September 12, 2003

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IMPORTANT READ: This is the PHL News-Line 70 from Mollie McCarthy LECP. If you would like to respond to Mollie, please use this email address mmccarthy@afausairways.org. Subscribe to News-Line 70 at http://www.afausairways.org/PHL/phlemailform.html

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In this Issue:

-- Tax On Our Stock
-- Lost Vacation Day - Returned

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The Tax On Our Stock

Dear Council 70 Flying Partners, 

Are you aware that US Airways management is not open to giving the Flight Attendants a choice as to how the tax will be paid on our stock allocation? Whereas the pilot's have a choice, the tax on our stock will be justified by using our shares. 

If the stock is mine, then the liability is mine and I should have some say in how that liability is to be paid. I must ask myself why would management be so opposed to giving us the same options to handle the tax liability, as our pilot's will have? I admit after dealing with this management, there is no trust, so I tend to question everything.

Yes, the pilots negotiated the option to pay out of pocket, but why wasn't this option standard for all the other employee groups? Whatever the reason may be, at the very least there should have been "Full Disclosure" from this management before we chose stock as our equity piece. Traditionally, under similar circumstances the Flight Attendants would be treated "No less favorably" than our fellow crewmembers.

The stock was 'sold' to us as a way to offset lost wages, it was our reward for saving our Company, a return for our investment. A significant number of these shares will now be taken before received to pay the tax even though many of us would be willing to pay up front or to have the amount of the tax deducted from our pay rather than lose the shares.

I am sure many of you are aware of reports that anonymous, private investors are looking to purchase our stock. If there is subsequently an immediate gain and we are excluded from participating fully in that gain by not being able to exercise our awarded shares, then who will reap the benefit?

Has management found another way to squelch on what little we received for our significant givebacks?

I copied management in on a similar letter asking if anyone could give me some answers to my questions. So far, it appears they have no answers. 

The MEC has asked AFA Attorney, David Borer, to have outside counsel review the situation. Pending the review of outside counsel, we will then see if other expertise is required. We will be filing a grievance, as are the other unions who are being disadvantaged. 

For some additional information, I have included both an article from the recent FA Hotline along with and interesting new article. See Below.

In Solidarity AND Wearing the Green,

Mollie McCarthy
Local 70 President
PHL/PHW
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>From the AFA Hotline
STOCK ALLOCATION/TAXATION

As part of last year's restructuring agreement, flight attendants received a stake in the equity of US Airways. That stake has begun to be distributed to the flight attendants. The Company recently sent out letters describing the number of shares you are to receive. The Company also described the tax withholding event that occurred on the date the shares were vested to you. The shares are considered a form of compensation and are therefore subject to withholding taxes.

ALPA had negotiated for their members the ability to either pay the withholding taxes by check, have them withheld from their payroll check, or have the shares withheld. No other labor group on this property negotiated that provision and the Company opted not to offer any other employees the ability to pay the withholding in lieu of having shares withheld. AFA and other labor unions have filed grievances as we believe you should have had the right to make the choice on how to pay the withholding taxes.


Additionally, those flight attendants on voluntary leaves had shares withheld for the entire amount of shares that they will receive if they remain on the property to the final distribution in January 2005. According to the Company, IRS rules speak to those individuals with no substantial risk of forfeiture as defined in Internal Revenue Code Section 83 and Treasury Regulation Section 1.83-3(c). AFA has asked our Legal Department to retain outside counsel to review the Company's interpretation of these rules.

US Airways selected E*Trade to administer this stock plan. You will be receiving a letter from E*Trade providing you with information about the account that has been set up for you for these shares of stock. The US Airways ticker symbol, "USALA" will be needed to activate your account. If you have any additional question, please send them via email to stockplan@usairways.com. Once we have obtained additional information from our outside legal counsel, we will provide it to you via this hotline and the eline

Fri. August 22,2003 

Charlotte Observer


US Airways wants to resume sale of stock
Former shareholders won't benefit, but its creditors, top execs may
TED REED
Staff Writer

US Airways wants to resume sale of its stock to the public Former shareholders won't benefit, but its creditors, top execs may. 

A year after a bankruptcy filing made its stock worthless; US Airways is preparing to once again sell shares to the public.
For some, the move connotes the promise of the airline's future as a company. To others, it signifies the betrayal of the owners of the shares wiped out by the bankruptcy.

US Airways filed for bankruptcy protection on Aug. 11, 2002, essentially eliminating some 68 million shares of stock that had been worth more than $1 billion a year earlier.

Now, the airline wants to start fresh. A spokesman said it is seeking a listing on a stock exchange, but apparently cannot requalify for the New York Stock Exchange, because it does not meet listing requirements for new companies.
Among them: Earnings of at least $2 million for each of the two previous years. US Airways lost $1.7 billion in 2002 and $2.1 billion in 2001.

