EX-99.1 2 p74886aexv99w1.htm EX-99.1 exv99w1
 

Exhibit 99.1

(US AIRWAYS LETTERHEAD)
INVESTOR RELATIONS UPDATE
January 24, 2008
General Comments
  •   Profit Sharing / CASM — Profit sharing equals 10% of pre-tax earnings excluding transition expenses and special items up to a 10% pre-tax margin and 15% above the 10% margin. Profit sharing is included in the CASM guidance given below.
 
  •   Cargo / Other Revenue — Cargo / Other Revenue includes: cargo revenue, ticket change fees, excess/overweight baggage fees, contract services, simulator rental, airport clubs, Materials Service Corporation (MSC), and inflight service revenues.
 
  •   Fuel — US Airways uses costless collars on Heating Oil Futures as a fuel-hedging vehicle. For Q108, the Company has 50% of its mainline fuel hedged, and expects to pay between $2.52 and $2.57 per gallon of jet fuel (including taxes and hedges). The weighted average collar range of the hedges in place is between $1.98 and $2.18 per gallon of heating oil, or between $68.79 and $77.19 per barrel of crude oil. Forecasted volume, fuel prices, hedge percentages, and equivalent price per barrel of crude oil are provided in the table below.
 
  •   Taxes / NOLs — Taxes / NOLs — As of December 31, 2007, the Company has approximately $850 million of net operating loss carryforwards (NOL) to reduce future taxable income. Of this amount, approximately $735 million is available to reduce federal taxable income in the calendar year 2008. The Company’s deferred tax asset, which includes the $735 million of NOL discussed above, has been subject to a valuation allowance.
 
      For the full year 2007 the Company utilized federal NOL to reduce its income tax obligation. Utilization of the NOL results in a corresponding decrease in the valuation allowance. In accordance with SFAS No. 109, as this valuation allowance was established through the recognition of tax expense, the decrease in valuation allowance offsets the Company’s tax provision dollar for dollar. At December 31, 2007, the Company’s remaining valuation allowance, which when utilized, will offset the Company’s tax provision is $50 million.
 
      US Airways recognized $7 million of non-cash state income tax expense for the full year 2007, as the Company utilized NOL that was generated by US Airways prior to the merger. In accordance with SFAS No. 109, as this was acquired NOL, the decrease in the valuation allowance associated with this NOL reduced goodwill instead of the provision for income taxes. At December 31, 2007, the remaining valuation allowance associated with acquired state NOL is approximately $24 million. The state valuation allowance remaining at December 31, 2007 that will offset the Company’s tax provision is $19 million.
 
      The Company was subject to Alternative Minimum Tax liability (“AMT”) for the full year 2007. In most cases, the recognition of AMT does not result in tax expense. However, since the Company’s NOL was subject to a full valuation allowance, any liability for AMT is recorded as tax expense. The Company recognized $2 million of net AMT tax expense for the full year 2007. The Company also recorded $1 million of net state tax expense for the full year 2007 related to certain states where NOL was limited or not available to be used.
 
      To the extent profitable, the Company will use NOL to reduce federal and state taxable income in 2008. The Company also may be subject to AMT liability and obligated to record and pay state income tax related to certain states where NOL was limited or not available to be used, if profitable in 2008.
 
  •   Share Count — At the end of FY07, the Company had 91.5 million basic and 95.6 million diluted weighted average shares outstanding. Both basic and diluted shares guidance is provided in the table below.
 
  •   Cash — At the end of FY07, the Company had approximately $3.0 billion in total cash, of which $2.5 billion was unrestricted.
Please refer to the footnotes and the forward looking statements page of this document for additional information

 

 

(US AIRWAYS LETTERHEAD)
MAINLINE UPDATE
January 24, 2008

Mainline General Comments
  •   Mainline data includes US Airways operated flights and all operating expenses are for mainline operated flights only. Please refer to the following page for information pertaining to Express.
  •   Full year 2008 CASM (excluding fuel and special items) is forecasted to increase by 2 to 4 percent. More than half of that increase is due to higher year-over-year engine overhauls (72 vs. 41). The first quarter impact is approximately half of the 7 to 9 percent increase.

