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

For the quarterly period ended September 30, 2002

or

For the transition period from                      to                     

(DEBTOR AND DEBTOR-IN-POSSESSION)
(Exact name of registrant as specified in its charter)
State of Incorporation: Delaware

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

(Commission file number: 1-8442)
(I.R.S. Employer Identification No: 53-0218143)

     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      

     As of October 31, 2002 there were outstanding 1,000 shares of common stock of US Airways, Inc.

US Airways, Inc.
(Debtor and Debtor-in-Possession)
Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended September 30, 2002 and 2001 (unaudited)
(in millions)

See accompanying Notes to Condensed Consolidated Financial Statements.

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US Airways, Inc.
(Debtor and Debtor-in-Possession)
Condensed Consolidated Balance Sheets
September 30, 2002 (unaudited) and December 31, 2001
(in millions)

See accompanying Notes to Condensed Consolidated Financial Statements.

US Airways, Inc.
(Debtor and Debtor-in-Possession)
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2002 and 2001 (unaudited)
(in millions)

See accompanying Notes to Condensed Consolidated Financial Statements.

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     In light of recent severe financial losses and as previously announced, US Airways, Inc.'s (US Airways or the Company) management has undertaken a comprehensive restructuring effort to achieve cost competitiveness through economic concessions from key stakeholders, such as employees, aircraft lenders and lessors and other vendors in order to allow the Company to reduce costs, create financial flexibility and restore its long-term viability and profitability. Despite extensive negotiations and substantial progress in obtaining concessions, the Company was unable to achieve sufficient cost savings from a sufficient number of its key stakeholders to enable it to restructure on a consensual basis outside of Chapter 11 of the United States Bankruptcy Code (Bankruptcy Code). Accordingly, faced with declining seasonal revenues and cash flow, the Company determined it was necessary to file for relief under Chapter 11 as a means of completing the restructuring process an d putting the Company in a position to return to profitability.

     On August 11, 2002 (Petition Date), US Airways filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Virginia, Alexandria Division (Bankruptcy Court or Court) (Case No. 02-83985-SSM). On the same date, US Airways Group, Inc. (US Airways Group), US Airways' parent company, and six of its other subsidiaries (collectively with US Airways, the Debtors) also filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Debtors cases are being jointly administered under the caption "In re US Airways Group, Inc., et al., Case No. 02-83984-SSM." US Airways will continue to operate its business as a "debtor-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

     At hearings held on August 12, 2002, the Bankruptcy Court granted US Airways' first day motions for various relief designed to stabilize its operations and business relationships with customers, vendors, employees and others and entered orders granting authority to US Airways to, among other things: (a) pay pre-petition and post-petition employee wages, salaries, benefits and other employee obligations; (b) pay vendors and other providers in the ordinary course for goods and services received from and after the Petition Date; (c) honor customer service programs, including the Debtors' Dividend Miles program and its ticketing programs; and (d) honor obligations arising prior to the Petition Date related to the Company's interline, clearinghouse, code sharing and other similar agreements. The Bankruptcy Court also gave interim approval for $75 million of a proposed $500 million senior secured debtor-in-possession financing facility provided by Credit Suisse First Bost on, Cayman Islands Branch, and Bank of America, N.A., with participation from Texas Pacific Group (Original DIP Facility). At that time, US Airways Group also announced its entry into a memorandum of understanding with Texas Pacific Group (TPG) for a $200 million equity investment upon emergence from bankruptcy (the TPG Investment). Such proposed investment was subject to higher or otherwise better offers.

     On September 26, 2002, US Airways Group entered into a definitive investment agreement with the Retirement Systems of Alabama (RSA) to be the proposed plan of reorganization equity sponsor superceding the TPG Investment. RSA will invest $240 million in cash and is expected to receive an equity ownership interest of approximately 37.5% in the reorganized US Airways Group immediately upon emergence from Chapter 11 pursuant to a confirmed plan of reorganization (the RSA Investment). The RSA Investment is subject to higher or otherwise better offers. US Airways

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Group also accepted a commitment from RSA for a fully-underwritten $500 million debtor-in-possession financing facility on substantially the same terms as the Original DIP Facility (RSA DIP Facility or DIP Facility). The RSA Dip Facility replaced the Original DIP Facility. At hearings held on September 26, 2002, the Bankruptcy Court, among other things, granted interim approval of the RSA DIP Facility and allowed a $300 million draw on such funds, $75 million of which was used to repay amounts that had already been drawn on the Original DIP Facility. A final order approving the RSA DIP Facility was entered by the Bankruptcy Court on November 8, 2002. The obligations of RSA under the RSA Investment and the RSA DIP Facility may be performed and/or guaranteed by certain affiliates of RSA. See "Debtor-In-Possession Financing" and "RSA Investment" below for more information.

