================================================================= US AIRWAYS BANKRUPTCY NEWS Issue Number 4 ----------------------------------------------------------------- Copyright 2002 (ISSN XXXX-XXXX) August 27, 2002 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- US AIRWAYS BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtor's cases. New issues are prepared by Geoff J. Bailey, Frauline Sinson-Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of US AIRWAYS GROUP BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00045] DEBTORS' 1ST MOTION TO EXTEND DEADLINE TO FILE SCHEDULES [00046] DEBTORS' MOTION TO SIGN BANK OF AMERICA PURCASHING PACT [00047] DEBTORS' APPLICATION TO EMPLOY O'MELVENY AS LABOR COUNSEL [00048] DEBTORS' APPLICATION TO EMPLOY LOGAN AS CLAIMS AGENT [00049] DEBTORS' MOTION TO REJECT 57 AIRCRAFT LEASES [00050] DEBTORS' MOTION TO PAY PREPETITION TAXES [00051] DEBTORS' MOTION TO REJECT 25 REAL PROPERTY LEASES [00052] DEBTORS' APPLICATION TO EMPLOY MCGUIREWOODS AS CO-COUNSEL [00053] DEBTORS' APPLICATION TO HIRE PwC AS ADVISOR & ACCOUNTANT [00054] DEBTORS' APPLICATION TO EMPLOY KPMG AS TAX ADVISORS [00055] DEBTORS' MOTION FOR INVESTMENT PROPOSALS & PLAN SPONSOR [00056] DEBTORS' MOTION TO RESTRICT CLAIM TRADING & PRESERVE NOLs [00057] U.S. TRUSTEE APPOINTS UNSECURED CREDITORS' COMMITTEE [00058] US AIRWAYS WILL CONTINUE SERVICE TO 203 CITIES [00059] US AIRWAYS EXTENDS SHUTTLE GUARANTEE PROGRAM [00060] US AIR REJECTS TAKEOVER BID BY MARVIN DAVIS [00061] TWU TRAINING INSTRUCTORS APPROVE RESTRUCTURING AGREEMENT [00062] TRAINING SPECIALISTS RATIFY RESTRUCTURING PROPOSAL KEY DATE CALENDAR ----------------- 08/11/02 Voluntary Petition Date 08/31/02 Deadline to provide Utilities with adequate assurance 09/25/02 Deadline for filing Schedules of Assets and Liabilities 09/25/02 Deadline for filing Statement of Financial Affairs 09/25/02 Deadline for filing Lists of Leases and Contracts 10/10/02 Deadline to make decisions about lease dispositions 11/09/02 Deadline to remove actions pursuant to F.R.B.P. 9027 12/09/02 Expiration of Debtors' Exclusive Plan Proposal Period 02/07/04 Expiration of Debtors' Exclusive Solicitation Period 08/10/04 Deadline for Debtors' Commencement of Avoidance Actions Organizational Meeting with UST to form Committees Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 USC Sec. 341 ----------------------------------------------------------------- [00045] DEBTORS' 1ST MOTION TO EXTEND DEADLINE TO FILE SCHEDULES ----------------------------------------------------------------- Section 521(1) of the Bankruptcy Code and Rule 1007 of the Federal Rules of Bankruptcy Procedure require all debtors to prepare comprehensive lists of their creditors and equity security holders, detailed schedules of assets and liabilities, schedules of current income and expenditures, a schedule of all executory contracts and unexpired leases to which they are a party and a statement of financial affairs. If a debtor can't or won't disclose this information to the Court and creditors, the sanction is dismissal of the bankruptcy case. John Wm. Butler, Esq., at Skadden, Arps, Slate, Meagher & Flom, assures Judge Mitchell that the Debtors take these disclosure obligations seriously. Mr. Butler also reminds Judge Mitchell that the Debtors provide regularly scheduled service at over 200 airports in the United States, Canada, Mexico, France, Germany, Italy, Spain, Belgium, the United Kingdom and the Caribbean. During 2001, the Debtors enplaned 56,000,000 passengers, making it the seventh largest air carrier in the United States -- as ranked by revenue passenger miles. Thus, the Debtors have tens of thousands of creditors and other parties-in-interest. Given the size and complexity of the Debtors' operations, and since prepetition invoices have not yet been received or entered into its financial systems, the Debtors have not had the opportunity to gather the necessary information to prepare and file their Schedules and Statements. Accordingly, the Debtors sought and obtained a Court order extending their time to file the Schedules and Statements until September 25, 2002. ----------------------------------------------------------------- [00046] DEBTORS' MOTION TO SIGN BANK OF AMERICA PURCASHING PACT ----------------------------------------------------------------- By this motion, the Debtors seek the Court's authority to enter into a Corporate Purchasing Card Agreement with Bank of America. John Butler, Esq., at Skadden, Arps, Slate, Meagher & Flom, explains that the Debtors will receive a revolving line of credit from Bank of America under the Card Agreement. The Debtors' personnel will be able to access the credit line by using charge cards to purchase, on credit, goods and services incidental to business activities. Material terms of the Card Agreement include: (a) Term: The Card Agreement will continue until terminated by either party upon prior written notice contemplated to be 30 to 60 days; (b) Late Payment Interest: The late payment interest charge will be the prime rate published in the Money Rates section of The Wall Street Journal -- adjusted on the first day of each calendar month -- plus a number of basis points; (c) Charge Limits: The Card Agreement imposes an aggregate charge limit of up to $5,000,000 subject to adjustment in an amount less than $5,000,000. Each card will have preset per-card charge limits; (d) Fees: The Debtors may incur charges under the Card Agreement based upon usage. These fees may include late payment fees, periodic finance charges, cash advance fees and returned payment