SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the Commission
Only (as Permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
US AIRWAYS GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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Notes:
US AIRWAYS GROUP, INC.
2345 CRYSTAL DRIVE
ARLINGTON, VIRGINIA 22227
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 2002
Washington, D.C.
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April 12, 2002
To the Stockholders of
US AIRWAYS GROUP, INC.
The 2002 annual meeting of stockholders of US Airways Group, Inc. (the
"Company") will be held at the Capital Hilton Hotel, 16th & K Streets, N.W.,
Washington, D.C. on May 15, 2002 at 9:30 a.m. local time, to consider and act
on the following matters:
1. The election of 12 directors to hold office for one year or until
their successors are elected and qualified (Item No. 1).
2. Ratification of the selection of auditors of the Company for fiscal
year 2002 (Item No. 2).
3. Consideration of one stockholder proposal as described in the
accompanying Proxy Statement (Item No. 3).
4. The transaction of such other business as may properly come before
the meeting.
Eligible stockholders of record at the close of business on March 25, 2002
will be entitled to vote at the meeting. A list of stockholders entitled to
vote at the meeting may be examined at the executive offices of the Company at
2345 Crystal Drive, Arlington, Virginia.
By Order of the Board of Directors
Jennifer C. McGarey
Secretary
If you do not expect to attend the meeting in person, please sign and date
the accompanying proxy and return it promptly in the enclosed envelope, which
requires no postage if mailed in the United States.
US AIRWAYS GROUP, INC.
2345 CRYSTAL DRIVE
ARLINGTON, VIRGINIA 22227
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 2002
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INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board of Directors") of US Airways Group, Inc. (the
"Company") of proxies to be voted at the annual meeting of stockholders in
Washington, D.C. on May 15, 2002. Enclosed with this Proxy Statement is a
notice of the meeting, together with a proxy for your signature if you are
unable to attend. Stockholders who execute proxies may revoke them at any time
before they are voted. Any proxy may be revoked by the person giving it any
time before it is voted by delivering to the Secretary of the Company at 2345
Crystal Drive, Arlington, Virginia 22227, on or before the business day prior
to the meeting or at the meeting itself, a subsequent written notice of
revocation or a subsequent proxy relating to the same shares or by attending
the meeting and voting in person. The approximate date on which this Proxy
Statement and the accompanying form of proxy will first be sent to the
Company's stockholders is April 12, 2002.
Shares of the Company's common stock, par value $1.00 per share ("Common
Stock"), represented by properly executed proxies received prior to or at the
meeting, unless such proxies have been revoked, will be voted in accordance
with the instructions indicated in the proxies. If no instructions are
indicated on a properly executed proxy of the Company, the shares will be voted
in accordance with the recommendations of the Board of Directors.
For those participants who hold shares in the US Airways, Inc. Employee
Stock Ownership Plan, the US Airways, Inc. Employee Savings Plan, the US
Airways, Inc. 401(k) Savings Plan, the US Airways, Inc. 401(k) Savings Plan for
Pilots or the Supplemental Retirement Plan of Piedmont Aviation, Inc., the
proxy card must be received no later than May 10, 2002 in order to be voted in
a timely manner by the administrator of the plans. In accordance with these
plans, you may not vote the shares in person at the meeting.
Stockholders of record at the close of business on March 25, 2002 (the
"Record Date") are entitled to vote at the meeting. On March 25, 2002 the
Company had outstanding 68,058,172 shares of Common Stock. Each share of Common
Stock is entitled to one vote, except as set forth below. From time to time,
the voting power of the Common Stock may be limited by then applicable U.S.
statutory and U.S. Department of Transportation regulatory foreign ownership
restrictions ("Foreign Ownership Restrictions") the breach of which could
result in the loss of any operating certificate or authority of the Company or
certain of its subsidiaries. As of the date hereof, the Company does not
believe that Foreign Ownership Restrictions limit the voting power of any
Common Stock and the Company expects that the holders thereof will be entitled
to their full voting power at the annual meeting.
Required Votes
The vote of the holders of a plurality of the votes cast by holders of
shares of Common Stock will elect candidates for director (Item No. 1 on your
proxy). Abstentions or broker non-votes as to the election of directors will
not affect the election of the candidates receiving the plurality of votes. The
vote of the holders of at least a majority of the shares of Common Stock
present in person or represented by proxy at the meeting and entitled to vote
is required (i) to ratify the Board of Directors' appointment of KPMG LLP as
the Company's independent
public accountants for 2002 (Item No. 2), and (ii) to approve the stockholder
proposal regarding cumulative voting (Item No. 3). Therefore, abstentions as to
these particular proposals will have the same effect as votes against such
proposals. With respect to Item No. 2, broker non-votes will be treated as
votes against the proposal. With respect to Item No. 3, however, broker
non-votes will be deemed shares of stock not entitled to vote on such proposal
and will not be counted as votes for or against such proposal, and will not be
included in calculating the number of votes necessary for approval of such
proposal.
BENEFICIAL SECURITY OWNERSHIP
The following information pertains to Common Stock beneficially owned by all
directors, nominees for director and executive officers of the Company (or its
principal operating subsidiary, US Airways, Inc. ("US Airways")) as of January
31, 2002. Information with respect to beneficial ownership is based upon
information furnished by each director, nominee for director and executive
officer of the Company. Unless indicated otherwise by footnote, the owner
exercises sole voting and investment power over the securities (other than
unissued securities, the ownership of which has been imputed to such owner).
Number of Percent of
Owner Shares Class(1)
----- --------- ----------
Directors and Nominees for Director
Mathias J. DeVito............................... 9,500(2)
Peter M. George................................. 7,341(3)
Robert L. Johnson............................... 12,744(4)
Robert LeBuhn................................... 36,016(2)(5)
John G. Medlin, Jr.............................. 12,500(2)
Hanne M. Merriman............................... 9,000(2)
Thomas H. O'Brien............................... 5,375(3)
Hilda Ochoa-Brillembourg........................ 24,694(3)(6)
Richard B. Priory............................... 6,711(3)
David N. Siegel................................. 0(7)
Raymond W. Smith................................ 19,121(2)
Stephen M. Wolf................................. 3,029,616(8) 4.5%
Executive Officers
Lawrence M. Nagin............................... 430,486(9)
Michelle V. Bryan............................... 107,131(10)
Thomas A. Mutryn................................ 189,722(11)
Gregory T. Taylor............................... 108,660(12)
Rakesh Gangwal.................................. 2,199,412(13) 3.2%
21 directors and executive officers of the
Company as a group............................. 6,658,767(14) 9.8%
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(1) Percentages are shown only where they exceed one percent of the number of
shares outstanding and are based on shares of Common Stock outstanding on
January 31, 2002.
(2) These holdings include 7,500 shares of Common Stock issuable within 60
days of January 31, 2002 upon exercise of stock options.
(3) These holdings include 3,000 shares of Common Stock issuable within 60
days of January 31, 2002 upon exercise of stock options.
(4) These holdings include 4,500 shares of Common Stock issuable within 60
days of January 31, 2002 upon exercise of stock options.
(5) These holdings include 10,000 shares of Common Sock held in trust.
(6) These holdings include 14,000 shares of Common Stock held jointly by Ms.
Ochoa-Brillembourg and her spouse.
(7) See page 16 for a description of Mr. Siegel's rights to obtain shares of
Common Stock which are subject to certain restrictions ("Restricted
Stock") and stock options.
(8) Mr. Wolf's holdings include 350,000 shares of Restricted Stock and
1,975,000 shares of Common Stock issuable within 60 days of January 31,
2002 upon exercise of stock options. Mr. Wolf retired as Chairman and
Chief Executive Officer of both the Company and US Airways, effective
March 11, 2002. He remains non-executive Chairman of the Board of
Directors of both the Company and US Airways.
(9) Mr. Nagin's holdings include 35,000 shares of Restricted Stock and 325,000
shares of Common Stock issuable within 60 days of January 31, 2002 upon
exercise of stock options. Mr. Nagin retired from the Company and US
Airways effective March 31, 2002.
(10) Ms. Bryan's holdings include 28,750 shares of Restricted Stock and 62,000
shares of Common Stock issuable within 60 days of January 31, 2002 upon
exercise of stock options.
(11) Mr. Mutryn's holdings include 48,332 shares of Restricted Stock and
118,750 shares of Common Stock issuable within 60 days of January 31, 2002
upon exercise of stock options. Mr. Mutryn ceased to be the Senior Vice
President--Finance and Chief Financial Officer effective April 5, 2002.
(12) Mr. Taylor's holdings include 35,250 shares of Restricted Stock and 57,500
shares of Common Stock issuable within 60 days of January 31, 2002 upon
exercise of stock options.
2
(13) Mr. Gangwal's holdings include 1,625,000 shares of Common Stock issuable
within 60 days of January 31, 2002 upon exercise of stock options. Mr.
Gangwal resigned as an officer and director of both the Company and US
Airways effective November 27, 2001.
(14) All directors' and executive officers' holdings include 580,832 shares of
Restricted Stock and 4,536,750 shares of Common Stock issuable within 60
days of January 31, 2002 upon exercise of stock options.
Set forth below are the number of options and units of phantom stock of the
Company ("Deferred Stock Units") held by each director who participates in the
director compensation programs. See "Compensation of Directors" below. Although
each Deferred Stock Unit represents the economic equivalent of a share of
Common Stock, no voting rights are attached thereto and the Deferred Stock
Units lack certain other attributes of Common Stock.
Number of Number of Director
Owner Deferred Stock Units Stock Options(1)
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Directors
Mathias J. DeVito.......... 11,069.29 9,000
Peter M. George............ 1,500.00 4,500
Robert L. Johnson.......... 2,000.00 6,000
Robert LeBuhn.............. 10,111.38 9,000
John G. Medlin, Jr......... 10,185.42 9,000
Hanne M. Merriman.......... 7,239.13 9,000
Thomas H. O'Brien.......... 1,500.00 4,500
Hilda Ochoa-Brillembourg... 1,500.00 4,500
Richard B. Priory.......... 1,500.00 4,500
Raymond W. Smith........... 5,694.78 9,000
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(1) The holdings for Messrs. DeVito, LeBuhn, Medlin and Smith and Ms. Merriman
include 7,500 shares of Common Stock issuable within 60 days of January 31,
2002 upon the exercise of stock options. The holdings for Mr. Johnson
include 4,500 shares of Common Stock issuable within 60 days of January 31,
2002 upon the exercise of stock options. The holdings for Messrs. George,
O'Brien and Priory and Ms. Ochoa-Brillembourg include 3,000 shares of
Common Stock issuable within 60 days of January 31, 2002. These options are
also reflected in the Beneficial Security Ownership table on page 2.
The only persons known to the Company (from Company records and reports on
Schedules 13D and 13G filed with the Securities and Exchange Commission (the
"SEC")) which owned, as of January 31, 2002, more than 5% of its Common Stock
are listed below:
Percent
Name and address Amount and nature of
Title of Class of beneficial owner of beneficial ownership Class(1)
- -------------- ------------------- ----------------------- --------
Common Stock Julian H. Robertson, Jr. 4,401,084(2) 6.5%
101 Park Avenue
New York, NY 10178
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(1) Represents percentage of shares of Common Stock outstanding on January 31,
2002.