     Shortly after the Chapter 11 filing, US Airways began notifying all known or potential creditors of the Chapter 11 filing for the purpose of identifying and quantifying all pre-petition claims against the Company. The Chapter 11 filing triggered defaults on substantially all debt and lease obligations of the Company. Subject to certain exceptions under the Bankruptcy Code, US Airways' Chapter 11 filing automatically enjoined, or stayed, the continuation of any judicial or administrative proceedings or other actions against the Company or its property to recover on, collect or secure a claim arising prior to the Petition Date. Thus, for example, creditor actions to obtain possession of property from US Airways, or to create, perfect or enforce any lien against the property of US Airways, or to collect on or otherwise exercise rights or remedies with respect to a pre-petition claim are enjoined unless and until the Court lifts the automatic stay.

     Notwithstanding the above general discussion of the automatic stay, however, US Airways' right to retain and operate certain aircraft, aircraft engines and other equipment defined in section 1110 of the Bankruptcy Code that are leased or subject to a security interest or conditional sale contract are specifically governed by section 1110 of the Bankruptcy Code. That section provides, in relevant part, that unless US Airways, within 60 days after the Petition Date (Section 1110 Deadline), agrees to perform all of the obligations (Section 1110 Agreement) under the lease, security agreement, or conditional sale contract and cure all defaults thereunder (other than defaults constituting a breach of provisions relating to the filing of the Chapter 11 cases, US Airways' insolvency or other financial condition of the Debtors) within the time specified in section 1110, the right of the lessor, secured party or conditional vendor to take possession of such equipment in compliance with the provisions of the lease, security agreement, or conditional sale contract and to enforce any of its other rights or remedies under such lease, security agreement, or conditional sale contract is not limited or otherwise affected by the automatic stay, by any other provision of the Bankruptcy Code, or by any power of the Bankruptcy Court. The provisions of section 1110 may materially impact US Airways' options with respect to its fleet optimization strategy.

     In order to address the fleet-related issues raised by Section 1110, US Airways has entered into various stipulations and agreements with its respective aircraft lessors and mortgagees including, but not limited to, stipulations to extend the Section 1110 Deadline (Section 1110 Deadline Extension) and Section 1110 Agreements. As of November 8, 2002, 129 of US Airways' 311 pre-petition operating aircraft were subject to a Section 1110 Agreement and 28 were subject to a Section 1110 Deadline Extension. In addition, as of November 8, 2002, US Airways has rejected or abandoned 75 aircraft, including 51 aircraft that were parked prior to the Petition Date. With respect to certain aircraft that are not subject to Section 1110 Deadline Extensions or Section 1110 Agreements, US Airways is in negotiations with certain aircraft lessors and/or mortgagees with respect to such aircraft over the disposition or use of such aircraft, and the appropriate economic terms of such disposition or use. In the event such negotiations are unsuccessful and such lessors or mortgagees exercise remedies under the relevant aircraft documents to take possession of such aircraft, US Airways' business may be materially and adversely affected.

     US Airways has the exclusive right for 120 days after the Petition Date to file a plan of reorganization and, if it does so, 60 additional days to obtain necessary acceptances of its plan. Such periods may be extended by the Bankruptcy Court for cause. If US Airways' exclusivity

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period lapses, any party in interest may file a plan of reorganization for US Airways. In addition to being voted on by holders of impaired claims and equity interests, a plan of reorganization must satisfy certain requirements of the Bankruptcy Code and must be approved, or confirmed, by the Court in order to become effective. A plan has been accepted by holders of claims against and equity interests in US Airways if (i) at least one-half in number and two-thirds in dollar amount of claims actually voting in each impaired class of claims have voted to accept the plan and (ii) at least two-thirds in amount of equity interests actually voting in each impaired class of equity interests has voted to accept the plan. Under certain circumstances set forth in the provisions of section 1129(b) of the Bankruptcy Code, the Bankruptcy Court may confirm a plan even if such plan has not been accepted by all impaired classes of claims and equity interests. A class of claims or equity interests that does not receive or retain any property under the plan on account of such claims or interests is deemed to have voted to reject the plan. The precise requirements and evidentiary showing for confirming a plan notwithstanding its rejection by one or more impaired classes of claims or equity interests depends upon a number of factors, including the status and seniority of the claims or equity interests in the rejecting class-i.e., secured claims or unsecured claims, subordinated or senior claims, preferred or common stock.

