UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year end December 31, 1998
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
US Airways, Inc. 401(k) Savings Plan
(Full title of the plan)
US Airways Group, Inc.
(Issuer of securities held pursuant to the plan noted above)
2345 Crystal Drive, Arlington, VA 22227
(Address of principal executive offices)
Commission file number: 1-8444
US Airways, Inc.
401(k) Savings Plan
Financial Statements
and Supplemental Schedules
December 31, 1998 and 1997
(With Independent Auditors'
Report Thereon)
US Airways, Inc.
401(k) Savings Plan
Table of Contents
-----------------
Page
----
Independent Auditors' Report 1
Financial Statements
Statements of Net Assets Available for Plan
Benefits as of December 31, 1998 and 1997 2
Statements of Changes in Net Assets Available
for Plan Benefits for the years ended
December 31, 1998 and 1997 3
Notes to Financial Statements 4 - 15
Supplemental Schedule I - Item 27a
Schedule of Assets Held for Investment Purposes
as of December 31, 1998 16 - 17
Supplemental Schedule II - Item 27d
Schedule of Reportable Transactions for the year
ended December 31, 1998 18
Signature 19
Exhibit 23
Consent of Independent Auditors 20
Independent Auditors' Report
The Plan Administrator and Participants
US Airways, Inc. 401(k) Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the US Airways, Inc. 401(k) Savings Plan (the Plan), as of
December 31, 1998 and 1997, and the related statements of changes in net
assets available for plan benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan
as of December 31, 1998 and 1997, and the changes in net assets available for
plan benefits for the years then ended in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The supplemental schedules of assets held for
investment purposes as of December 31, 1998 and reportable transactions for
the year ended December 31, 1998 are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but
are supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of
the Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, are fairly stated in all material respects in relation
to the basic financial statements taken as a whole.
Washington, D.C. KPMG
June 11, 1999
US Airways, Inc.
401(k) Savings Plan
Statements of Net Assets Available for Plan Benefits
----------------------------------------------------
December 31,
--------------------
1998 1997
---- ----
Assets
Investments:
At fair value:
Shares of registered investment
companies:
Fidelity Magellan Fund $ 335,334,685 $ 239,942,434
Fidelity Equity Income Fund 166,665,398 165,244,527
Fidelity Spartan U.S. Equity
Index Portfolio 111,140,435 73,411,088
Capital Growth Mix Portfolio 56,326,673 45,313,907
MAS Domestic Fixed Income
Portfolio Institutional 24,729,470 -
Fidelity Intermediate Bond Fund - 21,419,128
Neuberger & Berman Guardian Trust 18,627,942 21,248,359
Moderation Mix Portfolio 16,367,503 13,397,985
Income Mix Portfolio 4,475,139 2,714,770
T. Rowe Price Small Cap
Stock Fund 2,782,269 -
Putnam International
Growth A Fund 1,610,797 -
US Airways Common Stock Fund 213,193,003 207,438,910
Fidelity Retirement Government
Money Market Portfolio 47,021,361 42,444,074
Participant loans 34,694,947 26,715,794
------------- -----------
1,032,969,622 859,290,976
At contract value:
Fixed Income Fund 39,820,570 36,141,816
------------- -----------
Total investments 1,072,790,192 895,432,792
------------- -----------
Receivables:
Participant contributions 1,629,532 4,958,566
Employer contributions 114,658 235,042
------------- -----------
Total receivables 1,744,190 5,193,608
------------- -----------
Total assets 1,074,534,382 900,626,400
------------- -----------
Liabilities
Accrued expenses 64,848 63,237
------------- -----------
Total liabilities 64,848 63,237
------------- -----------
Net assets available for plan benefits $ 1,074,469,534 $ 900,563,163
============= ===========
See accompanying Notes to Financial Statements.
2
US Airways, Inc.