fees; (e) Collateral: The obligations under the Card Agreement will be secured by cash collateral of up to 110% of the effective aggregate charge limit, pursuant to a Cash Collateral Account Agreement between US Airways, Inc. and Bank of America. The Debtors agree to deposit the cash collateral in a special cash collateral account with Bank of America, which is under the sole control of Bank of America. Bank of America will hold the Account as security for the Debtors' obligations and may draw funds from the Account should the Debtors fail to make timely payments under the Card Agreement; and (f) Representations and Warranties: The Card Agreement contains representations and warranties customarily found in purchasing card agreements for similar financings. Mr. Butler emphasizes that immediate approval of the Card Agreement and authorization to use the purchasing cards is critical to the successful launch of these Chapter 11 cases. The Debtors intend to rely on credit availability to make emergency payments in the initial stages of these proceedings. Absent a ready and available source of funds, the Debtors may be unable to make necessary payments in a timely and efficient manner. Thus, the Debtors contend that the purchasing card program serves to: -- avoid immediate and irreparable harm to the estates, and -- preserve the assets. In addition, the use of purchasing cards will eliminate the need for numerous petty cash allotments and, more importantly, provide a control mechanism to ensure that purchases of incidental goods and services are appropriate, authorized and properly recorded. Collateralizing the Card Agreement is a condition precedent to its execution and Bank of America, as well as other institutions that maintain similar purchasing card programs, would not provide credit on an unsecured basis. The Debtors believe that collateralization of the Card Agreement is appropriate and does not unduly burden the Debtors or their estates. Mr. Butler reminds Judge Mitchell that the Court may authorize the Debtors to enter into the Card Agreement under Section 364(c)(2) of the Bankruptcy Code. This Section provides that a court may authorize the obtaining of credit secured by a lien on property of the estate that is not otherwise subject to a lien if the Debtors are unable to obtain unsecured credit allowable as an administrative expense under Section 503(b)(1) of the Bankruptcy Code. ----------------------------------------------------------------- [00047] DEBTORS' APPLICATION TO EMPLOY O'MELVENY AS LABOR COUNSEL ----------------------------------------------------------------- US Airways Group sought and obtained the Court's authority to employ O'Melveny & Myers as special labor, regulatory, antitrust and litigation counsel. O'Melveny has performed similar work in the past for US Air and is familiar with its businesses and operations. According to US Air CEO David N. Siegel, O'Melveny is "especially attuned to the unique labor, regulatory and antitrust issues that arise in the airline industry. Several members of the firm have extensive experience in airline law and its interplay with restructuring and bankruptcy law." Mr. Siegel assures the Court that the employment of O'Melveny will enhance, not duplicate, the employment of Skadden, Arps, Slate, Meagher & Flom, as well as other professionals retained in these cases. The O'Melveny attorneys expected to be responsible for matters in these cases and their hourly rates are: Labor Matters ------------- Robert Siegel $600 Tom Jerman $540 Chris Hollinger $460 Robert E. Winter $355 Rachel A. Shapiro $320 Regulatory Matters ------------------ Joel Burton $600 Patrick Rizzi $390 Benjamin Bradshaw $355 Antitrust and Litigation Matters -------------------------------- Henry Thumann $660 Tad Allen $540 Neil Gilman $390 O'Melveny will automatically reduce all fees and expenses by 10%. Specifically, O'Melveny will provide these services: 1) Advertising: Consult, advise and prepare regulatory pleadings and comments on compliance with advertising regulations; 2) Regulatory Matters: Review, consult, advise and prepare regulatory pleadings on foreign and domestic aviation issues, including applications, renewals, responses to regulatory proceedings, inquiries, investigations, enforcement actions, legislative matters and rulemakings, industry research and analysis; 3) Consumer Issues: Consult, advise and prepare regulatory pleadings and comments on marketing and customer service issues, including regulatory compliance, inquiries and investigations; 4) High Density Rule: Consult, advise and prepare regulatory pleadings and comments on airport issues, including slots and airport access; 5) International Route Proceedings: Prepare and analyze regulatory pleadings concerning international route authorities, operations and bilateral/multilateral negotiations and agreements; 6) Domestic and International Codeshare Agreements and Alliances: Consult, advise and prepare regulatory pleadings and comments on codeshare agreements and global alliances; 7) Express and Commuter Issues: Consult, advise and prepare regulatory pleadings and comments concerning the creation, organization and operation of express affiliates and subsidiaries: 8) Labor: Provide advice in connection with labor and employment issues related to bankruptcy; 9) Section 1113: Prepare and prosecute motions pursuant to Section 1113 of the Code; 10) CBAs: Participate in negotiations of collective bargaining agreements with US Air's labor unions; and 11) Other Matters: Assist with additional labor or employment matters as Debtors