     Although US Airways expects to file a reorganization plan that provides for emergence from Chapter 11 in March 2003, there can be no assurance that a reorganization plan will be proposed by US Airways or confirmed by the Court, or that any such plan will be consummated.

     Under section 365 of the Bankruptcy Code, US Airways may assume, assume and assign, or reject executory contracts and unexpired leases, including leases of real property, aircraft and aircraft engines, subject to the approval of the Court and certain other conditions. Rejection constitutes a court-authorized breach of the lease or contract in question and, subject to certain exceptions, relieves US Airways of its future obligations under such lease or contract but creates a deemed pre-petition claim for damages caused by such breach or rejection. Parties whose contracts or leases are rejected may file claims against US Airways for damages. Generally, the assumption of an executory contract or unexpired lease requires US Airways to cure all prior defaults under such executory contract or unexpired lease, including all pre-petition arrearages, and to provide adequate assurance of future performance. In this regard, the Company expects that liabilities subjec t to compromise and resolution in the Chapter 11 case will arise in the future as a result of damage claims created by US Airways' rejection of various executory contracts and unexpired leases. Conversely, the Company would expect that the assumption of certain executory contracts and unexpired leases may convert liabilities shown as subject to compromise to liabilities not subject to compromise. On November 7, 2002, the Court extended the deadline under section 365(d)(4) of the Bankruptcy Code to assume or reject nonresidential leases of real property through March 31, 2003.

     Moreover, section 554 of the Bankruptcy Code provides a mechanism by which US Airways may abandon property if it is no longer beneficial to the estates and its retention serves no purpose in effectuating the goals of the Bankruptcy Code. Abandonment constitutes a court-authorized divestiture of all of US Airways' interests in the property. Abandonment gives rise to potential claims against US Airways.

     Due to the uncertain nature of many of the potential rejection and abandonment-related claims, the Company is unable to project the magnitude of such claims with any degree of certainty at this time.

     The Company has incurred and will continue to incur significant costs associated with the reorganization. The amount of these costs, which are being expensed as incurred, are expected to significantly affect the results of operations.

     As required by the Bankruptcy Code, the United States Trustee has appointed an official committee of unsecured creditors (the Official Committee). The Official Committee and its legal

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representatives have a right to be heard on all matters that come before the Bankruptcy Court. There can be no assurance that the Official Committee will support US Airways' positions in the reorganization case or the plan of reorganization, once proposed, and disagreements between US Airways and the Official Committee could protract the reorganization case, could negatively impact US Airways' ability to operate during the Chapter 11 case, and could delay US Airways' emergence from Chapter 11.

     On September 25, 2002, US Airways filed with the Bankruptcy Court schedules and statements of financial affairs setting forth, among other things, the assets and liabilities of US Airways, subject to the assumptions contained in certain notes filed in connection therewith. All of the schedules are subject to further amendment or modification. The deadline for filing proofs of claim with the Bankruptcy Court was November 4, 2002, with a limited exception for governmental entities, which have until February 7, 2003 to file proofs of claim. Differences between amounts scheduled by US Airways and claims by creditors will be investigated and resolved in connection with the claims resolution process. That process has commenced and, in light of the number of creditors of US Airways, may take considerable time to complete. Accordingly, the ultimate number and amount of allowed claims is not presently known and, because the settlement terms of such allowed claims a re subject to a confirmed plan of reorganization, the ultimate distribution with respect to allowed claims is not presently ascertainable.

     As of September 30, 2002, the Company had $890 million in unrestricted cash, cash equivalents and short-term investments and US Airways Group has a DIP Facility of up to $500 million ($300 million of which had been drawn as of September 30, 2002) to provide sufficient liquidity during the restructuring process. The ability of the Company, both during and after the Chapter 11 cases, to continue as a going-concern is dependent upon, among other things, (i) US Airways Group's ability to comply with the terms of the DIP Facility and any cash management orders entered by the Bankruptcy Court in connection with the Chapter 11 cases; (ii) the ability of the Company to successfully achieve required cost savings to complete its restructuring; (iii) the ability of the Company to maintain adequate cash on hand; (iv) the ability of the Company to generate cash from operations; (v) the ability of the Company to confirm a plan of reorganization under the Bankruptcy Code and obtai n emergence financing including the loan guarantee under the Air Transportation Safety and System Stabilization Act (Stabilization Act); and (vi) the Company's ability to achieve profitability. Uncertainty as to the outcome of these factors raises substantial doubt about the Company's ability to continue as a going-concern. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going-concern. A plan of reorganization could materially change the amounts currently disclosed in the unaudited condensed consolidated financial statements.

