##### 



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, 2005
 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, Inc.
 (Debtor-in-Possession)
   
 
  þ o
  o þ
  þ o




---



##### 



US Airways, Inc.
 (Debtor-in-Possession)
Form 10-Q
Quarterly Period Ended June 30, 2005
 Table of Contents
 PagePart I.
    
    Financial InformationItem 1.
    
    Financial StatementsUS Airways, Inc.Condensed Statements of Operations
    
    
    1Condensed Balance Sheets
    
    
    2Condensed Statements of Cash Flows
    
    
    3Notes to Condensed Financial Statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    16Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    36Item 4.
    
    Controls and Procedures
    
    
    36Part II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    37Item 3.
    
    Defaults Upon Senior Securities
    
    
    39Item 6.
    
    Exhibits
    
    
    40Signature
    
    
    41




---



##### 



Part I. Financial Information
 Item 1. Financial Statements
 US
Airways, Inc.  (Debtor-in-Possession)  Condensed Statements of Operations  (in millions)  (unaudited)
 Three Months
    
    Three Months
    
    Six Months
    
    Six MonthsEnded
    
    Ended
    
    Ended
    
    EndedJune 30, 2005
    
    June 30, 2004
    
    June 30, 2005
    
    June 30, 2004Operating RevenuesPassenger transportation
    
    $
    1,768
    
    
    $
    1,761
    
    
    $
    3,214
    
    
    $
    3,274Cargo and freight
    
    
    25
    
    
    
    34
    
    
    
    46
    
    
    
    68Other
    
    
    160
    
    
    
    152
    
    
    
    315
    
    
    
    289Total Operating Revenues
    
    
    1,953
    
    

    
    1,947
    
    
    
    3,575
    
    
    
    3,631Operating ExpensesPersonnel costs
    
    
    341
    
    
    
    564
    
    
    
    758
    
    
    
    1,141Aviation fuel
    
    
    400
    
    
    
    243
    
    
    
    735
    
    
    
    458US Airways Express capacity purchases
    
    
    382
    
    
    
    340
    
    
    
    709
    
    
    
    653Other rent and landing fees
    
    
    101
    
    
    
    99
    
    
    
    192
    
    
    
    198Aircraft rent
    
    
    104
    
    
    
    102
    
    
    
    209
    
    
    
    202Selling expenses
    
    
    91
    
    
    
    96
    
    
    
    186
    
    
    
    192Aircraft maintenance
    
    
    95
    
    
    
    75
    
    
    
    170
    
    
    
    147Depreciation and amortization
    
    
    58
    
    
    
    54
    
    
    
    110
    
    
    
    106Other
    
    
    322
    
    
    
    289
    
    
    
    630
    
    
    
    596Total Operating Expenses
    
    
    1,894
    
    
    
    1,862
    
    
    
    3,699
    
    
    
    3,693Operating Income (Loss)
    
    
    59
    
    
    
    85
    
    
    
    (124
    )
    
    
    (62
    )Other Income (Expense)Interest income
    
    
    7
    
    
    
    3
    
    
    
    9
    
    
    
    7Interest expense, net
    
    
    (80
    )
    
    
    (56
    )
    
    
    (156
    )
    
    
    (112
    )Reorganization items, net
    
    
    (26
    )
    
    
    
    
    
    
    (28
    )
    
    
    Other, net
    
    
    (6
    )
    
    
    3
    
    
    
    (6
    )
    
    
    21Other Income (Expense), Net
    
    
    (105
    )
    
    
    (50
    )
    
    
    (181
    )
    
    
    (84
    )Income (Loss) Before Income Taxes
    
    
    (46
    )
    
    
    35
    
    
    
    (305
    )
    
    
    (146
    )Income Tax Benefit
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    Net Income (Loss)
    
    $
    (44
    )
    
    $
    35
    
    
    $
    (303
    )
    
    $
    (146
    )
  1




---



##### 



US
Airways, Inc.  (Debtor-in-Possession)  Condensed Balance Sheets  June 30, 2005 (unaudited) and December 31, 2004  (in millions)
 June 30,
    
    December 31,2005
    
    2004ASSETSCurrent AssetsCash and cash equivalents
    
    $
    552
    
    
    $
    734Restricted cash
    
    
    133
    
    
    
    99Receivables, net
    
    
    301
    
    
    
    247Materials and supplies, net
    
    
    147
    
    
    
    147Prepaid expenses and other
    
    
    148
    
    
    
