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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of
1934 (Amendment No. )
Filed by the Registrant [ ]
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[x] Soliciting Material Pursuant toss.240.14a-12
US Airways Group, Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Name of Registrant as Specified In Its Charter)
UAL Corporation
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
..........................................................................
2) Aggregate number of securities to which transaction applies:
..........................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
..........................................................................
4) Proposed maximum aggregate value of transaction:
..........................................................................
5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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4) Date Filed:
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The following presentation was shown on a video monitor during a presentation
to analysts by UAL Corporation and US Airways Group, Inc. on May 24, 2000.
United US Airways
"The Premier Global Carrier"
Unparalleled Access
May 24, 2000
2
Safe Harbor
This presentation contains certain "forward-looking" statements within the
meaning of the Private Securities Reform Act of 1995. These statements are
based on management's current expectations and are naturally subject to
uncertainty and changes in circumstances. Actual results may vary materially
from the expectations contained herein. The forward-looking statements
contained herein include statements about future financial and operating
results and benefits of the pending merger between United and US Airways.
Factors that could cause actual results to differ materially from those
described herein include: industry capacity decisions; the airline pricing
environment; competitors' route decisions; the inability to obtain regulatory
approvals; actions of the U.S., foreign and local governments; domestic and
international travel patterns; the inability to successfully integrate the
businesses of United and US Airways; costs related to the merger; the
inability to achieve cost-cutting synergies resulting from the merger; labor
integration issues; the economic environment of the airline industry and the
general economic environment. More detailed information about these factors is
set forth in the reports filed by United and US Airways with the Securities
and Exchange Commission. Neither United nor US Airways is under any obligation
to (and expressly disclaims any such obligation to) update or alter its
forward-looking statements, whether as a result of new information, future
events or otherwise.
3
James E. Goodwin
Chairman and Chief Executive Officer
UAL Corporation
4
Outline
o Transaction Overview and Strategic Rationale
o Consumer Benefits
o DC Air
o Labor and Fleet Integration
o Roadmap to Completion
o Economic and Financial Considerations
o US Airways Profile
5
Transaction Overview
o Total offer value $11.6 billion
- Total offer price, $4.3 billion
- Plus the assumption of $1.5 billion in net debt
- and $5.8 billion in aircraft leases.
o $60 per share offer in cash for all US Airways shares
- A premium of 130% over May 23 closing price
o Expected to close in 2001, accretive in year 2
o Financing: Cash on hand, existing credit facilities and other borrowings
o Break-up fee: $160 million
o Spin-off certain Washington Reagan assets to DC Air to enhance
competition
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Strategic Rationale
o East Coast has the largest population in the US
- Northeast alone is a $14 billion travel market
o United has only a 14% market share in the Northeast
o United has a significant opportunity to create a nationwide network o
There were two possible solutions
- Develop own presence -> uneconomical
- Acquire existing carrier -> US Airways is the obvious choice
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US Airways Completes United's Domestic Network
[GRAPHICS OMITTED]
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Combined Operations
[GRAPHICS OMITTED]
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Combined Operations - Selected Statistics
United US Airways Total*
- - - - - - - ------------------------------------------------------------
Fleet (aircraft) 600 403 1,003
Hubs 5 3 8
Employees 97,000 46,000 143,000
Passengers (MM) 81.7 55.0 136.7
Flights 2,356 2,156 4,512
Destinations 133 103 170
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Consumer Benefits - Better Service For Travelers
o Benefits for all customers
- Seamless access to the premier global network
- Enhanced convenience: one ticket, one baggage check-in, one club,
one frequent flyer program
o Benefits to US Airways' customers
- United's East-West route network complements US Airways' North-South
network
- New reach to Europe, South America, Asia and Australia
- Access to Star Alliance
o Benefits to United's customers
- First true nationwide network
- Increased East Coast access
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Creation of DC Air - New Competitive Presence
o DC Air
- Based at Washington-Reagan Airport
- Composed of majority of US Airways' routes from Washington-Reagan
- Will initially wet-lease aircraft and purchase other necessary
operating assets from United
- Will ensure greater competition and consumer benefits
o Purchased and managed by Robert Johnson, Chairman & CEO BET Industries, a
media-entertainment conglomerate