While airline officials won't comment specifically on their plans for a public market, experts expect the airline to be listed on Nasdaq by year end.

Over the past two weeks, the airline has filed a series of documents with the Securities and Exchange Commission detailing to its plans to allocate stock.

The documents show that Retirement Systems of Alabama, will get 20 million shares of common stock, about 36.6 percent, as well as 100 percent of Class B stock, which has super voting rights.

RSA, which lent US Airways money during bankruptcy and invested $240 million afterwards, will control the airline. US Airways has its busiest hub in Charlotte, where it employs 5,739.

Among individuals, Chief Executive David Siegel will receive the largest allocation: about a million shares of common stock, and 720,000 shares of preferred stock, which has a dividend. 

Although stock is being distributed to most employees, the airline's board has not determined when executives' shares will be vested. Reissuing stock after a company emerges from bankruptcy is a common practice. Under bankruptcy law, common shareholders are often wiped out, while key creditors get stock.

"The old common stockholders are at the bottom of the totem pole," said Gary Ivey, a partner and securities lawyer at Alston & Bird LLP in Charlotte. "The creditors are at the top."

Ivey said emerging from bankruptcy and preparing to issue stock are positive steps for a company, putting it "in a position where it can move forward and be successful again. Some companies go into bankruptcy and don't survive."
Among the benefits: Once its shares are listed and trading, US Airways "will have an easier time tapping into the capital markets," providing an opportunity to raise money by issuing stock.

Some employees question the allocation of the new stock, which rewards top management far more than other workers. For instance, most ticket and gate agents will receive about 225 shares each, despite have made major concessions in wages and benefits to keep the airline operating, said James Root, president of Local 3641 of the Communications Workers of America.
"It's not a surprise to me," Root said. "It's always been the case that the rich get richer." Added Roy Freundlich, spokesman for the US Airways chapter of the Air Line Pilots Association: "Ever since the senior officers got here, they've been in the business of taking care of themselves."

Many US Airways workers held the airline's stock in their retirement accounts -- and lost thousands of dollars when it was devalued. But unlike some 401(k) retirement accounts, the US Airways accounts allowed employees to sell the stock when they chose, a spokesman said.

Ayn Landon, a 25-year flight attendant, had a small amount of company stock in her 401(k). Now her savings are invested in Fidelity Magellan, a popular mutual fund. Landon is "afraid" to have her retirement funds in the company's stock, she said: "If I was going to invest, I'd invest somewhere else."

Some owners of the old US Airways shares find the issuing of new shares hard to stomach.

"I never would have believed the judge would let them take everybody's (stock), and then they would come back smelling like a rose, while poor people like me lost their life savings," said Charlotte landscaper Marty Sherrill.

Sherrill said he invested $35,000 in 5,405 shares of US Airways stock, and lost every penny. "If they issue stock again, I think anybody that buys it is a damn fool," he said.

In July, the airline allocated 25 percent of its common stock to its unions, who will distribute it to union members. This month, according to filings with the Securities and Exchange Commission, the airline has:

- Reached agreement with two private investment groups who will buy 5 million shares of stock for approximately $37 million.
Airline spokesman Chris Chiames said the deal will relieve employees' tax liability. In effect, the firms are buying stock with money that will pay the taxes on employee stock grants. The firms bought the stock at $7.24 per share and expect it will appreciate, Chiames said.

- Distributed shares to RSA, including 20.7 million shares of Class A common; 5 million shares of Class B common; 2 million shares of Class A preferred and 75,000 shares of Class B. Preferred stock, unlike common, pays a dividend.

- Allocated shares to 10 senior officers (including Siegel) and to 10 board members, but did not distribute them. That means officers who leave today would get no stock, said Jerry Glass, senior vice president for employee relations. "Everybody has been allocated stock, but there's one group with no shares vested, and that's senior management," he said.

While executives will get stock, their bonuses and other perks have been eliminated at least through 2004, and there were no bonuses for successful completion of the airline's bankruptcy.

Recently, a few shares of the stock have been traded over the counter. In the last trade, on Aug. 8, the price for 400 shares was $24 each. The trades represent speculation on potential value of the stock, which has not yet been issued. "At this point, it's meaningless," said analyst Ray Neidl of Blaylock and Partners. "No real market has been established."
Neidl said he expects the shares will be listed on Nasdaq sometime this year, but he's not yet convinced of their value. "Until I see the airline starting to make money, it would be hard to recommend the stock," he said.


Management's Share

DAVID SIEGEL
President and CEO
Class A preferred: 720,000 shares
Common: 1,080,000

ELIZABETH LANIER
General counsel
Class A preferred: 120,000
Common: 180,000

NEAL COHEN - CFO
Class A preferred: 240,000
Common: 360,000

JERRY GLASS
Senior VP/employee relations
Class A preferred: 120,000
Common: 180,000