(2) As set forth in a Schedule 13G, dated February 14, 2002, as of December 31,
2001.
3
ELECTION OF DIRECTORS (Item No. 1)
Pursuant to the by-laws of the Company, the Board of Directors consists of
12 members. All of the directors except Mr. Siegel were elected in September,
2001 by the stockholders of the Company. Each director of the Company is also a
director of the Company's principal operating subsidiary, US Airways. Directors
will be elected to hold office for one year or until the election and
qualification of their successors. Proxies will be voted only for the nominees
named below. Except as noted otherwise, the following biographies describe the
business experience of each nominee for at least the past five years.
Served as
director
since
- - ---------
Mathias J. DeVito, 71 Mr. DeVito is Chairman Emeritus of The Rouse 1981
Company (real estate development and management). He
serves as a Director of Mars Supermarkets, Inc., Lenders
Service, Inc. and Sitel Corporation. He is a member of the
Board of the Maryland Institute, College of Art, and
former Chairman of the Greater Baltimore Committee.
Mr. DeVito is Chairman of the Human Resources
Committee and a member of the Executive and Safety
Committees of the Board of Directors.
Peter M. George, 58.. Mr. George has since November 2001 been Senior 1998
Vice President and Managing Director of the International
Group for Park Place Entertainment. Mr. George was,
until he retired in August 2000, Vice Chairman and Chief
Executive Officer of Hilton Group PLC (hotel and
gaming industries) and held such position since 1994. Mr.
George also serves as a Director of the Hilton Hotels
Corporation and Magna Entertainment Corporation. Mr.
George is a member of the Nominating and Human
Resources Committee of the Board of Directors.
Robert L. Johnson, 56 Mr. Johnson is the Chief Executive Officer of BET 1998
Holdings, Inc., a subsidiary of Viacom Inc. (media-
entertainment holding company). Mr. Johnson also serves
as a Director of the Hilton Hotels Corporation, The
United Negro College Fund, the National Cable and
Telecommunications Association, the American Film
Institute, and General Mills Corporation. He is a member
of the Audit and Nominating Committees of the Board of
Directors.
Robert LeBuhn, 69.... Mr. LeBuhn is a private investor and is a Director of 1966
Cambrex Corporation and Enzon, Inc. He is Trustee and
Chairman of the Geraldine R. Dodge Foundation,
Morristown, New Jersey; a trustee and Treasurer of All
Kinds of Minds, Chapel Hill, North Carolina; a trustee of
Executive Service Corps, Aspen, Colorado; director of
The International Research Foundation for Children's
Eyecare, Inc., New York and a member of the National
Council of the Aspen Music Festival and School in
Aspen, Colorado. He is Chairman of the Safety
Committee and a member of the Audit and Executive
Committees of the Board of Directors.
4
Served as
director
since
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John G. Medlin, Jr., 68..... Mr. Medlin is Chairman Emeritus and, until April, 1998, 1987
was Chairman of the Board of Wachovia Corporation
(bank holding company), a position he had held since
1988. Mr. Medlin also served as Chief Executive Officer
of Wachovia Corporation from 1977 until December 31,
1993. Mr. Medlin is a trustee of The Duke Endowment,
the Kenan Institute for Ethics, the National Humanities
Center, Wake Forest University, the Research Triangle
Foundation, the Winston-Salem Foundation and a
member of the North Carolina Judicial Council. He also is
a Director of BellSouth Corporation, Burlington
Industries, Inc., Media General, Inc., and R.J. Reynolds
Tobacco Holdings, Inc. He is Chairman of the
Nominating Committee and a member of the Executive
and Human Resources Committees of the Board of
Directors.
Hanne M. Merriman, 60....... Mrs. Merriman is the Principal in Hanne Merriman Asso- 1985
ciates (retail business consultants). Mrs. Merriman is a
Director of Ameren Corporation, State Farm Mutual
Automobile Insurance Company, The Rouse Company,
Ann Taylor Stores Corporation, T. Rowe Price Mutual
Funds, and Finlay Enterprises, Inc. She is a member of
the National Women's Forum. She was a member of the
Board of Directors of the Federal Reserve Bank of
Richmond, Virginia from 1984-1990 and served as
Chairman in 1989-1990. Mrs. Merriman is Chairman of
the Audit Committee and is a member of the Human
Resources and Safety Committees of the Board of
Directors.
Thomas H. O'Brien, 65....... Mr. O'Brien is Chairman of the Executive Committee of 1999
The PNC Financial Services Group, Inc. (diversified
financial services) and has held this title since May 2001.
He also served as Chairman of the PNC Financial
Services Group, Inc. and Chairman of PNC Bank,
National Association and held those combined titles from
May 2000 to May 2001. He served as Chairman and
Chief Executive Officer from June 1988 until May 2000.
Mr. O'Brien serves as a Director of Verizon
Communications, Inc., Viasystems Inc., BlackRock, Inc.
and Hilb, Rogal & Hamilton Company. He also is a
board member of the Extra Mile Education Foundation,
the Carnegie Museums of Pittsburgh, Pittsburgh Opera,
University of Pittsburgh, and is co-chair of the Riverlife
Task Force. Mr. O'Brien is a member of the Audit and
Safety Committees of the Board of Directors.
Hilda Ochoa-Brillembourg, 57 Ms. Ochoa-Brillembourg is President and Chief Executive 1999
Officer of Strategic Investment Management, Emerging
Markets Investment Corporation and Emerging Markets
Management (investment management), and has held such
position since 1987. Prior to that, she was the Chief
Investment Officer of the Pension Investment Division at
5
Served as
director
since
---------
the World Bank. Ms. Ochoa-Brillembourg serves as a
Director of World Bank/ International Monetary Fund
Credit Union and also the Harvard Management
Company. Ms. Ochoa-Brillembourg is also a trustee and
executive committee member of the Washington Opera,
the National Symphony Orchestra and the Rockefeller
Center for Latin American Studies at Harvard University.
She is a member of the Audit and Nominating
Committees of the Board of Directors.
Richard B. Priory, 55 Mr. Priory is Chairman of the Board, President and Chief 1999
Executive Officer of the Duke Energy Corporation (global
energy services). Prior to that, he was President and Chief
Operating Officer of Duke Power Company from 1994
until its merger with Pan Energy Corporation in 1997. Mr.
Priory joined Duke Power Company in 1976. He is a
member of the Board of Directors of the Dana Corporation,
and the Foundation of the University of North- Carolina at
Charlotte. Mr. Priory is a member of the Nominating and
Safety Committees of the Board of Directors.
David N. Siegel, 40.. Mr. Siegel became President and Chief Executive Officer 2002
of the Company and US Airways in March 2002.
Immediately prior to joining US Airways, Mr. Siegel was
Chairman and Chief Executive Officer of Avis Rent A
Car since September 2001. He also served as Managing
Director of eVolution Global Partners from June 2000
until August 2001. Prior thereto, Mr. Siegel was President
and Chief Operating Officer of Budget Group from
November 1999 to May 2000. Mr. Siegel previously
served in a variety of management roles at Continental
Airlines including President, Continental Express from
November 1995 to October 1999, Senior Vice President,
Planning and Scheduling from August 1994 to October
1995, and Vice President, Corporate Development from
June 1993 to July 1994. Prior to joining Continental
Airlines, Mr. Siegel was a Director, Corporate Planning at
Northwest Airlines. Mr. Siegel is a Director of Mountain
Province Diamonds. Mr. Siegel is a member of the
Executive Committee of the Board of Directors.
Raymond W. Smith, 64. Mr. Smith is the founding partner of Arlington Capital 1990
Partners. He is also Chairman of Rothschild North
America, Inc. (international investment banking) and
Chairman of Verizon Ventures. Prior to that he was
Chairman of the Board and Chief Executive Officer of
Bell Atlantic Corporation from 1989 until December
1998. Previously, Mr. Smith had served as Vice Chairman
and President of Bell Atlantic and Chairman of The Bell
Telephone Company of Pennsylvania. He is a trustee of
Carnegie Mellon University and the Lincoln Center
Theater and serves on the boards of Carnegie Corporation
and Rothschild Continuation Holdings AG. He is a
member of the Executive and Human Resources
Committees of the Board of Directors.
6
Served as
director
since
---------
Stephen M. Wolf, 60 Mr. Wolf is non-executive Chairman of the Board of 1996
Directors of the Company and US Airways and has
served in those positions since March 2002. Prior to that,
Mr. Wolf served as Chairman of the Company and US
Airways since January 1996. He reassumed the position
of Chief Executive Officer of the companies in November
2001 when Mr. Gangwal resigned those positions. Mr.
Wolf also served as Chief Executive Officer of the
Company from January 1996 until November 1998, and
as the Chief Executive Officer of US Airways from
January 1996 until May 1998. Immediately prior to
joining US Airways, Mr. Wolf was a senior advisor to the
investment bank Lazard Freres & Co. Mr. Wolf was
Chairman and Chief Executive Officer of UAL
Corporation and United Air Lines, Inc. from December
1987 until July 1994. Mr. Wolf is a Director of Philip
Morris Companies, Inc., R.R. Donnelley & Sons Co., The
Brookings Institution, Georgetown University and the
World Wildlife Fund. Mr. Wolf is also Chairman of the
Executive Committee.
Committees and Meetings of the Board of Directors
The Board of Directors of the Company held twenty meetings in 2001. During
2001, the following standing committees as established by the Board of
Directors were in effect: Audit Committee, Executive Committee, Human Resources
Committee, Nominating Committee and Safety Committee. During 2001, the Audit
Committee held seven meetings, the Executive Committee held nine meetings, the
Human Resources Committee held nine meetings, the Nominating Committee held one
meeting, and the Safety Committee held two meetings.
The Audit Committee, in consultation with financial officers of the Company
and the independent public accountants, assists in establishing the scope of
the annual audit. The Audit Committee (1) reviews annual and quarterly
financial statements and periodic reports filed with the SEC, (2) recommends to
the Board of Directors the appointment of independent public accountants, (3)
reviews the annual programs of the internal audit staff and (4) reviews
programs designed to protect and maintain the assets of the Company, including
insurance and internal security programs.
The Human Resources Committee determines the salaries, incentive
compensation, stock option and restricted stock grants, retirement and other
benefits which accrue to officers of the Company and its subsidiaries. The
Human Resources Committee makes recommendations to the Board of Directors
concerning the levels of compensation and benefits for the Chairman and the
Chief Executive Officer.
The Nominating Committee is responsible for making recommendations
regarding the nomination of individuals for election to the Board of Directors.
The Nominating Committee will consider individuals recommended by stockholders.
Any such recommendation must be submitted in writing prior to January 1 of each
year, accompanied by a description of the proposed nominee's qualifications and
other relevant biographical information, and should be addressed to the
Nominating Committee, in care of the Secretary of the Company.
During 2001, each of the incumbent directors attended 75 percent or more of
the total number of meetings of the Board of Directors and of the committees on
which the director served.