o United to retain Shuttle
o United retains assets to fly non-stop between DCA and PIT, CLT, PHL hubs
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DC AIR
o Over $500 Million Annual Revenue
o Over 100 Round Trip Flights per Day
o Service to 44 airports
o 3 Million Annual Passengers
o 500 mile stage length
[GRAPHICS OMITTED]
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Labor Integration
o IAM
- Representation determined by NMB process
- Union determines seniority list
o AFA
- Determined by AFA merger policy
o Pilots
- Determined by ALPA merger policy
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Fleets Are Compatible
United Fleet US Airways Fleet
Type Current Type Current
- - - - - - - ---- ------- ---- -------
A320 family 87 Common A320 family 49
B727 75 Aircraft B727 4
B737 182 496 297 B737 198
B757 98 B757 34
B767 53 B767 12
B747 51 Other F-100 40
B777 42 Aircraft MD-80/DC9 64
DC10 11 104 106 A330 2
- - - - - - - ----------------- ---------------------------
600 403
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Roadmap to Completion
o US Airways stockholder approval
o Regulatory approvals
o Expected to close in 2001
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Economic and Financial Considerations
Douglas A. Hacker
Executive Vice President Finance and
Planning and Chief Financial Officer
UAL Corporation
17
Transaction Highlights
o Total transaction value $11.6 billion
- Total offer price of $4.3 billion
- plus the assumption of $1.5 billion in net debt
- and $5.8 billion in aircraft operating leases
o US Airways standalone transaction multiples 2001
- Transaction Value/EBITDAR 6x
- Transaction Value/Revenues 1x
o Accretive in year 2 (reported and cash EPS)
o Financing: Cash on hand, existing and new credit facilities, and other
borrowings
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Shareholder Value Creation
o This combination creates value for shareholders well in excess of the
purchase price
[GRAPHICS OMITTED]
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Shareholder Value
[GRAPHICS OMITTED]
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Earnings Accretion
[GRAPHICS OMITTED]
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EPS Accretion / (Dilution) to United
[GRAPHICS OMITTED]
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Revenue Benefits
o Increased Connectivity
- Customers offered more options in commonly served cities
- Over 560 new online city pairs created for United and US Airways
passengers
- Improved business traffic mix
o Increased City Presence
- As a carrier's service share in a city increases, that carrier
achieves greater revenue efficiency
o Improved Overall Asset Allocation
- Route reallocation
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Revenue Benefits
[GRAPHICS OMITTED]
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Increased Connections
New Online Connections Achieve a Higher CRS Screen Display
Interline: This connection appears on page 8 of the CRS display
US Airways 121 CLT-DEN 800A 939A
United 5594 COS 1025A 1102P
Online: With the United code it appears on page 1 of the CRS display
United 121 CLT-DEN 800A 939A
United 5594 COS 1025A 1102A
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Increased City Presence
Increasing presence in a city drives revenue benefit
o As an airline gets larger in a city, it offers:
- Increased frequencies on key routes
- A wider selection of destinations
o This leads to increased revenue due to:
- Corporate volume agreements
- A more attractive frequent-flyer program
- Becoming the `Natural Choice'
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US Airways Enhances United's Eastern Presence
City Revenue Rankings East Of Ohio
United US Airways Combined
New York 4 5 3
Washington 1 2 1
Atlanta 5 7 4
Boston 4 3 1
Orlando 5 2 2
Philadelphia 3 1 1
Miami 2 4 2
Tampa 7 2 2
Ft. Lauderdale 8 2 2
Pittsburgh 5 1 1
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Improved Asset Allocation
Some aircraft redeloped to more
strategic/profitable markets:
- East Coast - International
- Caribbean
- Hub Markets
Opportunity to cancel unprofitable flights:
Cost savings benefit or early
retirement of older aircraft
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Cost Synergies
o Station, line maintenance and overhead consolidation
- Labor force efficiencies accomplished through growth of the business
and normal attrition
o More efficient aircraft utilization and facility consolidation
o Other ongoing benefits
- Advertising consolidation
- Liability insurance savings
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Proposed Financing
o Cash required at closing approximately $4.4 billion
o Sources
- Cash on hand
- Existing and new credit facilities
- Secured and unsecured borrowings
o United will retain significant financial flexibility
o Revenue benefits will quickly begin to restore balance sheet post
completion
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Liquidity and Credit Ratios
2000 Pro Forma
UAL B/(W)
Standalone 2001 2002
---------- ---- ----
Adj Total Debt/EBITDAR 3.7X (1.3) (0.1)
Adj Total Debt/Total Cap 69% (11) (8)
EBITDAR/Adj Total Interest Exp 2.2X (0.5) (0.1)
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Summary
o Leading airline with first true nationwide network
- Significant consumer benefits
o DC Air divestiture will enhance competition
o Combination creates value well in excess of purchase price
- Driven by large revenue benefits
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"The Premier Global Carrier"
Unparalleled Access
33
Stephen M. Wolf
Chairman
US Airways Group, Inc.
