Filed by US Airways Group, Inc.
pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Delta Air Lines, Inc.
Commission File No.: 001-05424
The following document is filed herewith pursuant to Rule 425 under the
Securities Act of 1933:
o Transcript of US Airways Group, Inc.'s Merger Proposal Presentation on
Wednesday, November 15, 2006.
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FINAL TRANSCRIPT
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Thomson StreetEvents(SM)
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LCC - US Airways - Delta Merger Proposal Conference Call
Event Date/Time: Nov.15. 2006 / 8:15AM ET
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Nov. 15. 2006 / 8:15AM, LCC - US Airways Delta Merger Proposal Conference Call
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CORPORATE PARTICIPANTS
Elise Eberwein
US Airways - SVP of Corporate Communications
Doug Parker
US Airways - CEO
Scott Kirby
US Airways - President
CONFERENCE CALL PARTICIPANTS
Jamie Baker
JPMorgan - Analyst
Ray Neidl
Calyon Securities - Analyst
David Strine
Bear Stearns - Analyst
Kevin Crissey
UBS - Analyst
Helane Becker
Benchmark - Analyst
Gary Chase
Lehman Brothers - Analyst
Mark Streeter
JPMorgan - Analyst
Daniel McKenzie
Credit Suisse - Analyst
Bill Mastoris
Bank of New York - Analyst
PRESENTATION
Operator
Ladies and gentlemen, welcome to the US Airways Group conference call to discuss
the Company's proposal to merge with Delta Air Lines proposed this morning. All
participants are in a listen-only mode. When we go to questions, instructions
will be given at that time. Today's call is being recorded.
At this time for opening remarks and introductions I would like to turn the call
over to Miss Elise Eberwein, Senior Vice President Corporate Communications at
US Airways. Ms. Eberwein, please go ahead.
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Elise Eberwein - US Airways - SVP of Corporate Communications
Thank you, Peter. Good morning everybody. Thanks for joining us this morning.
Obviously we have some exciting news this morning. Let me tell you who is here
in the room. We've got Doug Parker, obviously Chairman and CEO; Scott Kirby, our
President; Chief Financial Officer, Derek Kern Janet Dhillon, our Senior Vice
President and General Counsel. After our prepared remarks we will open it up
today for analyst questions. We are presenting later this morning at the City
Transportation Conference here in New York. We will have limited time for
questions this morning, so thanks for your understanding on that.
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Nov. 15. 2006 / 8:15AM, LCC - US Airways Delta Merger Proposal Conference Call
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Before we get started I'd like to read some Safe Harbor language relating to any
forward-looking statements that we're going to make on the call today. As you
know today's call may contain forward-looking statements. These forward-looking
statements may be identified by words such as may, will, expect, intend,
anticipate, believe, pro forma and other similar words used in connection with
statements regarding the outlook of US Airways Group, Delta Air Lines, the new
Delta or the proposed merger. Forward-looking statements include all statements
other than statements of historical fact about US Airways Group.
Information about factors that may affect future results of US Airways Group and
the risks and uncertainties that could cause actual results to differ from
projected results can be found in the forward-looking statements disclosure
included in the presentation which is on our website this morning and in the
press release that we issued this morning as well. Subject to future
developments, US Airways will file with the United States Securities and
Exchange Commission a registration statement to register the US Airways shares
which would be issued in the proposed transaction and/or a proxy statement with
respect to the proposed transaction.
Investors and security holders are urged to read the registration statement
and/or proxy statement when and if it's available and any other relative
documents filed with the commission as well as any amendments or supplements to
those documents because they will contain important information. Investors and
security holders may obtain a free copy of the registration statement and/or the
proxy statement when and if available and other relevant documents at the
Commission's Internet website which is www sec.gov; the registration statement
and/or proxy statement when and if available and other such documents may also
be obtained free of charge from US Airways by directing such requests to -- and
I'm going to give you an address here, US Airways Group, Inc., 111 West Rio
Salado Parkway, Tempe, Arizona 85281; attention Chief Legal Officer.
Both the press release announcing this transaction and the slides that summarize
today's discussion are posted on our website; that address is usairways.com. The
press release and slides will be filed with the SEC on a current report on Form
8-K, in fact those are being filed as we speak here and you may find it helpful
to review the slides as we give our prepared remarks this morning. Okay.
At this point let's get going. I'm going to turn it over to Doug and thanks
again for being on the call.
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Doug Parker - US Airways - CEO
Thank you, Elise. If anyone is still awake we will get started here. Thanks
everybody for joining us. As Elise said, we have some exciting news that wea
TMre excited about. We sent out an announcement that hopefully you've been able
to see. We also filed an 8-K that had with it a presentation that I'm going to
be walking through. If you have that you may find it helpful, if not it's not
required. But there is a presentation that I'm going to be walking through and
if you have that you might want to follow along.
What it says at the start is talks about how excited we are about the prospect
of combining US Airways and Delta. Through the transaction we propose, we create
a new Delta, one of the world's largest airlines and a much more effective
competitor in what is a currently fragmented marketplace. This transaction would
we believe would be able to achieve $1.6 billion of annual synergies which is
obviously a very large number and those we think would phase in over a two-year
period.
We would rationalize capacity by combining the two airlines and reducing total
ASMs by about 10%. But we do so and continue to remain 100% coverage of the U.S.
cities we currently serve much like we did in US Airways America West. This
transaction would be nicely accretive to the US Airways shareholders and would
provide a significant premium to Delta's creditors of 25%.
On top of all of that we think this combination will create significant value
for all of our employees of both companies, the customers of both companies and
the communities we serve.
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Nov. 15. 2006 / 8:15AM, LCC - US Airways Delta Merger Proposal Conference Call
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The transaction itself is described on the next slide. It shows the transaction
that we put forward this morning would provide about approximately $8 billion to
Delta's unsecured claimholders. That consists of $4 billion of cash and 78.5
million shares of US Airways stock which yesterday's closed price is worth right
at $4 billion. This would represent as I said about 25% premium to the current
trading price of Delta's pre-petition unsecured clients assuming there will
ultimately be $16 billion of unsecured claims. It also represents a 40% premium
over the average trading price for those claims over the last 30 days.
I'm happy to report we have committed financing from Citigroup to fund the cash
portion of this offer as well as some debt refinancing that would need to take
place at both companies as a result of change of control.