401(k) Savings Plan
Statements of Changes in Net Assets Available for Plan Benefits
---------------------------------------------------------------
Years ended December 31,
------------------------
1998 1997
---- ----
Additions to net assets attributable to:
Net appreciation in fair value
of investments $ 72,923,196 $ 203,502,580
Investment income 35,240,886 33,223,449
Interest income on participant
loans 2,707,277 1,847,899
Participant contributions 80,591,535 82,058,710
Employer contributions 6,026,531 5,757,899
Rollover contributions 400,860 227,185
----------- -----------
Total additions 197,890,285 326,617,722
----------- -----------
Deductions from net assets attributable to:
Benefits paid to participants 23,718,856 11,984,242
Administrative expenses 264,923 227,155
----------- -----------
Total deductions 23,983,779 12,211,397
----------- -----------
Net increase 173,906,506 314,406,325
Net assets available for plan benefits:
Beginning of year 900,563,163 586,158,845
Transfer to the US Airways, Inc.
Employee Savings Plan (135) (2,007)
------------- -----------
End of year $1,074,469,534 $ 900,563,163
============= ===========
See accompanying Notes to Financial Statements.
3
US Airways, Inc.
401(k) Savings Plan
Notes to Financial Statements
-----------------------------
1. Description of Plan
The following description of the US Airways, Inc. 401(k) Savings Plan
(the Plan) provides only general information. Participants should refer
to the Plan document for a more complete description of the Plan's
provisions.
(a) General
The Plan is a defined contribution plan intended to be a qualified cash
or deferred compensation arrangement under Section 401(k) of the Internal
Revenue Code (IRC), as amended and to qualify under Section 401(a) of the
IRC. The Plan was established effective September 1, 1988 to provide
retirement income to employees of US Airways, Inc. (US Airways or the
Company). In general, employees of US Airways, who are covered by a
collective bargaining agreement which provides for their participation in
the Plan, with at least 90 days of service, are eligible to participate
except for those individuals not covered under the United States income
tax laws and those individuals who are participants in another 401(k)
plan sponsored by US Airways. The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974 (ERISA), as amended.
US Airways, the plan administrator, is responsible for the content and
issuance of the Plan's financial statements. US Airways Group, Inc. (US
Airways Group), is the issuer of certain common stock securities held
pursuant to the Plan.
(b) Contributions
Eligible US Airways employees electing to participate in the Plan make
contributions to the Plan via payroll deductions. Each year Plan
participants may contribute up to 15 percent of pre-tax annual
compensation, as defined in the Plan, unless the participant is
classified as a highly compensated employee, as defined by the IRC. The
contribution percentage may not exceed a certain percentage of pre-tax
annual compensation as determined by the plan administrator, if the
participant is a highly compensated employee. The amount of contribution
that may be made by a participant to the Plan shall be a whole percentage
of a participant's compensation. Individual participant contributions
for 1998 and 1997 could not exceed the statutory limit of $10,000 per
year.
The Company will make a 50% matching contribution each payroll period, up
to two percent of compensation for those participants who are represented
by the International Association of Machinists and Aerospace Workers (the
IAM).
4
US Airways, Inc.
401(k) Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
(c) Vesting
Participants are immediately vested in their contributions, plus actual
earnings thereon. The Company's matching contributions, plus actual
earnings thereon, become 100 percent vested after two years of continuous
service.
(d) Investment Options
The Company selects the number and type of investment options available.
Fidelity Institutional Retirement Services Company, the Plan's
Recordkeeper, is responsible for maintaining an account balance for each
participant. Fidelity Management Trust Company is the Plan Trustee.
Each participant instructs the Recordkeeper how to allocate their
participant and Company contributions. Participants may invest their
contributions in any combination among the investment options available
in increments of five percent. If a participant fails to instruct the
Recordkeeper on how to allocate the contributions, then their
contributions will be invested in a cash equivalent fund, such as the
Fidelity Retirement Government Money Market Portfolio.
The Recordkeeper values account balances daily. Each account balance is
based on the value of the underlying investments in each account.
Generally, participants may elect to change how future contributions are
allocated or may transfer current account balances among investment
options.