7
Compensation of Directors
The annual retainer and meeting fee payable to non-employee directors in
2001 were $22,000 and $1,000, respectively. Mr. DeVito, Chairman of the Human
Resources Committee, Ms. Merriman, Chairman of the Audit Committee, Mr. Medlin,
Chairman of the Nominating Committee, and Mr. LeBuhn, Chairman of the Safety
Committee, each receives an additional fee of $2,000 per year for serving in
those respective capacities. Mr. DeVito also received a payment of $25,000 for
the additional time expended in connection with matters related to the Human
Resources Committee. Pursuant to the terms of the US Airways Group, Inc.
Nonemployee Directors Stock Purchase Plan, the directors may elect to receive
all or a portion of their retainer and meeting fees in the form of Company
stock. During 2001, Mr. Wolf received his compensation in his capacity as an
officer of US Airways and received no additional compensation as a director of
the Company and US Airways. Prior to his resignation in November, 2001, Mr.
Gangwal also received his compensation in his capacity as an officer of US
Airways and received no additional compensation as a director of the Company
and US Airways.
The compensation for non-employee directors consists of cash and stock
compensation. Each year active directors receive a grant of 1,500 stock options
and 500 Deferred Stock Units, both of which vest on the earlier of the
completion of their term of office or one year after grant. Using stock based
compensation for directors is intended to more closely align directors'
financial interests with that of shareholders of the Company.
Each director, director's spouse and the director's dependent children are
provided free transportation on US Airways and reimbursement for federal and
state income taxes incurred thereon. Additionally, these benefits are provided
for retired directors. During 2001, non-employee directors received the
following benefits under this program: Mathias J. DeVito, $3,012; Peter M.
George, $25,398; Robert L. Johnson, $104; Robert LeBuhn, $27,322; John G.
Medlin, Jr., $6,799; Hanne M. Merriman, $23,585; Thomas H. O'Brien, $0; Hilda
Ochoa-Brillembourg, $31,894; Richard B. Priory, $1,302; and Raymond W. Smith,
$0.
Certain Relationships and Related Transactions
Robert L. Johnson has been a member of the Board of Directors of the Company
and US Airways since 1998. To address certain potential competitive issues
surrounding a proposed merger transaction between the Company and UAL
Corporation, to be carried out pursuant to a certain Agreement and Plan of
Merger dated as of May 23, 2000, as amended, (Merger Agreement) by and among
the Company, UAL Corporation and Yellow Jacket Acquisition Corp., the Company,
UAL Corporation and Mr. Johnson entered into a certain Memorandum of
Understanding dated May 23, 2000, as amended (Memorandum). The Memorandum
contemplated the formation of an entity to acquire certain of the assets of the
combined company and the creation of a new regional airline, DC Air. The
transactions contemplated in the Memorandum were contingent upon consummation
of the merger. The Memorandum terminated on July 27, 2001 concurrent with the
termination of the Merger Agreement.
Pursuant to the terms of the Memorandum, if the Memorandum was terminated
for any reason other than solely as a result of a breach by Mr. Johnson, the
Company would, upon request of Mr. Johnson, reimburse Mr. Johnson for up to $3
million of his reasonable out-of-pocket expenses incurred in connection with
the Memorandum and the transactions contemplated thereby. In September, 2001,
US Airways paid Mr. Johnson $2.094 million as reimbursement for his
out-of-pocket expenses.
8
Executive Officers
The executive officers of the Company are: David N. Siegel, President and
Chief Executive Officer of the Company and US Airways; Michelle V. Bryan,
Executive Vice President--Corporate Affairs and General Counsel of the Company
and US Airways; Neal S. Cohen--Executive Vice President--Finance and Chief
Financial Officer of the Company and US Airways; Alan W. Crellin, Executive
Vice President--Operations of US Airways; N. Bruce Ashby, Senior Vice
President--Corporate Development of US Airways; B. Ben Baldanza, Senior Vice
President--Marketing and Planning of US Airways; Christopher Doan, Senior Vice
President--Maintenance of US Airways; Jerrold A. Glass, Senior Vice
President--Employee Relations of US Airways and Gregory T. Taylor, Senior Vice
President and President--Express Division of US Airways. Mr. Siegel joined the
Company and US Airways in March 2002. Ms. Bryan joined US Airways in 1983, was
promoted to Senior Vice President--Human Resources of US Airways in 1999 and
was named Executive Vice President--Corporate Affairs and General Counsel of
the Company and US Airways in April 2002. Mr. Cohen joined the Company and US
Airways in April 2002. Mr. Crellin joined US Airways' predecessor, Pacific
Southwest Airlines in 1971, was promoted to Senior Vice President--Customer
Service in March 2000, and was promoted to Executive Vice President--Operations
in January 2002. Mr. Doan joined US Airways in March 1997. Mr. Ashby joined US
Airways in April 1996 and became Senior Vice President--Corporate Development
in June 1999. Mr. Taylor joined US Airways in November 1998, was promoted to
Senior Vice President--Planning in June 1999 and was named Senior Vice
President and President--Express Division in April 2002. Mr. Glass joined US
Airways in April 2002.
9
Compensation of Executive Officers
The Summary Compensation Table below sets forth the compensation paid during
the years indicated to the individuals who served as the Chief Executive
Officer during the last fiscal year and the four remaining most highly
compensated executive officers of the Company or its subsidiaries as of the
last day of the last fiscal year.
Summary Compensation Table
Other Restricted
Name and Principal -Annual Stock LTIP All Other
Position Year Salary Bonus (B) Compensation Awards (I) Options (#) Payouts (P) Compensation (R)
- ------------------------ ---- -------- --------- ------------ ---------- ----------- ----------- ----------------
Stephen M. Wolf.......... 2001 $438,461(A) $ 0 $ 77,847(C) $1,393,600(J) 390,000 $ 0 $107,708
Former Chairman and 2000 $600,000 $ 0 $7,691,036(C) $3,112,500(J) 0 $ 0 $164,803
Chief Executive Officer 1999 $600,000 $600,000 $4,325,146(C) $ 0 0 $ 0(Q) $208,593
Rakesh Gangwal........... 2001 $493,269(A) $ 0 $ 110,414(D) $2,144,000(K) 600,000 $ 0 $130,878
Former President and 2000 $675,000 $ 0 $7,478,724(D) $3,815,625(K) 0 $ 0 $160,666
Chief Executive 1999 $675,000 $675,000 $1,912,405(D) $ 0(K) 0 $ 0(Q) $183,261
Officer
Lawrence M. Nagin........ 2001 $428,038 $ 0 $ 26,299(E) $ 134,000(L) 100,000 $ 0 $ 77,738
Former Executive Vice 2000 $410,000 $ 0 $ 890,529(E) $ 705,938(L) 0 $ 0 $134,872
President - Corporate 1999 $390,577 $425,000 $ 488,638(E) $ 548,750(L) 0 $186,827 $191,666
Affairs and General
Counsel
Michelle V. Bryan........ 2001 $303,346 $ 0 $ 12,055(F) $ 80,400(M) 50,000 $ 0 $ 39,318
Executive Vice 2000 $275,000 $ 0 $ 137,831(F) $ 643,125(M) 0 $ 0 $ 49,252
President - Corporate 1999 $249,038 $250,000 $ 5,776(F) $ 274,375(M) 20,000 $ 94,757 $ 50,055
Affairs and General
Counsel
Thomas A. Mutryn......... 2001 $400,769 $ 0 $ 21,069(G) $ 134,000(N) 75,000 $ 0 $ 67,163
Former Senior Vice 2000 $375,000 $ 0 $ 51,172(G) $ 894,375(N) 0 $ 0 $ 97,252
President - Finance 1999 $337,308 $375,000 $ 61,254(G) $ 411,563(N) 0 $111,600 $ 96,155
and Chief Financial
Officer
Gregory T. Taylor........ 2001 $294,327 $ 0 $ 27,500(H) $ 80,400(O) 50,000 $ 0 $ 48,718
Senior Vice President 2000 $275,000 $ 0 $ 43,820(H) $ 705,938(O) 0 $ 0 $ 62,200
and President - Express 1999 $229,423 $250,000 $ 43,874(H) $ 192,063(O) 15,000 $ 68,717 $ 70,535
Division
- --------
(A) Mr. Wolf declined to accept any salary during the period from September,
2001 though December 31, 2001. Mr. Gangwal declined to accept any salary
for the period September, 2001 through the date of his resignation in
November, 2001.
(B) Incentive awards reflected for 1999 were earned in 1999 but paid in 2000.
(C) Amount disclosed for 2001 includes $18,000 paid for automobile expenses,
$25,000 paid for tax and financial planning services and $34,847 in income
and tax liability payments related to personal travel provided by US
Airways. Amount disclosed for 2000 includes $7,620,370 for income tax
liabilities incurred to permit the retention of Restricted Stock vesting
pursuant to Mr. Wolf's Restricted Stock agreements with US Airways, $18,000
paid for automobile expenses, $7,029 paid for tax and financial planning
services and
10
$45,637 in income and tax liability payments related to personal travel
provided by US Airways. Amount disclosed for 1999 includes $4,306,356 for
income tax liabilities incurred to permit the retention of Restricted Stock
vesting pursuant to Mr. Wolf's Restricted Stock agreements with US Airways,
$18,000 paid for automobile expenses and $790 in income and tax liability
payments related to personal travel provided by US Airways.
(D) Amount disclosed for 2001 includes $16,500 paid for automobile expenses,
$47,115 paid for accrued vacation and $46,799 in income and tax liability
payments related to personal travel provided by US Airways. Amount
disclosed for 2000 includes $7,201,902 for income tax liabilities incurred
to permit the retention of Restricted Stock vesting pursuant to Mr.
Gangwal's Restricted Stock agreements with US Airways, $197,308 in accrued
compensation-related benefits and $41,514 in income and tax liability
payments related to personal travel provided by US Airways. Amount
disclosed for 1999 includes $1,892,007 for income tax liabilities incurred
to permit the retention of Restricted Stock vesting pursuant to Mr.
Gangwal's Restricted Stock agreement with US Airways, $18,000 paid for
automobile expenses and $2,398 in income and tax liability payments related
to personal travel provided by US Airways.
(E) Amount disclosed for 2001 includes $9,000 paid for automobile expenses,
$8,400 paid for tax and financial planning services and $8,899 in income
and tax liability payments related to personal travel provided by US
Airways. Amount disclosed for 2000 includes $720,019 for income tax
liabilities incurred to permit the retention of Restricted Stock vesting
pursuant to Mr. Nagin's Restricted Stock agreements with US Airways,
$126,942 in accrued compensation-related benefits and $14,668 in income and
tax liability payments related to personal travel provided by US Airways.
Amount disclosed for 1999 includes $451,045 for income tax liabilities
incurred to permit the retention of Restricted Stock vesting pursuant to
Mr. Nagin's Restricted Stock agreement with US Airways, $9,000 paid for
automobile expenses, $10,059 in income and tax liability payments related
to personal travel provided by US Airways and $16,134 paid for tax
liability related to moving expense.