Now I'm going to step back a moment and talk about the industry landscape and
what makes this such a compelling transaction. Again, as you can see on this
slide, this is an extremely fragmented industry that we participate in. Not one
airline has as much as a 20% revenue share and the sixth largest participant,
which is US Airways, is more than half the size as the industry leader, American
Airlines. And those are just U.S. numbers and U.S. airlines all of their
including international revenues. So obviously if you look at this in terms of
the entire global marketplace it is even much more fragmented.
The fact of the matter is I think there are not many industries more fragmented
than the one that we participate in and in an industry this fragmented, we think
there are opportunities for mergers that can achieve significant synergies and
increased competition.
Going to the next page, one very recent case of this which we're extremely
familiar with is the US Airways/America West transaction. That transaction as
you recall was one where we brought US Airways out of bankruptcy through a
merger and the specific timing of this proposal is driven by the fact that Delta
is in bankruptcy. We believe that is what makes this such a unique opportunity
to realize value. In order to explain that I want to talk about what happened
with US Airways versus United Airlines.
Both these airlines have come out of bankruptcy in the last 14 months; US
Airways in September of 2005; United in February of '06. US Airways merged with
our merger partner, America West. And in doing so I was able to merge with over
$600 million in estimated annual synergies. United chose to merge independently
and the results have been strikingly different. If you look at the chart, what
you'll see is on a year to date basis US Airways has a pretax income margin of
4.9% which is far better than the industry average of 2.2%. And United is lower
than that with a margin of one-half of 1%.
When you create those types of returns your equity does better and you if you
look at the right side of the chart you see that has happened. Our shareholders
have seen 164% total equity return since we emerged from bankruptcy; United has
seen a 2% return. The primary driver of this is as much as would like to say
it's brilliant management, the fact of the matter is the big difference here is
that we were able to generate synergies by merging, by bringing US Airways out
of bankruptcy with a merger that United simply wasn't able to do with a
stand-alone plan.
Now I'll talk more about those synergies in a minute. But one of the bigger
ones, it's important for everybody to understand is shown on the next slide
which is the revenue per ASM improvements that happened through capacity
reductions. And that is dramatically easier to do when one of the partners is
in bankruptcy. The first chart on this shows the strong inverse relationship
in our industry between capacity and unit revenues and as we've seen lately
small declines in capacity, 3% to 4% reductions, can result in unit revenue
increases of over 10%.
And while that is true for the industry, if you look to do next chart, the
affect was much greater in US Airways and America West. Our ability to use
bankruptcy to reduce capacity has led to us having a large outperformance
versus the industry. Our revenue per ASM growth on a year to date basis has
actually been 17.1%, the best performance of any U.S. airline. And that has
been driven by the fact that if you look we actually pulled our capacity down
more than even the industry did as we were able to do so through the benefits
of US Airways' bankruptcy.
That's outperformance is a very large number for those of you who understand
-- the analysts I know all understand this. That type of outperformance alone
is worth about $425 million year to date. We believe we can achieve similar
revenue per ASM
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Nov. 15. 2006 / 8:15AM, LCC - US Airways Delta Merger Proposal Conference Call
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outperformance in a US Airways/Delta merger although for our models and in the
synergy estimates we're going to give you, we've assumed -- only an incremental
3.5% revenue per ASM improvement.
So moving forward, we know the kind of value that can be realized through a
merger particular when one of the airlines is emerging from bankruptcy. Indeed
we think it's the success of our own US Airways/America West merger that's
leading others in this industry to consider mergers of their own. The attributes
that made our contribution successful are all present here but on a larger
scale.
The bankruptcy process allows the return of unprofitable aircraft and the
shedding of some other nonperforming assets. We happened to have similar labor
costs on both sides and a complementary route network. The result is that with
the new US Airways -- with US Airways -- the new Delta would be one of the
world's largest airlines and one that is able to compete in an increasingly
competitive industry under any sort of merger scenario one might contemplate.
Moving forward getting a little more to the specifics. As it relates to network
optimization, our plan is to optimize our network of complementary hubs as we
did in US Airways and America West. In doing so we will be able to maintain
service to all of the existing U.S. destinations of both Delta and US Airways.
But we will be able to do so with 10% fewer ASMs. We will do this by reducing
unprofitable or lower load factor flights and while still flying all the cities
we serve, we will be able to optimize the flows over the existing hubs.
Some examples of this in the southeast we will use Atlanta and Charlotte hubs to
realign capacity in some of the lower low [vendor] markets and optimize the
flows there. We'll upgrade some of the smaller gauge regional jets to larger and
more efficient equipment. In the Northeast, we will reoptimize the domestic and
international traffic flows. Domestic service will focus on LaGuardia while the
international service will be balanced between Philadelphia and JFK. And we
would plan to divest of some assets such as the shuttle.
In the western part of United States, Phoenix and Salt Lake City will retain hub
status but more with more efficient flows, increase southern tier focus and
reach for Phoenix, increase northern tier focus and reach for Salt Lake City.
With the aircraft that we would now have in this merger coming from Delta, the
long-range aircraft we would acquire we would be able to present nonstop
international service opportunities for the first time from the west, something
US Airways can't do today.
The central region would be optimized for further focus Cincinnati on the
Midwest markets and Pittsburgh on Northeastern markets. The next charts just
show route maps. I'm not going to spend any time on it. The first one just shows
what US Airways looks by itself. The next is Delta by itself and the last one
shows what we look like together and what you see is an airline with true
domestic scale and scope and one that can provide great benefit to customers in
the United States.
If you get to the next slide, slide 13, what you -- we show this again in more
of a regional basis and what you see is our combined domestic network position
would make the new Delta a leading competitor in the eastern United States and
enhance our position in the western United States. Right now US Airways is
number one in the northeast, number two in the southeast. Delta is number three
in the northeast, number one in the southeast. The new Delta becomes number one
in both regions.
We'd also be the leader in Florida and be the number two carrier in the
northwest and number three in the Southwest. Importantly, we would be no lower
than number four in any of these regions of the United States. We'd be the
number one airline in 155 airports, and again we'd do so by maintaining service
to all of our existing U.S. destinations.
On the next chart you see it just breaks out by carrier the share of domestic
ASMs. We with 18.2% would have the highest share of domestic ASMs.
The next page shows the Delta International network which also is nicely
complementary. We would move to extend our reach around the world; number one
airline across the Atlantic; second-largest airline to the Caribbean; an airline
that would clearly
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Nov. 15. 2006 / 8:15AM, LCC - US Airways Delta Merger Proposal Conference Call
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be a valued partner for either Star Alliance or Sky Team which would allow all
of our customers the ability to fly to parts of the world that this airline
doesn't serve.