As of December 31, 1998, the Company offered thirteen investment options
in the form of ten individual investment options and three diversified
portfolio mixes, which are pre-selected combinations of mutual funds.
The thirteen options available to participants are as follows:
Fidelity Magellan Fund - The fund primarily invests in common stocks and
securities of both well-known and lesser known companies with potentially
above-average growth potential. Securities may be of foreign, domestic
and multinational companies.
US Airways Common Stock Fund - A fund comprised primarily of US Airways
Group, Inc. (Group) common stock purchased on the open market or directly
from Group at market prices. A small percentage of the fund is invested
in short-term liquid investments. Company contributions cannot be
invested in this fund, in accordance with the Plan document. In addition,
officers of the Company are not permitted to invest their contributions in
this Fund. Effective November 28, 1997 participants who exchange out of
this fund to other investment options cannot exchange into the fund for a
period of 30 calendar days.
5
US Airways, Inc.
401(k) Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
Fidelity Equity Income Fund - The fund seeks reasonable income by
investing primarily in common and preferred stocks. The fund also invests
in bonds and convertible securities.
Fidelity Spartan U.S. Equity Index Portfolio - The portfolio seeks growth
and income by matching the composition and total return of the Standard &
Poor's Daily Stock Price Index of 500 common stocks.
Capital Growth Mix Portfolio - A diversified portfolio mix comprised of
80% equity securities and 20% fixed income securities. The equity
securities are invested 20% in the Fidelity Equity Income Fund,
approximately 15% in the Fidelity OTC Portfolio, approximately 30% in the
Fidelity Magellan Fund and approximately 15% in the Fidelity Overseas
Fund. The fixed income securities are invested in the Fidelity
Intermediate Bond Fund.
Fidelity Retirement Government Money Market Portfolio - Investments are
made in obligations issued or guaranteed as to principal and interest by
the U.S. government, its agencies or instrumentalities.
MAS Domestic Fixed Income Portfolio Institutional - The portfolio seeks to
provide above-average total returns from both income and price
appreciation by investing in U.S. government securities, and other U.S.
investment-grade fixed income securities. The Portfolio's average
duration is generally between five and seven years.
Neuberger & Berman Guardian Trust - The fund primarily invests in stocks
of established, high-quality companies considered to be undervalued.
Moderation Mix Portfolio - A diversified portfolio mix comprised of 60%
equity securities and 40% fixed income securities. The equity securities
are invested approximately 20% in the Fidelity Equity Income Fund,
approximately 20% in the Fidelity Spartan U.S. Equity Index Portfolio, 15%
in the Fidelity Magellan Fund and approximately 5% in the Fidelity
Overseas Fund. The fixed income securities are invested approximately 15%
in the Fidelity Short-Term Bond Fund and approximately 25% in the Fidelity
Intermediate Bond Fund.
Income Mix Portfolio - A diversified portfolio mix comprised of 20% equity
securities and 80% fixed income securities. The equity securities are
invested 10% in the Fidelity Equity Income Fund and 10% in the Fidelity
Spartan U.S. Equity Index Portfolio. The fixed income securities are
invested approximately 15% in the Fidelity Retirement Government Money
Market Portfolio, approximately 35% in the Fidelity Short-Term Bond Fund
and approximately 30% in the Fidelity Intermediate Bond Fund.
6
US Airways, Inc.
401(k) Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
T. Rowe Price Small Cap Stock Fund - The fund seeks to provide long-term
capital growth by investing primarily in stocks of small and medium sized
companies that are believed to offer superior earnings or appear to be
undervalued. Small cap stocks are those with a market capitalization of
$1 billion or less at the time of investment. The fund also invests in
foreign securities.
Putnam International Growth A Fund - The fund seeks capital appreciation
over the long term by investing primarily in stocks of all-sized companies
located outside the United States that have the potential for growth.
Investments include stocks of companies that appear to be undervalued as
well as inexpensive stocks of well-developed companies.
