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(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2004

or

For the transition period from                      to                     

US Airways Group, Inc.
(Exact name of registrant as specified in its charter)
State of Incorporation: Delaware

2345 Crystal Drive, Arlington, Virginia 22227
(Address of principal executive offices, including zip code)
(703) 872-7000
(Registrant's telephone number, including area code)

(Commission file number: 1-8444)
(I.R.S. Employer Identification No: 54-1194634)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
                                                                Yes    X                     No          

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

                                                                Yes    X                     No          

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
                                                                Yes    X                     No          

     As of July 31, 2004 there were outstanding approximately 52,126,400 shares of US Airways Group, Inc. Class A common stock and 5,000,000 shares of US Airways Group, Inc. Class B common stock.

Part I. Financial Information

Item 1. Financial Statements

US Airways Group, Inc.
Condensed Consolidated Statements of Operations
(in millions, except share and per share amounts)
(unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements.

US Airways Group, Inc.
Condensed Consolidated Balance Sheets
(in millions)

US Airways Group, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements.

     Background

     On August 11, 2002, US Airways Group, Inc. (US Airways Group or the Company) and its then seven domestic subsidiaries (collectively, the Filing Entities), which account for substantially all of the operations of the Company, including its principal operating subsidiary, US Airways, Inc. (US Airways), filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code (Bankruptcy Code) in the United States Bankruptcy Court for the Eastern District of Virginia, Alexandria Division (Bankruptcy Court) (Case Nos. 02-83984-SSM through 02-83991-SSM). The reorganization cases were jointly administered under the caption "In re US Airways Group, Inc., et al., Case No. 02-83984-SSM." During the pendency of the Chapter 11 cases, the Filing Entities continued to operate their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of th e Bankruptcy Court.

     The Filing Entities emerged from bankruptcy protection under the First Amended Joint Plan of Reorganization of US Airways Group, Inc. and Affiliated Debtors and Debtors-in-Possession, As Modified (Plan of Reorganization), which (i) was confirmed pursuant to an order of the Bankruptcy Court on March 18, 2003 and (ii) after each of the conditions precedent to consummation was satisfied or waived, became effective on March 31, 2003 (Effective Date). In accordance with AICPA Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" (SOP 90-7), the Company adopted fresh-start reporting on the Effective Date.

     The Plan of Reorganization constituted a separate plan of reorganization for each of the Filing Entities. In accordance with the Bankruptcy Code, the Plan of Reorganization divided claims against, and interests in, each of the Filing Entities into classes according to their relative seniority and other criteria and provided the same treatment for each claim or interest of a particular class unless the holder of a particular claim or interest agreed to a less favorable treatment of its claim or interest. Among other things, the Plan of Reorganization generally provided for full payment of all allowed administrative and priority claims, and the distribution of shares (or warrants to purchase shares) of new equity in the reorganized US Airways Group, Inc. (Reorganized US Airways Group) to the Air Transportation Stabilization Board (Stabilization Board), the Retirement Systems of Alabama Holdings LLC (RSA), the Company's management and labor unions, General Electric Capita l Corporation (GE) and Bank of America, N.A., and to unsecured creditors of the Filing Entities, including the Pension Benefit Guarantee Corporation (PBGC), in satisfaction of their allowed claims. The distribution to unsecured creditors is currently estimated to have a value of between 0.65 percent and 0.90 percent of total allowed unsecured claims; however, the ultimate distribution percentage may fall outside of this range. See "Claims Resolution" below. Persons holding equity in the Company prior to the Effective Date were not entitled to any distribution under the Plan of Reorganization and their shares of common stock were cancelled. For a complete discussion of the distributions provided for under the Plan of Reorganization, investors should refer to the Plan of Reorganization confirmed by the Bankruptcy Court on March 18, 2003 and filed with US Airways Group's Current Report on Form 8-K, dated March 18, 2003 and filed with the Securities and Exchange Commission (SEC) on April 2, 2003.

     Operating Environment

     Competition in the industry continues to intensify. The Company is highly leveraged and requires substantial working capital in order to meet scheduled debt and lease payments and to finance day-to-day operations. The Company is pursuing a Transformation Plan to reduce the cost per available seat mile to levels competitive with other low-cost carriers such as America West and Jet Blue; however, there is no assurance that the Plan can be achieved. Failure to achieve the Transformation Plan will force the Company to reexamine its strategic options including but not limited to a judicial restructuring.