and US Airways, Inc.
34
Rakesh Gangwal
President and Chief Executive Officer
US Airways Group, Inc.
and US Airways, Inc.
35
US Airways Is The Sixth-Largest
U.S. Domestic Carrier In Terms of ASMs
(1999 Available Seat Miles in Billions)
[GRAPHICS OMITTED]
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US Airways Is A Merger of Seven Small Airlines
[GRAPHICS OMITTED]
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We Had Too Many Different Aircraft Types
o B767-200
o B757-200
o MD-80
o B727 (Shuttle)
o B737-300 and -400
o B737-200
o DC9-30
o F100
o F28
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Product Quality And Service Levels
Were Significantly Below Par
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Our Cost Structure Was High
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A Management Change Occurred At US Airways In January 1996
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We Embarked On A Five Point Business Plan
[GRAPHICS OMITTED]
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We Changed Our Name And Livery
[GRAPHICS OMITTED]
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We Purchased The US Airways Shuttle
[GRAPHICS OMITTED]
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We Introduced Regional Jet Service
In January, 1998
[GRAPHICS OMITTED]
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In June 1998, We Launched Our
Response To Low-Cost Carriers
[GRAPHICS OMITTED]
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In November 1998, We Introduced The
A320 Family Into Our Operations
[GRAPHICS OMITTED]
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In May 2000, We Introduced The
A330 Widebody Into Our Operations
[GRAPHICS OMITTED]
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The Airbus Contracts Are "One Of A Kind"
o Pricing
o Financing
o Terms and Conditions
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We Expanded Transatlantic Operations Significantly
[GRAPHICS OMITTED]
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We Launched Employee Task Forces
o MetroJet
o On-Time Departures and Arrivals
o PAWOB (Lost Baggage)
o Aircraft / Ground Equipment Damage
o Fuel Consumption
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Most Importantly, We Have Made Spectacular Strides In Providing Superior
Customer Service
[GRAPHICS OMITTED]
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[GRAPHICS OMITTED]
US Airways was Rated #1 In The 1999 Annual Airline Quality Rating Survey
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Our New Web Site Is A Great Success
[GRAPHICS OMITTED]
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We Are Increasing Our Online Sales and Reducing Commission Expense (Percent of
Revenue)
[GRAPHICS OMITTED]
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Our E-Ticketing Penetration Is Among
The Highest In The Industry
[GRAPHICS OMITTED]
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All Major Labor Negotiations Are Behind Us...