Fixed Income Fund - The fund buys high-quality investment contracts, a
type of investment product offered to retirement and savings plans by
insurance companies, banks, and other financial institutions. Money
transferred out of the Fixed Income Fund cannot be invested in the
Fidelity Retirement Government Money Market Portfolio, the Fidelity
Intermediate Bond Fund or the Income Mix Portfolio for a period of 90 days
because these funds are considered competitive by the insurance industry.
(e) Participant Withdrawals
All participants can borrow from their account, but may have only one
loan outstanding at any given point in time. Participants may borrow
from their accounts a minimum of $1,000 up to a maximum amount equal to
the lesser of $50,000 (reduced by the highest outstanding loan balance
from the Plan or any other plan maintained by the Company during the
preceeding twelve month period) or 50 percent of their vested separate
account balance as of the date of the loan. Loan transactions are
treated as transfers between the investment funds and participant loans
receivable. Loan terms cannot exceed five years, except for loans
obtained for the purchase of a primary residence. The loans are secured
by the balance in the participant's account and bear interest at a rate
commensurate with local prevailing market rates for loans made under
similar circumstances. Principal and interest are paid ratably through
payroll deductions.
Upon approval by the plan administrator, a participant may withdraw his
or her contributions from the account if it is
determined that the withdrawal is necessary to meet an immediate and
heavy financial need of the participant under the deemed hardship
standards set forth in the Plan.
7
US Airways, Inc.
401(k) Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
(f) Payment of Benefits
Upon termination of service due to death, disability, retirement or other
termination of employment, distributions to a participant or beneficiary
are made as soon as reasonably practicable. If the participant's account
balance is less than $5,000, a lump sum distribution is automatic upon
separation. If the participant's account balance is greater than $5,000,
the distribution can be deferred or provided in cash as a lump sum
distribution.
(g) Forfeited Accounts
Forfeited nonvested accounts are used by the Company to reduce future
employer contributions. During 1998 forfeited nonvested accounts totaled
$1,042 which will be used to offset future employer contributions.
(h) Administrative expenses
Certain administrative expenses of the Plan are paid by US Airways.
2. Summary of Accounting Policies
(a) Basis of Accounting
The financial statements of the Plan are prepared under the accrual
method of accounting.
(b) Investment Valuation and Income Recognition
The assets of the US Airways Common Stock Fund, Capital Growth Mix
Portfolio, Moderation Mix Portfolio, Income Mix Portfolio and Fixed
Income Fund are commingled with certain assets of other defined
contribution plans sponsored by US Airways. The Plan's Recordkeeper
separately identifies the assets of each plan participant who has an
interest in the commingled funds.
Fair values for assets were determined by quoted market values, when
available. The Plan presents in the statement of changes in net assets
the net appreciation (depreciation) in the fair value of its investments,
which consists of the realized gains or losses and unrealized
appreciation (depreciation) on those investments. The Plan's investments
in guaranteed investment contracts (GICs) are stated at contract value
(See Note 4). Purchases and sales of investments are recorded on a
trade-date basis. Interest and dividend income are recorded on the
accrual basis.
8
US Airways, Inc.
401(k) Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
The value of a participant's investment in the US Airways Common Stock
Fund is represented by units credited to the participant's account. The
unit values were determined by the trustee. The units and unit values
(rounded to the nearest whole unit and cent) of the US Airways Common
Stock Fund as of the close of each quarter during 1998 and 1997 were as
follows:
1998 Number of Units Unit Value
- ----------- --------------- ----------
March 31 2,225,317 $ 106.88
June 30 2,415,618 114.27
September 30 2,723,450 73.68
December 31 2,820,013 75.60
1997 Number of Units Unit Value
- ----------- --------------- ----------
March 31 1,793,129 $ 38.44
June 30 1,976,072 52.69
September 30 2,186,809 61.08
December 31 2,289,865 90.59
(c) Payment of Benefits
Benefits are recorded as deductions when paid.
(d) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results may differ from those
estimates.
(this space intentionally left blank)
9
US Airways, Inc.