                                         
Mainline General Guidance   1Q08E   2Q08E   3Q08E   4Q08E   FY08E
 
Available Seat Miles (ASMs) (bil)
    ~18.3       ~19.2       ~19.3       ~18.0       ~74.9  
 
CASM ex fuel, special items, & transition expense (YOY % change) 1
  +7% to +9%   0% to +2%   +2% to +4%   +1% to +3%   +2% to +4%
 
Cargo / Other Revenues ($ mil)
    ~220       ~220       ~210       ~215       ~865  
 
Fuel Price (incl hedges and taxes) ($/gal)
    2.52 — 2.57       2.60 — 2.65       2.63 — 2.68       2.68 — 2.73       2.60 — 2.65  
Fuel Gallons Consumed (mil)
    ~290       ~305       ~310       ~290       ~1,195  
 
Percent Hedged
    50 %     36 %     23 %     10 %     30 %
Weighted Avg. Heating Oil Collar Range ($/gal)
    1.98 — 2.18       2.06 — 2.26       2.13 — 2.33       2.34 — 2.54       2.07 — 2.27  
Weighted Avg. Jet Fuel Equivalent (incl, transport, and refining margin) ($/gal)
    2.08 — 2.28       2.23 — 2.43       2.30 — 2.50       2.46 — 2.66       2.20 — 2.40  
Weighted Avg. Estimated Crude Oil Equivalent ($/bbl)
  68.79 — 77.19   74.67 — 83.07   76.45 — 84.85   82.21 — 90.61   73.24 — 81.64
Estimated Jet Price Assumption (unhedged, incl transport) ($/gal)
    ~2.65       ~2.61       ~2.61       ~2.61       ~2.62  
Impact of Fuel Hedges (Gains)/Losses ($/gal)
    (0.19 )     (0.08 )     (0.04 )     (0.00 )     (0.07 )
 
Interest Expense ($ mil)
    ~65       ~65       ~65       ~65       ~260  
Interest Income ($ mil)
    ~35       ~30       ~30       ~25       ~120  
 
                                        
Merger Update ($ mil)
                                        
Transition Expense
    ~10       —       —       —       ~10  
 
                                        
Capital Update ($ mil)
  FY08E                                
                                     
Cash CAPX (non-aircraft)
  $ 315                                  
Net aircraft / PDP CAPX (E190 & A321 Acquisition & PDP)
  $ 115                                  
     Notes:
  1.   CASM ex fuel, special items & transition expenses is a non-GAAP financial measure. Please see the GAAP to non-GAAP reconciliation at the end of this document
                     
Shares Outstanding ($ and shares mil)   Basic   Diluted   Interest Addback
 
                    
For Q1 through Q4
                    
Earnings above $41
   92.0     95.7     $ 1.3  
Earnings up to $41
   92.0     92.6       —  
Net Loss
   92.0     92.0       —  
 
                    
Full Year 2008
                    
Earnings above $161
   92.0     95.7     $ 5.3  
Earnings up to $161
   92.0     92.6       —  
Net Loss
   92.0     92.0       —  
Shares outstanding are based upon several estimates and assumptions, including average per share stock price, stock options, stock appreciation rights, restricted stock unit award activity, and conversion of outstanding senior convertible notes. The number of shares in the actual calculation of earnings per share will likely be different from those set forth above.
Please refer to the footnotes and the forward looking statements page of this document for additional information

 

 

(US AIRWAYS LETTERHEAD)
EXPRESS UPDATE
January 24, 2008
Express General Comments
  •   US Airways Express is a network of nine regional airlines (2 wholly owned) operating under code share and service agreements with US Airways. All operating expenses (including purchase agreements) associated with US Airways Express are included within the Express Non-Fuel Operating Expense line item on our income statement.
Express General Guidance
 
                     
    1Q08E   2Q08E   3Q08E   4Q08E   FY08E
Available Seat Miles (ASMs) (bil)
  ~3.6   ~3.9   ~4.0   ~3.9   ~15.4
CASM ex fuel ( YOY % change) 1
  -1% to -3%   -1% to -3%   0% to -2%   -1% to -3%   -1% to -3%
Fuel Price (incl taxes) ($/gal)
  2.74 — 2.79   2.70 — 2.75   2.70 — 2.75   2.70 — 2.75   2.71 — 2.76
Fuel Gallons Consumed (mil)
  ~85   ~95   ~95   ~95   ~370
Express Carriers
     
Air Midwest Airlines, Inc. 4
  Piedmont Airlines, Inc. 2
Air Wisconsin Airlines Corporation
  PSA Airlines, Inc 2
Chautauqua Airlines, Inc.
  Republic Airways
Colgan Air, Inc. 4
  Trans States Airlines, Inc. 4
Mesa Airlines 3
    
Notes:
  1.   CASM ex fuel expense is a non-GAAP financial measure. Please see the GAAP to non-GAAP reconciliation at the end of this document.
 