direct. Robert Siegel, Esq., asserts that O'Melveny does not hold or represent any interest adverse to the Debtors or any other party- in-interest in relation to these Chapter 11 cases. Mr. Siegel reports that in the 90 days leading up to the Petition Date, the Debtors paid O'Melveny $2,942,180 in fees and expenses for advice and legal services, plus $850,000 as an "evergreen" retainer. ----------------------------------------------------------------- [00048] DEBTORS' APPLICATION TO EMPLOY LOGAN AS CLAIMS AGENT ----------------------------------------------------------------- David N. Siegel, US Air's Chief Executive Officer, tells the Court that the Debtors have identified over 100,000 creditors, potential creditors and other parties-in-interest that should be sent notices, including notice of the commencement of the Chapter 11 cases, and voting documents. The office of the Clerk of the Bankruptcy Court for the Eastern District of Virginia, Alexandria Division, is not equipped to efficiently and effectively docket and maintain the extremely large number of proofs of claim that will be filed. The sheer magnitude of the Debtors' creditor body makes it impracticable for the Clerk's Office to undertake that task and send notices to the creditors and other parties-in- interest. Additionally, the Debtors expect that the solicitation of votes on their reorganization plan will necessitate forwarding ballots, a disclosure statement, reorganization plan and related solicitation materials to many thousands of creditors, as well as the accurate recordation and tabulation of the numerous ballots that are returned. Mr. Siegel contends that the most effective and efficient manner to process proofs of claim and documents related to a reorganization plan is for an independent third party to act as an agent of the Court. Accordingly, the Debtors sought and obtained the Court's authority to employ Logan & Company as claims and noticing agent to: (a) serve as the Court's notice agent to mail notices to the estates' creditors and other parties-in-interest; (b) provide computerized claims, objection and balloting database services; and (c) provide expertise, consultation and assistance in claim and ballot processing and the dissemination of administrative information in the Debtors' Chapter 11 cases. Logan is a data processing firm that specializes in noticing, claims processing, and other administrative tasks in Chapter 11 cases. At the Debtors' request, Logan will send out designated notices, maintain claims files and a claims register, and act as voting agent. The Debtors believe that this assistance will expedite service of Rule 2002 notices, streamline the claims administration process, and permit the Debtors to focus on their reorganization efforts. Logan is well qualified to provide these services, expertise, consultation and assistance. Logan has assisted and advised numerous Chapter 11 debtors in connection with noticing, claims administration and reconciliation, and administration of plan votes. Specifically, the Debtors anticipate that Logan will perform these services as Claims and Noticing Agent, at the request of the Debtors or the Clerk's Office: (a) Prepare and serve required notices in these Chapter 11 cases, including: -- A notice of the commencement of these Chapter 11 cases and the initial meeting of creditors under Section 341(a) of the Bankruptcy Code; -- A notice of the claims bar date; -- Notices of objections to claims; -- Notices of any hearings on a disclosure statement and confirmation of a plan or plans of reorganization; and -- Other miscellaneous notices as the Debtors or the Court may deem necessary or appropriate for an orderly administration of these Chapter 11 cases; (b) Within 5 business days after the service of a particular notice, file with the Clerk's Office a certificate or affidavit of service that includes: -- a copy of the notice served, -- an alphabetical list of persons on whom the notice was served, along with their addresses, and -- the date and manner of service; (c) Maintain copies of all proofs of claim and proofs of interest filed in these cases; (d) Maintain official claims registers in these cases by docketing all proofs of claim and proofs of interest in a claims database that includes the following information for each claim or interest asserted: -- The name and address of the claimant or interest holder and any agent, if the proof of claim or proof of interest was filed by an agent; -- The date the proof of claim or proof of interest was received by Logan and/or the Court; -- The claim number assigned to the proof of claim or proof of interest; -- The asserted amount and classification of the claim; -- The applicable Debtor against which the claim or interest is asserted; (e) Implement necessary security measures to ensure the completeness and integrity of the claims registers; (f) Transmit to the Clerk's Office a copy of the claims registers on a weekly basis, unless requested by the Clerk's Office on a more or less frequent basis; (g) Maintain an up-to-date mailing list for all entities that have filed proofs of claim or proofs of interest and make such list available upon request to the Clerk's Office or any party-in-interest; (h) Provide access to the public for examination of copies of the proofs of claim or proofs of interest filed in these cases without charge during regular business hours; (i) Record all transfers of claims pursuant to Rule 3001(e) of the Federal Rules of Bankruptcy Procedure, and provide notice of such transfers as required by Rule 3001(e), if directed by the