    136Total Current Assets
    
    
    1,281
    
    
    
    1,363Property and EquipmentFlight equipment
    
    
    2,655
    
    
    
    3,084Ground property and equipment
    
    
    342
    
    
    
    348Less accumulated depreciation and amortization
    
    
    (334
    )
    
    
    (283
    )2,663
    
    
    
    3,149Purchase deposits for flight equipment
    
    
    72
    
    
    
    138Total Property and Equipment
    
    
    2,735
    
    
    
    3,287Other AssetsGoodwill
    
    
    2,490
    
    
    
    2,490Other intangibles, net
    
    
    481
    
    
    
    494Restricted cash
    
    
    660
    
    
    
    527Other assets, net
    
    
    80
    
    
    
    89Total Other Assets
    
    
    3,711
    
    
    
    3,600$
    7,727
    
    
    $
    8,250LIABILITIES & STOCKHOLDERS DEFICITCurrent LiabilitiesCurrent maturities of debt, capital leases and debtor in possession financing
    
    $
    857
    
    
    $
    721Accounts payable
    
    
    426
    
    
    
    338Payables to related parties, net
    
    
    44
    
    
    
    68Traffic balances payable and unused tickets
    
    
    1,065
    
    
    
    820Accrued aircraft rent
    
    
    49
    
    
    
    51Accrued salaries, wages and vacation
    
    
    168
    
    
    
    154Other accrued expenses
    
    
    300
    
    
    
    247Total Current Liabilities
    
    
    2,909
    
    
    
    2,399Noncurrent Liabilities and Deferred CreditsLong-term debt and capital lease obligations, net of current maturities
    
    
    76
    
    
    
    Deferred gains and credits, net
    
    
    163
    
    
    
    44Postretirement benefits other than pensions
    
    
    
    
    
    
    Employee benefit liabilities and other
    
    
    225
    
    
    
    230Total Noncurrent Liabilities and Deferred Credits
    
    
    464
    
    
    
    274Liabilities Subject to Compromise
    
    
    5,043
    
    
    
    6,078Commitments and ContingenciesStockholders DeficitCommon Stock
    
    
    
    
    
    
    Paid-in capital
    
    
    349
    
    
    
    349Accumulated deficit
    
    
    (1,042
    )
    
    
    (738
    )Deferred compensation
    
    
    (7
    )
    
    
    (14
    )Accumulated other comprehensive income (loss)
    
    
    11
    
    
    
    (98
    )Total Stockholders Deficit
    
    
    (689
    )
    
    
    (501
    )$
    7,727
    
    
    $
    8,250
  2




---



##### 



US
Airways, Inc.  (Debtor-in-Possession)  Condensed Statements of Cash Flows  (in millions)  (unaudited)
 Six Months Ended June 30,2005
    
    2004Net cash provided by (used for) operating activities
before reorganization items, net
    
    $
    (23
    )
    
    $
    187Reorganization items, net
    
    
    (42
    )
    
    
    Net cash provided by (used for) operating activities
    
    
    (65
    )
    
    
    187Cash flows from investing activitiesCapital expenditures and purchase deposits for flight equipment, net
    
    
    (40
    )
    
    
    (36
    )Proceeds from dispositions of property
    
    
    4
    
    
    
    16Increase in short-term investments
    
    
    
    
    
    
    (59
    )Increase in restricted cash
    
    
    (167
    )
    
    
    (203
    )Other
    
    
    
    
    
    
    2Net cash used for investing activities
    
    
    (203
    )
    
    
    (280
    )Cash flows from financing activitiesProceeds from issuance of debt
    
    
    68
    
    
    
    42Proceeds from debtor in possession financings
    
    
    100
    
    
    
    Principal payments on debt and capital lease obligations
    
    
    (82
    )
    
    
    (319
    )Net cash provided by (used for) financing activities
    
    
    86
    
    
    
    (277
    )Net decrease in Cash and cash equivalents
    
    
    (182
    )
    
    
    (370
    )Cash and cash equivalents at beginning of period
    
    
    734
    
    
    
    923Cash and cash equivalents at end of period
    
    $
    552
    
    
    $
    553Noncash investing and financing activitiesReduction in debt related to sale leaseback transaction
    
    $
    624
    
    
    $
    Reduction in flight equipment related to sale leaseback transaction
    
    
    517
    
    
    
    Flight equipment acquired through issuance of debt
    
    
    53
    
    
    
    242Supplemental InformationInterest paid during the period
    
    $
    138
    
    
    $
    100Income taxes refunded during the period
    
    
    
    
    
    
    9
  3




---



##### 



US
Airways, Inc.  Notes to Condensed Financial Statements
(Unaudited)
 1. Chapter 11 Reorganization and Merger Agreement
   
 4




---



##### 



Wellington Management Company
    
    $
    150Eastshore Aviation, LLC
    
    
    125Par Investment Partners, L.P.
    