  2.   Wholly owned subsidiary of US Airways Group, Inc.
 
  3.   Subsidiary of Mesa Air Group, Inc
 
  4.   Pro-rate agreement
Please refer to the footnotes and the forward looking statements page of this document for additional information

 

 

(US AIRWAYS LETTERHEAD)
FLEET UPDATE
January 24, 2008
Fleet General Comments
  •   On October 2, 2007 the Company executed definitive purchase agreements with Airbus for the acquisition of 92 aircraft, including 60 single-aisle A320 family aircraft and 32 wide-body aircraft, including 22 next generation A350 XWBs and 10 A330s. The 60 A320 family aircraft would replace 60 older aircraft in the airline’s fleet. Deliveries for the 60 A320 family aircraft will begin in 2010. The Company also reaffirmed its commitment to the A350 program by increasing its previously announced order of 20 A350s by two to 22 A350 XWBs in both the -800 and larger -900 series configuration. Deliveries for the A350 XWBs are expected to begin in 2014 and can be used for modest international expansion, or replacement of existing older technology aircraft. The 10 A330s will facilitate the retirement of US Airways’ existing B767 fleet. Deliveries of the A330s are expected to commence in 2009.
 
  •   On November 15, 2007 the Company and Airbus amended the A330 purchase agreement, adding an additional five firm A330-200s to the purchase agreement. On November 20, 2007 the Company announced that it had entered into a letter of intent with International Lease Finance Corporation for the lease of two A330-200s. These additional aircraft allow the Company to continue its international growth plans of adding approximately three to four new markets per year between 2009 and 2011.
 
  •   On January 11, 2008 the Company and Airbus amended the A320 purchase agreement, converting thirteen A319s to A320s, one A319 to an A321 and eleven A320s to A321s for deliveries during 2009 and 2010.

Mainline Fleet Update (End of Period)
                                                     
        YE07A   1Q08E   2Q08E   3Q08E   4Q08E   FY08E
Mainline
                                                
EMB-190
         11       14       19       23       25       25  
737-300
         47       46       43       40       36       36  
737-400
         40       40       40       40       40       40  
A319
         93       93       93       93       93       93  
A320
         75       75       75       75       75       75  
A321
         28       28       28       31       33       33  
A330
         9       9       9       9       9       9  
B757
         43       43       42       41       39       39  
B767
         10       10       10       10       10       10  
 
                                                    
Total
         356       358       359       362       360       360  

Express Fleet Update (End of Period)
                                                 
    YE07A   1Q08E   2Q08E   3Q08E   4Q08E   FY08E
Express
                                                
DH8
     61       61       61       61       61       61  
CRJ-200
     118       117       117       116       116       116  
CRJ-700
     14       14       14       14       14       14  
CRJ-900
     38       38       38       38       38       38  
EMB-170
     23       21       20       20       20       20  
ERJ-145
     9       9       9       9       9       9  
EMB-175
     23       31       36       38       38       38  
 
                                                
Total
     286       291       295       296       296       296  
Please refer to the footnotes and the forward looking statements page of this document for additional information

 

 

(US AIRWAYS LETTERHEAD)
GAAP to Non-GAAP RECONCILIATION
January 24, 2008
Reconciliation of GAAP to Non-GAAP Financial Information
US Airways Group, Inc. (the “Company”) is providing disclosure of the reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis. The Company believes that the non-GAAP financial measures provide investors the ability to measure financial performance excluding special items, which is more indicative of the Company’s ongoing performance and is more comparable to measures reported by other major airlines. The Company believes that the presentation of mainline CASM excluding fuel, special items & transition expense and Express CASM excluding fuel is useful to investors as both the cost and availability of fuel are subject to many economic and political factors beyond the Company’s control.
This update contains forward-looking statements that are not limited to historical facts, but reflect the Company’s current beliefs, expectations or intentions regarding future events. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. For examples of such risks and uncertainties, please see the risk factors set forth in the Company’s Form 10-Q for the quarter ended September 30, 2007, and its other securities filings, including any amendments thereto, which identify important matters such as the consequences of fuel, labor costs, competition, and industry conditions, including the demand for air travel, the airline pricing environment and industry capacity decisions, regulatory matters and the seasonal nature of the airline business. The Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this update.
                                                                                 