Court; (j) Comply with applicable federal, state, municipal and local statutes, ordinances, rules, regulations, orders and other requirements; (k) Provide temporary employees to process claims, as necessary; (l) Promptly comply with further conditions and requirements as the Clerk's Office or the Court may at any time prescribe; and (m) Provide other claims processing, noticing, balloting, and related administrative services as may be requested from the Debtors. The Debtors also want Logan to assist them with: (1) the preparation of their schedules, statements of financial affairs, and master creditor lists, and any amendments; (2) the reconciliation and resolution of claims; and (3) the preparation, mailing and tabulation of ballots of certain creditors for the purpose of voting to accept or reject a plan or plans of reorganization. Logan will submit to the Office of the United States Trustee, on a monthly basis, copies of the invoices it submits to the Debtors for services rendered. In return for its services: A. Logan will charge its standard rates for services, expenses and supplies; B. Logan will not increase its prices or rates for a period of 1 year from this agreement date; C. US Air will pay Logan for out-of-pocket expenses for transportation, lodging, meals and related items; D. US Air will advance $50,000 to Logan, which will be applied to the final billing; and E. Logan will submit its invoice to US Air at the end of each calendar month. Any amount not paid within 30 days is subject to a late charge of 1.5% on the amount unpaid, accruing from the invoice date. Logan will charge consulting fees at its customary hourly rates: Principal (Kate Logan) $250 Account Executive Support 165 Court Depositions 200 Statement & Schedule Preparation 200 Programming Support 100 Project Coordinator 105 Data Entry 55 Clerical 35 Ms. Logan assures the Court that neither her Firm nor any employee has any connection with the Debtors, their creditors, or any other party-in-interest. The firm is a "disinterested person," as that term is defined in Section 101(14) of the Bankruptcy Code, Ms. Logan asserts. Furthermore, Ms. Logan adds, the firm does not hold or represent any interest adverse to the Debtors' estates. ----------------------------------------------------------------- [00049] DEBTORS' MOTION TO REJECT 57 AIRCRAFT LEASES ----------------------------------------------------------------- In the third quarter of 2001, US Airways Group announced plans to retire Fokker F-100s, McDonnell Douglas MD-80s and Boeing 737- 200s from their fleet. The Debtors also have an excess of de Havilland Dash 8-100s, which are not being utilized. The Excess Aircraft and their engines are either leased or are owned and subject to mortgages with independent mortgagees. All of the Excess Aircraft and related engines have been or are being taken out of service. By this motion, the Debtors seek the Court's authority: (a) pursuant to Section 365 of the Bankruptcy Code, to reject 57 Aircraft Leases, and (b) pursuant to Section 554 of the Bankruptcy Code, to abandon the Owned Aircraft and Engines. According to John Wm. Butler, Esq., at Skadden, Arps, Slate, Meagher & Flom, the Leased Aircraft and Engines no longer fit into the Debtors' business plan and are no longer utilized. In the case of each Leased Aircraft and Engines, Mr. Butler notes, the leases do not have any marketable value that would benefit the Debtors' estates, making the Leases burdensome. Thus, Mr. Butler asserts, rejection of the Leases is in the best interests of the Debtors' estates and creditors and an exercise of the Debtors' sound business judgment. Furthermore, Mr. Butler relates, the liens against the Owned Aircraft and Engines possessed by the mortgagees exceed their value, leaving no equity for the estates. Consequently, the Owned Aircraft and Engines are burdensome and should be abandoned. The abandonment is "as is, where is" and the Debtors make neither representation nor warranties regarding the abandoned Owned Aircraft and Engines. Section 554 of the Bankruptcy Code provides that: "After notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate." The Debtors have served a notice on each of the Lessors and Mortgagees setting forth their intent to reject or abandon, as the case may be, and authorizing the Lessors and Mortgagees to take possession of their aircraft and engines. Each affected Lessor or Mortgagee will have the right to object to the rejection of the Lease or Mortgage to which it is a party. If no objection is timely filed, the Debtors propose that the Order automatically become final. If a timely objection is filed but overruled, the Order would also automatically be deemed final and effective as of the Petition Date. Mr. Butler explains that this procedure is necessary to balance the due process rights of the Lessors and Mortgagees without unduly exposing any of the Debtors' estates to unwarranted postpetition administrative expenses. Lessors/Mortgagee Airframe Engine ---------- ------ -------- ------- Ameriquest Holdings Boeing 737-200 P&W JT8D-15A Bofa Leasing Corp. Boeing 737-200 P&W JT8D-15A Bofa Leasing Corp. Boeing 737-200 P&W JT8D-15A RR North America Fokker F100 RR Tay Mark 650-15 RR North America Fokker F100 RR Tay Mark 650-15 RR North America Fokker F100 RR Tay Mark 650-15 RR North America Fokker F100 RR Tay Mark 650-15 Boeing Capital MD-81 P&W JT8D Airlease c/o BofA MD-80 P&W JT8D Airlease c/o BofA MD-80 P&W JT8D Airlease c/o BofA MD-80 P&W JT8D Finova Capital MD-82 P&W JT8D Heller Financial MD-82 P&W JT8D Heller Financial MD-82 P&W JT8D Finova Capital