Moving forward to the synergies which I keep talking about but I can't stress
enough the importance of this value we are creating; $1.65 billion in annual
synergies. There is not an airline out there today who on its own is producing
$1.65 billion of profits. The simple act of putting these companies together is
creating more value than any airline that is flying today. And this is not value
that either of our companies could create independently. It only happens by
putting the companies together which is why this is so important.
We'll talk more about those but the other point I want to make is we can't
stress enough that we believe the way to do this is as Delta emerges from
bankruptcy, we believe the opportunity to generate over half of these synergies
could be lost if a merger is delayed until after Delta emerges. The potential
network synergies would be dramatically reduced if we couldn't return aircraft
as Delta would be able to do in a bankruptcy and the cost synergies which we
estimate at $700 million would be reduced by our inability to terminate leases,
operating contracts and other costs that we could do in bankruptcy but not post
emergence.
Moving to the network synergies, the $935 million in network synergies is based
on Delta's publicly available information and the experience we had in US
Airways and America West. As I stated as we went through the impact on industry
capacity, we believe this to be a conservative estimate and we look forward to
getting the opportunity to begin due diligence and better refine the
opportunities. It is based upon the estimated network synergies come from
rationalizing the network -- over to the left again --this is the flying
everywhere we fly and keeping virtually all the revenues but doing with 10%
fewer aircraft resulting in higher load factors, lower cost. We'd also benefit
from reducing service to some underperforming markets and discontinuing some
unprofitable point-to-point flying.
We estimate the total capacity synergy at $777 million. We'd also generate $158
million of present synergies from a more comprehensive network which includes
new connectivity and an enhanced Northeast and East Coast position that would
allow the new Delta to better compete for corporate accounts.
Moving to the cost synergies where we believe there are $710 million of cost
synergies, that occurs through the reduction of overlapping information systems
and overhead; the consolidation of facilities including gates, hangars and other
leases; along with the divestiture of redundant non-operating space and other
reduced expenses. It's important to note that because our plan actually is to
take the labor cost to the highest common denominator in all groups.
So whatever exists at either of the airlines today in terms of total labor
costs, we assume we will move to the highest in place at either of the airlines
premerger.That resulted in negative synergy but one of $90 million which while
significant is overwhelmed by the positive synergies that are created and we
think very friendly to labor.
Moving forward, I've talked about how we create value with this. Bottom line on
this based on the equity research estimates, our own internal projections we
believe this combination would create significant EPS accretion for US Airways
in year one. On a steady-state basis once we have this up and running, about a
40% accretion. Once all the synergies are in, this is obviously great for our
existing shareholders; it's also great for Delta creditors who would receive a
25% premium but then also be able to participate in that same upside potential
as a combined company as owners of 78.5 million shares of US Airways' stock.
This transaction -- this combination would also create a best in class capital
structure. On a pro forma basis, a last 12-month EBITDAR of almost $3.8 billion;
pro forma lease adjusted debt of about $22 billion gives you a ratio of lease
adjusted debt to EBITDAR of 5.8 times which is lower than either US Airways or
Delta currently has. US Airways right now is the strongest on that measure but
this company would be even stronger once the synergies are in place. With a
balance sheet like this, we clearly have the ability to weather the changing
market conditions and better compete.
Moving to labor, we learned a lot about merging workforces in our US Airways and
America West transaction. And we're going to use that insight to help us with
the integration of the workforces here. What we demonstrated through that
transaction is
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Nov. 15. 2006 / 8:15AM, LCC - US Airways Delta Merger Proposal Conference Call
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that there is a lot of long-term job security created for employees when you
have a strong fundamental airline. And we saved some 35,000 jobs at US Airways
through our merger. We've also have been hiring since the merger. We've proven
that when you actually go do create positive cash flows that is better for
employees. That's what we believe will happen here.
It's important to note that as in US Airways/America West there is nothing in
the labor contracts on either side in this transaction that would prohibit a
merger. As I noted earlier, our model assumes that we would take labor costs to
the highest of the existing levels in every group which we think will facilitate
getting this done. And we expect to manage the capacity reduction in terms of
our line employees through attrition and leaves, not through furloughs.
In the US Airways/America West merger we were just at fleet by 15% initially but
with no mainline furloughs after the merger and have begun hiring in every
workgroup. Indeed we've hired some 4000 employees since the merger last year. So
we believe our employees and those at Delta will benefit from working for a
larger and more competitive airline.
Moving to the next slide is the consumers. Consumers obviously benefit from this
-- will also benefit from this merger. The new Delta will offer customers the
advantages of a larger full-service airline with the cost structure of a low
fare carrier. Even with the 10% reduction in capacity all existing U.S.
destinations served today by US Airways and Delta will remain part of the new
and improved network with greater scale. We will be able to better than before
connect customers to the people and places they went to visit in over 350
destinations across five continents.
I think you know our management team has a proven record of consumer friendly
pricing, one we established while we were still at -- while we were back at
America West and one that we still strongly believe in. Our US Airways/America
West merger has already helped to lower business fares in nearly 400 markets
with an average discount of 37%. And we've lowered leisure fares in nearly 350
markets with an average discount of 24%. All the time doing that and improving
our revenue for (indiscernible) we believe because while lowering the fares
we've actually attracted traffic that was moving elsewhere.
As it relates to antitrust. Obviously our combination is going to require a
review by a number of regulatory bodies from an antitrust and competition
perspective and we welcome that. We don't anticipate any problems here that
cannot be resolved. The industry has changed dramatically since the Department
of Justice reviewed the US Airways and United Merger in 2000 with the growth of
low-cost carriers, domestic coaches, international alliances as well as all the
turmoil we've had with bankruptcies and the impact of 9-11.
The merger of US Airways and America West has shown the industry that synergies
can be achieved through this combination and that it can indeed can be good for
both investors and consumers. The merger we propose will enhance competition. As
I said when I started, this is a uniquely fragmented industry and it will remain
so when the new Delta begins flying. It will continue to face vigorous
competition especially from low-cost carriers. The difference is we will have
leading positions that will enable us to continue effectively competing and the
significant synergies we expect to generate are not premised on rising fare
loads.
As the integration, we are successfully on track with the US Airways/America
West integration and expect it will be complete before we would begin the Delta
integration. As I've already mentioned, we've done much, much better than
certainly anyone was suggesting we would do at the time we announced the US
Airways/America West merger. RASM is up 17% year-to-date versus the forecast of
about 10% when we put it together. We've identified $300 million of cost
synergies now in that merger versus the $250 million that we announced at the
time of the transaction. And all of our other initiatives are on track.
