insurance settlement recorded in the second
quarter of 2007 as well as lower allocated costs for shared services with AWA including
reservations, technology and data processing services in the 2007 period.
  52




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Nonoperating Income (Expense):
 Percent2007
    
    
    2006
    
    
    Change(In millions)Nonoperating income (expense):Interest income
    
    $
    51
    
    
    $
    34
    
    
    
    48.1Interest expense, net
    
    
    (109
    )
    
    
    (107
    )
    
    
    1.3Other, net
    
    
    4
    
    
    
    (1
    )
    
    nmTotal nonoperating expense, net
    
    $
    (54
    )
    
    $
    (74
    )
    
    
    (27.2
    )
  Liquidity and Capital Resources
 Sources and Uses of Cash
 US Airways Group
    AWA
  53




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US Airways
    Commitments
  Refinancing Transaction
  54




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
    
    The amended and restated loan agreement, dated April 7, 2006, entered into by US Airways
Group with GECC and a syndicate of lenders. At the time of the repayment, the total
outstanding balance of the loan was $1.25 billion.
    
    The Barclays prepaid miles issued on October 3, 2005 in connection with the amended
co-branded credit card agreement dated August 8, 2005 between pre-merger US Airways Group,
AWA and Juniper Bank, a subsidiary of Barclays PLC that has since been renamed Barclays Bank
Delaware (Barclays). At the time of the repayment, the total outstanding balance was $325
million.
    
    The credit facility with GECC, amended in July 2005 with an original balance of $28
million. At the time of the repayment, the total outstanding balance of the loan was $19
million.
    Embraer Purchase Commitments
  55




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Airbus Purchase Commitments
   Asset Based Financings
   Affinity Credit Card Partner Agreement
     56




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Covenants and Credit Rating
   Off-Balance Sheet Arrangements
   57




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Other Indebtedness and Obligations
  Payments Due by Period2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    TotalUS Airways Group (1)Debt (2)
    
    $
    
    
    
    $
    16
    
    
    $
    16
    
    
    $
    16
    
    
    $
    16
    
    
    $
    1,610
    
    
    $
    1,674Aircraft related and other commitments (3)
    
    
    196
    
    
    
    442
    
    
    
    40
    
    
    
    48
    
    
    
    239
    
    
    
    1,429
    
    
    
    2,394US Airways (4)Debt and capital lease obligations
    
    
    39
    
    
    
    92
    
    
    
    92
    
    
    
    97
    
    
    
    109
    
    
    
    1,009
    
    
    
    1,438Aircraft purchase and operating lease commitments (3)
    
    
    304
    
    
    
    643
    
    
    
    584
    
    
    
    544
    
    
    
    515
    
    
    
    3,127
    
    
    
    5,717Regional capacity purchase agreements (5)
    
    
    516
    
    
    
    1,194
    
    
    
    1,248
    
    
    
    1,273
    
    
    
    1,298
    
    
    
    7,277
    
    
    
    12,806AWA (4)Debt and capital lease obligations
    
    
    2
    
    
    
    2
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    64Aircraft purchase and operating lease commitments (3)
    
    
    214
    
    
    
    692
    
    
    
    1,135
    
    
    
    774
    
    
    
    260
    
    
    
    1,609
    
    
    
    4,684Regional capacity purchase agreements (5)
    
    
    269
    
    
    
    530
    
    
    
    541
    
    
    
    552
    
    
    
    563
    
    
    
    287
    
    
    
    2,742Other US Airways Group subsidiaries (6)
    
    
    4
    
    
    
    10
    
    
    
    4
    
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    22Total
    
    $
    1,544
    
    
    $
    3,621
    
    
    $
    3,690
    
    
    $
    3,305
    
    
    $
    3,001
    
    
    $
    16,380
    
    
    $
    31,541
 
 (1)
    
    These commitments represent those specifically entered into by US Airways Group or joint
commitments entered into by US Airways Group, AWA and US Airways under which each entity is
jointly and severally liable.(2)
    
    Includes $74 million aggregate principal amount of 7% senior convertible notes due 2020
issued by US Airways Group and the $1.6 billion Citicorp credit facility due March 23, 2014.(3)
    
    Aircraft purchase commitments exclude the Airbus aircraft and Rolls Royce engine orders
announced in June 2007 as the orders are contingent upon execution of definitive purchase
agreements.(4)
    
    Commitments listed separately under US Airways or AWA represent commitments under agreements
entered into separately by those companies.(5)
    
    Represents minimum payments under capacity purchase agreements with third-party Express
carriers.(6)
    
    Represents operating lease commitments entered into by US Airways Groups other airline
subsidiaries Piedmont and PSA.  58




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Critical Accounting Policies and Estimates
  Recent Accounting Pronouncements
      
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Market Risk Sensitive Instruments
  59




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##### Table of Contents



Commodity price risk
   Interest rate risk
  
 Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures.
  Changes in internal control over financial reporting.
  Limitation on the effectiveness of controls.
  