o Fleet Service Employees Closed March 1999
o Shuttle Pilots Interim Agmt. Closed March 1999
o Bermuda Agents Closed March 1999
o Flight Crew Training Instructors Closed April 1999
o Pilots - Check Airmen Closed May 1999
o Shuttle Mechanics Integration Closed May 1999
o Dispatchers Closed July 1999
o Mechanics and Related Closed October 1999
o Passenger Service Employees Closed November 1999
o Shuttle Pilots - Integration Closed March 2000
o Flight Attendants Closed May 2000
o Simulator Engineers Negotiations Ongoing
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And We Began Growing US Airways
[GRAPHICS OMITTED]
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Domestic Capacity And Traffic Trends:
May Through August (Year-over-Year Change)
[GRAPHICS OMITTED]
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The Intrinsic Value Of US Airways
[GRAPHICS OMITTED]
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U.S. Domestic 48 State Air Travel Revenues
(Originating Passenger Revenues For 1999)
[GRAPHICS OMITTED]
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US Airways Is The Leading Carrier For
Intra-East Coast Passengers
[GRAPHICS OMITTED]
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Combined With Our Express Operations,
Our East Coast Presence Is Unmatched
[GRAPHICS OMITTED]
63
Long Haul Traffic From US Airways Core
Region Is Fragmented Among Many Carriers
[GRAPHICS OMITTED]
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Merger Will "Plug In" US Airways' Intra-East
Coast Network To United's Global Network
[GRAPHICS OMITTED]
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Merger Will "Plug In" US Airways' Intra-East
Coast Network To United's Global Network
[GRAPHICS OMITTED]
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Merger Will "Plug In" US Airways' Intra-East
Coast Network To United's Global Network
[GRAPHICS OMITTED]
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Merger Will "Plug In" US Airways' Intra-East
Coast Network To United's Global Network
[GRAPHICS OMITTED]
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[GRAPHICS OMITTED]
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Proxy Legend
In connection with merger, US Airways will be filing a proxy statement with
the Securities and Exchange Commission. STOCKHOLDERS OF US AIRWAYS ARE URGED
TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION. Investors and security holders may obtain a free copy
of the proxy statement when it becomes available and other documents filed by
United and US Airways with the Securities and Exchange Commission in
connection with the merger at the Securities and Exchange Commission's web
site at www.sec.gov. Stockholders of US Airways may also obtain for free the
proxy statement and other documents filed by US Airways in connection with the
merger by directing a request to: US Airways, 2345 Crystal Drive, Arlington,
Virginia 22227, Attention: Kimberly Holland, Investor Relations, Telephone:
(703) 872-5009, email: kimberly_holland@usairways.com. Stockholders of US
Airways may also obtain for free documents filed by United in connection with
the merger by directing a request to: United Airlines, 1200 East Algonquin
Road, Elk Grove Village, Illinois 60007, Attention: Patty Chaplinski, Investor
Relations, Telephone: (847) 700-7501, email: patty.chaplinski@ual.com.
US Airways and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from US Airways stockholders in
favor of the merger. These directors and executive officers include the
following: N. Bruce Ashby, Mathias J. DeVito, Rakesh Gangwal, Peter M. George,
Robert L. Johnson, Robert LeBuhn, John G. Medlin, Jr., Hanne M. Merriman,
Thomas A. Mutryn, Thomas H. O'Brien, Larry M. Nagin, Hilda Ochoa-Brillembourg,
Richard B. Priory, Raymond W. Smith, Stephen M. Wolf. Collectively, as of
January 31, 2000, the directors and executive officers of US Airways may be
deemed to beneficially own approximately 6.6% of the outstanding shares of US
Airways common stock. Stockholders of US Airways may obtain additional
information regarding the interests of participants by reading the proxy
statement when it becomes available.
United and certain of its directors and executive officers may also be deemed
to be participants in the solicitation of proxies from US Airways stockholders
in favor of the merger. These directors and executive officers include:
Christopher Bowers, Frederic F. Brace, Rono J. Dutta, James E. Goodwin,
Douglas A. Hacker, Francesca M. Maher, Peter McDonald, Andrew Studdert and
Daniel Walsh. As of the date of this communication, United, Mr. Brace, Mr.
Dutta, Mr. Goodwin, Mr. Hacker and Ms. Maher do not beneficially own any
shares of US Airways common stock.
Private Securities Reform Act of 1995. These statements are based on
management's current expectations and are naturally subject to uncertainty and
changes in circumstances. Actual results may vary materially from the
expectations contained herein. The forward-looking statements contained herein
include statements about future financial and operating results and benefits
of the pending merger between United and US Airways. Factors that could cause
actual results to differ materially from those described herein include:
industry capacity decisions; the airline pricing environment; competitors'
route decisions; the inability to obtain regulatory approvals; actions of the
U.S., foreign and local governments; domestic and international travel
patterns; the inability to successfully integrate the businesses of United and
US Airways; costs related to the merger; the inability to achieve cost-cutting
synergies resulting from the merger; labor integration issues; the economic
environment of the airline industry and the general economic environment. More
detailed information about these factors is set forth in the reports filed by
United and US Airways with the Securities and Exchange Commission. Neither
United nor US Airways is under any obligation to (and expressly disclaims any
such obligation to) update or alter its forward-looking statements, whether as
a result of new information, future events or otherwise.
70