    
    100ACE Aviation Holdings Inc.
    
    
    75Tudor Investment Corporation
    
    
    65Peninsula Investment Partners, L.P.
    
    
    50$
    565
  5




---



##### 



Restructuring
     Balance at January 1, 2005
    
    $
    Severance including benefits expense
    
    
    99Payments
    
    
    (28
    )Balance at June 30, 2005
    
    $
    71
 6




---



##### 



Financing during the Chapter 11 Proceedings
     7




---



##### 



8




---



##### 



Merger Agreement and Investment Agreements
    Aircraft Financing
  9




---



##### 



Aircraft Transactions.
     10




---



##### 



Regional Jet Financing.
   11




---



##### 



2. Basis of Presentation
    3. Reorganization Items and Liabilities Subject to Compromise
 (a) Reorganization items
  12




---



##### 



Three
    
    SixMonths Ended
    
    Months EndedJune 30, 2005Gain related to curtailment of postretirement benefits (a)
    
    $
    
    
    
    $
    183Gain related to curtailment of pension plans (a)
    
    
    
    
    
    
    24Interest on accumulated cash
    
    
    3
    
    
    
    5Severance including benefits (b)
    
    
    (4
    )
    
    
    (99
    )Minimum pension liability adjustment (a)
    
    
    
    
    
    
    (91
    )Professional fees
    
    
    (19
    )
    
    
    (34
    )Damage and deficiency claims (c)
    
    
    (6
    )
    
    
    (14
    )Aircraft order penalties (d)
    
    
    
    
    
    
    (2
    )Reorganization items, net
    
    $
    (26
    )
    
    $
    (28
    )
 
 (a)
    
    In January 2005, the Bankruptcy Court approved settlement agreements between US Airways and its unions
and the court-appointed Section 1114 Committee, representing retirees other than those represented by the
IAM and TWU, to begin the significant curtailment of postretirement medical benefits. The Company
recognized a gain of $183 million in connection with this curtailment. Also in January 2005, US Airways
terminated its three mainline defined benefit plans. The Company recognized a curtailment gain of $24
million and a $91 million minimum pension liability adjustment in connection with the terminations. See
also Notes 1 and 5.(b)
    
    In connection with the new labor agreements, approximately 5,000 employees across several of the
Companys labor groups were involuntarily terminated or participated in voluntary furlough and
termination programs. See also Note 1.(c)
    
    Damage and deficiency claims arise as a result of the Companys election to restructure, abandon or
reject aircraft debt and leases during the bankruptcy proceedings.(d)
    
    As a result of the Companys bankruptcy filing in
September 2004, the Company did not expect to be able
to secure the financing necessary to take on-time delivery of three scheduled regional jet aircraft and
therefore accrued penalties of $2 million in the first quarter of 2005. See also Note 1. (b) Liabilities Subject to Compromise
  Postretirement and other employee related expenses
    
    $
    2,572Debt and capital leases
    
    
    1,705Other accrued expenses
    
    
    543Accounts payable
    
    
    160Aircraft-related accruals and deferrals
    
    
    63Total Liabilities Subject to Compromise
    
    $
    5,043
 4. Income Taxes
  13




---



##### 



5. Employee Benefit Plans
  Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2005
    
    2004
    
    2005
    
    2004Service cost
    
    $
    
    
    
    $
    10
    
    
    $
    1
    
    
    $
    20Interest cost
    
    
    
    
    
    
    38
    
    
    
    6
    
    
    
    76Expected return on plan assets
    
    
    
    
    
    
    (32
    )
    
    
    (5
    )
    
    
    (64
    )Net periodic cost
    
    
    
    
    
    
    16
    
    
    
    2
    
    
    
    32Curtailment gain
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    Total periodic cost (benefit)
    
    $
    
    
    
    $
    16
    
    
    $
    (22
    )
    
    $
    32
  Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2005
    
    2004
    
    2005
    
    2004Service cost
    
    $
    1
    
    
    $
    9
    
    
    $
    7
    
    
    $
    21Interest cost
    
    
    3
    
    
    