We expect to cut over our reservation system and move to a single operating
certificate in the first half of 2007 which would leave only labor contracts as
the only outstanding item in the integration of US Airways and America West. The
fact of the matter is our team has done a fantastic job of integrating those two
companies. That success gives us all the more confidence that we can integrate
-- that we can do this transaction and have a successful integration as well.
As to the roadmap to getting all this done, there clearly are a number of
milestones that need to be completed. They are laid out on slide 25. We believe
we can close this transaction by the first half of '07 and get through all of
these milestones. That is
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consistent with Delta's plan to emerge from Chapter 11 and we don't believe that
our proposal should cause any delays for Delta as it pursues its alternative
stand-alone plan.
The first step toward completion is to commence due diligence which we believe
can be completed expeditiously. We need to complete due diligence as soon as
possible so we can remove that condition to our offer and give Delta's creditors
the opportunity to evaluate this alternative versus stand-alone plan. Then we
would enter into a merger agreement with the management team at Delta and file a
plan of reorganization with the U.S. Bankruptcy Court. We would need regulatory
approval from among others the Department of Justice and we'd need the approval
of Delta's creditors and our own shareholders.
It is again important to note that many of these steps can happen at the same
time. You'll recall that from the time we announced the US Airways/America West
merger to the time we closed it was a four-month process and that included
completing all these steps. We believe we can in this case certainly have this
done by the first half of '07.
And again which is important because we believe if we wait for Delta to emerge
from bankruptcy it will be too late to maximize the tremendous synergies
available and we will all regret not having acted sooner. As I've said, these
$1.65 billion in synergies would go -- about half of those would go away if we
didn't do this while Delta was in bankruptcy.
In summary, this is an extremely exciting opportunity for us and one to create
one of the world's largest airlines, one that we've built to compete in an
evolving industry for the long-term. We create significant value for the US
Airways shareholders and create significant premium and liquidity to the Delta
creditors. We create a stronger employer for our labor employees with higher
common denominator labor costs and better future growth prospects and we give
consumers greater choice through our broader combined network and our customer
friendly pricing philosophy.
So we are extremely excited about this. We hope you all share our enthusiasm for
it and the real value it will create. And we are now happy to answer any
questions you may have.
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QUESTIONS AND ANSWERS
Operator
(OPERATOR INSTRUCTIONS) Jamie Baker, JPMorgan.
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Jamie Baker - JPMorgan - Analyst
Good morning, Doug. You state you don't anticipate many antitrust problems but
given Delta is so far an unwilling participant and in light of the recent
congressional changes I'm not entirely sure that I share your confidence. How
willing are you to offer carveouts in order to appease regulators or other
airlines that might object? And what might those carveouts include?
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Doug Parker - US Airways - CEO
Jamie, we've done a good bit of work on this with the antitrust council and feel
very strongly there are no issues that can't be resolved. So I did mention that
we believe that our plan contemplates selling one of the shuttles. And so like I
said, we have done a significant amount of work on this and feel quite strongly
there are no antitrust issues here that can't be resolved.
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Jamie Baker - JPMorgan - Analyst
Okay. Fair enough, good luck. Thanks.
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Operator
Ray Neidl, Calyon Securities.
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Ray Neidl - Calyon Securities - Analyst
Doug, why Delta and not Northwest? Is one of the reasons that Delta is largely
nonunion and it might be easier to integrate to your system?
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Doug Parker - US Airways - CEO
Well, Ray, the fact is in this transaction we think is a unique opportunity to
do some stuff that results in higher synergies than we would see in any other
combination. I don't want to spend a lot of time comparing and contrasting
versus other airlines. But the fact of the matter is we have looked at a
number of other possibilities and have come to the conclusion that this
opportunity is the most compelling and the one that creates the most value for
our shareholders.
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Ray Neidl - Calyon Securities - Analyst
Okay. And the timing of it, you explained it very well. You have to do this
before they exit bankruptcy otherwise you wouldn't get a lot of the benefits.
I take it that means you would intend to try and renegotiate all the aircraft
leases that Delta has done already?
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Doug Parker - US Airways - CEO
Ray, I'm sorry. I lost you there at the end.
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Ray Neidl - Calyon Securities - Analyst
Okay. You said that a lot of the benefits would accrue if you did it before
Delta exited bankruptcy. Delta is pretty far along now in renegotiating with
their unsecured creditors and their aircraft lessors and so forth. Would you
open up all those boxes again and further renegotiate leases and of course I
think you said you'd reject some of the additional aircraft?
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Doug Parker - US Airways - CEO
Go ahead, Scott.
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Scott Kirby - US Airways - President
Ray, this is Scott. Deals that are already affirmed in bankruptcy we would
intend to honor. We would also look forward to working with aircraft lessors to
try to identify aircraft lessors who actually are willing and want to take
airplanes back. The world aviation market for aircraft is strong right now much
like we saw in the US Airways/America West merger we were able to come to
consensual deals with virtually everyone on aircraft returns.
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Nov. 15. 2006 / 8:15AM, LCC - US Airways Delta Merger Proposal Conference Call
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Ray Neidl - Calyon Securities - Analyst
Okay. And then finally, you can still do this deal even if Delta management is
hostile because of the premium that you are offering to the unsecured creditors
if they went along, is that your assumption?
--------------------------------------------------------------------------------
Doug Parker - US Airways - CEO
Our assumption is bankruptcy is an open process. The purpose of bankruptcy is to
ensure you get the most value for the creditors. What we have done today is put
an alternative plan out there. We know Delta management is excited about their
stand-alone plan. They've done a lot of work on it and we appreciate that.
We just have an alternative that we think is better. And as I said, this isn't
about us being able to do it better than them. This is value that can't be
created by either one of us independently. It can only be done by putting them
together.
So what we've done is put out an alternative. We actually believe that once they
have a full understanding of how much value we can create and what that does for
their creditors and for their entire team and their employees, they will find us
to be a better alternative too. They haven't had a chance to do that yet. We
look forward to working with them and over time think they will come to that
conclusion.
--------------------------------------------------------------------------------
Ray Neidl - Calyon Securities - Analyst
Okay, good luck on this.
--------------------------------------------------------------------------------
Operator
David Strine, Bear Stearns.