 Part II. Other Information
 
 Item 1. Legal Proceedings
  60




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61




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Item 1A. Risk Factors
  Risk Factors Relating to the Company and Industry Related Risks
 Our business is dependent on the price and availability of aircraft fuel. Continued periods of
historically high fuel costs, significant disruptions in the supply of aircraft fuel or significant
further increases in fuel costs could have a significant negative impact on our operating results.
  Our high level of fixed obligations limits our ability to fund general corporate requirements and
obtain additional financing, limits our flexibility in responding to competitive developments and
increases our vulnerability to adverse economic and industry conditions.
  
    
    A decrease in revenues results in a disproportionately greater percentage decrease in earnings.
    
    We may not have sufficient liquidity to fund all of these fixed costs if our revenues decline or costs increase.
    
    We may have to use our working capital to fund these fixed costs instead of funding
general corporate requirements, including capital expenditures.
    
    We may not have sufficient liquidity to respond to competitive developments and adverse
economic conditions.
   62




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##### Table of Contents



Union disputes, employee strikes and other labor-related disruptions may adversely affect our
operations.
   We rely heavily on automated systems to operate our business and any failure of these systems, or
the failure to integrate them successfully following the merger, could harm our business.
   We might not be able to fully realize the synergies generated by the merger.
  The integration of US Airways Group and America West Holdings following the merger continues to
present significant challenges.
  63




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##### Table of Contents



The inability to maintain labor costs at competitive levels could harm our financial performance.
   Our future growth is dependent on obtaining adequate operating facilities at airports throughout
our network.
  The travel industry continues to face ongoing security concerns.
  Delays in scheduled aircraft deliveries or other loss of anticipated fleet capacity may adversely
impact our operations and financial results.
  Fluctuations in interest rates could adversely affect our liquidity, operating expenses and
results.
  64




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##### Table of Contents



If we incur problems with any of our third party service providers, our operations could be
adversely affected by a resulting decline in revenue or negative public perception about our
services.
  Increases in insurance costs or reductions in insurance coverage may adversely impact our
operations and financial results.
  Changes in government regulation could increase our operating costs and limit our ability to
conduct our business.
  Ongoing data security compliance requirements could increase our costs, and any significant data
breach could harm our business, financial condition or results of operations.
  65




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##### Table of Contents



The airline industry is intensely competitive.
   The loss of key personnel upon whom we depend to operate our business or the inability to attract
additional qualified personnel could adversely affect the results of our operations or our
financial performance.
  Interruptions or disruptions in service at one of our hub airports could have a material adverse
impact on our operations.
  We are at risk of losses and adverse publicity stemming from any accident involving any of our
aircraft.
  Our business is subject to weather factors and seasonal variations in airline travel, which cause
our results to fluctuate.
  66




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##### Table of Contents



The use of America West Holdings and US Airways Groups respective pre-merger NOLs and certain
other tax attributes could be limited in the future.
  Bankruptcy-related changes to employee benefit plans could lead to protracted litigation.
  US Airways Group could experience significant operating losses 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
 67




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##### Table of Contents




    
    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.
  A small number of stockholders beneficially own a substantial amount of our common stock.
  Certain provisions of the amended and restated certificate of incorporation and amended and
restated bylaws of US Airways Group make it difficult for stockholders to change the composition of
our board of directors and may discourage takeover attempts that some of our stockholders might
consider beneficial.
  
    
    a classified board of directors with three-year staggered terms;
    
    advance notice procedures for stockholder proposals to be considered at stockholders meetings;
    
    the ability of US Airways Groups board of directors to fill vacancies on the board;
    
    a prohibition against stockholders taking action by written consent;
    
    a prohibition against stockholders calling special meetings of stockholders;
    
    a requirement that holders of at least 80% of the voting power of the shares entitled to
vote in the election of directors approve amendment of the amended and restated bylaws; and
    
    super-majority voting requirements to modify or amend specified provisions of US Airways
Groups amended and restated certificate of incorporation.
  Our charter documents include provisions limiting voting and ownership by foreign owners.
  68