(F) Amount disclosed for 2001 includes $12,055 in income and tax liability
payments related to personal travel provided by US Airways. Amount
disclosed for 2000 includes $126,923 in accrued compensation-related
benefits and $10,908 in income and tax liability payments related to
personal travel provided by US Airways. Amount disclosed for 1999 includes
$5,776 in income and tax liability payments related to personal travel
provided by US Airways
(G) Amount disclosed for 2001 includes $21,069 in income and tax liability
payments related to personal travel provided by US Airways. Amount
disclosed for 2000 includes $28,846 in accrued compensation-related
benefits and $22,326 in income and tax liability payments related to
personal travel provided by US Airways. Amount disclosed for 1999 includes
$20,186 in income and tax liability payments related to personal travel
provided by US Airways and $41,068 paid for tax liability related to moving
expense.
(H) Amount disclosed for 2001 includes $27,500 in income and tax liability
payments related to personal travel provided by US Airways. Amount
disclosed for 2000 includes $21,154 in accrued compensation-related
benefits and $22,666 in income and tax liability payments related to
personal travel provided by US Airways. Amount disclosed for 1999 reflects
$21,475 paid for tax liability related to personal travel provided by US
Airways and $22,399 paid for tax liability related to moving expense.
(I) The aggregate number of shares of Restricted Stock held by each of Messrs.
Wolf, Gangwal, Nagin, Mutryn, Taylor, and Ms. Bryan on December 31, 2001,
and the respective value based on the fair market value of the stock on
such date ($6.03) were, respectively: Mr. Wolf--270,000 shares, $1,628,100;
Mr. Gangwal, 0 shares, $0; Mr. Nagin -- 39,375 shares, $237,431; Mr. Mutryn
-- 54,582 shares, $329,129; Mr. Taylor -- 39,625 shares, $238,939; and Ms.
Bryan -- 32,500 shares, $195,975. The Restricted Stock is entitled to the
same dividends payable on outstanding shares of Common Stock.
11
(J) Amount disclosed for 2001 reflects an award of 260,000 shares of Restricted
Stock effective October 16, 2001, vesting 25% on November 15, 2001, 25% on
December 1, 2002 and 25% on each of October 16, 2003 and October 16, 2004,
based on the closing price ($5.36) on the grant date. Amount disclosed for
2000 reflects an award of 100,000 shares of Restricted Stock effective
January 18, 2000, vesting 25% on each of January 18, 2001 and the three
succeeding anniversaries of the grant date, based on the closing price
($25.125) on the grant date; and an award of 29,721 shares of Restricted
Stock effective March 9, 2000, vesting immediately, based on the closing
price ($20.1875) on the grant date.
(K) Amount disclosed for 2001 reflects an award of 400,000 shares of Restricted
Stock effective October 16, 2001, vesting 25% on November 15, 2001, 25% on
December 1, 2002, and 25% on each of October 16, 2003 and October 16, 2004
, based on the closing price ($5.36) on the grant date. Amount disclosed
for 2000 reflects an award of 125,000 shares of Restricted Stock effective
January 18, 2000, scheduled to vest 25% on each of January 18, 2001 and the
three succeeding anniversaries of the grant date, based on the closing
price ($25.125) on the grant date; and an award of 33,437 shares of
Restricted Stock effective March 9, 2000, vesting immediately, based on the
closing price ($20.1875) on the grant date. Mr. Gangwal forfeited all
shares of unvested Restricted Stock upon his resignation on November 27,
2001.
(L) Amount disclosed for 2001 reflects an award of 25,000 shares of Restricted
Stock effective October 16, 2001, vesting 25% on November 15, 2001, 25% on
December 1, 2002 and 25% on each of October 16, 2003 and October 16, 2004,
based on the closing price ($5.36) on the grant date. Amount disclosed for
2000 reflects an award of 17,500 shares of Restricted Stock effective
January 18, 2000, scheduled to vest 25% on each of January 18, 2001 and the
three succeeding anniversaries of the grant date, based on the closing
price ($25.125) on the grant date; and an award of 10,000 shares of
Restricted Stock effective May 16, 2000, scheduled to vest 25% on each of
May 16, 2001 and the three succeeding anniversaries of the grant date,
based on the closing price ($26.625) on the grant date. Amount disclosed
for 1999 reflects an award of 10,000 shares of Restricted Stock, effective
May 18, 1999, scheduled to vest 25% on each of May 18, 2000 and the three
succeeding anniversaries of the grant date, based on the closing price
($54.875) on the grant date.
(M) Amount disclosed for 2001 reflects an award of 15,000 shares of Restricted
Stock effective October 16, 2001, vesting 25% on November 15, 2001, 25% on
December 1, 2002 and 25% on each of October 16, 2003 and October 16, 2004,
based on the closing price ($5.36) on the grant date. Amount disclosed for
2000 reflects an award of 15,000 shares of Restricted Stock effective
January 18, 2000, scheduled to vest 25% on each of January 18, 2001 and the
three succeeding anniversaries of the grant date, based on the closing
price ($25.125) on the grant date; and an award of 10,000 shares of
Restricted Stock effective May 16, 2000, scheduled to vest 25% on each of
May 16, 2001 and the three succeeding anniversaries of the grant date,
based on the closing price ($26.625) on the grant date. Amount disclosed
for 1999 reflects an award of 5,000 shares of Restricted Stock, effective
May 18, 1999, scheduled to vest 25% on each of May 18, 2000 and the three
succeeding anniversaries of the grant date, based on the closing price
($54.875) on the grant date.
(N) Amount disclosed for 2001 reflects an award of 25,000 shares of Restricted
Stock effective October 16, 2001, vesting 25% on November 15, 2001, 25% on
December 1, 2002 and 25% on each of October 16, 2003 and October 16, 2004,
based on the closing price ($5.36) on the grant date. Amount disclosed for
2000 reflects an award of 25,000 shares of Restricted Stock effective
January 18, 2000, scheduled to vest 25% on each of January 18, 2001 and the
three succeeding anniversaries of the grant date, based on the closing
price ($25.125) on the grant date; and an award of 10,000 shares of
Restricted Stock effective May 16, 2000, scheduled to vest 25% on each of
May 16, 2001 and the three succeeding anniversaries of the grant date,
based on the closing price ($26.625) on the grant date. Amount disclosed
for 1999 reflects an award of 7,500 shares of Restricted Stock, effective
May 18, 1999, scheduled to vest 25% on each of May 18, 2000
12
and the three succeeding anniversaries of the grant date, based on the
closing price ($54.875) on the grant date.
(O) Amount disclosed for 2001 reflects an award of 15,000 shares of Restricted
Stock effective October 16, 2001, vesting 25% on November 15, 2001, 25% on
December 1, 2002 and 25% on each of October 16, 2003 and October 16, 2004,
based on the closing price ($5.36) on the grant date. Amount disclosed for
2000 reflects an award of 17,500 shares of Restricted Stock effective
January 18, 2000, scheduled to vest 25% on each of January 18, 2001 and the
three succeeding anniversaries of the grant date based on the closing price
($25.125) on the grant date, and an award of 10,000 shares of Restricted
Stock effective May 16, 2000, scheduled to vest 25% on each of May 16, 2001
and the three succeeding anniversaries of the grant date, based on the
closing price ($26.625) on the grant date. Amount disclosed for 1999
reflects an award of 3,500 shares of Restricted Stock effective May 18,
1999, scheduled to vest 25% on each of May 18, 2000 and the three
succeeding anniversaries of the grant date based on the closing price
($54.875) on the grant date.
(P) Long Term Incentive Plan (LTIP) payments reflected for the year 1999 were
earned for the period 1997-1999 but paid in 2000.
(Q) Messrs. Wolf and Gangwal declined to accept payments from the US Airways
Group, Inc. Long Term Incentive Plan for the performance period ending with
fiscal year 1999.
(R) As further described herein, amounts disclosed include the value of
benefits under the US Airways officer split dollar life insurance program,
and contributions to the defined contribution pension plans. Under the
split dollar life insurance plan of US Airways, individual life insurance
coverage is available to executive officers, with US Airways paying the
premium associated with this coverage. Based on life expectancy and other
assumptions, US Airways expects to recover the premiums it pays with
respect to the whole life component of the coverage. The following amounts
reflect the value of the benefits accrued in 2001, calculated on an
actuarial basis, ascribed to the insurance policies purchased on the lives
of the executives, plus the dollar value of premiums paid by US Airways
with respect to the insurance. Mr. Wolf--$35,708; Mr. Gangwal--$40,282; Mr.
Nagin--$28,538; Mr. Mutryn--$27,086; Mr. Taylor--$19,285; and
Ms. Bryan--$13,003. During 2001, US Airways made contributions to the
accounts of Messrs. Wolf, Gangwal, Nagin, Mutryn, Taylor and Ms. Bryan in
certain defined contribution plans, in the following amounts, respectively:
$72,000; $90,596; $49,200; $40,077; $29,433; $26,315.
Stock Option Grants in Last Fiscal Year
The following table provides information on stock option grants in 2001 to
the named executive officers.
Percent of
Number of Shares Total Options Grant Date
Underlying Option Granted to Exercise or Expiration Present
Name Granted Employees in 2001 Base Price Date Value $/(1)/
---- ----------------- ----------------- ----------- ---------- -----------
Stephen M. Wolf.............. 390,000 8.88% $5.415 11/16/11 $1,259,700
Rakesh Gangwal............... 600,000 13.67% $5.415 11/16/11 $1,938,000
Lawrence M. Nagin............ 100,000 2.28% $5.415 11/16/11 $ 323,000
Michelle V. Bryan............ 50,000 1.14% $5.415 11/16/11 $ 161,500
Thomas A. Mutryn............. 75,000 1.71% $5.415 11/16/11 $ 242,250
Gregory T. Taylor............ 50,000 1.14% $5.415 11/16/11 $ 161,500
- --------
(1) The Black-Scholes model used to estimate the present value of the options
at the date of grant considers a number of factors, including the stock's
projected volatility, the expected exercise period of the option, interest
rates and the vesting features of the option. The following assumptions
were used in determining the
13
values under the Black-Scholes model: (i) the risk free rate of return:
3.69%; (ii) expected stock price volatility: 78.2%; (iii) exercise period of
4 years, and (iv) dividend yield: 0.00%. The actual value, if any, realized
upon the exercise of a stock option will depend on the excess of the market
value of the Common Stock on the date the option is exercised over the
exercise price.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table provides information on the number of options held by
the named executive officers at fiscal year-end 2001. A portion of the
unexercised options held by the officers were in-the-money based on the fair
market value of the Common Stock on December 31, 2001 ($6.03).