    21
    
    
    
    18
    
    
    
    46Amortization of:Prior service benefit
    
    
    (31
    )
    
    
    (2
    )
    
    
    (44
    )
    
    
    (6
    )Actuarial gain
    
    
    (4
    )
    
    
    (3
    )
    
    
    (7
    )
    
    
    (3
    )Net periodic cost (benefit)
    
    
    (31
    )
    
    
    25
    
    
    
    (26
    )
    
    
    58Curtailment gain
    
    
    
    
    
    
    
    
    
    
    (183
    )
    
    
    Total periodic cost (benefit)
    
    $
    (31
    )
    
    $
    25
    
    
    $
    (209
    )
    
    $
    58
    14




---



##### 



6. Comprehensive Income (Loss)
  7. Recent accounting pronouncements and changes
  15




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations.
 General Information
   16




---



##### 



Introduction
   Chapter 11 Proceedings
  
 17




---



##### 



Plan of Reorganization and Merger Agreement
   Wellington Management Company
    
    $
    150Eastshore Aviation, LLC
    
    
    125PAR Investment Partners, L.P.
    
    
    100ACE Aviation Holdings Inc.
    
    
    75Tudor Investment Corporation
    
    
    65Peninsula Investment Partners, L.P.
    
    
    50$
    565
  18




---



##### 



Restructuring
     Balance at January 1, 2005
    
    $
    Severance including benefits expense
    
    
    99Payments
    
    
    (28
    )Balance at June 30, 2005
    
    $
    71
 19




---



##### 



Results of Operations
  Three Months Ended June 30, 2005
Compared with the
Three Months Ended June 30, 2004
 Operating Revenues Passenger transportation Cargo and
freight Other
 Operating Expenses Personnel costs Aviation fuel US Airways Express
capacity purchases Other rent and landing fees Aircraft rent elling expenses Aircraft maintenance Depreciation and amortization Other
 Other Income (Expense) Interest income Interest expense, net Other, net
 20




---



##### 



Provision for Income Taxes
 Six Months Ended June 30, 2005
Compared with the
Six Months Ended June 30, 2004
 Operating Revenues Passenger transportation Cargo and freight Other
 Operating Expenses Personnel costs Aviation fuel US Airways Express capacity
purchases Other rent and landing fees Aircraft rent elling expenses Aircraft maintenance Depreciation and
amortization Other
 Other Income (Expense) Interest income Interest expense, net Other, net
 21




---



##### 



Provision for Income Taxes
 22




---



##### 



Selected Operating and Financial Statistics (1)
 Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004Revenue passenger miles (millions) *System
    
    
    12,530
    
    
    
    12,015
    
    
    
    23,578
    
    
    
    22,094Mainline
    
    
    10,727
    
    
    
    10,669
    
    
    
    20,372
    
    
    
    19,788Available seat miles (millions) *System
    
    
    16,496
    
    
    
    15,529
    
    
    
    32,015
    
    
    
    30,298Mainline
    
    
    13,817
    
    
    
    13,519
    
    
    
    27,002
    
    
    
    26,507Total available seat miles (millions)System
    
    
    16,496
    
    
    
    15,529
    
    
    
    32,016
    
    
    
    30,300Mainline
    
    
    13,817
    
    
    
    13,519
    
    
    
    27,003
    
    
    
    26,509Passenger load factor (2) *System
    
    
    76.0
    %
    
    
    77.4
    %
    
    
    73.6
    %
    
    
    72.9
    %Mainline
    
    
    77.6
    %
    
    
    78.9
    %
    
    
    75.4
    %
    
    
    74.7
    %Yield (3) *System
    
    
    14.11
    ¢
    
    
    14.66
    ¢
    
    
    13.63
    ¢
    
    
    14.82
    ¢Mainline (4)
    
    
    12.42
    ¢
    
    
    12.87
    ¢
    
    
    12.10
    ¢
    
    
    13.05
    ¢Passenger revenue per available seat mile (5) *System
    
    
    10.72
    ¢
    
    
    11.34
    ¢
    
    
    10.04
    ¢
    
    
    10.81
    ¢Mainline (4)
    
    
    9.64
    ¢
    
    
    10.16
    ¢
    
    
    9.13
    ¢
    
    
    9.75
    ¢Revenue passengers (thousands) *System
    
    
    15,826
    
    
    
    14,883
    
    
    