     ATSB Loan

     As part of its restructuring efforts, US Airways received a $900 million loan guarantee (ATSB Guarantee) under the Air Transportation Safety and System Stabilization Act from the Stabilization Board in connection with a $1 billion term loan financing (the ATSB Loan). The Company and US Airways required this loan and related guarantee in order to provide the additional liquidity necessary to carry out the restructuring plan. The ATSB Loan was funded on the Effective Date. The ATSB Loan is secured by substantially all of the assets of US Airways Group and its subsidiaries not otherwise encumbered. US Airways is the primary obligor under the ATSB Loan, which is guaranteed by the Company and each of its other domestic subsidiaries.

     Effective March 12, 2004, US Airways and the Stabilization Board amended the financial covenants of the ATSB Loan to provide covenant relief for the measurement periods beginning June 30, 2004 through December 31, 2005. The ratios used in the financial covenants were adjusted and reset to align with the Company's forecast for 2004 and 2005 as of the date of the amendment, which assumed a return to profitability in 2005. In exchange for this covenant relief and other changes described below, US Airways made a voluntary prepayment of $250 million on March 12, 2004, which reduced, pro rata, all future scheduled principal payments of the ATSB Loan (rather than shortening the remaining life of the loan).

     The amendment also permitted US Airways to retain, at its election, up to 25% of the net cash proceeds from any asset sale for which definitive documentation would be completed by February 28, 2005, up to a total of $125 million for all asset sales. In addition, the amendment permitted US Airways to accept a third-party secured note as consideration for certain asset sales (including the US Airways Shuttle and wholly owned regional airline assets) as long as specified conditions are met. These conditions include: the note's amortization schedule will be no more favorable than the ATSB Loan; proceeds from the note will be used to prepay the ATSB Loan; the credit strength of the ATSB Loan will not be adversely affected as measured by specified ratings tests; and the note will be pledged as collateral for the ATSB Loan. Finally, in consideration for the lenders agreeing to amend the provision related to the going concern paragraph in the independent auditor's rep ort for the Company's audited financial statements for the year ended December 31, 2003, US Airways agreed to a revised covenant providing that month end minimum unrestricted cash would equal or exceed the lesser of the outstanding ATSB Loan balance and $700 million and that no intra-month end of day unrestricted cash balance would fall below the lesser of the outstanding ATSB Loan balance and $575 million.

     Effective May 21, 2004, US Airways amended the ATSB Loan to permit use of its regional jets financed by GE utilizing mortgage debt as cross-collateral for other obligations of US Airways to GE. In consideration for this amendment, US Airways agreed to a revised covenant providing that month end minimum unrestricted cash will equal or exceed the lesser of the outstanding ATSB Loan balance and $725 million and that no intra-month end of day unrestricted cash balance will fall below the lesser of the outstanding ATSB Loan balance and $625 million. In addition, US Airways agreed to give up the right to retain up to 25% of the net cash proceeds from any asset sale, as had been permitted by the March 12, 2004 amendment. US Airways made a prepayment of $5 million in connection with this amendment.

     The ATSB Loan contains financial covenants that must be satisfied by US Airways at the end of each fiscal quarter. US Airways was uncertain as to its ability to satisfy these covenants as of June 30, 2004. US Airways and the Stabilization Board amended the ATSB Loan, effective June 30, 2004, to remove the uncertainty relating to the Company's ability to satisfy its financial covenant tests for the second quarter of 2004. In consideration for this amendment, the Company agreed to change the loan amortization schedule, by increasing each of the first six principal repayment installments commencing on October 1, 2006 by approximately $16 million, and reducing the last principal repayment installment on October 1, 2009 by $94 million. While the Company was in compliance with the financial covenants as of June 30, 2004, it anticipates risk of failing to comply with the covenants as of September 30, 2004.

    RSA Investment

     Pursuant to a definitive agreement, on the Effective Date, RSA invested $240 million in cash in Reorganized US Airways Group (the RSA Investment Agreement) in exchange for approximately 36.2%, on a fully-diluted basis, of the equity in Reorganized US Airways Group. As of the Effective Date, in connection with its investment, RSA obtained a voting interest of approximately 71.6% in Reorganized US Airways Group and is entitled to designate and vote to elect eight of 15 directors to Reorganized US Airways Group's Board of Directors. RSA's Class B Preferred Stock is entitled to quarterly cumulative dividends at a rate of 8 percent per annum paid in cash by the Company. At March 31, 2004, the Company did not have sufficient capital surplus (in accordance with Section 154 of the Delaware General Corporation Law) and did not make the dividend payment. At June 30, 2004, the Company had sufficient capital surplus and paid the dividends owed for both quarter s, a payment of approximately $3 million, on July 21, 2004.