de Havilland Dash8-100 P&W 120A BTM Capital de Havilland Dash8-100 P&W 120A BTM Capital de Havilland Dash8-100 P&W 120A BTM Capital de Havilland Dash8-100 P&W 120A Boeing Capital de Havilland Dash8-100 P&W 120A GE Capital Aviation de Havilland Dash8-100 P&W 120A Finova Capital MD DC 9-30 P&W JT8D Finova Capital MD DC 9-30 P&W JT8D Finova Capital MD DC 9-30 P&W JT8D Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau ABN-AMRO Fokker F100 RR Tay Mark 650-15 ABN-AMRO Fokker F100 RR Tay Mark 650-15 CSFB Fokker F100 RR Tay Mark 650-15 Mizuho Bank Fokker F100 RR Tay Mark 650-15 Mizuho Bank Fokker F100 RR Tay Mark 650-15 UBS Warburg Fokker F100 RR Tay Mark 650-15 Barclays Bank Fokker F100 RR Tay Mark 650-15 Barclays Bank Fokker F100 RR Tay Mark 650-15 Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau Kreditanstalt fur Fokker F100 RR Tay Mark 650-15 Wiederaufbau State of Alabama Fokker F100 RR Tay Mark 650-15 Retirement Fund State of Alabama Fokker F100 RR Tay Mark 650-15 Retirement Fund State of Alabama Fokker F100 RR Tay Mark 650-15 Retirement Fund State of Alabama Fokker F100 RR Tay Mark 650-15 Retirement Fund State of Alabama Fokker F100 RR Tay Mark 650-15 Retirement Fund State of Alabama Fokker F100 RR Tay Mark 650-15 Retirement Fund State of Alabama Fokker F100 RR Tay Mark 650-15 Retirement Fund John Hancock Fokker F100 RR Tay Mark 650-15 Mutual Life John Hancock Fokker F100 RR Tay Mark 650-15 Mutual Life Note: RR = Rolls Royce; P&W = Pratt & Whitney; MD = McDonnell-Douglas ----------------------------------------------------------------- [00050] DEBTORS' MOTION TO PAY PREPETITION TAXES ----------------------------------------------------------------- Pursuant to Sections 105(a), 541, and 507(a)(8) of the Bankruptcy Code, US Airways Group seeks the Court's authority to pay prepetition sales, use, transportation and other "trust fund" taxes and obligations. John Wm. Butler, Esq., at Skadden, Arps, Slate, Meagher & Flom, relates that the Debtors: (a) incur use and franchise taxes and collect sales and transportation taxes from their customers, on behalf of various taxing authorities; (b) are responsible for the collection of: (i) an excise tax on the amount paid for domestic air transportation, and (ii) another excise tax on each domestic segment pursuant to Section 4261 of the Internal Revenue Code charged to the Debtors passengers, which if not paid may become a liability of the Debtors; (c) are charged fees, licenses and other similar charges and assessments by various licensing authorities; and (d) collect fees on passenger tickets charged by airports for general Passenger Facilities Charges at the airports. The Taxes, Transportation Taxes, Fees and PFCs are paid to various taxing, licensing and airport Authorities. Prior to the Petition Date, the Debtors established four Special Purpose Trust Funds, in order to facilitate payment and ensure that the funds are segregated from the Debtors' general bank accounts. The Debtors believe that most of the prepetition Taxes, Transportation Taxes, Fees and PFCs have been or will be paid with specifically designated funds deposited in the Special Purpose Trust Funds; however, the Special Purpose Trust Funds may not satisfy some of the Taxes. In this case, the Authorities may cause the Debtors to be audited if the amounts are not paid immediately. Mr. Butler warns that the Authorities may even attempt to suspend the Debtors' business. Audits and disruption in business activities will materially affect the Debtors' reorganization prospects and unnecessarily divert the Debtors' attention away from the successful administration of the Chapter 11 cases. Moreover, the Debtors believe that they do not have any equitable interest in the Taxes, Transportation Taxes, Fees and PFCs. Therefore, the Debtors contend that the Court should approve the payment of the Taxes, Transportation Taxes, Fees and PFCs to the relevant Authorities in the ordinary course of business. Because of the costs that would be involved and the multiple legal bases for granting the relief requested, the Debtors have not conducted an exhaustive survey of all states in which the Taxes, Transportation Taxes, Fees and PFCs are due to determine whether the amounts are deemed "trust fund" taxes in each and every jurisdiction. Nevertheless, these amounts likely constitute so-called "trust fund" taxes, which are required to be collected from third parties and held in trust for payment to the taxing or other appropriate authorities. Mr. Butler relates that most, if not all, of the Taxes are entitled to priority status under Section 507(a)(8) of the Bankruptcy Code. The Debtors' payment now will only affect the timing of the payments and not the amounts to be received. Other creditors and parties-in-interest, therefore, will not be prejudiced if this relief granted. The Debtors' prompt and regular payment will avoid unnecessary governmental actions like a marked increase in state audits, a flurry of lien filings or lift stay motions, and significant administrative problems. Most importantly, Mr. Butler emphasizes that the payments are necessary because, in many states they constitute "trust fund" taxes. "This makes officers and directors of the collecting entity personally liable for the funds," Mr. Butler explains. The potential lawsuits would prove extremely distracting for the Debtors, for the named officers and directors whose immediate and full-time attention to the reorganization process is required, and for this Court, which might be asked to entertain motions seeking injunctions relating to potential state