Revisions to AFA Restructuring Agreement

This Term Sheet sets forth the terms of the Company’s Modified Restructuring Proposal on changes to the AFA-US Airways existing collective bargaining agreement, the “Basic Agreement”  (the Flight Attendant Agreement dated May 2000)  and  the July 2002 Restructuring Agreement between the Association of  Flight Attendants (AFA) and US Airways, Inc.  Provisions of the collective bargaining agreement not modified by this Term Sheet remain in full force and effect.  These modifications were made in light of the Company’s current financial condition. 
EFFECTIVE DATE:  January 1, 2003
COMPENSATION: No later than March 1, 2007 and March 1, 2008, each eligible flight attendant will receive a lump sum payment equal to 2% of Adjusted W-2 Earnings for the preceding year (does not include MDA earnings; otherwise, eligibility as defined in Section 3.R.3).
PRODUCTIVITY:  The Company may implement the following Productivity Improvements:

1.

 Modify Duty Rigs and VM:  Duty rig of 1:2.25 for day (0600 – 2159) and 1:2 for night (2200 – 0559); VM of 5 hour average with no floor and no ceiling.
2.
 Claiming Sick Leave:  A lineholder may claim sick leave to the line value (post-SAP, post-overprojection adjustments or Preferential Bid award, whichever is in effect) for the month minus 5 hours unless the sick claim is for more than ½ of his line value, in which case he/she can claim up to his line value by use of sick bank.   A reserve’s sick claim, when added to previous and subsequent flying and other credited time for that month, may not exceed monthly guarantee, i.e., a reserve cannot claim sick time that would result in pay exceeding the minimum monthly guarantee.  A 95-hour or 105-hour option reserve may claim up to 90 and 100 hours, respectively.
3.
  Rescheduling:  Eliminate  the phrase, “and there is no available unassigned reserve in domicile that could be used to prevent such delay or cancellation”  in Section 9.G.1.a.(2).
4.
  Modify reserve system – Implementation scheduled for no later than June 2004.
a.  After the lines of time are awarded, the remaining flight attendants will bid and be awarded a reserve line.
b.  Reserves may bid for days off
c.  Eight (8) inviolable days
d.  Scheduling process for reserves
i.
 Trips will be awarded to the reserve with the least amount of credited monthly projected hours (e.g., count vacation and/or training as projected hours).  For purposes of determining credited monthly projected hours, daily sick pay shall be credited (but not to exceed the guarantee) upon completion of the bid month.
ii.
 Flight attendants with more available days than the trip flies will not be passed over, but may not pass.
iii.
 Reserves with fewer available days than the trip flies will not be passed over.  A reserve may split a trip for day(s) off, however, if there are no other reserves available to complete the trip, the Company may require a reserve to fly into his non-immovable day(s) off to complete the trip, and such day(s) off shall be restored.  The Company may also require a reserve to split a trip for day(s) off.  Notwithstanding the preceding sentence, the reserve, at his option, may fly into his day(s) off to complete a trip and such day(s) shall not be restored. (blackout periods to be discussed) 
iv.
 In the event that multiple trips are open at the time of processing, the reserve must select a trip which does not require a split if one is available (the reserve may negate a split by flying into a day(s) off)
v.
 Reserves may not create a split if there are trips available which do not require a split
vi.
 High option (95 & 105) flight attendants may continue to pick up trips on days off, and time picked up on days off is not taken into account for purposes of determining credited monthly projected hours
vii.
 Reserves released upon assignment except in the case of system irregular operations declared by the Director of Crew Scheduling or his/her designee
5.
 Replace primary lines, SAP, secondary lines, with a preferential bidding system (algorithm). Implementation scheduled for no later than June 2004.
a. Vendor must be mutually agreed upon.
b. All algorithm, parameters, constraints and interface must be mutually agreed upon.  Any future changes to the algorithm or system user interface or parameters must be mutually agreed upon.
c. AFA and the Company will approve all implementation steps through a joint committee.
d. AFA will be provided equal access to verify system settings, constraints and parameters (within the vendor's contractual limitations/restrictions, provided that, if the applicable contract does not permit AFA to acquire its own copy of the software, then AFA will be provided access to the Company's copy adequate to enable AFA to verify system settings, constraints and parameters).  Bidding interface will be accessible to flight attendants both inside and outside the Company's network (home computer via internet).
e. The monthly trip pairings constructed shall be the same as the pilots.  However, pairings may be constructed that may differ from the pilots’ in those cases where identical pairings can not be used for both groups, e.g., LOD/O, B-757/767.
f.  The following statement will be on each published bid, "Based on the projected credited time for the month of X, the Company anticipates that X number of lines of flying will be available, absent unplanned or extenuating circumstances."
g. Line values must fall between 70 and 85 hours* (if unable to bid a line worth 70 hours or greater, the flight attendant will be awarded 0 time).  Eliminate the 10% open time requirement in Section 9.B.4.  (* Note:  for non-option flight attendant).
h. Flight attendants awarded a line during the first run may participate in a second process which will allow the flight attendant to add additional time to increase the amount of time in their line (discuss need for second run).
i. Trip pairings will be published (on paper and electronically) no later than 5 days prior to the opening of the bid period.If the parties are unable to resolve any issues concerning the preferential bid system, such unresolved issues will be submitted to an arbitrator for resolution on an expedited basis.
6.
 Automate the AIL.  Implementation scheduled for no later than June 2004.
MIDATLANTIC RATES: The Company may operate MDA as a separate division within mainline – US Airways, Inc.  Wages, benefits and work rules will match the AA Eagle flight attendant agreement. Flight attendants will carry to MDA their longevity for pay purposes only.  Seniority relative to other US Airways flight attendants will not be affected.A flight attendant may bid or be displaced to an MDA position subject to restrictions to be negotiated. A flight attendant may accept an involuntary furlough in lieu of displacement to an MDA position and will receive accrued furlough pay, and a flight attendant on furlough may bypass recall to an MDA position; in either case, the flight attendant will then be offered recall when his/her seniority entitles him/her to a position on a mainline aircraft.
MINIMUM AIRCRAFT: As a condition of implementing and maintaining any of the Productivity Improvements, the Minimum Active Fleet shall be increased to 279 aircraft (excluding SJs but including permanent bid plus 8% for active spares) with daily utilization rate measured monthly of no less than 10 hours, whether or not the Company is in Chapter 11.  The Minimum Active Fleet number may be reduced only as made necessary by a new force majeure event, which includes acts of terrorism with a material adverse impact on commercial aviation.
HEALTH AND WELFARE: See PowerPoint Presentation
ENHANCED PROFIT SHARING: Enhanced profit sharing returns in exchange for participation in 200 million "Modified Restructuring Program" as follows:
Any year in which pre-tax profits exceed 7%, 50% of such profits in excess of 7% will be distributed to participating employees.
- Capped at $100 million