    29,894
    
    
    
    21,354Mainline
    
    
    11,101
    
    
    
    11,070
    
    
    
    21,354
    
    
    
    20,922Mainline revenue per available seat mile (6)
    
    
    10.97
    ¢
    
    
    11.52
    ¢
    
    
    10.45
    ¢
    
    
    11.08
    ¢Mainline cost per available seat mile (Mainline CASM) * (7)
    
    
    10.59
    ¢
    
    
    11.18
    ¢
    
    
    10.74
    ¢
    
    
    11.41
    ¢Mainline average stage length (miles) *
    
    
    782
    
    
    
    805
    
    
    
    775
    
    
    
    789Mainline cost of aviation fuel per gallon (8)
    
    $
    1.68
    
    
    $
    1.07
    
    
    $
    1.58
    
    
    $
    1.03Mainline cost of aviation fuel per gallon (excluding fuel taxes)
    
    $
    1.63
    
    
    $
    1.01
    
    
    $
    1.53
    
    
    $
    0.98Mainline gallons of aviation fuel consumed (millions)
    
    
    226
    
    
    
    225
    
    
    
    445
    
    
    
    441Mainline number of aircraft in operating fleet at period-end
    
    
    268
    
    
    
    283
    
    
    
    268
    
    
    
    283Full-time equivalent employees at period end
    
    
    21,396
    
    
    
    26,880
    
    
    
    21,396
    
    
    
    26,880
 
 *
    
    Scheduled service only (excludes charter service). (1)
    
    Operating statistics include free frequent travelers and the related miles flown. System
statistics encompass all wholly owned airline subsidiaries of US Airways Group, including US
Airways, Allegheny Airlines (through June 2004), Piedmont Airlines and PSA Airlines, as well
as operating and financial results from capacity purchase agreements with Mesa Airlines,
Chautauqua Airlines and Trans States Airlines. For purposes of Mainline statistical
calculations and to provide better comparability between periods, Mainline statistics exclude
revenue and expenses associated with US Airways capacity purchase arrangements with certain
affiliated airlines and US Airways regional jet division, MidAtlantic Airways (MidAtlantic).(2)
    
    Percentage of aircraft seating capacity that is actually utilized (RPMs/ASMs).(3)
    
    Passenger transportation revenue divided by RPMs.(4)
    
    Mainline passenger revenue excludes US Airways Express and MidAtlantic passenger revenue of
$436 million and $750 million for the three and six months ended June 30, 2005, respectively,
and $388 million and $691 million for the three and six months ended June 30, 2004,
respectively.(5)
    
    Passenger transportation revenue divided by ASMs (a measure of unit revenue).(6)
    
    Mainline operating revenues divided by ASMs (a measure of unit revenue). Mainline operating
revenues exclude US Airways Express and MidAtlantic operating revenues of $437 million and
$753 million for the three and six months ended June 30, 2005, respectively, and $390 million
and $694 million for the three and six months ended June 30, 2004, respectively.(7)
    
    Mainline operating expenses divided by mainline ASMs (a measure of unit cost). Mainline
operating expenses exclude US Airways capacity purchases and MidAtlantic operating expenses of
$432 million and $799 million for the three and six months ended June 30, 2005, respectively,
and $351 million and $668 million for the three and six months ended June 30, 2004,
respectively.(8)
    
    Includes fuel taxes and transportation charges and excludes service fees.
 23




---



##### 



Liquidity and Capital Resources
  ATSB Loan and Cash Collateral Agreement
     24




---



##### 



Merger Agreement and Investment Agreements
   25




---



##### 



General Electric
  26




---



##### 




    
    agreements providing for continued use by US Airways Group of certain
Airbus, Boeing and regional jet aircraft, and the return to GECC of
certain other leased Airbus and Boeing aircraft;
    
    a bridge facility of up to approximately $56 million for use by the
Debtors during the pendency of the Chapter 11 proceedings (the Bridge
Facility);
    
    GEs purchase and immediate leaseback to US Airways of: (a) 11 Airbus
aircraft, 28 spare engines and the engine stands securing the 2001 GE
Credit Facility, the 2003 GE Liquidity Facility and certain other GE
obligations, and (b) ten regional jet aircraft currently debt financed
by GECC;
    
    a restructuring of the balance of the 2001 GE Credit Facility to
provide additional liquidity, subject to the pledge of junior liens on
four CRJ aircraft and a first lien on one spare engine to secure the
restructured 2001 GE Credit Facility;
    
    subject to US Airways Groups satisfaction of certain financial tests
and other conditions, financing for up to 31 additional regional jet
aircraft;
    
    the modification and assumption of certain of US Airways engine
maintenance agreements with GE Engine Services; and
    
    upon emergence from bankruptcy, the issuance of convertible notes of
the reorganized US Airways to GECC in the aggregate principal amount
of $125 million.
  27