     Claims Resolution

     Pursuant to the bankruptcy process, the Filing Entities' claims agent received proofs of claims totaling approximately $65.5 billion in the aggregate, exclusive of approximately $16 billion in claims from Allegheny County, Pennsylvania (Allegheny County) and Allegheny County Airport Authority (ACAA) which have been resolved and approximately 350 proofs of claims filed by governmental entities totaling approximately $225 million in the aggregate. As of June 30, 2004, there are $3.1 billion of unresolved claims. The Plan of Reorganization provides for a disputed claims resolution process. The Plan of Reorganization provides for 4,968,720 shares of Class A Common Stock and 3,048,030 each of Class A-1 Warrants and shares of Class A Preferred Stock to be issued to unsecured creditors following resolution of their claims. Distributions of these shares and warrants to unsecured creditors through June 30, 2004 totaled approximately 3.8 million shares of Class A Common Stock and 2.3 million each of Class A-1 Warrants and shares of Class A Preferred Stock. The effects of these distributions were reflected in the Company's financial statements upon emergence and will not have any further impact on the results of operations. A number of significant claims, including certain aircraft related claims, remain to be resolved. Accordingly, ultimate allocations and distributions of new equity to claimants in Reorganized US Airways Group on account thereof are not presently known.

     Pittsburgh Leases and Operations

     On January 5, 2004, US Airways signed a long-term lease agreement for ten gates and related terminal and support facilities at Pittsburgh International Airport (Pittsburgh), to replace the lease that was rejected as part of the Company's Chapter 11 reorganization. Under the agreement, US Airways leases ten gates and associated operations and ticketing space on a signatory basis through 2018. The balance of 40 gates and other facilities currently used by US Airways and US Airways Express carriers at Pittsburgh are leased on a month-to-month, non-signatory basis. Additionally, US Airways signed a three-year lease agreement for its on-airport support facilities, including maintenance hangars, cargo, mail sorting and foodservice facilities. This agreement includes an option for either party to terminate such agreement with respect to all or part of the facilities after 2004.

     In the period since US Airways rejected its broader lease arrangements for the Pittsburgh hub and related facilities, the Company has been in discussions with Allegheny County, the ACAA and the Commonwealth of Pennsylvania about various proposals to reduce the debt service and the related costs of doing business at Pittsburgh. To date, those changes have resulted in the implementation of some cost savings initiatives and the enactment of state legislation that will dedicate soon-to-be-allowed gambling-generated tax revenue to be applied toward airport debt reduction. Nevertheless, changes in the airline industry as reflected in the Company's Transformation Plan have led to the decision to downsize US Airways' operations at Pittsburgh, and it envisions its presence at Pittsburgh International Airport to reflect its role as a focus city, rather than a hub that connects passengers.

     On July 20, 2004, the Company announced that its tentative schedule commencing November 4, 2004 would include about 240 daily nonstop departures at Pittsburgh to about 65 markets, continuing service to the most popular destinations for travel from Western Pennsylvania. Currently, US Airways and US Airways Express operate a total of 373 flights at Pittsburgh, serving 102 destinations with nonstop service. Between August and October 2004, the Company anticipates slight reductions in service as affiliate carriers reduce or eliminate service. US Airways remains the largest carrier at the Pittsburgh airport.
     
     The Company is currently pursuing a Transformation Plan to achieve profitability by reducing its costs to levels competitive with low-cost carriers. The final outcome on the future scope of service and the location of maintenance, reservations, training and other support facilities in the Pittsburgh region will ultimately depend on the negotiations between the Company and its labor unions, and state and local officials, on respective issues that need to be resolved as the Company implements its Transformation Plan.

2.  Basis of Presentation

     The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements contained in US Airways Group's Annual Report to the SEC on Form 10-K for the year ended December 31, 2003. The accompanying Condensed Consolidated Financial Statements include the accounts of US Airways Group and its wholly owned subsidiaries. Principal subsidiaries include US Airways, Allegheny Airlines, Inc., Piedmont Airlines, Inc. and PSA Airlines, Inc. Effective July 1, 2004, Allegheny Airlines merged with Piedmont Airlines. All significant intercompany accounts and transactions have been eliminated. Certain prior year amounts have been reclassified to conform with the 2004 presentation.

     Management believes that all adjustments, consisting of normally recurring items, necessary for a fair presentation of results have been included in the Condensed Consolidated Financial Statements for the interim periods presented, which are unaudited. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The principal areas of judgment relate to impairment of goodwill, passenger revenue recognition, fresh-start reporting, impairment of long-lived assets and intangible assets subject to amortization, and pensions and other postretirement benefits.