401(k) Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
3. Investment Activity
The following table represents the investment funds' and participant loans' activities, for the years ended
December 31, 1998 and 1997:
Fidelity Fidelity
Retirement Fidelity Spartan Income
Fixed Government Fidelity Fidelity Equity U.S. Equity Mix
Income Money Market Magellan Intermediate Income Index Port-
Fund 1) Portfolio 1) Fund 1) Bond Fund 1) Fund 1) Portfolio 1) folio 1)
----------- ----------- ------------ ----------- ------------ ----------- ----------
Balance at December 31, 1996 $31,401,787* $38,186,803* $196,731,304* $18,833,705 $113,645,244* $ 38,666,486* $1,953,338
Investment income 2,118,731 2,226,126 15,596,680 1,217,334 8,931,367 1,544,508 -
Net appreciation (depreciation)
in fair value 31,517 (180,363) 34,872,182 175,074 28,422,885 14,752,325 230,105
Interest income on participant loans - - - - - - -
Contributions 2,927,801 5,712,128 27,310,282 2,385,700 17,517,629 8,645,886 376,513
Net exchanges between investment funds 689,818 (1,525,105) (30,946,817) (603,177) (715,569) 10,580,735 248,087
Administrative expenses (36,261) (7,271) (71,927) (1,106) (10,950) (2,005) (1,280)
Benefits paid to participants (991,308) (2,069,612) (3,491,621) (587,727) (2,527,534) (771,412) (91,993)
Transfers from (to) other plans (269) 101,368 (57,649) (675) (18,545) (5,435) -
----------- ----------- ------------ ----------- ------------ ----------- ----------
Net Change in Investment Funds 4,740,029 4,257,271 43,211,130 2,585,423 51,599,283 34,744,602 761,432
----------- ----------- ------------ ----------- ------------ ----------- ----------
Balance at December 31, 1997 $36,141,816 $42,444,074 $239,942,434* $21,419,128 $165,244,527* $ 73,411,088* $2,714,770
Investment income 2,297,811 2,353,520 15,100,933 1,255,864 9,774,072 2,046,778 -
Net appreciation (depreciation)
in fair value 98,618 (9,204) 65,866,392 221,948 9,058,314 20,443,105 327,229
Interest income on participant loans - - - - - - -
Contributions 2,730,797 5,184,952 27,474,024 2,037,530 17,108,314 10,921,259 398,830
Net exchanges between investment funds 624,822 893,573 (6,929,604) (24,130,466) (30,005,763) 6,359,367 1,191,384
Administrative expenses (37,817) (8,374) (77,766) (1,241) (11,107) (2,558) (1,714)
Benefits paid to participants (1,881,381) (4,458,466) (5,914,401) (799,241) (4,466,317) (2,010,136) (155,360)
Transfers from (to) other plans (154,096) 621,286 (127,327) (3,522) (36,642) (28,468) -
----------- ----------- ------------ ----------- ------------ ----------- ----------
Net Change in Investment Funds 3,678,754 4,577,287 95,392,251 (21,419,128) 1,420,871 37,729,347 1,760,369
----------- ----------- ------------ ----------- ------------ ----------- ----------
Balance at December 31, 1998 $39,820,570 $47,021,361 $335,334,685* $ - $166,665,398* $111,140,435* $4,475,139
=========== =========== ============ =========== ============ =========== ==========
* Investment fund balance represents greater than five percent of ending net assets available for plan benefits.
1) Party in interest.
(table continued on next page)
10
US Airways, Inc.