Number of Unexercised Value of Unexercised In-
Options/SAR's at the-Money Options/SAR's
Year-End (#) at Year-End (#)
------------------------- -------------------------
Shares
Acquired on Value
Name Exercise (#) Realized $ Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ------------ ---------- ----------- ------------- ----------- -------------
Stephen M. Wolf.. 0 $0 1,922,500 292,500 $59,963 $179,888
Rakesh Gangwal... 0 $0 1,625,000 0 92,250 0
Thomas A. Mutryn. 0 $0 118,750 56,250 11,531 34,594
Lawrence M. Nagin 0 $0 325,000 75,000 15,375 46,125
Michelle V. Bryan 0 $0 62,000 37,500 7,688 23,063
Gregory T. Taylor 0 $0 57,500 37,500 7,688 23,063
Long-Term Incentive Plan--Basis of Awards in Last Fiscal Year
Estimated future payouts under
non-stock price-based plans(2)
------------------------------
Performance or other period until Threshold Target
Name maturatio or payout(1) (%) (%) Maximum (%)
- ----------------- --------------------------------- --------- ------ -----------
Stephen M. Wolf.. 1999-
2001 0 220 440
1999-
Rakesh Gangwal... 2001 0 220 440
1999-
Thomas A. Mutryn. 2001 0 80 160
1999-
Lawrence M. Nagin 2001 0 80 160
1999-
Michelle V. Bryan 2001 0 70 140
1999-
Gregory T. Taylor 2001 0 70 140
- --------
(1) Awards for this cycle are determined based upon the Company's pre-tax
margin as compared to the pre-tax margin of selected competitors.
(2) Awards are stated as a percentage of the officer's base annual salary.
Actual awards paid for the performance period are listed in the "LTIP
Payout" column in the Summary Compensation Table on page 10. No payments
were made from the plan for the performance period 1999-2001.
14
Retirement Benefits
US Airways previously maintained a defined benefit retirement plan
(Retirement Plan) for its salaried employees which provided noncontributory
benefits based upon years of service and the employee's highest three-year
average annual compensation during the last ten calendar years of service.
Under the Retirement Plan, benefits were generally payable commencing at age of
65. However, the Retirement Plan provided reduced early retirement benefits
commencing as early as age 55. Benefits under the Retirement Plan were
integrated with the Social Security program.
US Airways also maintained an unfunded supplemental retirement plan
(Supplemental Plan) which provided those benefits which would otherwise be
payable to officers under the Retirement Plan, but which, under the Internal
Revenue Code (Code), were not permitted to be funded or paid through the
Retirement Plan.
Other than Ms. Bryan, none of the named executive officers participate in
the Retirement Plan or the Supplemental Plan. However, Messrs. Wolf, Siegel,
Gangwal, Nagin, Mutryn, and Taylor, have entered into agreements which provide
for the payment of the same supplemental retirement benefits as would have been
payable had they participated in the Retirement Plan and the Supplemental Plan.
The benefits under the supplemental retirement arrangements, which are payable
when the executive is no longer a full-time employee, are based on actual
salary and bonus (salary and assumed maximum bonus with respect to his final
full year of employment) for Mr. Wolf, actual salary and bonus for Mr. Siegel,
the greater of actual salary and bonus or base salary and assumed maximum bonus
for Mr. Gangwal, base salary and assumed maximum bonus for Mr. Nagin, and base
salary and assumed target bonus paid for Messrs. Mutryn and Taylor. The
benefits payable to Messrs. Wolf, Siegel, Gangwal and Nagin are subject to an
offset for benefits payable under the tax-qualified and non-qualified defined
contribution plan retirement program. The credited years of service under these
supplemental arrangements for each of the individuals included in the Summary
Compensation Table are as follows: Mr. Wolf-30 years, Mr. Gangwal-30 years, Mr.
Nagin-30 years, Mr. Mutryn-3 years, and Mr. Taylor-3 years. The credited years
of service under these supplemental arrangements for Mr. Siegel are as follows:
3 years of credited service for each of the first five years of service, 5
additional years of credited service upon the completion of five years of
service, and thereafter an additional 1.5 years of credited service for each
year of service up to a maximum of 30 years of credited service. Ms. Bryan has
eight years of Credited Service in the Retirement Plan.
The following table presents the noncontributory benefits payable per year
for life to employees under the Retirement Plan and the Supplemental Plan,
assuming normal retirement in the current year. The table also assumes the
retiree would be entitled to the maximum Social Security benefit in addition to
the amounts shown.
Credited Service
--------------------------------------------------
Final Average Earnings 10 Years 15 Years 20 Years 25 Years 30 Years
- ---------------------- -------- -------- ---------- ---------- ----------
$ 250,000........................ $ 54,024 $ 81,036 $ 108,048 $ 135,060 $ 147,560
500,000........................ $114,024 $171,036 $ 228,048 $ 285,060 $ 310,060
750,000........................ $174,024 $261,036 $ 348,048 $ 435,060 $ 472,560
1,000,000........................ $234,024 $351,036 $ 468,048 $ 585,060 $ 635,060
1,250,000........................ $294,024 $441,036 $ 588,048 $ 735,060 $ 797,560
1,500,000........................ $354,024 $531,036 $ 708,048 $ 885,060 $ 960,060
1,750,000........................ $414,024 $621,036 $ 828,048 $1,035,060 $1,122,560
2,000,000........................ $474,024 $711,036 $ 948,048 $1,185,060 $1,285,060
2,250,000........................ $534,024 $801,036 $1,068,048 $1,335,060 $1,447,560
2,500,000........................ $594,024 $891,036 $1,188,048 $1,485,060 $1,610,060
The values reflected in the above chart represent the application of the
Retirement Plan and Supplemental Plan formula to the specified amounts of
compensation and years of service.
15
Employment Arrangements
Mr. Siegel joined US Airways in March, 2002. Under his employment
arrangements with the Company and US Airways, Mr. Siegel is entitled to an
annual base salary of not less than $750,000. Base salary is to be reviewed at
least annually, and, if increased, may not thereafter be decreased. Upon
employment, Mr. Siegel received a one time payment of $750,000. In addition,
Mr. Siegel is eligible for an annual bonus pursuant to the terms of the
Company's Incentive Compensation Plan. Under the plan, Mr. Siegel may receive a
bonus of 100% of annual base salary for target results, which may be increased
for results in excess of the target up to a maximum bonus of 200% of base
salary. Mr. Siegel's employment arrangement provides that he is entitled to a
minimum incentive payment for the 2002 fiscal year of no less than the target
amount. Mr. Siegel is also eligible for a bonus of 220% of his average annual
base salary from the Company's Long Term Incentive Plan (LTIP) if certain
target results are achieved during the performance period, which may be
increased to a maximum bonus of 440% for results exceeding the target.
Mr. Siegel is entitled to an award of stock options and Restricted Stock, as
follows: (i) 750,000 stock options effective March 1, 2002, at an exercise
price based on the fair market value of the stock on the date of the grant,
scheduled to vest 25% on each of March 11, 2002 and the three succeeding
anniversaries of the grant date; (ii) 500,000 stock options effective March 11,
2003, at an exercise price based on the fair market value of the stock on the
date of the grant with such options vesting on a pro-rata basis over a three
year period; and (iii) 350,000 shares of Restricted Stock, effective March 11,
2002, with all shares vesting on the third anniversary of the grant date,
provided however, that if Mr. Siegel's employment should terminate under
certain circumstances prior to the third anniversary of the grant date, he will
vest in the number of shares determined as if 25% of the shares vested on March
11, 2002 and each of the three succeeding anniversaries of the grant date.
Prior to his assumption of the role of non-executive Chairman of the Company
and US Airways in March, 2002, Mr. Wolf was entitled to an annual base salary
of not less than $875,000 effective January 2002 through the date of his
retirement from the Company in March 2002. During 2001, and while he was
executive Chairman of the Company and US Airways, he was entitled to a base
salary of not less than $600,000 which was increased to $675,000 in October
2001. From September 2001 through December 31, 2001, Mr. Wolf did not accept
any base salary and he only accepted base salary at an annual rate of $600,000
beginning January 2002 through his retirement as Chief Executive Officer. In
addition, Mr. Wolf was eligible for an annual bonus pursuant to the terms of
the Company's Incentive Compensation Plan. Under the plan, Mr. Wolf could have
received a bonus of 100% of annual base salary for target results, which could
have been increased for results in excess of the target up to a maximum bonus
of 200% of base salary. Mr. Wolf was also eligible for a bonus of 220% of his
average annual base salary from the Company's Long Term Incentive Plan (LTIP)
if certain target results were achieved during the performance period, which
could have been increased to a maximum bonus of 440% for results exceeding the
target. Mr. Wolf declined to accept payment from the LTIP for the performance
period ending with fiscal year 1999 and no amount was payable from the LTIP for
the performance periods ending with fiscal years 2000 and 2001.
Prior to his resignation in November 2001, Mr. Gangwal was entitled under
his employment arrangement to an annual base salary of not less than $875,000.
In addition, Mr. Gangwal was eligible for an annual bonus pursuant to the terms
of the Company's Incentive Compensation Plan. If the Company achieved its
target objectives, Mr. Gangwal could have received a bonus of 100% of his
annual base salary, which could have been increased for results in excess of
the target up to a maximum bonus of 200% of his base salary. Mr. Gangwal also
could have received a bonus of 220% of his average annual base salary if the
Company achieved its target objectives during the performance period under the
LTIP, and up to a maximum of 440% of his average annual base salary for results
exceeding the target. Mr. Gangwal declined to accept payment from the LTIP for
the performance period ending with fiscal year 1999 and no amount was payable
from the LTIP for the performance periods ending with fiscal years 2000 and
2001.
16
Prior to his retirement on March 31, 2002, Mr. Nagin was entitled to receive
an annual base salary of not less than $480,000. In addition, Mr. Nagin was
eligible for an annual bonus pursuant to the terms of the Company's Incentive
Compensation Plan. If the Company achieved its target objectives, Mr. Nagin
could have received a bonus of 60% of his annual base salary, which could have
been increased for results in excess of target up to a maximum bonus of 120% of
his base salary. Mr. Nagin also could have received a bonus of 80% of his
average annual base salary if the Company achieved its target objectives during
the performance period under the LTIP, and up to a maximum of 160% of his
average annual base salary for results exceeding the target. No amount was
payable from the LTIP for the performance periods ending with fiscal years 2000
and 2001.
Messrs. Mutryn and Taylor and Ms. Bryan are eligible for an annual bonus
pursuant to the terms of the Company's Incentive Compensation Plan. If the
Company achieves its target objectives, Mr. Mutryn and Ms. Bryan may receive a
bonus of 60% of their respective annual base salaries, which may be increased
for results in excess of the target up to a maximum bonus of 120% of base
salary. Mr. Taylor may receive a bonus of 50% of his annual base salary, which
may be increased for results in excess of the target up to a maximum bonus of
100% of base salary. Mr. Mutryn and Ms. Bryan are also eligible for a bonus
under the LTIP of 80% of their respective average annual base salaries if the
Company achieves its target objectives which may be increased up to a maximum
of 160% of average annual base salary for results exceeding target. Mr. Taylor
is eligible for a bonus under the LTIP of 70% of his average annual base salary
if the Company achieves its target objectives which may be increased up to a
maximum of 140% of average annual base salary for results exceeding target.
In connection with their employment arrangements, each of Messrs. Wolf,
Siegel and Nagin (prior to his retirement) are entitled to reimbursement of
fees for certain tax and financial planning advice.