--------------------------------------------------------------------------------
David Strine - Bear Stearns - Analyst
Good morning, gentlemen. With respect to the labor cost offset that you
mentioned being around $100 million. When I have been running through some of
these numbers I was coming to a number several hundred million higher. I was
wondering if you could provide any more color around how you are arriving? I
know you said you are just bringing it to the higher level but when I do that I
get a much higher number. How exactly are you getting to the $100 million labor
cost penalty?
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Doug Parker - US Airways - CEO
I don't know what you are doing but what we did is we just look at each of the
contracts and know what the costs would be up moving to the higher cost
contract. I could only be guessing at why -- if you go just do this on the
straight block hour cost or ASM cost, you are going to miss the seniority
levels, the different seniority levels of the two companies. And my guess is
that's probably what's causing some of your trouble.
--------------------------------------------------------------------------------
David Strine - Bear Stearns - Analyst
Okay. I guess the only contract that exists at Delta is the Alpha?
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Nov. 15. 2006 / 8:15AM, LCC - US Airways Delta Merger Proposal Conference Call
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Doug Parker - US Airways - CEO
Yes, but -- that's true. But they also obviously have other employees and those
employees are getting paid something. And what we've done is go model; we go to
the highest where everyone currently is being paid. And when we do that it --
with a good bit of work come up with a number we came up with which we feel very
good about.
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David Strine - Bear Stearns - Analyst
Okay. And then the second question is sort of leading to what Ray was asking.
Obviously the management team at Delta has a fiduciary duty and responsibility
to maximize value here for all involved. Clearly you guys you value have
demonstrated it quite well with your last transaction. Why do you think that
they can't see the same value that you are seeing?
--------------------------------------------------------------------------------
Doug Parker - US Airways - CEO
I don't know what it is. Again, we haven't sat down and had the opportunity to
share it with them. Really probably a better question for them --
--------------------------------------------------------------------------------
David Strine - Bear Stearns - Analyst
Well Doug, you sent them a letter months ago explaining these similar issues,
right?
--------------------------------------------------------------------------------
Doug Parker - US Airways - CEO
We explained the synergies and what they said is you know we are working -- we
are dedicated on our stand-alone and we want to keep moving on the stand-alone.
We believe we have an alternative that is better and we think it's important
that the creditors see that.
--------------------------------------------------------------------------------
David Strine - Bear Stearns - Analyst
The creditors committee will make the decision.
--------------------------------------------------------------------------------
Doug Parker - US Airways - CEO
We've made it much more formal now than just a request for a meeting. We called
them and said okay, we will put our money where our mouth is. We have committed
financing. We will get this done and we're going to put a very attractive offer
out there which we think is compelling to show that indeed we are extremely
serious about this and this alternative we believe is much more compelling than
a stand-alone plan. And the creditors will see that and again I think the
management and employees at Delta will come to see it as well once we get a
chance to sit down and work with them.
--------------------------------------------------------------------------------
David Strine - Bear Stearns - Analyst
Okay. And last question, when you mentioned that your hope would be to get the
deal done before Delta emerges from bankruptcy and if that -- if you weren't
able to do that then you could potentially lose up to half of the synergies. And
then earlier in the call you referenced that much of that would come through the
restructuring of leases. Other than leases, is there anything else that you
could lose if you weren't able to do it before the emergence?
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Nov. 15. 2006 / 8:15AM, LCC - US Airways Delta Merger Proposal Conference Call
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Doug Parker - US Airways - CEO
Well, again, other than leases and I don't just want to dismiss that, that's
enormous. And we're talking about aircraft leases there because it would be
much, much harder to get to optimize the route networks if you didn't have the
ability to return aircraft. That is a very big one. But in addition to answer
your question, in addition to that, we learned through our last merger that
bankruptcy gave us the opportunity to go through and renegotiate every single
one of our contracts at both airlines. Because we had the opportunity to reject
one of them and pick someone new and that allowed us a tremendous amount of
leverage that we wouldn't have -- which you don't have once you come out.
So we had a lot of contract savings that are non aircraft contracts, just
operating contracts where we saw very large synergy benefits on the cost side
that we would be able to realize here that are in our cost synergy estimate that
we don't believe we'd be able to get if we waited till after they emerged.
--------------------------------------------------------------------------------
David Strine - Bear Stearns - Analyst
Thank you very much.
--------------------------------------------------------------------------------
Operator
(OPERATOR INSTRUCTIONS) Kevin Crissey, UBS.
--------------------------------------------------------------------------------
Kevin Crissey - UBS - Analyst
Good morning, everybody. I wanted to ask you, would you be surprised if there
was a counteroffer from one of your competitors who has been openly interested
in mergers? And would this be your top end offer?
--------------------------------------------------------------------------------
Doug Parker - US Airways - CEO
We put together a proposal that we think is extremely compelling to our
shareholders and to their creditors. And that is what we are focused on. Would
we be surprised if someone came in? In this business we're not surprised by
anything anymore. So we shall see. But we welcome the opportunity for people to
scrutinize this offer and that is actually what we are asking -- that's all were
asking for is a chance to get a day in front of the creditors and let them have
let them have their chance to understand what the real value we're putting
forward here. And we believe once we have a chance to do that this offer will
prevail over any other plan.
--------------------------------------------------------------------------------
Kevin Crissey - UBS - Analyst
Okay. And I guess the second question would be, the last merger you did was more
I'd say the economy was looking at bit stronger than it is say now. What is your
counter to the argument that airlines typically merge at the end of a cycle and
not typically a bad thing?
--------------------------------------------------------------------------------
Unidentified Company Representative
David, what we would say is one, I think the economy it appears remains pretty
strong from all the data that we can see certainly passenger demand for airlines
remain strong. But in any event, because we will be generating $1.65 billion in
synergies in any economic situation this is a better result for both US Airways
and for Delta because we'll be able to generate the $1.65 billion in synergies
that will come whether the economy is strong or weak. So we are better
regardless of what your economic assumption is.
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Kevin Crissey - UBS - Analyst
Okay, thank you very much.
--------------------------------------------------------------------------------
Operator
Helane Becker, Benchmark Brokerage.
--------------------------------------------------------------------------------
Helane Becker - Benchmark - Analyst
Thank you very much, operator. Most of my questions were answered. Doug, just
one question. Have you -- I know you've taken this to the creditors now and
sort of opened it up and asked for their response but have you talked
preliminary to anybody at DOJ or sort of started that ball rolling?