---



##### 



Bridge Facility. pari passu,
 Sale-Leaseback Transaction.
 
    
    with respect to the Airbus aircraft, on either October 31, 2005, or if
the Debtors emerge from the Chapter 11 cases prior to that date, on
agreed upon dates, with six of the Airbus leases to expire by the end
of 2005, without regard to the merger, and the balance expiring during
2017;
    
    with respect to the CRJ aircraft, on the earlier of the Debtors
emergence from the Chapter 11 cases and October 31, 2005, provided
that US Airways has agreed to convert the leases for the CRJ aircraft
into permanent long-term leases with only
rent payable through October 31, 2005 (or a later date as the parties
may agree) and return condition obligations being afforded
administrative expense status in the Chapter 11 cases; and
    
    as to the spare engines, on either of October 31, 2005, or, if the
Debtors emerge from the Chapter 11 cases prior to that date, then,
with respect to 14 CFM56-5B6 engines on agreed upon dates in 2015
(subject to the Debtors right to select one engine for early delivery
in November 2005, and further subject to the Debtors right to swap
the expiry date for each CFM56-5B6 lease with the expiry date for any
other CFM56-5B6 lease), and with respect to the 14 CFM56-3B2 engines
on agreed upon dates in 2010. The expiration of the lease terms with
respect to the 14 CFM56-3B2 engines is subject to the Debtors right
to terminate the lease for one CFM56-3B2 engine upon the scheduled
lease expiration date for a related Boeing 737-300 aircraft, on the
basis of one spare engine for every fifth Boeing 737-300 lease
terminated, up to a maximum of five CFM56-3B2 engine leases, and
subject further to the Debtors right to terminate any CFM56-3B2 lease
upon not less than 60 days notice, provided that the Debtors pay GE an
amount equal to the balance of the basic rent due under such lease,
with a credit for any maintenance adjustment credit payable to the
Debtors on account of the redelivery of the applicable engine.
  28




---



##### 



001 GE Credit Facility.
 Convertible Notes.
 Aircraft Financing
  Aircraft Transactions.
 29




---



##### 



30




---



##### 




    
    With respect to six A319/320 aircraft that are subject to the
sale-leaseback transaction, and one B737-300 aircraft, the applicable
leases will be amended to modify the expiry dates under the leases to
provide for their early termination and return of the subject aircraft
to GE during the last six months of 2005. The amendments to the
applicable leases and the early return of the aircraft will be
effectuated without regard to the completion of the merger or the
occurrence of an event of default.
    
    The leases for five B737-300s currently operated by the Debtors will
be amended to provide for their termination, and attendant early
redelivery of the subject aircraft between July 2005 and October 31,
2005, provided that, as of the date of each such termination and
redelivery, no event of default has occurred and is continuing and
there has been no public announcement by US Airways Group or America
West, any SEC filing or any governmental authority pronouncement,
which evidences that any significant term or condition of the merger
will not be complied with or that an applicable milestone as provided
for in the Merger MOU will not be met.
    
    Leases in respect of an additional 29 Boeing aircraft from US Airways
Groups fleet will be amended to modify the expiry dates under the
leases so as to provide for their early termination and accompanying
early return of the subject aircraft to GE between 2005 and 2009,
subject to completion of the merger. With respect to 11 of the Boeing
aircraft, however, which will be scheduled for removal from service
during 2009 pursuant to the applicable amended leases, US Airways
Group will grant GE an option exercisable on or before October 31,
2006 to further modify the expiry dates of those leases to provide for
the removal of those aircraft during an earlier period, from July 2007
through July 2008, unless US Airways Group has, as of September 30,
2006, achieved an agreed upon corporate credit rating or satisfied
certain financial covenant tests.
    
    In connection with the removal of the above-referenced Boeing aircraft
from US Airways Groups fleet, US Airways Group will be permitted to
terminate an agreed upon number of the spare engine leases entered
into by the Debtors pursuant to the sale-leaseback transaction, from
time to time, as and when an agreed upon number of those aircraft have
been redelivered to GE.
    