Arrangements Concerning Termination of Employment and Change of Control
Consistent with the practice in the industry, US Airways has entered into an
employment agreement with Mr. Siegel. The term of Mr. Siegel's employment
agreement extends until the third anniversary thereof, or his normal retirement
date, and is subject to automatic one-year annual extensions on each
anniversary date unless advance written notice is given by US Airways. In
exchange for his commitment to devote his full business efforts to US Airways,
Mr. Siegel's employment agreement provides that he will be re-elected to his
current position and will receive (1) an annual base salary at a rate not less
than that in effect during the previous year, (2) incentive compensation as
provided in the employment agreement and (3) insurance, disability, medical and
other benefits generally granted to other officers. In the event of a change of
control, as defined in Mr. Siegel's employment agreement, the term of his
employment agreement is automatically extended until the third anniversary of
the change of control date or his normal retirement date.
Mr. Siegel's employment agreement provides that, should US Airways or any
successor fail to re-elect Mr. Siegel to his position, assign him to duties
which result in a diminution in his position, duties, authority or
responsibilities, fail to compensate him as provided in his employment
agreement, relocate him in violation of the terms of his employment agreement,
fail to require any successor to US Airways to comply with the employment
agreement or otherwise terminate his employment in violation of the employment
agreement, Mr. Siegel may elect to treat such failure as a breach of the
employment agreement if he then terminates employment. As liquidated damages as
the result of an event not following a change of control that is deemed to be a
breach of his employment agreement, US Airways or its successor would be
required to pay Mr. Siegel a lump sum equal to three years' base salary and to
continue granting certain employee benefits for 3 years. If the breach follows
a change of control, Mr. Siegel will be entitled to receive (i) a lump sum
payment equal to the product of three times the sum of his annual base salary
plus an annual bonus, and (ii) continuation of his pension, health insurance,
travel and certain other welfare and fringe benefits for 3 years (except for
travel and health insurance benefits which will continue for the remainder of
his life). Mr. Siegel shall be entitled to recover from
17
US Airways reasonable attorney's fees in connection with enforcement of his
rights under his employment agreement. Mr. Siegel's employment agreement also
provides that any payments Mr. Siegel receives in the event of a termination
after a change of control shall be increased, if necessary, such that, after
taking into account all taxes he would incur as a result of such payments, Mr.
Siegel would receive the same after-tax amount he would have received had no
excise tax been imposed under Section 4999 of the Code.
Mr. Wolf's agreement provides for his employment as Chief Executive Officer
until a replacement has been elected by the Board of Directors, which occurred
in March 2002 when Mr. Siegel was elected Chief Executive Officer of the
Company and US Airways. In addition, Mr. Wolf's agreement provides for Mr.
Wolf's continued service as non-executive Chairman, the position he assumed
when Mr. Siegel was elected Chief Executive Officer, or as a director or
consultant to the Board of Directors until the earlier of (i) age 65 or (ii) a
change of control. While Mr. Wolf serves as non-executive Chairman, he will not
receive any base salary or director fees but will be eligible for such
incentive compensation as determined by the Board of Directors and he will
continue to receive certain benefits on the same basis that such benefits were
provided to him immediately prior to the change in his status from Chief
Executive Officer to non-executive Chairman. In the event of a change of
control, during the term of his agreement, Mr. Wolf's role with the Company
will cease and he will be entitled to receive (i) a lump sum equal to three
times the sum of Mr. Wolf's highest annual salary in effect during the term of
the agreement and highest bonus, and (ii) a payment with respect to each
performance period under the LTIP that had not been completed on the date of
the change of Mr. Wolf's status to non-executive Chairman equal to the amount
that would have been paid with respect to such performance period if the
performance factors for such period had been achieved. Mr. Wolf previously
declined to accept a severance payment to which he would have been entitled
under his prior employment agreement.
Mr. Wolf's agreement also provides that regardless of the reason for the
termination of Mr. Wolf's services to the Company, he is entitled to receive
(i) travel benefits for his lifetime; (ii) health benefits for he and his
spouse for the remainder of their lives; and (iii) certain other fringe
benefits provided to him as Chief Executive Officer to the extent such benefits
are provided to other officers of the Company. Under the terms of his
employment contract, Mr. Wolf is also entitled to recover from US Airways
reasonable attorney's fees in connection with enforcement of his rights under
the agreement. Mr. Wolf's agreement provides that any payments that Mr. Wolf
receives in the event of a change of control shall be increased, if necessary,
such that, after taking into account all taxes he would incur as a result of
such payments, Mr. Wolf would receive the same after-tax amount he would have
received had no excise tax been imposed under Section 4999 of the Code.
Prior to his retirement, US Airways had also entered into an employment
contract with Mr. Nagin. The terms of Mr. Nagin's employment agreement extended
until the third anniversary thereof, or his normal retirement date, and were
subject to automatic one-year annual extensions on each anniversary date unless
advance written notice was given by US Airways. In exchange for Mr. Nagin's
commitment to devote his full business efforts to US Airways, the agreement
provided that Mr. Nagin would be re-elected to his then current position and
would receive (1) an annual base salary at a rate not less than that in effect
during the previous year, (2) incentive compensation as provided in the
contract and (3) insurance, disability, medical and other benefits generally
granted to other officers. In the event of a change of control, as defined in
Mr. Nagin's employment agreement, the term of his employment agreement were
automatically extended until the earlier of the third anniversary of the change
of control date or Mr. Nagin's normal retirement date.
Mr. Nagin's employment agreement provided that, should US Airways or any
successor fail to re-elect Mr. Nagin to his position, assign him to duties
which result in a diminution in his position, duties, authority or
responsibilities, fail to compensate Mr. Nagin as provided in his employment
agreement, relocate Mr. Nagin in violation of his employment agreement, fail to
require any successor to US Airways to comply with the employment agreement or
otherwise terminate Mr. Nagin's employment in violation of the Employment
Contract, Mr. Nagin could have elected to treat such failure as a breach of the
employment agreement if Mr. Nagin
18
then terminated employment. As liquidated damages as the result of an event not
following a change of control that is deemed to be a breach of his employment
agreement, US Airways or its successor would be required to pay Mr. Nagin a
lump sum equal to three years' base salary, and to continue granting certain
employee benefits for 3 years. If the breach follows a change of control, Mr.
Nagin would have been entitled to receive (i) a lump sum payment equal to the
product of three times the sum of his annual base salary plus an annual bonus,
and (ii) continuation of his pension, health insurance, travel and certain
other welfare and fringe benefits for 3 years. In addition, during the 30-day
period immediately following the first anniversary of a change of control,
Mr. Nagin could have elected to terminate his employment agreement for any
reason and receive the liquidated damages described in the immediately
preceding sentence. Mr. Nagin's employment agreement provided that Mr. Nagin
would be entitled to recover from US Airways reasonable attorney's fees in
connection with enforcement of his rights under the employment agreement. Mr.
Nagin's employment agreement also provided that any payments that he received
in the event of a termination after a change of control could be increased, if
necessary, such that, after taking into account all taxes he would incur as a
result of such payments, Mr. Nagin would receive the same after-tax amount he
would have received had no excise tax been imposed under Section 4999 of the
Code. Mr. Nagin's employment agreement terminated upon his retirement in March
2002.
Mr. Wolf's benefits under the supplemental retirement agreement described on
page 15 would have vested immediately upon a change of control, a termination
of employment without cause or upon resignation for good reason. Mr. Siegel's
benefits under the supplemental retirement agreement will vest immediately upon
a change of control. Certain of Messrs. Wolf's and Siegel's restricted stock
will vest immediately upon a change of control or his death or disability. All
of Messrs. Wolf's and Siegel's stock options will vest immediately upon a
change of control.
Prior to the resignation of Mr. Gangwal, the Company had entered into
substantially the same arrangements with Mr. Gangwal. Such agreements
terminated upon Mr. Gangwal's resignation.
In 2001, the Company has also entered into severance agreements (Severance
Agreement) with Messrs. Mutryn and Taylor and Ms. Bryan.
The Severance Agreement extends until the earlier of the severance of their
employment, or their retirement date. The Severance Agreements provide that if,
within the two year period commencing with the effective date of the Agreement,
the executive officer's employment should be terminated other than for cause
(as defined in the Severance Agreement), demoted or if there is a reduction in
base salary, he or she may elect to treat such occurrence as a breach of the
Severance Agreement if he or she then elects to terminate employment. Under
such circumstances, Messrs. Mutryn and Taylor and Ms. Bryan would be entitled
to receive (i) a lump sum payment equal to the product of two times the sum of
his or her annual salary plus target bonus and (ii) certain health insurance
and travel benefits for the remainder of his or her life. In addition, the
Severance Agreements provide that if Messrs. Mutryn or Taylor, or Ms. Bryan,
terminate employment after the two year period commencing on the effective date
of the Severance Agreement, they will be entitled to certain health insurance
and travel benefits for the remainder of their lives. Pursuant to the terms of
the Severance Agreement, if following a change of control, US Airways should
assign him or her duties which are inconsistent with his or her position,
authorities, duties or responsibilities, fail to compensate him or her in
accordance with the terms of the Severance Agreement, require relocation under
certain circumstances, fail to require any successor to US Airways to comply
with the Severance Agreement or otherwise terminate his or her employment in
violation of the Severance Agreement, he or she may elect to treat such failure
as a breach of the Severance Agreement if he or she then terminates employment.
19
Under such circumstances Messrs. Mutryn and Taylor and Ms. Bryan will be
entitled to receive (i) a lump sum payment equal to the product of three times
the sum of his or her annual salary plus annual bonus, (ii) certain health
insurance benefits, (iii) travel benefits for life; and (iv) continuation of
certain other benefits during the three year period following the termination
of employment. The Severance Agreement provides that Messrs. Mutryn and Taylor
and Ms. Bryan shall be entitled to recover from US Airways reasonable
attorney's fees in connection with enforcement of their rights under the
Severance Agreement. The Severance Agreement further provides that any payments
received in the event of termination after a change of control shall be
increased, if necessary, such that, after taking into account all taxes
incurred as a result of such payments, Messrs. Mutryn and Taylor and Ms. Bryan
would receive the same after-tax amount they would have received had no excise
tax been imposed under Section 4999 of the Code.
Messrs. Mutryn's and Taylor's benefits under the supplemental retirement
agreement will vest immediately upon a change of control or upon resignation
for good reason.
Currently, under the Company's 1996 Stock Incentive Plan (1996 Plan),
pursuant to which employees of the Company and its subsidiaries have been
awarded stock options with respect to Common Stock and shares of restricted
stock, the occurrence of a change of control, as defined, would make all
granted options immediately exercisable without regard to the vesting
provisions thereof, and under certain circumstances, would cause shares of
restricted stock to vest.
In addition under the terms of the LTIP, upon the occurrence of a change in
control, as defined, each participant in the LTIP will be entitled to receive a
payment with respect to each performance period that has not been completed
equal to the amount that would have been paid with respect to such performance
period if the performance factors for such period had been achieved at the
target level.