--------------------------------------------------------------------------------
Doug Parker - US Airways - CEO
Helene, what we've done is we've done a lot of work with Antitrust Council who
is Fried Frank who is very, very good at this. It is upon that that we base our
belief that there are no antitrust issues that can't be resolved. We will
obviously be in very -- in a lot of contact with regulatory officials but that
process doesn't really start until today.
--------------------------------------------------------------------------------
Helane Becker - Benchmark - Analyst
Okay. And is there anything in the Star Alliance contract that makes that more
attractive than Sky Team or is it -- how will you resolve that I guess is the
question?
--------------------------------------------------------------------------------
Unidentified Company Representative
Well, that is a high-class problem for us. We have the option of two
outstanding alliances between Star Alliance and Sky Team and we will work with
our partners in each of those two alliances and make a decision at some point
down the road. But it's two great options to choose from.
--------------------------------------------------------------------------------
Helane Becker - Benchmark - Analyst
Okay, thanks. Congratulations and good luck.
--------------------------------------------------------------------------------
Operator
Gary Chase, Lehman Brothers.
--------------------------------------------------------------------------------
Gary Chase - Lehman Brothers - Analyst
Good morning, guys. I apologize if I missed some of the prepared remarks that
you made us a little bit busy this morning. Just in terms of process, let's
assume -- I was told I've not seen it that Delta has already issued some kind
of statement that they are not receptive to this. They've got plan exclusivity
until February 15th, as I understand it. Presumably you would file a competing
plan around that timeframe. I guess just a number of questions around that.
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Nov. 15. 2006 / 8:15AM, LCC - US Airways Delta Merger Proposal Conference Call
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In the event that Delta tries to emerge independently and I apologize if I've
not seen it in the release, but does your offer change? Is it predicated on
consummating this transaction before the bankruptcy? And then secondarily, the
timing seems a little tough especially when you talk about tweaking the leases
and doing some other things. If you are not going to be able to get started on
that until February 15th, what ends up happening with that first half timing?
--------------------------------------------------------------------------------
Doug Parker - US Airways - CEO
Let me try all these. First off, what was the first half of the question?
--------------------------------------------------------------------------------
Gary Chase - Lehman Brothers - Analyst
The first half was just procedurally what happens here? Delta is not receptive,
let's make that assumption. On February 15th, they file their plan. You file a
competing plan with the court to try to make the argument the creditors should
opt for yours. Am I understanding that right?
--------------------------------------------------------------------------------
Doug Parker - US Airways - CEO
What we really think is going to happen here is and is why we did this way.
Actually now I remember the first half of your question that I did want to get
to which is you said is it contingent upon doing it before bankruptcy?
Absolutely. As I said I guess you missed the prepared remarks, but we think as
much as half of the synergies go away if we do it after they emerge. So that
means a tremendous amount of the value goes away.
So this only makes sense at these levels to do it as they emerge. As a result,
we think the right way to do this is to get their proposal out now and we
believe as the creditors see this proposal -- if you take a look at what the
bonds are doing already today it looks like the creditors are nicely in favor of
this. They will !think want to talk to us about an alternative proposal which is
all we want to do and talk about an alternative.
So long as were afforded the opportunity to do that, there will be plenty of
time to get this done on the timeline we laid out. We've got the US Airways
merger, the US Airways/America West from the time we announced till the time we
closed was just over four months.
--------------------------------------------------------------------------------
Gary Chase - Lehman Brothers - Analyst
Okay. Last time you did this or I should say in the America West/US Airways
merger a lot of capacity ended up coming out of the industry, industrywide we're
in a very different situation. People were really stressed particularly on the
East Coast where a lot of capacity came out. Do you expect a lot of backfilling
in the capacity that you take out of this transaction?
--------------------------------------------------------------------------------
Unidentified Company Representative
Gary, my expectation would be at an industry level that no we wouldn't see that.
You have seen a little bit of bias recently towards carriers pulling down their
growth plans. Still growth next year but pulling them down. So I think would
come -- it would be industry capacity that got reduced from where it currently
stands. And again, as the airlines that produces capacity the benefits of that
in terms of RASM would accrue disproportionately to US Airways and as you saw on
Doug's prepared slides, we've outperformed the industry by about 8 points this
year at US Airways. But that is because we went through the merger and got the
synergies from the merger. So we would for ourselves anticipate a similar
reaction.
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FINAL TRANSCRIPT
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Nov. 15. 2006 / 8:15AM, LCC - US Airways Delta Merger Proposal Conference Call
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Gary Chase - Lehman Brothers - Analyst
Okay so other than shuttle which you are talking about divesting you would
expect most of that capacity ends up staying out which obviously accrues to your
benefit, is that --?
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Unidentified Company Representative
Correct.
------------------------------------------------------------------------------
Gary Chase - Lehman Brothers - Analyst
Okay. Any issues about network structure just in the -- you know you'll have
Charlotte and Atlanta, Phoenix, Vegas, Salt Lake City. Is the plan to make -- to
create some focus cities there or obviously you're going to serve all those
destinations, how does the network restructuring look with hubs that are in
close to one another?
--------------------------------------------------------------------------------
Unidentified Company Representative
Well, we think we have a very complementary route network. As Doug said, we will
maintain service to all U.S. destinations. While we will reduce capacity by 10%,
we will continue to have a significant presence in all of our existing hubs and
focus cities. A lot of what we will be doing is reducing frequency in markets
that are largely connecting markets that really don't affect the local markets
very much. Short haul markets as an example where there is a lot of connecting
traffic and we can serve that more efficiently over one of the two hubs where
they are close geographic proximity.
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Gary Chase - Lehman Brothers - Analyst
Okay. Fleet issues, Scott, you are moving toward Airbus, Delta obviously not
in that camp. What are your thoughts going forward about how the fleet issues
work? Would you maintain a separate fleet? What you work toward one?
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Scott Kirby - US Airways - President
Well, I wouldn't characterize us as being in the Airbus camp today. We have a
number of the 737s and 757s and in fact are working with Boeing and they been
extremely helpful in working with us on a replacement aircraft order. We look
forward to working with both Boeing and Airbus going forward.
I'd also say that on our fleets, our fleet sizes are so large that we don't
really have any inefficiencies here. The one place arguably that we have
inefficiencies is the wide body 777 and A330s where we each have about ten of
those two aircraft types and they are a bit redundant. Everywhere else the
fleets are large enough that we aren't concerned about different fleet types.
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Gary Chase - Lehman Brothers - Analyst
Okay, thank you very much, guys.
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Operator
(OPERATOR INSTRUCTIONS) Mark Streeter, JPMorgan.