    To facilitate the early redelivery of the Airbus aircraft from US
Airways Groups fleet, GE has agreed to grant certain return condition
concessions relative to such aircraft. Prior to the Debtors emergence
from the Chapter 11 cases, GE and US Airways Group have agreed to net
(a) any redelivery payment obligations payable by GE to the Debtors
against (b) any redelivery payment obligations payable by the Debtors
to GE relative to redelivered aircraft, and to the extent that any net
balance is owing to the Debtors by GE, the balance will be payable to
the Debtors upon US Airways Groups emergence from the Chapter 11
cases.
  
    
    forgive and release US Airways from certain prepetition obligations;
    
    defer certain payment obligations arising under these agreements;
    
    extend one maintenance agreement;
 31




---



##### 




    
    continue certain existing deferrals; and
    
    determine the treatment of certain removal charges.
  
    
    forgive certain removal charges relative to CFM56-3
engines, in addition to those removal charges to be
forgiven pursuant to the Master MOU;
    
    provide US Airways with the right to remove certain
CFM56-3 engines otherwise subject to agreements with
GE Engine Services, with all removal credits owing to
the Debtors in connection with those agreements to be
applied against outstanding amounts otherwise owing to
GE Engine Services by the Debtors under the term note
issued to GE Engine Services pursuant to the Master
MOU;
    
    modify the Debtors obligations with respect to
deferred obligations (as defined in the Master MOU) to
provide that those obligations will be payable in two
installments, due on each of June 30, 2005 and
September 30, 2005;
    
    extend the term of the CFM56-5 engine maintenance
agreement with GE Engine Services, with the Debtors
waiving certain conversion rights; and
    
    modify the CFM56-3 engine maintenance agreement to provide for an
agreement upon minimum monthly payments on account of accrued engine
flight hours.
  
    
    a last right of offer for GE Engine Services with respect to any
follow-on engine maintenance agreement for the Debtors CF6-80C2
fleet;
    
    certain arrangements relative to engine selection in the event US
Airways Group elects to assume an existing A320 aircraft purchase
agreement between Airbus and US Airways Group upon its emergence from
the Chapter 11 cases; and
    
    certain arrangements relative to engine selection in the event New US
Airways Group, following the merger, proceeds to take delivery of
certain A350 aircraft from Airbus.
 Regional Jet Financing.
 32




---



##### 



33




---



##### 



Airbus
   
    
    adjustments to the delivery schedules for the narrow-body and
wide-body aircraft, and an agreement by US Airways Group to assume the
related purchase agreements in connection with its emergence from
Chapter 11;
    
    a new order for 20 A350 wide-body aircraft, subject to US Airways
Groups right to convert up to ten A350 orders to A330 orders, and a
backstop financing commitment by Airbus with respect to a substantial
number of the A350 aircraft;
    
    elimination of cancellation penalties on US Airways Groups existing
order for ten A330-200 aircraft, provided that New US Airways Group
has met certain predelivery payment obligations under the A350 order;
and
    
    a term loan of up to $250 million, of which $213 million can be used
for general corporate purposes.
  Statement of Cash Flows Narrative
    34




---



##### 



35




---



##### 



Item 3. Quantitative and Qualitative Disclosures About Market Risk
    Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  36




---



##### 



Part II. Other Information
 Item 1. Legal Proceedings
     37




---



##### 



38




---



##### 



Item 3. Defaults Upon Senior Securities
  39




---



##### 



Item 6. Exhibits
 Designation
    
    Description2.1
    
    Agreement and Plan of Merger, dated May 19, 2005, among US
Airways Group, Inc., America West Holdings Corporation and
Barbell Acquisition Corp. (incorporated by reference to
Exhibit 2.1 to the Current Report on Form 8-K filed by America
West Holdings Corporation on May 25, 2005)2.2
    
    Letter Agreement, dated July 7, 2005, among US Airways Group,
Inc., America West Holdings Corporation, Barbell Acquisition
Corp., ACE Aviation Holdings, Par Investment Partners, L.P.,
Peninsula Investment Partners, L.P., Eastshore Aviation, LLC,
and Wellington Management Company, LLP on behalf of certain
investors for whom it acts as an investment adviser
(incorporated by reference to Exhibit 10.2 to US Airways
Groups Current Report on Form 8-K filed July 13, 2005)10.1
    