court actions. * * * Understanding the Debtors' concerns, Judge Mitchell grants the Debtors' motion. ----------------------------------------------------------------- [00051] DEBTORS' MOTION TO REJECT 25 REAL PROPERTY LEASES ----------------------------------------------------------------- The Debtors are parties to over 500 leases and subleases of nonresidential real property. John Wm. Butler, Esq., at Skadden, Arps, Slate, Meagher & Flom, tells Judge Mitchell that the Debtors either have terminated or are in the process of terminating operations at numerous locations. By this motion, the Debtors seek the Court's authority to reject 25 real property leases. US Air has terminated business operations at all the premises covered by the 25 Real Property Leases. Clearly, these Real Property Leases no longer serve any benefit to the Debtors. Mr. Butler notes that the Debtors would be able to reduce postpetition administrative costs in rejecting these leases. Location Contract Type --------- -------------- Albany, NY City Ticket Office Lease Charlotte, NC City Ticket Office Lease Daytona Beach, FL Terminal Building Space Reston, VA City Ticket Office Lease Reston, VA City Ticket Office Sublease Herndon, VA Office Lease Herndon, VA Office Sublease Greensboro, NC City Ticket Office Lease Jackson Heights, NY Office Lease Jackson Heights, NY Office Sublease Jackson Heights, NY Office Sublease Orlando, FL City Ticket Office Lease Harrisburg, PA City Ticket Office Lease Virginia Beach, VA City Ticket Office Lease Palm Beach, FL City Ticket Office Lease Bala Cynwyd, PA City Ticket Office Lease Wilmington, DE City Ticket Office Lease Pittsburgh, PA City Ticket Office Lease Richmond, VA City Ticket Office Lease Roanoke, VA City Ticket Office Lease San Juan, Puerto Rico City Ticket Office Lease Tucson, AZ Terminal Building Space Tucson, AZ Terminal Building Space Tucson, AZ Terminal Building Space Tucson, AZ Terminal Building Space According to Mr. Butler, the Debtors evaluated the possibility of assigning or subleasing the Real Property Leases, or in certain instances, attempted to negotiate a buyout of the remaining lease obligation. But these 25 Leases simply have no marketable value beneficial to the Debtors' estates, Mr. Butler says. In addition to their obligation to pay rent under the Real Property Leases, the Debtors may also be obligated to pay for real estate taxes, utilities, insurance and other related charges. The Debtors have examined the costs associated with their obligation to pay rent under the Leases and estimate that the annual net cost is $2,400,000 and the net cost over the remaining life of the Leases is $4,700,000. These figures represent base rent only. The Debtors have determined that the costs constitute an unnecessary drain on its cash resources. Mr. Butler contends that the savings from the rejection of the Real Property Leases will favorably affect the Debtors' cash flow and assist in managing future operations. By rejecting the Real Property Leases now, the Debtors will avoid incurring unnecessary administrative charges for leased premises that provide no tangible benefit to the estates and will play no part in the Debtors' future operations. Mr. Butler assures the Court that no person has actively expressed an interest in purchasing or taking an assignment or sublease of the Real Property Leases. The Debtors were unable to give lessors for the Real Property Leases prior notice pursuant to Bankruptcy Rules 6006(a) and 9014 of the Federal Rules of Bankruptcy Procedure. To satisfy the notice and hearing requirements of Bankruptcy Rule 9014, the Debtors ask the Court enter a conditional order approving rejection of the Real Property Leases effective as of the Petition Date. Within 3 business days of the order, the Debtors will serve a copy of the Motion and the Order upon the lessors, to afford them the opportunity to object and demand a hearing within 10 days. ----------------------------------------------------------------- [00052] DEBTORS' APPLICATION TO EMPLOY MCGUIREWOODS AS CO-COUNSEL ----------------------------------------------------------------- See prior entry at [00032]. Application approved. ----------------------------------------------------------------- [00053] DEBTORS' APPLICATION TO HIRE PwC AS ADVISOR & ACCOUNTANT ----------------------------------------------------------------- See prior entry at [00030]. Application approved. ----------------------------------------------------------------- [00054] DEBTORS' APPLICATION TO EMPLOY KPMG AS TAX ADVISORS ----------------------------------------------------------------- See prior entry at [00029]. Application approved. ----------------------------------------------------------------- [00055] DEBTORS' MOTION FOR INVESTMENT PROPOSALS & PLAN SPONSOR ----------------------------------------------------------------- See prior entry at [00027]. Motion granted. ----------------------------------------------------------------- [00056] DEBTORS' MOTION TO RESTRICT CLAIM TRADING & PRESERVE NOLs ----------------------------------------------------------------- See prior entry at [00028]. Motion granted. ----------------------------------------------------------------- [00057] U.S. TRUSTEE APPOINTS UNSECURED CREDITORS' COMMITTEE ----------------------------------------------------------------- See prior entry at [00025]. The U.S. Trustee delivered a Notice of Appointment to the Court providing complete addresses for and the name of the individual representing each member of the Official Committee of Unsecured Creditors in US Airways Group's Chapter 11 cases: 