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Mark Streeter - JPMorgan - Analyst
Hi, gentlemen. Scott, really want to drill down just a little bit more on the
aircraft issue. You mentioned that affirmed aircraft deals will be reaffirmed.
And our interesting is that for Delta their [EETC's] and have been already
affirmed in bankruptcy and most of the ETC aircraft have been affirmed or
either recut. So are you saying that you will go and recut deals that Delta
has already affirmed or recut in bankruptcy? I just want to make sure we're
clear with your thought process here.
--------------------------------------------------------------------------------
Scott Kirby - US Airways - President
Without getting myself too far astray on the specifics of individual leases in
bankruptcy law, the way right bankruptcy works, deals that are already
affirmed we won't be able to change. However, there are far and away enough
aircraft deals that aren't affirmed that we can still address. And
additionally as we found in the US Airways/America West merger there are a
number of aircraft lessors, some of whom may have committed deals already who
are willing to take aircraft out and move them to other parts of the world
given the strong demand for aircraft in Asia. So we are confident that we can
get to the 10% capacity reduction that we've outlined.
--------------------------------------------------------------------------------
Mark Streeter - JPMorgan - Analyst
I'm wondering if you can talk a little bit about your regional feed and maybe
what to the combined companies' regional jet strategy would be going forward?
--------------------------------------------------------------------------------
Scott Kirby - US Airways - President
Well, we aren't disclosing all of the specifics today because we need to talk to
all of our existing regional partners and some of the new partners that we would
add at Delta. But a portion of our 10% capacity reduction is an assumed capacity
reduction in 50-seat regional jets.
--------------------------------------------------------------------------------
Mark Streeter - JPMorgan - Analyst
Got you. And then finally have you spoken to Boeing or Airbus about specifically
about your refleeting needs about them providing any capital to the merged
entity? Or any sort of agreement similar to what you did with Airbus with the US
Airways/America West merger?
--------------------------------------------------------------------------------
Scott Kirby - US Airways - President
We haven't spoken to them yet. We look forward to talking to both of them in the
very near future. While we might talk to them about that the fact that we've
already been able to raise $7.2 billion in committed financing from Citigroup
means that we probably have less pressure in this merger than we did in the last
merger to raise vendor financing. That was successful the last time around but
the success of that merger I think has demonstrated that this works and so we
may be able to get more pure financial -- well we already have gotten more pure
financial investors committed to the deal. So it might be a nice opportunity but
it is certainly not necessary.
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Mark Streeter - JPMorgan - Analyst
Great. Thank you very much.
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FINAL TRANSCRIPT
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Nov. 15. 2006 / 8:15AM, LCC - US Airways Delta Merger Proposal Conference Call
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Doug Parker - US Airways - CEO
Guys, we hate to do this but we've got as you might imagine other things we have
to go run and do. One of those is we're doing a presentation here today at the
Citigroup conference. So I think we have time for two more.
--------------------------------------------------------------------------------
Operator
Daniel McKenzie, Credit Suisse.
--------------------------------------------------------------------------------
Daniel McKenzie - Credit Suisse - Analyst
Good morning, thanks. You mentioned that some of the capacity would be taken
out at the regionals. Can you share how much capacity will be taken out at the
main line versus the regional level?
--------------------------------------------------------------------------------
Scott Kirby - US Airways - President
We haven't disclosed that yet and while we have modeling assumptions for that,
we really need to work with Delta on due diligence in order to get to the exact
allocation. So until we do that, we don't want to talk about it publicly.
--------------------------------------------------------------------------------
Daniel McKenzie - Credit Suisse - Analyst
Okay, I see. And then beyond separately, beyond revenues add a wrinkle to simply
looking a DOT revenues for the shuttle, can you share what US Airways shuttle
revenues are? What you believe Delta's revenues would be in the shuttle?
--------------------------------------------------------------------------------
Scott Kirby - US Airways - President
The attorney is looking at me and shaking her head. I'll say no.
--------------------------------------------------------------------------------
Daniel McKenzie - CreditSuisse - Analyst
Okay.
--------------------------------------------------------------------------------
Doug Parker - US Airways - CEO
The attorney is our general counsel.
--------------------------------------------------------------------------------
Daniel McKenzie - Credit Suisse - Analyst
Okay, I will try one last one here.
--------------------------------------------------------------------------------
Scott Kirby - US Airways - President
You can that through DOT filings, a pretty accurate representation.
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Nov. 15. 2006 / 8:15AM, LCC - US Airways Delta Merger Proposal Conference Call
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Daniel McKenzie - Credit Suisse - Analyst
Okay, all right, fair enough. And then you had mentioned that you'd looked at a
number of deals, Delta of course being the most compelling possibility for you.
What was the second best possibility for you if you can share any thoughts on
that?
--------------------------------------------------------------------------------
Doug Parker - US Airways - CEO
Dan, we've said a number of things and this is by far the most compelling and
the one that we are focused on. As to what is second I don't even know that we
know. The real answer is we're excited about this one and this creates more
value for our shareholders than any other opportunity that we looked at.
-------------------------------------------------------------------------------
Daniel McKenzie - Credit Suisse - Analyst
Okay, good luck. Thanks a lot.
--------------------------------------------------------------------------------
Operator
Bill Mastoris, Bank of New York.
--------------------------------------------------------------------------------
Bill Mastoris - Bank of New York - Analyst
Thank you. I'd like to go back to the aircraft leases and I apologize because
several questions have been asked about this. Scott, are you saying that what
you would do with the exception of the wide bodies is you would retain most of
the Delta narrow body fleets? And if you can subsegment that in other words if
you are not going to do it, can you say that you will keep the newer generation?
And maybe talk to aircraft lessors about maybe rejecting or recutting our maybe
taking back some deals about some of the older 737s which don't necessarily fit?
I'm not exactly sure or maybe another way to do it would be to say what types of
aircraft do you plan to retain in Delta's fleet?
--------------------------------------------------------------------------------
Scott Kirby - US Airways - President
I apologize in advance for the nonanswer I'm about to give. But much like our
conversation about regional jets, that is a -- those are specifics and details
that until we work with Delta on due diligence and importantly work with the
aircraft lessor community on who really wants airplanes back that we just can't
answer. We are flexible on those points. And it depends on what some of the
other constituents' views are what ultimately winds up happening.
We are comfortable that we can get to the 10% capacity reduction. We're
comfortable that our numbers are conservative with respect to the cost of the
type of aircraft that we will fly and so the synergy now is conservative and we
can at least achieve that. But we need to work with our other constituents to
get to the specifics.