    Investment Agreement, dated May 19, 2005, among Eastshore
Aviation, LLC, America West Holdings Corporation and U.S.
Airways Group, Inc. (incorporated by reference to Exhibit 2.1
to the Current Report on Form 8-K filed by America West
Holdings Corporation on May 25, 2005)10.2
    
    Investment Agreement, dated May 19, 2005, among Par Investment
Partners, L.P., America West Holdings Corporation and U.S.
Airways Group, Inc. (incorporated by reference to Exhibit 2.1
to the Current Report on Form 8-K filed by America West
Holdings Corporation on May 25, 2005)10.3
    
    Investment Agreement, dated May 19, 2005, among Peninsula
Investment Partners, L.P., America West Holdings Corporation
and U.S. Airways Group, Inc. (incorporated by reference to
Exhibit 2.1 to the Current Report on Form 8-K filed by America
West Holdings Corporation on May 25, 2005)10.4
    
    Investment Agreement, dated May 19, 2005, among ACE Aviation
Holdings, America West Holdings Corporation and U.S. Airways
Group, Inc. (incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K filed by America West Holdings
Corporation on May 25, 2005)10.5
    
    Voting Agreement, dated May 19, 2005, among TPG Partners,
L.P., TPG Parallel I, L.P., Air Partners II, L.P. and U.S.
Airways Group, Inc. (incorporated by reference to Exhibit 2.1
to the Current Report on Form 8-K filed by America West
Holdings Corporation on May 25, 2005)10.6
    
    Investment Agreement, dated May 27, 2005, among Wellington
Management Company, LLP, America West Holdings Corporation and
U.S. Airways Group, Inc. (incorporated by reference to Exhibit
10.1 to the Current Report on Form 8-K filed by America West
Holdings Corporation on June 2, 2005)10.7
    
    Amendment No. 5 dated December 28, 2004 to Loan Agreement
dated March 31, 2003 among US Airways, Inc. and Phoenix
American Financial Services, Inc., Bank of America, N.A. and
the Air Transportation Stabilization Board (incorporated by
reference to Exhibit 10.6 to US Airways Groups Registration
Statement on Form S-4 filed June 28, 2005)10.8
    
    Amendment No. 1 dated as of May 19, 2005 to Junior Secured
Debtor-in-Possession Credit Facility Agreement dated as of
February 18, 2005 among US Airways, Inc., as Debtor and
Debtor-in-Possession under Chapter 11 of the Bankruptcy Code
as Borrower, US Airways Group, Inc., PSA Airlines, Inc. and
Material Services, Inc. Debtors and Debtors-in-Possession
under Chapter 11 of the Bankruptcy Code as Guarantors, and
Eastshore Aviation, LLC, as Lender (incorporated by reference
to Exhibit 10.105 to US Airways Groups Registration Statement
on Form S-4 filed June 28, 2005)10.9
    
    Master Merger Memorandum of Understanding, dated as of June
13, 2005, among US Airways, Inc., US Airways Group, Inc.
America West Holdings, Inc., America West Airlines, Inc.
General Electric Capital Corporation acting through its agent,
GE Commercial Aviation Services, LLC, and General Electric
Company/GE Transport Component (incorporated by reference to
Exhibit 10.2 to the Form
 40




---



##### 



Designation
    
    Description10-Q of America West Holdings
Corporation for the quarter ended June 30, 2005) (portions of
this exhibit have been omitted pursuant to a request for
confidential treatment and filed separately with the SEC)10.10
    
    Investment Agreement, dated July 7, 2005, among Tudor
Proprietary Trading, L.L.C. and certain investors listed on
Schedule 1 thereto for which Tudor Investment Corp. acts as
investment adviser, U.S. Airways Group, Inc. and America West
Holdings Corporation (incorporated by reference to Exhibit
10.1 to US Airways Groups Current Report on Form 8-K filed
July 13, 2005)31.1
    
    Certification of the Principal Executive Officer pursuant to
Rule 13a-14(a) or Rule 15d-14(a) (Section 302 of the
Sarbanes-Oxley Act of 2002)31.2
    
    Certification of the Principal Financial Officer pursuant to
Rule 13a-14(a) or Rule 15d-14(a) (Section 302 of the
Sarbanes-Oxley Act of 2002)32.1
    
    Certifications pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 Signature
  US Airways, Inc. (Registrant)Date: August 1, 2005
    
    By:
    
    /s/ Anita P. BeierAnita P. BeierSenior Vice President-Finance and Controller
(Chief Accounting Officer)
 41