401(k) Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
MAS Domestic
Capital US Airways Neuberger Fixed T. Rowe
Growth Moderation Common & Berman Putnam Income Price
Mix Mix Stock Guardian International Portfolio Small Cap
Portfolio 1) Portfolio 1) Fund 1) Trust Growth A Fund Institutional Stock Fund
----------- ----------- ------------ ----------- ----------- ---------- ------------
Balance at December 31, 1996 $35,778,877* $ 8,417,652 $ 72,760,893* $ 8,880,099 $ - $ - $ -
Investment income - - - 1,588,703 - - -
Net appreciation (depreciation) in
fair value 7,131,298 1,994,646 115,383,065 689,846 - - -
Interest income on participant loans - - - - - - -
Contributions 8,568,605 2,591,523 5,755,017 3,558,606 - - -
Net exchanges between investment funds(5,918,600) 797,768 13,946,804 6,620,545 - - -
Administrative expenses (17,844) (4,610) (36,727) (18,626) - - -
Benefits paid to participants (226,363) (382,066) (368,196) (70,952) - - -
Transfers from (to) other plans (2,066) (16,928) (1,946) 138 - - -
----------- ----------- ------------ ----------- ----------- ---------- ------------
Net Change in Investment Funds 9,535,030 4,980,333 134,678,017 12,368,260 - - -
----------- ----------- ------------ ----------- ----------- ---------- ------------
Balance at December 31, 1997 $45,313,907* $13,397,985 $207,438,910* $21,248,359 $ - $ - $ -
Investment income - - - 1,650,732 40,077 644,574 76,525
Net appreciation (depreciation) in
fair value 10,122,944 2,298,018 (33,375,486) (1,832,560) 77,099 (583,276) 210,055
Interest income on participant loans - - - - - - -
Contributions 8,324,670 2,687,760 9,569,571 3,747,720 38,258 179,699 64,960
Net exchanges between investment funds(6,742,810) (1,461,675) 31,603,719 (5,735,779) 1,455,372 24,585,626 2,430,739
Administrative expenses (20,258) (5,458) (68,658) (28,331) (9) (11)
(10)
Benefits paid to participants (611,142) (546,269) (1,785,073) (405,539) - (95,912) -
Transfers from (to) other plans (60,638) (2,858) (189,980) (16,660) - (1,230) -
----------- ----------- ------------ ----------- ----------- ---------- ------------
Net Change in Investment Funds 11,012,766 2,969,518 5,754,093 (2,620,417) 1,610,797 24,729,470 2,782,269
----------- ----------- ------------ ----------- ----------- ---------- ------------
Balance at December 31, 1998 $56,326,673* $16,367,503 $213,193,003* $18,627,942 $1,610,797 $24,729,470 $2,782,269
=========== =========== ============ =========== =========== ========== ============
* Investment fund balance represents greater than five percent of ending net assets available for plan benefits.
1) Party in interest.
(table continued on next page)
11
US Airways, Inc.
401(k) Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
Participant
Loan Fund Other TOTAL
----------- ----------- ------------
Balance at December 31, 1996 $18,447,842 $2,454,815 $586,158,845
Investment income - - 33,223,449
Net appreciation (depreciation) in
fair value - - 203,502,580
Interest income on participant loans 1,847,899 - 1,847,899
Contributions - 2,694,104 88,043,794
Net exchanges between investment funds 6,825,511 - -
Administrative expenses - (18,548) (227,155)
Benefits paid to participants (405,458) - (11,984,242)
Transfers from (to) other plans - - (2,007)
----------- ----------- ------------
Net Change in Investment Funds 8,267,952 2,675,556 314,404,318
----------- ----------- ------------
Balance at December 31, 1997 $26,715,794 $5,130,371 $900,563,163
Investment income - - 35,240,886
Net appreciation (depreciation)
in fair value - - 72,923,196
Interest income on participant loans 2,707,277 - 2,707,277
Contributions - (3,449,418) 87,018,926
Net exchanges between investment funds 5,861,495 - -
Administrative expenses - (1,611) (264,923)
Benefits paid to participants (589,619) - (23,718,856)
Transfers from (to) other plans - - (135)
----------- ----------- ------------
Net Change in Investment Funds 7,979,153 (3,451,029) 173,906,371
----------- ----------- ------------
Balance at December 31, 1998 $34,694,947 $1,679,342 $1,074,469,534
=========== ============ =============
* Investment fund balance represents greater than five percent of ending net assets available for
plan benefits.
1) Party in interest. 12
US Airways, Inc.