1. Airbus North American Holdings, Inc. 198 Van Buren Street, Suite 300 Herndon, VA 20170-5335 703-834-3402 Attn: R. Douglas Greco 2. Air Line Pilots Association International 660 Lakeside Dock Drive Kingsport, TN 37663 423-279-0226 Attn: Captain Kelly Ison 3. Charles E. Smith Commercial Realty 2345 Crystal Drive Arlington, VA 22202 703-769-1215 Attn: Michael T. Crehan 4. Electronic Data Systems Corporation 2345 Crystal Drive, Suite H300 Arlington, VA 22227 703-872-6400 Attn: Mitchell B. George 5. First Union National Bank 401 S. Tryon Street, 12th Floor Charlotte, NC 28288 704-715-3021 Attn: Robert L. Bice, II 6. Honeywell International 1140 W. Warner Road Mail Stop 1233-M Tempe, AZ 85284 480-592-4506 Attn: Gerald W. Harris 7. International Assoc. of Machinists & Aerospace Workers 9000 Machinists Place, Suite 118B Upper Marlboro, MD 20772-2687 301-962-4560 Attn: James T. Varsel 8. J.P. Morgan Trust Company acting by HSBC Bank U.S.A. 10 East 40th Street New York, NY 10016 212-525-1324 Attn: Russ Paladino 9. LSG Sky Chefs, Inc. 524 E. Lamar Blvd. Arlington, TX 76011 817-792-5553 Attn: Janice L. Kiraly 10. Pension Benefit Guaranty Corporation 1200 K Street, NW, Suite 270 Washington, DC 20005-4026 202-326-4020 Attn: Craig Yamaoka 11. Rolls-Royce North America, Inc. and affiliates 14850 Conference Center Drive Chantilly, VA 20151 703-621-2816 Attn: Kevin T. Lowdermilk 12. State Street Bank and Trust Company 2 Avenue de Lafayette Boston, MA 02111 617-662-1754 Attn: E. Decker Adams 13. Wilmington Trust Company Rodney Square North 1100 N. Market Street Wilmington, DE 19890 302-636-6058 Attn: Steven M. Cimalore ----------------------------------------------------------------- [00058] US AIRWAYS WILL CONTINUE SERVICE TO 203 CITIES ----------------------------------------------------------------- ARLINGTON, Virginia -- August 15, 2002 -- US Airways announced that its restructuring plan will not result in pulling service from any of the cities it currently serves, with only one city, Saginaw, Michigan losing service on September 7. This is a result of an independent business decision made by Air Midwest, a US Airways Express affiliate carrier that was flying between Pittsburgh and Saginaw. "We are committed to making this reorganization transparent to our customers and to get people from point A to point B in much the same manner as we do today," said B. Ben Baldanza, senior vice president of marketing and planning. "We will maintain our hubs in Charlotte, Philadelphia and Pittsburgh, and keep our strong levels of service in Boston, New York LaGuardia and Washington Reagan airports. Our strengths include our service to large and small communities in the east, as well as our building presence in the Caribbean and some successful transatlantic operations, so those are assets we want to nurture." Baldanza said that strong advance booking patterns should continue. "Our passengers should purchase their travel with confidence, knowing that we are continuing normal operations to all our cities and are committed to providing quality service. While we expect to make further refinements to our schedule, these will be phased in and any customer needing reaccommodation will be personally contacted well in advance by US Airways or their travel agent," he said. ----------------------------------------------------------------- [00059] US AIRWAYS EXTENDS SHUTTLE GUARANTEE PROGRAM ----------------------------------------------------------------- ARLINGTON, Virginia -- August 16, 2002 -- US Airways has renewed its commitment to a convenient and hassle-free Shuttle travel experience by extending its guarantee and mileage bonus programs. US Airways Shuttle customers will continue to be eligible for a $200 voucher toward future travel on US Airways, US Airways Express or US Airways Shuttle, if, on any Monday through Friday, they are unable to make it to their boarding gate within 20 minutes of checking in at the US Airways Shuttle ticket counter or electronic ticket kiosks to make their scheduled departure to their ticketed destination. Dividend Miles members traveling the Shuttle also will continue to earn Triple Dividend Miles through Dec. 31, 2002, and the bonus miles count toward Dividend Miles Preferred Status. "The US Airways Shuttle is the quickest and most convenient means of travel between these important Northeast corridor business and vacation centers," said US Airways Vice President of Marketing and Revenue Management Stephen M. Usery. The US Airways Shuttle is the only Shuttle to offer hourly departures every business day between New York LaGuardia, Boston and Ronald Reagan Washington National airports, with 16 roundtrips between LaGuardia and Boston, 15 roundtrips between LaGuardia and Reagan National, and 14 roundtrips between Boston and Reagan National. Shuttle customers can fly comfortably on US Airways' modern Airbus A320 family of aircraft, which are used on all Shuttle flights. These aircraft have the widest cabins, aisles and seats of any Shuttle and also feature a generous seat pitch of 34 inches, drop-down video monitors every three rows and more standard overhead luggage space. With an in-seat power supply at every seat onboard and a Verizon Airfone located in each row, US Airways Shuttle customers can remain productive throughout the flight, or they can simply recline their seats and relax in the comfort of these state-of-the-art aircraft. US Airways Shuttle flights depart either on the hour or on the half-hour, depending on the route. To qualify for the 20- Minute Guarantee, customers must complete check-in at the dedicated