     The potential adverse publicity associated with the Chapter 11 filings and the resulting uncertainty regarding the Company's future prospects may hinder the Company's ongoing business activities and its ability to operate, fund and execute its business plan by impairing relations with existing and potential customers; negatively impacting the ability of the Company to attract and retain key employees; limiting the Company's ability to obtain trade credit; and impairing present and future relationships with vendors and service providers.

     As a result of the filings, realization of assets and liquidation of liabilities are subject to uncertainty. While operating as debtors-in-possession under the protection of Chapter 11 of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, US Airways may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the condensed consolidated financial statements. Further, a plan of reorganization could materially change the amounts and classifications reported in the consolidated historical financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization.

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     Under the priority scheme established by the Bankruptcy Code, unless creditors agree otherwise, pre-petition liabilities and post-petition liabilities must be satisfied in full before US Airways Group is entitled to receive any distribution or retain any property under a plan. The ultimate recovery to creditors and US Airways Group, as sole shareholder, if any, will not be determined until confirmation of a plan or plans of reorganization. No assurance can be given as to what values, if any, will be ascribed in the Chapter 11 case to each of these constituencies or what types or amounts of distributions, if any, they would receive. Accordingly, the Company urges that appropriate caution be exercised with respect to existing and future investments in any of the Company's liabilities.

     On September 26, 2002, the Bankruptcy Court approved US Airways Group's designation of RSA as its proposed plan of reorganization equity sponsor and granted interim approval of the $500 million RSA DIP Facility on substantially the same terms as the Original DIP Facility. The Bankruptcy Court also granted US Airways Group the authority to borrow up to $300 million under the RSA DIP Facility. On September 27, 2002, US Airways Group borrowed $300 million under the RSA DIP Facility and used a portion of such funds to repay the $75 million that was outstanding under the Original DIP Facility. A final order approving the RSA DIP Facility was entered by the Bankruptcy Court on November 8, 2002.

     The RSA DIP Facility consists of a $250 million term loan facility and a $250 million revolving credit facility (with a $50 million letter of credit sub-facility) and is guaranteed by each of the Debtors (other than US Airways Group). The RSA DIP Facility is secured by first priority liens on all unencumbered present and future assets of the Debtors and by best priority available junior liens on all other assets of the Debtors, other than certain specified assets, including assets which are subject to financing agreements that are entitled to the benefits of section 1110 of the Bankruptcy Code to the extent such financing agreements prohibit such junior liens. US Airways Group has the option of borrowing under the RSA DIP Facility at an interest rate of the prime rate plus 2.5% or LIBOR plus 4.0%.

     The maturity date of the RSA DIP Facility is the earlier of the effective date of a plan of reorganization of the Debtors or September 30, 2003. The RSA DIP Facility may be accelerated upon the occurrence of an event of default under the RSA DIP Facility and contains customary mandatory prepayment events including, among other things, the occurrence of certain asset sales and the issuance of certain debt or equity securities.

     In addition to the customary mandatory prepayment events, if a person other than RSA is determined to be the equity sponsor in the plan of reorganization (Winning Plan Sponsor) pursuant to the Court-approved bidding procedures, such determination would trigger a mandatory prepayment on the fifteenth day following the entry by the Court of an order approving such other person as the Winning Plan Sponsor. The amount of the mandatory prepayment that would be required of a person other than RSA that is designated as the Winning Plan Sponsor will be determined as follows: (i) if such Winning Plan Sponsor is acceptable to US Airways Group, as evidenced by delivery of an acceptance letter (which US Airways Group may elect to give in its sole discretion) to the proposed plan sponsor prior to the submission of a proposal by such person, then the portion of the RSA DIP Facility funded or guaranteed by RSA, up to a maximum of $100 million, is due and payable; and (ii) if a per son other than RSA is determined to be the Winning Plan Sponsor pursuant to the Court-approved bidding procedures and US Airways Group determines that the Winning Plan Sponsor is not acceptable, as evidenced by the failure to deliver an acceptance letter (in its sole discretion) to the proposed plan sponsor prior to the submission of a proposal by such person, US Airways Group will be required to repay the entire outstanding principal amount under the RSA DIP Facility. Any qualified plan sponsor will be required to include in its proposal the prepayment of the RSA DIP Facility described above.