- Program continues through status quo period

- 50% paid as lump sum payments

- 50% paid to defined benefit pension plan (or to defined contribution pension plan where an employee group has no defined benefit plan) above any minimum contribution requirements, but not in excess of maximum tax deductible contributions, under ERISA. 

- Pre-tax defined as excluding unusual items
EQUITY PARTICIPATION: Per Restructuring Agreement, but accelerate the vesting schedule as follows:
  • 25% on the first day of the month that occurs at least 60 days following emergence from bankruptcy
  • 25% on January 1 of the year following emergence from bankruptcy
  • 25% on January 1 of the second year following emergence from bankruptcy
  • 25% on January 1 of the third year following emergence from bankruptcy
WAR CONTINGENCY: In the event that (a) the U.S. invades Iraq (meaning that the U.S. initiates a sustained aerial bombardment of those parts of Iraq that are not within the current no fly zone or introduces substantial numbers of ground troops into the territory of Iraq), or (b) there is an act of terrorism which in either event has a material adverse impact on commercial aviation, there will be an immediate 5% pay deferral for up to 18 months.  The deferral will begin to be repaid starting in the first month following the end of the deferral and will continue to be repaid in as many monthly installments as were covered by the deferral.  In the event that US Airways Group reports a pretax profit with respect to any quarter during which the pay deferral is in effect, the deferral will immediately stop and repayment will begin in the next month to continue for the same number of months as were included in the deferral.
Management employees will participate in this provision on the same terms as other employee groups.
FEES AND EXPENSES: The Company will pay reasonable and necessary AFA fees and expenses incurred through the date of ratification of this Letter of Agreement.
DURATION: Concurrent with 2002 Restructuring Agreement.