Shuttle ticket counter or at an electronic-ticket kiosk at least 25 minutes before scheduled departure -- and not be able to arrive at the gate in time for final boarding at five minutes before departure. This offer does not apply during irregular operations, such as weather, government-mandated security actions, or other circumstances out of US Airways' control. This offer only applies to customers booked in Y, B, or U class service, excluding U class youth fares (fare basis: UOPKY24) and U class senior fares (fare basis: UOPKSR62), and it applies only to customers who originate their travel on US Airways Shuttle. The $200 voucher towards a US Airways ticket is valid systemwide and will be provided upon the customer's request at the Shuttle gate check-in only on the scheduled date of departure after not making the scheduled departure to their ticketed destination. This voucher program is the exclusive remedy under the 20-Minute Guarantee. In no event shall US Airways' liability exceed the award amount of the voucher. The voucher amount of $200 applies toward the base fare and federal excise tax of 7.5 percent only and applies only to the future purchase of airline tickets on US Airways. The purchase of the ticket must occur within one year of the voucher's issuance. Other terms and conditions for the voucher apply as stated on the voucher. Registration for Triple Miles is required before departure by calling 1-800-872-4738 and entering Bonus Request Number 5236, or online at http://www.usairways.com/dm/5236 Retroactive mileage credit will not be posted for travel prior to registration. All Dividend Miles terms and conditions apply. The Triple Miles offer is valid with the purchase of published adult fares for travel on US Airways Shuttle. For additional information on US Airways Shuttle schedules and fares, visit US Airways online at http://www.usairways.com or call US Airways Reservations at 1-800-428-4322. ----------------------------------------------------------------- [00060] US AIR REJECTS TAKEOVER BID BY MARVIN DAVIS ----------------------------------------------------------------- According to a report appearing in Charlotte Observer newspaper, billionaire Marvin Davis offered to participate in the refinancing of US Airways Group Inc. But the US Airways Group board reportedly rejected Mr. Davis' bid. US Airways refused to make any official statement on this issue. However, the deal between US Airways and Texas Pacific Group provides that until uniform bidding procedures are in place, the Debtors agree not to hold formal talks with any competing bidders. ----------------------------------------------------------------- [00061] TWU TRAINING INSTRUCTORS APPROVE RESTRUCTURING AGREEMENT ----------------------------------------------------------------- ARLINGTON, Virginia -- August 23, 2002 -- US Airways' Transport Workers Union TWU of America, Local 547, representing 110 flight crew training instructors today ratified its agreement on the Company's restructuring plan by a favorable 92-7 vote. "We are pleased with this decision by our flight crew training instructors to ratify an agreement that is so vitally important to our recovery plans," said Jerry A. Glass, US Airways senior vice president of employee relations. US Airways now has ratified restructuring plan agreements with its pilots, represented by the Air Line Pilots Association; flight attendants, represented by the Association of Flight Attendants; simulator engineers, dispatchers, and the flight crew training instructors, each represented by the TWU. US Airways' machinists and fleet service workers, represented by the International Association of Machinists, are expected to vote on the Company's proposal by Aug. 28, 2002. No agreement has yet been reached with the Communications Workers of America. ----------------------------------------------------------------- [00062] TRAINING SPECIALISTS RATIFY RESTRUCTURING PROPOSAL ----------------------------------------------------------------- ARLINGTON, Virginia -- August 26, 2002 -- US Airways' maintenance training specialists, represented by the International Association of Machinists (IAM) District 141-M, ratified its proposal today on the Company's restructuring plan by a 39-1 vote in favor. "This ratification illustrates the strong commitment that these employees share to restoring US Airways' financial health," said Jerry Glass, US Airways senior vice president of employee relations. In addition to the maintenance training specialists, US Airways has ratified restructuring plan agreements with its pilots, represented by the Air Line Pilots Association; flight attendants, represented by the Association of Flight Attendants; simulator engineers, dispatchers, and the flight crew training instructors, each represented by the Transport Workers Union. US Airways' machinists and fleet service workers, also represented by the IAM, are expected to vote on the Company's proposal by Aug. 28, 2002. No agreement has yet been reached with the Communications Workers of America. *** End of Issue No. 4 *** ------------------------------------------------------------------------- Peter A. Chapman peter@bankrupt.com http://bankrupt.com ------------------------------------------------------------------------- Recommended Reading: Professor Stuart Gilson's newest title, "Creating Value Through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups." List Price: $79.95 -- Discounted to $55.96 at http://amazon.com/exec/obidos/ASIN/0471405590/internetbankrupt -------------------------------------------------------------------------