    GAAP to Non-GAAP Reconciliation ($mil except ASM and CASM data)  
    Q108 Range     Q208 Range     Q308 Range     Q408 Range     FY08 Range  
    Low     High     Low     High     Low     High     Low     High     Low     High  
 
                                                                                
Mainline
                                                                                
Mainline Operating Expenses
   $ 2,284     $ 2,327     $ 2,329     $ 2,401     $ 2,327     $ 2,372     $ 2,248     $ 2,292     $ 9,160     $ 9,338  
Less Mainline Fuel (net of (gains)/losses from fuel hedges)
     731       745       793       835       815       831       777       792       3,107       3,167  
Less Special Charges
     —       —       —       —       —       —       —       —       —       —  
Less Transition Expenses
     10       10       —       —       —       —       —       —       10       10  
 
                                                            
Mainline Operating Expense excluding fuel, special items, and transition expense
     1,543       1,572       1,536       1,567       1,512       1,542       1,471       1,500       6,043       6,162  
 
                                                                                
Mainline CASM (GAAP) (cts)
     12.48       12.72       12.13       12.51       12.06       12.29       12.49       12.73       12.23       12.47  
 
                                                                                
Mainline CASM excluding fuel, special items, and transition expenses (Non-GAAP) (cts)
     8.43       8.59       8.00       8.16       7.83       7.99       8.17       8.33       8.07       8.23  
 
                                                                                
Mainline ASMs (bil)
     18.3       18.3       19.2       19.2       19.3       19.3       18.0       18.0       74.9       74.9  
 
                                                                                
Express
                                                                                
Express Operating Expenses
   $ 706     $ 720     $ 751     $ 766     $ 748     $ 763     $ 735     $ 750     $ 2,937     $ 2,996  
Less Express Fuel Expense
     233       237       257       261       257       261       257       261       1,003       1,021  
 
                                                            
Express Operating Expenses excluding Fuel
     473       482       495       505       492       502       479       488       1,934       1,974  
 
                                                                                
Express CASM (GAAP) (cts)
     19.60       19.99       19.27       19.65       18.71       19.08       18.85       19.22       19.07       19.45  
 
                                                                                
Express CASM Excluding Fuel (Non-GAAP) (cts)
     13.13       13.40       12.69       12.95       12.30       12.55       12.27       12.52       12.56       12.82  
 
                                                                                
Express ASMs (bil)
     3.6       3.6       3.9       3.9       4.0       4.0       3.9       3.9       15.4       15.4  
Note: Amounts may not recalculate due to rounding
Please refer to the footnotes and the forward looking statements page of this document for additional information

 

 

(US AIRWAYS LETTERHEAD)
FORWARD-LOOKING STATEMENTS
January 24, 2008
FORWARD-LOOKING STATEMENTS
Certain of the statements contained herein should be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act 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 America West Holdings Corporation and US Airways Group, 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; our high level of fixed obligations and our ability to obtain and maintain financing for operations and other purposes; our ability to achieve the synergies anticipated as a result of the merger and to achieve those synergies in a timely manner; our ability to integrate the management, operations and labor groups of US Airways Group and America West Holdings; labor costs and relations with unionized employees generally and the impact and outcome of labor negotiations; the impact of global instability, including the current instability in the Middle East, the continuing impact of the military presence in Iraq and Afghanistan and the terrorist attacks of September 11, 2001 and the potential impact of future hostilities, terrorist attacks, infectious disease outbreaks or other global events that affect travel behavior; reliance on automated systems and the impact of any failure or disruption of these systems; the impact of future significant operating losses; changes in prevailing interest rates; our ability to obtain and maintain commercially reasonable terms with vendors and service providers and our reliance on those vendors and service providers; security-related and insurance costs; changes in government legislation and regulation; our ability to use pre-merger NOLs and certain other tax attributes; competitive practices in the industry, including significant fare restructuring activities, capacity reductions and in court or out of court restructuring by major airlines; continued existence of prepetition liabilities; interruptions or disruptions in service at one or more of our hub airports; weather conditions; our ability to obtain and maintain any necessary financing for operations and other purposes; our ability to maintain adequate liquidity; our ability to maintain contracts that are critical to our operations; our ability to operate pursuant to the terms of our financing facilities (particularly the financial covenants); our ability to attract and retain customers; the cyclical nature of the airline industry; our ability to attract and retain qualified personnel; economic conditions; and other risks and uncertainties listed from time to time in our reports to the Securities and Exchange Commission. 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, 2007, which is available at www.usairways.com.
Please refer to the footnotes and the forward looking statements page of this document for additional information