Tentative

Contents of the Tentative

Notes from the US Airways Negotiating Committee
Main Points of the Tentative Agreement
Changes to our contract Returns/Protections
Local DCA Edition of the E-Line
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Notes from the US Airways Negotiating Committee

Monday, 7/1/02 - The AFA Negotiating Committee met with management throughout the weekend. Late Sunday evening, we reached a tentative agreement on a plan that will provide US Airways with the labor cost savings it needs from flight attendants to get a loan guarantee from the federal government and possibly keep our carrier out of bankruptcy. The tentative agreement will reward flight attendants for their sacrifice and dedication and also provides flight attendants protections should the airline apply for bankruptcy.

Management originally asked for $90 million in cost savings each year from the flight attendants. Our agreement reduces that number to $77 million per year and builds in significant protections and rewards. Make no mistake, the $77 million is still a substantial number, and every cut is painful. The tentative deal attempts to make the best out of a bad situation by providing protection in the event of a bankruptcy and maximizing our returns once the company returns to profitability.

Main Points of the Tentative Agreement

Here are the basics of the deal (more details will be provided in the coming days):

First and foremost, all US Airways flight attendants currently paying dues and whose dues account is in good standing will have an opportunity to vote on the tentative agreement. If you're not sure about your eligibility to vote, call AFA at 1-800-424-2401, ext. 861.
If the company agrees to a lower percentage of cuts with the pilots, our percentage will be reduced to match it.

For example, our tentative agreement gives management $77 million of the $90 million per year US Airways sought. That's 85 percent of the original target savings number management set for us. If the pilots strike a deal that provides the company with less than 85 percent of the original $595 million per year that the company asked for, the savings provided in our deal will be reduced to match the lower percentage -- meaning we will put money back in our pockets.

AFA originally said we were going to wait for the pilots to make a deal first, and then we would follow. However, we were able to get the company to sign off on this provision, so we were able to continue with negotiations and still be ensured that we are not going to pay a higher percentage than the pilots.

If US Airways files for bankruptcy, management will not ask for cuts greater than those provided in our agreement.

This provision is effective throughout the ratification process. However, if a majority of the flight attendants do not ratify the deal, this provision (along with the rest of the agreement) goes away and we will be treated like any other labor group that doesn't have an agreement on concessions. That means management will ask the bankruptcy judge to authorize the cuts that the carrier proposed in its first concession Term Sheet.

The company's first concession Term Sheet given to the AFA Negotiating Committee sought cuts of $108 million per year, including a 15.5% cut in wages, a cut in our pension formula, and massive cuts in our health insurance that would increase flight attendant out-of-pocket costs over 380% in the next four years. In essence, a group without an agreement would be forced by the courts to take the maximum amount of cuts but would not share in profit sharing and other equity returns built into our tentative agreement.

Management still says it believes it can restructure the airline outside of bankruptcy. However, a number of factors still must fall into place. The other labor groups must finalize their deals. The agreements must be ratified. Creditors must agree to new terms of payment.

If any of those pieces fail to fall into place, management will have to consider filing for bankruptcy. Today's announcement (7/1) that management is not going to pay some of its public debt obligations is an indication that negotiations with some of its creditors may be going slowly. And if those talks fail, just like if the talks with the other labor groups fail, bankruptcy will be a reality.

If our deal fails to ratify, and the airline goes into bankruptcy (not a certainty, but from all indications, very likely under this scenario), AFA will get a chance to make our case to a bankruptcy judge concerning the cuts management asks to make, in an effort to lower the amount of cuts from the $108 million per year management is likely to request. Our success in convincing a bankruptcy judge that the cuts are too severe will rest with the judges sympathies. Some judges are sympathetic to workers. Some are not.

Changes to our contract Returns/Protections

IMPORTANT NOTE: Changes that are set to begin on July 1, 2002 will not go into effect unless the contract is ratified by a vote of the flight attendants -- those changes would then be retroactive.