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Item 4. Submission of Matters to a Vote of Security Holders
  Number of SharesFor
    
    WithheldDenise M. OLeary
    
    
    72,717,595
    
    
    
    799,747George M. Philip
    
    
    72,717,536
    
    
    
    799,806J. Steven Whisler
    
    
    72,713,689
    
    
    
    803,653
   For
    
    Against
    
    Abstain73,219,872
    
    278,263
    
    19,207
  For
    
    Against
    
    Abstain
    
    Broker Non-Votes2,234,705
    
    40,946,061
    
    22,938,353
    
    7,398,223
 69




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##### Table of Contents



Item 6. Exhibits
 Exhibit No.
    
    Description10.1
    
    Amendment No. 1 dated as of June 1, 2007 to Amended and
Restated Embraer Aircraft Purchase Agreement dated June 13,
2006 between US Airways Group, Inc. and Embraer  Empresa
Brasileira de Aeronautica S.A.*10.2
    
    Amendment No. 2 dated as of June 6, 2007 to Amended and
Restated Embraer Aircraft Purchase Agreement dated June 13,
2006 between US Airways Group, Inc. and Embraer  Empresa
Brasileira de Aeronautica S.A.*31.1
    
    Certification of US Airways Groups Chief Executive Officer
pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934, as amended.31.2
    
    Certification of US Airways Groups Chief Financial Officer
pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934, as amended.31.3
    
    Certification of AWAs Chief Executive Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as
amended.31.4
    
    Certification of AWAs Chief Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as
amended.31.5
    
    Certification of US Airways Chief Executive Officer pursuant
to Rule 13a-14(a) under the Securities Exchange Act of 1934, as
amended.31.6
    
    Certification of US Airways Chief Financial Officer pursuant
to Rule 13a-14(a) under the Securities Exchange Act of 1934, as
amended.32.1
    
    Certification of US Airways Groups Chief Executive Officer and
Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of AWAs Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.3
    
    Certification of US Airways Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
 
 *
    
    Portions of this exhibit have been omitted under a request for confidential treatment and filed
separately with the Securities and Exchange Commission. 70




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Signatures
  US Airways Group, Inc. (Registrant)Date: July 26, 2007
    
    By:
    
    /s/ Derek J. KerrDerek J. KerrSenior Vice President andChief Financial OfficerAmerica West Airlines, Inc. (Registrant)Date: July 26, 2007
    
    By:
    
    /s/ Derek J. KerrDerek J. KerrSenior Vice President andChief Financial OfficerUS Airways, Inc. (Registrant)Date: July 26, 2007
    
    By:
    
    /s/ Derek J. KerrDerek J. KerrSenior Vice President andChief Financial Officer
 71




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Exhibit Index
 Exhibit No.
    
    Description10.1
    
    Amendment No. 1 dated as of June 1, 2007 to Amended and
Restated Embraer Aircraft Purchase Agreement dated June 13,
2006 between US Airways Group, Inc. and Embraer  Empresa
Brasileira de Aeronautica S.A.*10.2
    
    Amendment No. 2 dated as of June 6, 2007 to Amended and
Restated Embraer Aircraft Purchase Agreement dated June 13,
2006 between US Airways Group, Inc. and Embraer  Empresa
Brasileira de Aeronautica S.A.*31.1
    
    Certification of US Airways Groups Chief Executive Officer
pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934, as amended.31.2
    
    Certification of US Airways Groups Chief Financial Officer
pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934, as amended.31.3
    
    Certification of AWAs Chief Executive Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as
amended.31.4
    
    Certification of AWAs Chief Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as
amended.31.5
    
    Certification of US Airways Chief Executive Officer pursuant
to Rule 13a-14(a) under the Securities Exchange Act of 1934, as
amended.31.6
    
    Certification of US Airways Chief Financial Officer pursuant
to Rule 13a-14(a) under the Securities Exchange Act of 1934, as
amended.32.1
    
    Certification of US Airways Groups Chief Executive Officer and
Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of AWAs Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.3
    
    Certification of US Airways Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
 
 *
    
    Portions of this exhibit have been omitted under a request for confidential treatment and filed
separately with the Securities and Exchange Commission. 72