     In accordance with SOP 90-7, the Company adopted fresh-start reporting on the Effective Date. References in the Condensed Consolidated Financial Statements and the Notes to the Condensed Consolidated Financial Statements to "Predecessor Company" refer to the Company prior to March 31, 2003. References to "Successor Company" refer to the Company on and after March 31, 2003, after giving effect to the cancellation of existing common stock and the issuance of new securities in accordance with the Plan of Reorganization, and application of fresh-start reporting. As a result of the adoption of fresh-start reporting, the Company's post-emergence financial statements are not comparable with its pre-emergence financial statements, because they are, in effect, those of a new entity.

     SOP 90-7 requires that the financial statements for periods following the Chapter 11 filing through the Effective Date distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, revenues, expenses, realized gains and losses and provisions for losses directly associated with the reorganization and restructuring of the business are reported separately as Reorganization items, net in the Condensed Consolidated Statements of Operations. In addition, cash used for reorganization items is disclosed separately in the Condensed Consolidated Statements of Cash Flows.

3. Fresh-start Reporting and Reorganization Items

     (a) Fresh-start Reporting

     In connection with its emergence from bankruptcy on March 31, 2003, US Airways Group adopted fresh-start reporting in accordance with SOP 90-7. Accordingly, the Company valued its assets, liabilities and equity at fair value. The excess of the reorganization value over tangible assets and identifiable intangible assets has been reflected as Goodwill on the Condensed Consolidated Balance Sheets. Estimates of fair value represent the Company's best estimate based on independent appraisals and valuations and, where the foregoing are not available, industry trends and by reference to market rates and transactions. The Company received third-party appraisals for certain assets and liabilities subsequent to March 31, 2003. Changes in the fair value of these assets and liabilities from the previously estimated values had an impact on the reported value of Goodwill. During the three months ended March 31, 2004, the Company increased Goodwill and Other accrued expenses by $15 mi llion related to the valuation of the Company's deferred tax liabilities. The Company does not expect any further adjustments to the fair value of assets and liabilities subsequent to March 31, 2004.

     Reorganization items, net for the Predecessor Company represent amounts recognized and incurred as a direct result of the Company's Chapter 11 filing and emergence and are presented separately in the Company's Condensed Consolidated Statements of Operations. Such items consist of the following for the three months ended March 31, 2003 (in millions):

4.  Earnings (Loss) per Common Share

     Basic Earnings (Loss) per Common Share (EPS) is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the maximum dilution that would result after giving effect to dilutive stock options, warrants, and non-vested restricted stock. The number of additional shares is calculated by assuming that outstanding in-the-money stock options and warrants were exercised and the proceeds from such exercises were used to buy back shares of common stock at the average market price for the reporting period. The following table presents the computation of basic and diluted EPS (in millions, except per share amounts):

     For the three months ended June 30, 2004, 19.4 million stock options and warrants have been excluded from the computation of diluted EPS because the exercise price of the stock options and warrants was greater than the average fair value of common stock for the period. For the six months ended June 30, 2004, 19.9 million stock options and warrants have been excluded from the computation of diluted EPS because of the antidilutive impact on EPS.

     For the three months ended June 30, 2003, 17.0 million stock warrants have been excluded from the computation of diluted EPS because the exercise price of the stock warrants was greater than the average fair value of common stock for the period. For the three months ended March 31, 2003, 19.0 million stock options have been excluded from the computation of diluted EPS because the option exercise price was greater than the average market price of common stock for the period.

     The earnings per share calculations for the Predecessor Company are based on common shares outstanding prior to the Company's emergence from Chapter 11 on March 31, 2003. Upon emergence, these shares were cancelled. Earnings per share for the Successor Company are based upon shares outstanding subsequent to emergence from Chapter 11. Accordingly, post-emergence earnings per share are not comparable with pre-emergence amounts.

5.  Income Taxes

     The Company continues to record a full valuation allowance against its net deferred tax asset. The Company recognized an income tax benefit of $0.3 million for the second quarter of 2004. The Company's effective tax rate for the six months ended June 30, 2004 was 0.2%. This differed from the statutory rate primarily due to limitations of the federal and state income tax benefit recognized because of the valuation allowance. The Company's federal and state income tax expense was $13 million for the second quarter of 2003.

6.  Employee Benefit Plans

     Components of the net and total periodic benefit include the following for pension benefits (in millions):