20
HUMAN RESOURCES COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Human Resources Committee (the "Committee") is responsible for
determining the annual salary, short-term and long-term cash and stock
incentive compensation, and other compensation of the executive officers,
including the executive officers named in the Summary Compensation Table. This
report describes the policies and approach of the committee in establishing
executive compensation during 2001.
Committee Approach to Compensation
In determining the principal components of executive compensation, the
Committee, in consultation with an independent compensation consultant,
considers the following factors: (a) the overall competitive environment in
executive compensation needed to attract, retain and motivate talented and
experienced senior management; (b) Company performance, both year over year and
in comparison to other companies within the airline industry; (c) the
individual performance of the executive; (d) comparative compensation studies;
and (e) historical compensation levels at the Company.
The Committee reviews the compensation levels for peer-level positions of
premier companies of similar size to the Company, as well as at other major
domestic passenger airlines, including, but not limited to, American Airlines,
Inc. ("American"), Continental Airlines, Inc. ("Continental"), Delta Air Lines,
Inc. ("Delta"), Northwest Airlines Corporation ("Northwest") and United Air
Lines Inc. ("United") and airline compensation data. Two of these airlines are
included in the S&P Airline Index used in the Performance Graph.
During 2001, the Committee modified its approach to compensation. The
Committee now targets base salary to be in the 60-70% level of the industry
peer group for the named executive officers. Total compensation is targeted to
be at or above the median compensation levels in the industry. However, a
significant portion of total compensation is variable and value is dependent
upon Company performance. Stock awards and long-term incentive compensation,
and consequently total compensation, are intended to link a significant portion
of each executive officer's compensation to the performance of the Company's
stock, thereby increasing shareholder value.
Components of Executive Compensation
Base Salary. Historically, base salaries are reviewed annually, in
connection with promotions and when responsibilities for the position are
changed. In 2001, the Committee recognized the need to retain executive talent
in light of (1) the termination of the merger agreement with UAL Corporation;
(2) the severance agreements of the senior executives that were triggered upon
shareholder approval of the merger agreement with UAL Corporation that allows
eligible executives to receive their severance benefits if their job
responsibilities are significantly altered, thereby creating a potential
conflict for the Company and US Airways as they reorganize and streamline for
the future; and (3) the business challenges facing the airline industry and the
Company following the September 11/th terrorist attacks. As a result, the
Committee has reevaluated its approach to base salaries and has established
base salaries at 60-70th/ percentile of the airline industry peer group, which
represents an increased emphasis from prior years on base salaries as a
component of total compensation. In exchange for receiving an increase in base
salary and certain other benefits, each senior vice president entered into a
new severance agreement pursuant to which each gave up the right to certain
payments and benefits they could have received under a prior agreement. The new
severance agreements provide the Company enhanced flexibility to reorganize and
streamline its operations.
Annual Cash Incentive Compensation. The Committee adopted and administers
the Incentive Compensation Plan (the "ICP plan"). All officers, including the
named executive officers, and certain other key management employees of the
Company are eligible to participate in the ICP plan. The ICP plan provides for
the payment of both incentive and discretionary awards. The incentive awards
are based upon the Company achieving a
21
performance objective, which is set by the Committee annually. The Committee
also establishes target percentages for each executive. The target awards for
the executive officers range from 50% to 60% of base salary for Senior Vice
Presidents to 60% for Executive Vice Presidents, and 100% of base salary for
the Chief Executive Officer and for the Chairman. If the Company's objective is
exceeded, then the incentive award may be increased up to a maximum amount of
double the target percentage, or 100% to 200% of base salary. The Committee
retains the discretion to adjust any award based on individual performance. The
Committee also retains the discretion to pay a discretionary award in a year
when the Company did not achieve its objective or to pay an award in addition
to the maximum incentive award when circumstances are appropriate for such
discretionary awards.
For the 2000 fiscal year, the Committee set as the Company's target
objective a stated percentage "Operating Margin." Since the Company did not
attain its performance objectives, no ICP awards were made to officers for
fiscal year 2000.
For the 2001 fiscal year, the Company delayed establishing performance
objectives until the consummation of the merger with UAL Corporation. After the
termination of the merger agreement, the Committee recognized that traditional
performance objectives based strictly on financial results would not serve as
an effective retention mechanism or further the Company's objectives of
increasing the overall performance of the Company. Accordingly, for the 2001
fiscal year, the Committee eliminated the traditional "operating margin"
performance objective and determined to make payments at the target level,
subject to individual performance with the ability to receive an increased
payment if certain management objectives are achieved. While the Company
achieved some of the established objectives for the 2001 fiscal year, given the
current financial situation of the Company in the wake of September 11/th/, the
Committee has not yet considered whether incentive payments will be made to the
named executive officers for 2001.
Long Term Cash Incentive Compensation. During 1998, the Board of Directors
adopted a long term cash incentive compensation plan ("LTIP"). The LTIP was
deemed necessary to hire and retain high performance executives. The purpose of
the LTIP is to tie a portion of total compensation to operating results over a
longer time period. With this overall compensation approach, the Committee
believes it will more closely align executive compensation with Company
performance while enabling the Company to recruit and retain talented
executives with attractive total compensation packages.
In the first three performance periods ending with fiscal years 1999, 2000
and 2001, the Committee set as the Company's objective the weighted average
pre-tax adjusted margin of selected competitors. The target award percentage
for executive officers under the LTIP ranges from 70% to 80% of average annual
base salary for Senior Vice Presidents, 80% of average base salary for
Executive Vice Presidents and 220% of average annual base salary for the Chief
Executive Officer and the Chairman.
For the first performance period ending with fiscal year 1999, the LTIP paid
out at 62% of the target percentage established by the Committee based upon the
Company's pre-tax adjusted margin. However, both the Chairman and the Chief
Executive Officer declined to accept payments for the performance period ending
with fiscal year 1999.
For the second performance period ending with fiscal year 2000, the Company
failed to achieve the minimum threshold required for payments from the LTIP.
Accordingly, no payments were made from the LTIP for the 1998-2000 performance
period.
22
For the third performance period ending with fiscal year 2001, the Company
also failed to achieve the minimum threshold required for payments from the
LTIP. Accordingly, no payments will be made from the LTIP for the 1999-2001
performance period.
Stock Options. The executive officers of the Company participate in the
Company's 1996 Stock Incentive Plan (the "1996 Plan") which is administered by
the Committee. The Committee is authorized to grant options under the 1996 Plan
at an exercise price equal to the fair market value of a share of Common Stock
on the effective date of the grant. The Committee is also authorized under the
terms of the 1996 Plan to grant awards of restricted stock. The Committee sets
the long-term incentive stock compensation for its executive officers above the
median of the airline industry peer group. The Committee believes that granting
stock options and restricted stock to executive officers aligns the executive's
interests more closely with those of the stockholders of the Company by tying a
meaningful portion of compensation to the performance of the Company's stock.
The Committee considers the individual performance of each executive officer,
historical stock grants made by the Company to the individual, survey data and
the recommendations of its independent compensation consultant.
Historically, stock options have generally been granted to officers on an
annual basis. During 2001, the Committee recognized that the financial impact
of the termination of the merger agreement with UAL Corporation and the
September 11/th terrorist attacks had significantly decreased the value of
restricted stock and stock options granted to executive officers in prior
years, thereby reducing the retention value of such grants. Additionally, no
new annual grants had been made since the announcement of the United merger.
The Committee determined that new stock grants were necessary in order to
incent executives to remain with the Company, and to reward them for future
increases in the share price. /
CEO Compensation
In establishing the compensation of the Chairman and the President and Chief
Executive Officer, the Human Resources Committee considered, among other
things, that Mr. Wolf and Mr. Gangwal (1) had not received an increase in base
compensation since 1998, (2) their compensation was set below their competitors
in the industry, and (3) the value of their stock holdings, which were intended
to make up a significant component of their total compensation, had declined
substantially as a result of the events of September 11, 2001. In addition, the
Committee considered the significant business challenges facing the Corporation.
With the resignation of Mr. Gangwal in November 2001, Mr. Wolf reassumed the
role of Chief Executive Officer in addition to his duties as the Chairman of
the Company and US Airways while the Company conducted a search for a new Chief
Executive Officer. In recognition of the additional duties that he had assumed,
the Committee determined to compensate Mr. Wolf at the level that the Committee
had previously established for Mr. Gangwal while he served as the Chief
Executive Officer. The Committee also sought to ensure that in connection with
the election of a replacement Chief Executive Officer, Mr. Wolf would continue
to serve in an advisory capacity to the Company and US Airways, either as
non-executive Chairman of the Company and US Airways, a director or a
consultant.
Deductibility of Executive Compensation
Section 162(m) of the Code limits the tax deduction of a publicly-held
company allowed for compensation paid to the Chief Executive Officer and to the
four most highly compensated executive officers other than the Chief Executive
Officer. Generally, the Committee desires to maintain the tax deductibility of
compensation for
23
executive officers to the extent it is feasible and consistent with the
objectives of the Company's compensation programs. Some, but not all, of the
compensation programs established for executive officers comply with the
deductibility requirements under Section 162(m). The Committee continues to
consider ways to maximize the deductibility of executive compensation, but
intends to retain the discretion the Committee deems necessary to compensate
executive officers in a manner commensurate with performance and the
competitive environment for executive talent.
This report has been approved by all members of the Committee.
Mathias J. DeVito, Chairman
Peter M. George
John G. Medlin, Jr.
Hanne M. Merriman
Raymond W. Smith
24
[CHART]
US Airways Group S&P 500 S&P Airline
1996 100.00 100.00 100.00
1997 267.38 131.01 168.15
1998 222.46 165.95 162.55
1999 137.17 198.35 161.07
2000 173.53 178.24 239.78
2001 27.12 218.58 161.39
The above graph compares the performance of the Company's Common Stock
during the period December 31, 1996 to December 31, 2001 with the S&P 500 Index
and the S&P Airline Index during the relevant time period. The graph depicts
the results of investing $100 in the Company's Common Stock, the S&P 500 Index
and the S&P Airline Index, at closing prices on December 31, 1996. The stock
price performance shown on the graph above is not necessarily indicative of
future price performance. The S&P Airline Index consists of American, Delta,
Southwest Airlines Co. and the Company.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors of US Airways Group, Inc. is
composed of five non-employee members of the Board of Directors. Each member of
the Audit Committee is independent, as defined by the New York Stock Exchange.
The Board of Directors has adopted a written Audit Committee Charter.
The Audit Committee reviews the Company's accounting and financial reporting
process on behalf of the Board of Directors. Management has primary
responsibility for the financial statements and the reporting process,
including the system of internal controls.
In fulfilling its oversight responsibilities, the Audit Committee has met
and held discussions with management and the independent auditors. The Audit
Committee discussed with the Company's internal and independent auditors the
overall scope and plans for their respective audits. The Audit Committee met
with the
25
internal and independent auditors, with and without management present, to
discuss the results of their examinations, the evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
Management represented to the Audit Committee that the Company's
consolidated financial statements were prepared in accordance with accounting
principles generally accepted in the United States, and the Audit Committee has
reviewed and discussed the consolidated financial statements with management
and the independent auditors. The Audit Committee discussed with the
independent auditors matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit Committees, as amended.