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     The definitive documentation relating to the RSA DIP Facility contains covenants that will require US Airways Group to satisfy ongoing financial requirements including operating results, cash receipts and liquidity. Such covenants also limit, among other things, the Debtors' ability to borrow additional money, pay dividends and make additional corporate investments.

     Under the RSA DIP Facility, borrowing availability is determined by a formula based on a percentage of eligible assets. The eligible assets consist of certain previously unencumbered aircraft, aircraft engines, spare parts, flight simulators, real property (including interests in certain airport facilities), takeoff and landing slots, ground equipment and accounts receivable. The underlying values of such assets may fluctuate periodically due to prevailing market conditions, and fluctuations in value may have an impact on the borrowing availability under the RSA DIP Facility. Availability may be further limited by additional reserves imposed by the administrative agent and the collateral agent as they deem necessary in their reasonable credit judgment.

     The remaining $200 million of availability under the RSA DIP Facility, subject to the limitations on borrowing availability discussed above, will be available to US Airways Group after certain conditions are met, including (i) the entry by the Bankruptcy Court of a final order approving the terms and conditions of the RSA DIP Facility documents; (ii) the minimum statutory and regulatory review periods shall have expired with respect to US Airways' marketing agreements with United Air Lines, Inc. (United) and neither the U.S. Department of Transportation nor any other applicable governmental authority or third party has filed any material objection to such marketing agreements which has not been resolved; (iii) (a) the receipt of written confirmation from the Air Transportation Stabilization Board (Stabilization Board) of its conditional approval for a $900 million loan guarantee (ATSB Guarantee) under the Stabilization Act, subject to confirmation by the Bankruptcy Court of a plan of reorganization reasonably acceptable to the Stabilization Board, (b) the approval by the Stabilization Board of a substantially final draft of the plan of reorganization and disclosure statement to be filed in the Cases, and (c) US Airways Group demonstrating to the reasonable satisfaction of RSA that it is likely to satisfy all of the conditions to the issuance of the ATSB Guarantee; and (iv) banks, financial institutions and other institutional lenders satisfactory to US Airways Group and RSA delivering commitments to lend at least the $100 million "at-risk" portion of the $1 billion Stabilization Board guaranteed loan. US Airways Group met the condition described in clause (i) above when the Bankruptcy Court entered a final order approving the RSA DIP Facility on November 8, 2002. With respect to the marketing agreements described in clause (ii) above, on October 2, 2002 the U.S. Department of Transportation announced that it had completed its review of US Airways' m arketing agreements with United and had determined to end the statutory waiting period for such agreements.

     On September 26, 2002, US Airways Group entered into a definitive investment agreement with RSA to be the proposed plan of reorganization equity sponsor superceding the TPG Investment. RSA will invest $240 million in cash and is expected to receive an equity ownership interest of approximately 37.5% in the reorganized US Airways Group immediately upon emergence from Chapter 11 pursuant to a confirmed plan of reorganization. This percentage of equity ownership is subject to change based upon definitive agreements in the final plan of reorganization. If the RSA Investment is consummated in accordance with its terms, RSA is expected to have a voting interest of approximately 71% in the reorganized US Airways Group immediately upon emergence from Chapter 11 pursuant to a confirmed plan of reorganization and would hold five of 13 seats on US Airways Group's Board of Directors. The RSA Investment is subject to cust omary conditions to closing as well as the Company's achievement of certain financial and operational benchmarks. The Company cannot presently determine that such conditions and benchmarks will be met and that the RSA Investment will be consummated. As discussed above, the RSA Investment, if consummated, contemplates the cancellation of the Common Stock. The RSA Investment is subject to higher or otherwise better offers in accordance with bidding procedures approved by the Bankruptcy Court. The submission deadline for qualified competing

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plan proposals is Friday, November 15, 2002. The Company cannot predict the outcome of the bidding process.