401(k) Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
4. Investment Contracts with Insurance Companies
The Plan had an interest in a portfolio of GICs with certain insurance
companies of $39,820,570 and $36,141,816 at December 31, 1998 and 1997,
respectively. The GICs are benefit responsive because they provide
reasonable access by Plan participants to invested funds. Therefore, in
accordance with the American Institute of Certified Public Accountant's
Statement of Position 94-4, "Application of Fair Value and Contract
Value Reporting for Defined Contribution Plan Investments," the interest
in these contracts is disclosed in the financial statements at contract
value which equals contributions made, plus accrued interest at the
specified rate, less plan withdrawals and administrative expenses. The
portfolio's contract value at December 31, 1998 and 1997 was $90,475,438
and $85,983,442, respectively. The average portfolio crediting interest
rate was approximately 5.9% and 6.0% at December 31, 1998 and 1997,
respectively. The portfolio average yield was approximately 6.2% and
6.1% for the years ended December 31, 1998 and 1997, respectively.
For GICs with variable rates (approximately 64% of the portfolio, as
measured by contract values), crediting rates are reset either quarterly
or bi-annually. Crediting rates are determined based upon the yields to
maturity of the underlying assets, net of certain origination fees.
No valuation reserves were recognized related to the portfolio as all
insurance companies in the portfolio had received an investment grade
rating from nationally recognized rating agencies as of December 31,
1998 and 1997. The fair value of the portfolio was $90,895,034 and
$85,243,181 at December 31, 1998 and 1997, respectively.
5. Related Party Transactions
Certain Plan investments are shares of mutual funds managed by Fidelity
Management Trust Company. Fidelity Management Trust Company is
the trustee as defined by the Plan and, therefore, these
transactions qualify as party-in-interest.
6. Plan Termination
Although it has not expressed any intent to do so, the Company reserves
the right to terminate the Plan at any time subject to the provisions of
ERISA and applicable collective bargaining agreements. Upon termination
of the Plan, participants will become 100 percent vested in their
accounts. In addition the following actions shall be taken for the
benefit of participants:
13
US Airways, Inc.
401(k) Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
(a) As of the termination date, each investment fund shall be valued.
In determining the net worth of the investment funds there shall be
included as a liability such amounts as shall be necessary to pay
all expenses in connection with the termination of the investment
funds and the liquidation and distribution of the property of the
funds, as well as other expenses, whether or not accrued, and shall
include as an asset all accrued income.
(b) All participant accounts must be disposed of in the forms of payment
available under the Plan, unless the participant's spouse consents
to another form of distribution.
7. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for plan
benefits per the financial statements to the Form 5500:
December 31,
-------------------
1998 1997
---- ----
Net assets available for plan
benefits per the financial
statements $1,074,469,534 $900,563,163
Amounts allocated to
Withdrawing participants (425,235) (213,984)
----------- -----------
Net assets available for plan
benefits per the Form 5500 $1,074,044,299 $900,349,179
============== ============
The following is a reconciliation of benefits paid to participants per
the financial statements to the Form 5500:
Year Ended
December 31, 1998
-----------------
Benefits paid to participants per the
financial statements $23,718,856
Add: Amounts allocated to withdrawing
participants at December 31, 1998 425,235
Less: Amounts allocated to withdrawing
participants at December 31, 1997 (213,984)
----------
Benefits paid to participants per the
Form 5500 $23,930,107
==========
14
US Airways, Inc.
401(k) Savings Plan
Notes to Financial Statements
-----------------------------
(Continued)
Amounts allocated to withdrawing participants are recorded on the Form
5500 for benefit claims that have been processed and approved for
payment prior to December 31 but not yet paid as of that date.
8. Tax Status
The Internal Revenue Service has determined and informed the Company by a
letter dated July 22, 1995, that the Plan and related trust are designed
in accordance with applicable sections of the IRC. The Plan has been
amended since receiving the determination letter. However, the Plan
administrator and the Plan's legal counsel believe that the Plan is
designed and is currently being operated in compliance with the
applicable requirements of the IRC.