The Audit Committee has received the written disclosures and the letter from
the independent auditors required by Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees, and has discussed with the
independent auditors, the auditors' independence from the Company and its
management. The Audit Committee has considered whether certain non-audit
services provided by KPMG LLP to the Company in 2001 is compatible with
maintaining auditor independence. The Company incurred the following fees for
services performed by its independent auditors, KPMG LLP, in fiscal year 2001:
Audit Fees:................................................... $ 615,000
Financial Information Systems Design and Implementation Fees.. $ 0
All other fees................................................ $1,370,000
- --------
All other fees includes $875,000 of audit related services and $495,000 of
tax services. Audit related services consists principally of audits of
financial statements of employee benefit plans, accounting research and
review of registration statements and related issuance of consents.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board of Directors
approved, the inclusion of the audited financial statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 2001, for filing
with the Securities and Exchange Commission. The report was filed with the
Securities and Exchange Commission on March 28, 2002. The Audit Committee and
the Board of Directors also have recommended, subject to stockholder approval,
the selection of the Company's independent auditors.
This report has been approved by all members of the Audit Committee.
Hanne M. Merriman, Chairman
Robert L. Johnson
Robert LeBuhn
Thomas H. O'Brien
Hilda Ochoa-Brillembourg
26
SELECTION OF AUDITORS (Item No. 2)
The Board of Directors has named KPMG LLP as independent public accountants
to examine the consolidated financial statements of the Company for fiscal year
2002, subject to ratification by the stockholders. KPMG LLP acted in the same
capacity during 2001. A representative from that firm is expected to be present
at the annual meeting of stockholders and will be afforded an opportunity to
make a statement if the representative desires to do so and to respond to
appropriate questions.
STOCKHOLDER PROPOSAL CONCERNING CUMULATIVE VOTING (Item No. 3)
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia, N.W., Suite
215, Washington, D.C. 20037, who is the beneficial owner of 1,000 shares of
Common Stock, has advised the Company of her intention to introduce the
following resolution at the annual meeting. To be adopted, this resolution,
which is opposed by the Board of Directors, would require the affirmative vote
of the holders of at least a majority of the shares of Common Stock, present in
person or represented by proxy at the meeting and entitled to vote.
RESOLVED: "That the stockholders of US AIRWAYS, assembled in Annual Meeting
in person and by proxy, hereby request the Board of Directors to take the
necessary steps to provide for cumulative voting in the election of directors,
which means each stockholder shall be entitled to as many votes as shall equal
the number of shares he or she owns multiplied by the number of directors to be
elected, and he or she may cast all of such votes for a single candidate, or
any two or more of them as he or she may see fit."
Supporting Statement of Mrs. Evelyn Y. Davis
REASONS: "Many states have mandatory cumulative voting, so do National
Banks." "In addition, many corporations have adopted cumulative voting."
"Executive compensation has been excessive, particular since many employees
have been laid off, the stock has dropped more than 90% in price as of
September 2001, and the Company continues to employ minimum wage people to
check bags. A director elected by cumulative voting might be more amenable to
make appropriate changes re these issues." "Last year the owners of 7,685,182
shares, representing approximately 20.67% of shares voting, voted FOR this
proposal."
"If you AGREE, please mark your proxy FOR this resolution."
Statement of the Company in Opposition to the Stockholder Proposal
Ms. Davis presented a similar proposal in 1999, 2000 and 2001. Last year,
the stockholders rejected this proposal by a vote of 79.33% against.
As it has in prior years, the Board of Directors recommends a vote against
the cumulative voting proposal because the Board firmly believes that
cumulative voting is not in the best interest of the Company or its
stockholders.
The Company's current voting system ensures that each Director is elected by
a plurality of the votes cast. By contrast, cumulative voting could favor
special interests. The Board of Directors believes that each Director should be
chosen for his or her qualifications and ability to serve the Company and our
stockholders. To do otherwise would sacrifice the interests of the Company and
stockholders as a whole.
Each Director has the duty to represent all the stockholders and to advance
the best interest of the Company. By permitting a relatively small group of
stockholders to pool their votes and elect a Director, cumulative voting would
produce a conflict between the Director's duty to represent all the
stockholders and the Director's allegiance to his or her narrow constituency.
27
A system of cumulative voting could render a partisan Board, as special
interest concerns prevent the members of the Board from working together as a
smoothly functioning unit.
In summary, the Company believes that the existing system of one vote per
share is working well.
Accordingly, the Board of Directors urges you to vote AGAINST the stockholder
resolution (Item No. 3).
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which may come before the
meeting except that indicated above. However, if other business is brought
before the meeting, the persons acting under the enclosed form of proxy may
vote thereunder in accordance with their best judgment.
The Company's by-laws require stockholders who intend to nominate directors
or propose new business at any Annual Meeting to provide advance notice of such
intended action as well as certain additional information. This by-laws
provision requires stockholders to provide the Company with notice of their
intent to nominate directors or propose new business at an Annual Meeting not
less than 30 days nor more than 60 days prior to such Annual Meeting; provided,
however, that in the event less than 40 days prior written notice or prior
public disclosure of the date of the meeting is given or made to the
stockholder, such notices by the stockholder must be received by the Company
not later than close of business on the 10th day following the day on which
such notice of the date of the Annual Meeting was mailed or such public
disclosure was made.
Assuming the 2002 Annual Meeting is held as scheduled, notice of intent to
nominate directors or propose new business to be brought before the 2002 Annual
Meeting must have been received in proper form on or prior to April 23, 2002.
COST AND METHOD OF PROXY SOLICITATION
Proxies will be solicited by mail. The expense of such solicitation will be
borne by the Company. Directors, officers, or regular employees of the Company
and US Airways may solicit proxies in person. The cost of such solicitation
will be nominal. In addition, D.F. King & Co., Inc. has been retained by the
Company to assist in soliciting proxies from brokerage firms, bank nominees and
other institutional holders to assure a timely vote by the beneficial owners of
stock held of record by such firms, banks and institutions. This firm will
receive a fee not to exceed $17,500 for its services.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
As discussed above, the Company's by-laws require stockholders who intend to
nominate directors or propose new business at any Annual Meeting to provide
advance notice of such intended action as well as certain additional
information. In addition, in accordance with federal securities laws, proposals
to be submitted by stockholders for consideration at the Company's next Annual
Meeting and inclusion in the Company's 2003 Proxy Statement must be received by
the Company at its executive offices in Arlington, Virginia, not later than
December 12, 2002.
28
AVAILABILITY OF ANNUAL REPORT TO STOCKHOLDERS AND REPORT ON FORM 10-K
Copies of the Company's Annual Report to Stockholders on Form 10-K for the
year ended December 31, 2001, which includes certain financial information
about the Company, have been mailed to the Company's stockholders. Copies of
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2001 as filed with the SEC (exclusive of exhibits and documents incorporated by
reference), may also be obtained for free by directing written requests to: US
Airways Group, Inc., Investor Relations, 2345 Crystal Drive, Arlington,
Virginia 22227, (703) 872-5305. Copies of exhibits and basic documents filed
with the Annual Report on Form 10-K or referenced therein will be furnished to
stockholders upon written request and payment of a nominal fee in connection
with the furnishing of such documents.
By Order of the Board of Directors,
Jennifer C. McGarey
Secretary
April 12, 2002
29
US AIRWAYS GROUP, INC.
2002 ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, MAY 15, 2002
9:30 A.M.
To vote your shares:
o Mark, sign and date the proxy card below
o Detach the proxy card
o Return the proxy card in the postage-paid envelope
provided
\/ DETACH PROXY CARD HERE \/
- --------------------------------------------------------------------------------
[ ] Mark, Sign, Date and Return [X] Votes must be indicated
the Proxy Card Promptly Using (x) in Black or Blue ink.
the Enclosed Envelope.
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
1. Election of Directors
FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below
Nominees: M.J. DeVito, P.M. George, R.L. Johnson, R. LeBuhn, J.G. Medlin, Jr.,
H.M. Merriman, T.H. O'Brien, H. Ochoa-Brillembourg, R.B. Priory,
D.N. Siegel, R.W. Smith, S.M. Wolf
(INSTRUCTIONS: To vote for all nominees other than certain specified nominees,
mark the "Exceptions" box and write that nominee's name in the space provided
below.)
*Exceptions ___________________________________________________________________
FOR AGAINST ABSTAIN
2. Ratification of the selection of KPMG [ ] [ ] [ ] To change your address, please mark this box. [ ]
LLP as auditors.
BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 3.
3. Stockholder proposal concerning cumulative [ ] [ ] [ ]
voting.
- -------
|
| [SCAN LINE]
|
|
| NOTE: Please sign as name appears hereon. Joint
| owners should each sign. When signing as
------ attorney, executor, administrator, trustee or
guardian, please give full title as such.
Date Share Owner sign here Co-Owner sign here
_________________________________________________________
_________________________________________________________
3955
ADMISSION TICKET
US AIRWAYS GROUP, INC.
2002 ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, MAY 15, 2002
9:30 a.m. Local Time
Capital Hilton Hotel
16th & K Street, N.W.
Washington, DC 20036
This admission ticket admits only the named stockholder
Note: If you plan on attending the annual meeting in person, please bring, in
- ----
addition to this admission ticket, a proper form of identification. Video, still
photography or recording devices are not permitted at the annual meeting. For
safety of attendees, all handbags and briefcases are subject to inspection. Your
cooperation is appreciated.
- --------------------------------------------------------------------------------
US AIRWAYS GROUP, INC.
PROXY
Proxy Solicited on Behalf of The Board of Directors for Annual
Meeting of Stockholders on May 15, 2002
The undersigned hereby appoints M. V. Bryan and J. C. McGarey, and each
of them, proxies (each with power of substitution) of the undersigned to attend
the above annual meeting of stockholders of US Airways Group, Inc. and any
adjournment or postponement thereof and thereat to vote all shares of stock held
by the undersigned, as specified on the reverse side, and on any other matters
that may properly come before said meeting.
For those participants who may hold shares in the US Airways, Inc.
Employee Stock Ownership Plan, the US Airways, Inc. 401(k) Savings Plan, the US
Airways, Inc. Employee Savings Plan, the US Airways, Inc. 401(k) Savings Plan
for Pilots or the Supplemental Retirement Plan of Piedmont Aviation, Inc.
(collectively, the "Plans"), please fill in and sign this card and mail it in
time to be received no later than May 10, 2002, in order to be voted in a timely
manner by the administrator of the Plans, Fidelity Management Trust Company (the
"Administrator"). After May 10, 2002, the instructions cannot be revoked and, in
accordance with the Plans, you may not vote these shares in person at the
meeting. The Administrator is authorized to vote the Plan shares for which
instructions have been given upon such other business as may come before the
meeting. The Bank of New York will tally the vote on behalf of the
Administrator.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN ON THE REVERSE
SIDE AND RETURN PROMPTLY.
US AIRWAYS GROUP, INC.
P.O. BOX 11029
NEW YORK, N.Y. 10203-0029