Wages will be cut 8.4 percent, retroactive to July 1, 2002.
Two percent raises in 2003 and 2004 will be eliminated.
'No furlough' clause will be deleted, however, flight attendant jobs are protected to a minimum fleet size of 275 aircraft outside of bankruptcy and 245 aircraft in bankruptcy; if a furlough becomes necessary, management will offer a voluntary furlough first, including 24-month passes; if not enough voluntary furloughees apply, involuntary furloughees will receive passes for one year and will have bumping rights at MidAtlantic Airways in seniority order; management will also offer a Voluntary Separation Incentive Package in lieu of a furlough.
Longevity Pay, Crew Meals (except transoceanic flights) and Uniform Allowance will be discontinued until Dec. 31, 2008.
Per diem increase scheduled for Jan. 1, 2003 will be delayed until Dec. 31, 2008.
Vacation Pay and Credit will be reduced by 10 percent effective Jan. 1, 2003 through Dec. 31, 2004, snapping back to current levels thereafter.
Vacation Accrual rates will be reduced by 20 percent between July 1, 2002 and Dec. 31, 2002. Vacation accrual rates will be reduced by 10 percent between Jan. 1, 2003 and Dec. 31, 2008.
Reserve Override will be eliminated July 1, 2002 through Dec. 31, 2005. It will snap back to $.50/hour on Jan. 1, 2006 and will snap back to $1.00/hour on Dec. 31, 2008.
Health Care: All flight attendants will participate in a national preferred provider organization health care, dental and drug plan. Details of that plan will be made available shortly. The new plan will mean health care cost increases for most flight attendants.
Effective Date: July 1, 2002 through Dec. 31, 2008. Negotiations for a new agreement will open on Jan. 1, 2008. If no agreement is reached by July 1, 2008, the parties will mutually file a request for mediation.

Returns/Protections

Flight attendants will receive the benefits of a profit-sharing plan on the same terms agreed to by other employee groups.

Flight attendants will also be provided returns in the form of equity [details to come].

Section 1113 Letter - gives flight attendants protection against cuts greater than those in this agreement in the event the carrier enters bankruptcy.

Verification - If concessionary negotiatons with ALPA achieve less than 85% of its savings target (based on $90 million/$595 million per year savings relationship), wage rates for the flight attendants will be adjusted such that the flight attendants achieve the same percentage savings target.

Governance - Participating unions, including AFA but not ALPA, will nominate a member to sit on the US Airways Group, Inc. Board of Directors. A new Board seat will be created for this position.

Change in Control - In the event there is a change in control of US Airways, flight attendant wage rates will snap back to the June 30, 2002 level.

Involuntarily furloughed US Airways flight attendants will be provided job opportunities at MidAtlantic Airways in seniority order and will retain the same contractual rights and benefits as all other furloughed US Airways flight attendants.

Cameras in the Cabin - Should video monitoring devices be required in the cabin during flight, the company will meet with AFA in advance and negotiate the formulation of policies regarding the use of such devices.

Unable to Commute Policy (effective Jan. 1, 2003).

Paid Personal Days (2 per year) will be granted based on coverage and will be deducted from next year's vacation if used (effective Jan. 1, 2003).

Shuttle flight attendants will be placed on the mainline vacation schedule.

Bereavement Leave - grandchildren added.

Salary Continuance - A flight attendant receiving salary continuance shall accrue vacation and sick leave for the first six months of salary continuance (effective Jan. 1, 2003).

Company will alter its drug policy so that the first confirmed positive drug test will not automatically result in termination.

Health Insurance Program

The information on the changes to our health insurance program will be provided as soon as possible. Basically, management wants all US Airways employees under a single, national preferred provider organization.

Your Negotiating Committee worked hard to move management's cost savings number from $90 million to $77 million per year. We worked hard to structure the cuts in a way that would have the least hurt. Regardless of our efforts, these cuts are going to hurt. However, if our carrier turns around and becomes profitable, we will receive the benefits of those profits in the form of returns. And we were able to provide protections against more dramatic cuts in bankruptcy, as well as other new gains for flight attendants. Of course, all of these changes, returns and protections hinge upon ratification of the agreement.

On July 1, the AFA US Airways Master Executive Council met and unanimously voted to send the tentative deal outlined here to the flight attendants for a ratification vote. A majority of the MEC also voted to recommend that flight attendants vote to approve the package based upon the returns and protections it provides.

We will provide you will all of the details of the tentative agreement in the days and weeks to come. A schedule for road shows will be developed and posted. And a date for the ratification vote will be set.