9. Transfers to the US Airways, Inc. Employee Savings Plan
Transfers to the US Airways, Inc. Employee Savings Plan represent the
correction of an insignificant recordkeeping error.
(this space intentionally left blank)
15
Supplemental Schedule I
US Airways, Inc. Page 1 of 2
401(k) Savings Plan
Item 27a - Schedule of Assets Held for Investment Purposes
----------------------------------------------------------
December 31, 1998
Identity Description Current
of Issue of Investment Cost Value
- -------- ------------- ---- -------
Fidelity Magellan Fund* Shares in registered $234,021,864 $335,334,685
investment company
US Airways Common Stock Common stock of employer's 191,950,508 213,193,003
Fund* parent company, US Airways
Group, Inc., and short-
term investments
Fidelity Equity Shares in registered 124,301,213 166,665,398
Income Fund* investment company
Fidelity Spartan U.S. Shares in registered 76,064,416 111,140,435
Equity Index Portfolio* investment company
Capital Growth Mix Shares in registered 39,095,238 56,326,673
Portfolio* investment companies
Fidelity Retirement Shares in money 47,021,361 47,021,361
Government Money market fund
Market Portfolio*
Neuberger & Berman Shares in registered 19,816,541 18,627,942
Guardian Trust investment companies
(table continued on next page)
* Party in interest.
16
US Airways, Inc. Page 2 of 2
401(k) Savings Plan
Item 27a - Schedule of Assets Held for Investment Purposes
----------------------------------------------------------
(Continued)
December 31, 1998
Identity Description Current
of Issue of Investment Cost Value
-------- ------------- ---- -------
Moderation Mix Portfolio* Shares in registered 12,620,418 16,367,503
investment companies
Income Mix Portfolio* Shares in registered 4,101,376 4,475,139
investment companies
Participant Loans Interest rates range - 34,694,947
from 7% to 11% per annum
Fixed Income Fund* Guaranteed Investment 39,820,570 39,820,570
Contracts, interest rates
range from 5.27% to 8.07%
per annum
Putnam International Shares in registered 1,534,099 1,610,797
Growth A Fund investment companies
MAS Domestic Fixed Income US Government securities 25,291,591 24,729,470
Portfolio Institutional and US investment grade
fixed income securities
T. Rowe Price Small Cap Shares in registered 2,594,794 2,782,269
Stock Fund investment companies
------------ ------------
Total Investments $818,233,989 $1,072,790,192
============ ============
* Party in interest.
See accompanying Independent Auditors' Report.
17
Supplemental Schedule II
US Airways, Inc.
401(k) Savings Plan
Item 27d - Schedule of Reportable Transactions
----------------------------------------------
Year Ended December 31, 1998
Aggregate transactions during the year ended December 31, 1998, with securities of the same issue,
accounting for greater than five percent of the value of Plan assets at the beginning of the period
were as follows:
Total Number of Total Number Realized
Purchases Purchases Sales of Sales Gain
------------ --------- ------------ -------- -----------
Fidelity Magellan Fund* $118,205,061 252 $ 88,608,307 252 $ 8,624,325
Fidelity Equity 62,784,126 252 70,428,049 252 9,091,281
Income Fund*
US Airways Common Stock 202,380,330 252 163,360,956 252 30,405,746
Fund*
Fidelity Spartan U.S. 78,689,931 252 61,394,919 252 4,817,868
Equity Index Portfolio*
Fidelity Retirement 122,284,285 256 117,706,998 252 -
Government Money
Market Portfolio*
Fixed Income Fund* 68,497,914 255 64,819,159 251 -
Fidelity Intermediate 19,642,302 235 41,283,661 223 184,860
Bond Fund*
* Party in interest.
See accompanying Independent Auditors' Report.
18
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on their behalf by the
undersigned hereunto duly authorized.
US Airways, Inc.
401(k) Savings Plan
By: /s/ Anita P. Beier
----------------------
Anita P. Beier
Controller
US Airways Group, Inc.
June 25, 1999
19