--------------------------------------------------------------------------------
Doug Parker - US Airways - CEO
Bill, this is Doug. All I would add to that is when Scott says that, we are not
saying we know but we won't tell you. The issue is we don't know yet and this --
what you are asking about is optimizing a fleet which we could do without the
benefit of talking to lessors and we would have it wrong. The way we did this
the last time we went and modeled what we thought the fleet might look like and
we ended up with something dramatically different because a number of lessors
were very willing to work with us to have their airplanes leave the United
States.
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--------------------------------------------------------------------------------
We ended up with airplanes that we might have assumed were going to stay
leading. So a long way of me saying we believe that we will be able to work
with the lessors to have aircraft leave in a way that is not overly adversarial
to them and accrues to our benefit by not having too many airplanes in the
system.
So that is part of what we needed to go do. It's just that we've done it
before, we know how it works and we can't tell you right now what the fleet is
going to look like to that level of detail because it's going to much more
matter about who wants to work to see their airplanes stay versus who wants to
have theirs leave.
--------------------------------------------------------------------------------
Bill Mastoris - Bank of New York - Analyst
What I'm trying to get to also is that if you do end up reaching an agreement
with certain aircraft lessors, chances are they are going to want a much
larger deficiency claim. So I assume the 16 billion that you threw out which
was predicated on the filing that that actually could grow?
--------------------------------------------------------------------------------
Unidentified Company Representative
Our claim estimate, the 16 billion importantly said the claims will ultimately
be 16 billion I thinkthere is a wide range of estimates and we in our analysis
have made provisions for what we assume. Again there's a lot of assumptions in
what they are that the claims will ultimately be about 16 billion.
--------------------------------------------------------------------------------
Bill Mastoris - Bank of New York - Analyst
Okay. This is after maybe renegotiating a couple more leases or agreeing to
larger deficiency claims after you take back aircraft?
------------------------------------------------------------------------------
Doug Parker - US Airways - CEO
Absolutely.
------------------------------------------------------------------------------
Bill Mastoris - Bank of New York - Analyst
Okay. Thank you very much.
--------------------------------------------------------------------------------
Doug Parker - US Airways - CEO
All right. We've got to wrap it up. I'm sorry for anybody that had questions
that we didn't get to. We are obviously -- we will be in contact and more to
come. Any questions give any of us a call. We will do our best to get back to
you as quickly as we can. Thanks for your interest and stay tuned.
--------------------------------------------------------------------------------
Operator
This does conclude today's conference. Thank you for your participation.
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of 1995. These forward-looking statements may be identified by words such as
"may," "will," "expect," "intend," "indicate," "anticipate," "believe,"
"forecast," "estimate," "plan," "guidance," "outlook," "could," "should,"
"continue" and similar terms used in connection with statements regarding the
outlook of US Airways Group, Inc. (the "Company"). Such statements include, but
are not limited to, statements about expected fuel costs, the revenue and
pricing environment, the Company's expected financial performance and
operations, future financing plans and needs, overall economic conditions and
the benefits of the business combination transaction involving West and the
Company or potential business combination transaction involving Delta Air Lines,
Inc. ("Delta") and the Company, including future financial and operating results
and the combined companies' plans, objectives, expectations and intentions.
Other forward-looking statements that do not relate solely to historical facts
include, without limitation, statements that discuss the possible future effects
of current known trends or uncertainties or which indicate that the future
effects of known trends or uncertainties cannot be predicted, guaranteed or
assured. Such statements are based upon the current beliefs and expectations of
the Company's management and are subject to significant risks and uncertainties
that could cause the Company's actual results and financial position to differ
materially from the Company's expectations. Such risks and uncertainties
include, but are not limited to, the following: the impact of high fuel costs;
significant disruptions in the supply of aircraft fuel and further significant
increases to fuel prices; the Company's high level of fixed obligations and its
ability to obtain and maintain financing for operations and other purposes; the
Company's ability to achieve the synergies anticipated as a result of the merger
with America West Holdings Corporation and the potential business combination
transaction involving Delta and to achieve those synergies in a timely manner;
the Company's ability to integrate the management, operations and labor groups
of the Company and America West Holdings Corporation and the Company and Delta;
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 potential impact of any failure or disruption of
these systems; the potential impact of future significant operating losses;
changes in prevailing interest rates; the Company's ability to obtain and
maintain commercially reasonable terms with vendors and service providers and
its reliance on those vendors and service providers; security-related and
insurance costs; changes in government legislation and regulation; the Company's
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 the Company's hub airports; weather
conditions; the Company's ability to obtain and maintain any necessary financing
for operations and other purposes; the Company's ability to maintain adequate
liquidity; the Company's ability to maintain contracts that are critical to its
operations; the Company's ability to operate pursuant to the terms of its
financing facilities (particularly the financial covenants); the Company's
ability to attract and retain customers; the cyclical nature of the airline
industry; the Company's ability to attract and retain qualified personnel;
economic conditions; and other risks and uncertainties listed from time to time
in the Company's reports to the Securities and Exchange Commission. There may be
other factors not identified above of which the Company is not currently aware
that may affect matters discussed in the forward-looking statements, and may
also cause actual results to differ materially from those discussed. All
forward-looking statements are based on information currently available to the
Company. The Company assumes no obligation to publicly update or revise any
forward-looking statement to reflect actual results, changes in assumptions or
changes in other factors affecting such estimates. Additional factors that may
affect the future results of the Company are set forth in the section entitled
"Risk Factors" in the Company's Quarterly Report on Form 10-Q for the period
ended September 30, 2006, which is available at www.usairways.com.
ADDITIONAL INFORMATION
----------------------
Subject to future developments, US Airways may file with the United States
Securities and Exchange Commission a registration statement to register the US
Airways shares which would be issued in the proposed transaction and/or a proxy
statement with respect to the proposed transaction. Investors and security
holders are urged to read the registration statement and/or proxy statement
(when and if available) and any other relevant documents filed with the
Commission, as well as any amendments or supplements to those documents, because
they will contain important information. Investors and security holders may
obtain a free copy of the registration statement and/or proxy statement (when
and if available) and other relevant documents at the Commission's Internet web
site at www.sec.gov. The registration statement and/or proxy statement (when and
if available) and such other documents may also be obtained free of charge from
US Airways by directing such request to: US Airways Group, Inc., 111 West Rio
Salado Parkway, Tempe, Arizona 85281 Attention: Chief Legal Officer.