     In connection with US Airways Group's bankruptcy filing, on August 12, 2002, the Bankruptcy Court entered an interim order (Interim NOL Order) to assist the Debtors in monitoring and preserving their net operating losses (NOLs) by imposing certain notice and hearing procedures on trading in (i) claims against the Debtors (Claims) or (ii) equity securities in US Airways Group. In general, the Interim NOL Order applied to any person or entity that, directly or indirectly, beneficially owns, or was about to enter into a transaction pursuant to which it would directly or indirectly beneficially own, (i) an aggregate principal amount of Claims equal to or exceeding $50 million (including a lease or leases under which one or more of the Debtors are lessees and pursuant to which payments of $50 million or more, in the aggregate, are or will become due) or (ii) three million or more shares of the common stock of US Airways Group (Common Stock). Under the Interim NO L Order, such persons or entities were required to provide 30 calendar days advance notice to the Court, the Debtors, and Debtors' counsel prior to purchasing or selling any Claims or Common Stock, and the Debtors had 30 calendar days after receipt of such notice to object to any proposed transfer described therein. If the Debtors filed an objection, such transaction would not be effective unless approved by a final and nonappealable order of the Bankruptcy Court. If the Debtors did not object within such 30 day period, such transaction may have proceeded solely as set forth in the notice. Moreover, the Interim NOL Order required that any person or entity who, directly or indirectly, beneficially owned $50 million or more in Claims or three million or more shares of Common Stock file and serve a notice setting forth the size of their holdings on or before the later of (i) 40 days after the effective date of the notice of entry of the Interim NOL Order or (ii) 10 days after becoming such a beneficial owner. P ursuant to the Interim NOL Order, any purchase, sale or other transfer of Claims or equity securities in the Company in violation of these procedures was null and void ab initio as an act in violation of the automatic stay under section 362 of the Bankruptcy Code.

     After holding a final hearing on the Interim NOL Order on September 26, 2002, the Bankruptcy Court entered the final order on October 2, 2002 (Final NOL Order), which modified certain aspects of the Interim Order. The modifications include, among others, (i) an increase from $50 million to $100 million of the Claims threshold amount for determining which creditors are subject to the notice and objection procedures of the Final NOL Order, and (ii) a decrease from 30 calendar days to 10 business days of the period during which the Debtors may object to a notice of proposed transfer of Claims or Common Stock. The Common Stock threshold amount for determining which equity holders are subject to the notice and objection procedures of the Final NOL Order remains unchanged from the Interim NOL Order.

     As part of its restructuring efforts, US Airways sought and received conditional approval for a $900 million loan guarantee under the Stabilization Act from the Stabilization Board in connection with a proposed $1 billion loan financing. US Airways applied for this loan and related guarantee in order to provide additional liquidity necessary to carry out its restructuring plan. The Stabilization Board's conditions to issuance of the ATSB Guarantee included, among other things, the execution and delivery of legally binding agreements acceptable to the Stabilization Board containing economic concessions from key stakeholders, as well as an agreement to issue a sufficient number of stock warrants to the Stabilization Board at a strike price acceptable to the Stabilization Board.

     The regulations promulgated pursuant to the Stabilization Act provide that an eligible borrower must be an air carrier that can demonstrate, to the satisfaction of the Stabilization Board, that it is not under bankruptcy protection or receivership when the Stabilization Board

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issues the guarantee, unless the guarantee and the underlying financial obligation are to be part of a bankruptcy court-certified reorganization plan. Subsequent to the Chapter 11 filings of US Airways Group and US Airways, the Stabilization Board issued a statement that its conditional approval of US Airways' application for the loan guarantee remains in effect. The Company continues to provide supplemental information to the Stabilization Board in connection with developing its plan of reorganization. The Company expects that closing on the ATSB Guarantee will require confirmation of a plan of reorganization in which the Company can achieve financial and operational benchmarks acceptable to the Stabilization Board.

     The accompanying Condensed Consolidated Financial Statements include the accounts of US Airways and US Airways Investment Management Company, Inc. (USIM), a former wholly-owned subsidiary of US Airways, through June 30, 2002. Effective July 1, 2002, USIM and USLM Corporation, a wholly-owned subsidiary of US Airways Group, were merged into US Airways. These interim period statements should be read in conjunction with the Consolidated Financial Statements contained in US Airways' Annual Report to the United States Securities and Exchange Commission on Form 10-K for the year ended December 31, 2001.

     Management believes that all adjustments necessary for a fair statement of results have been included in the Condensed Consolidated Financial Statements for the interim periods presented, which are unaudited. All significant intercompany accounts and transactions have been eliminated. 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.

     These interim Condensed Consolidated Financial Statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and satisfaction of liabilities in the ordinary course of business, and in accordance with Statement of Position 90-7 (SOP 90-7), "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." SOP 90-7 requires that the financial statements for periods subsequent to the Chapter 11 filing petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.

     Revenues, expenses (including professional fees), realized gains and losses, and provisions for losses directly associat